February 28, 1997
Dear Investor,
I am pleased to provide you with a list of the portfolio holdings of the Quaker
Family of Funds as of December 31, 1996. There is also enclosed a set of
unaudited financial statements as of the end of the year. The Funds began
operations on November 25, 1996.
Please contact me with any questions or comments.
Sincerely,
/s/ Peter F. Waitneight
Peter F. Waitneight
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
PORTFOLIO OF INVESTMENTS
December 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
Value
Shares (Note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - 97.86%
Advertising - 0.69%
Interpublic Group of Companies, Inc. 40 $1,900
Aerospace & Defense - 2.30%
Lockheed Martin Corporation 50 4,575
McDonnell Douglas Corporation 10 650
The Boeing Company 10 1,064
-- -----
6,289
Agriculture - 0.15%
Deere & Company 10 406
Auto Parts - Original Equipment - 0.50%
PACCAR Inc. 20 1,360
Auto & Trucks - 1.94%
Arvin Industries, Inc. 40 990
Chrysler Corporation 80 2,640
General Motors Corporation 30 1,676
-- -----
5,306
Beverages - 2.69%
The Coca-Cola Company 140 7,367
Building Materials - 0.52%
Lowe's Companies, Inc. 40 1,420
Chemicals - 0.94%
E.I. du Pont de Nemours and Company 10 943
Rohm & Haas Company 20 1,632
-- -----
2,575
Computers - 3.64%
(a)Applied Magnetics Corporation 20 600
(a)Compaq Computer Corporation 30 2,227
(a)Dell Computer Corporation 10 531
International Business Machines 30 4,530
(a)Sun Microsystems, Inc. 70 1,798
(a)Tandem Computers, Inc. 20 275
-- ---
9,961
Computer Software & Services - 1.94%
(a)Cisco Systems, Inc. 30 1,908
Computer Associates International, Inc. 10 497
(a)Microsoft Corporation 30 2,478
(a)Oracle Corporation 10 418
-- ---
5,301
Cosmetics & Personal Care - 1.25%
Avon Products, Inc. 60 3,428
(Continued)
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
PORTFOLIO OF INVESTMENTS
December 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
Value
Shares (Note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Electrical Equipment - 2.63%
Duke Power Company 40 $1,860
(a)General Instrument Corporation 20 433
Texas Utilities Company 120 4,890
--- -----
7,183
Electronics - 5.85%
(a)Coltec Industries, Inc. 80 1,500
(a)GenRad, Inc. 100 2,325
General Electric Company 90 8,910
Hewlett-Packard Company 50 2,513
(a)National Semiconductor Corporation 20 490
Pittston Brink's Group 10 270
-- ---
16,008
Electronics - Semiconductor - 3.09%
Intel Corporation 50 6,547
Texas Instruments, Inc. 30 1,913
-- -----
8,460
Engineering & Construction - 0.50%
Cummins Engine Company, Inc. 30 1,380
Entertainment - 3.72%
(a)King World Productions, Inc. 40 1,475
Meredith Corporation 20 1,055
The Walt Disney Company 110 7,659
--- -----
10,189
Environmental Control - 0.44%
Potlatch Corporation 20 860
Thermo Instrument Systems, Inc. 10 331
-- ---
1,191
Financial - Banks, Commercial - 3.24%
BankAmerica Corporation 10 996
Citicorp 30 3,098
Norwest Corporation 30 1,305
State Street Boston Corporation 10 646
Wachovia Corporation 50 2,825
-- -----
8,870
Financial - Banks, Money Center - 4.17%
Banc One Corporation 30 1,298
KeyCorp 200 10,100
--- ------
11,398
Financial - Securities Brokers - 2.40%
Lehman Brothers Holdings, Inc. 40 1,255
Merrill Lynch & Company, Inc. 30 2,445
Morgan Stanley Group, Inc. 50 2,856
-- -----
6,556
(Continued)
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
PORTFOLIO OF INVESTMENTS
December 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
Value
Shares (Note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Financial Services - 3.90%
American Express Company 40 $2,265
Federal Home Loan Mortgage Corporation 20 2,202
Federal National Mortage Association 90 3,353
Countrywide Credit Industries, Inc. 100 2,862
--- -----
10,682
Food - Processing - 1.74%
General Mills, Inc. 40 2,535
Hormel Foods Corporation 40 1,080
Philip Morris Companies, Inc. 10 1,135
-- -----
4,750
Food - Wholesale - 2.42%
Great Atlantic & Pacific Tea Company, I 70 2,231
Ralston-Ralston Purina Group 60 4,402
-- -----
6,633
Foreign Securities - 1.04%
British Telecommunications 10 686
Canadian Pacific, Ltd. 10 265
Ranger Oil Ltd. 20 197
Royal Dutch Petroleum Company 10 1,708
-- -----
2,856
Homebuilders - 0.59%
Centex Corporation 20 753
Fleetwood Enterprises, Inc. 20 550
Pulte Corporation 10 308
-- ---
1,611
Household Products & Housewares - 1.86%
Maytag Corporation 40 795
Procter & Gamble Company 40 4,305
-- -----
5,100
Insurance - Multiline - 4.18%
Allstate Corporation 10 578
American International Group, Inc. 40 4,330
CIGNA Corporation 30 4,099
Chubb Corporation 20 1,075
Travelers Group, Inc. 30 1,361
-- -----
11,443
Insurance - Property & Casualty - 0.25%
Progressive Corporation 10 674
Machine - Construction & Mining - 0.82%
Caterpillar, Inc. 20 1,505
Foster Wheeler Corporation 20 743
-- ---
2,248
(Continued)
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
PORTFOLIO OF INVESTMENTS
December 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
Value
Shares (Note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Manufactured Housing - 0.25%
Clayton Homes, Inc. 50 $675
Medical - Biotechnology - 1.11%
(a)Advance Technology Laboratories, Inc. 10 310
(a)Amgen, Inc. 50 2,722
-- -----
3,032
Medical Supplies - 2.25%
American Home Products Corporation 20 1,175
Johnson & Johnson 100 4,988
--- -----
6,163
Metals - Diversified - 1.58%
Snap-On, Inc. 10 356
United Technologies Corporation 60 3,960
-- -----
4,316
Office & Business Equipment - 1.15%
Xerox Corporation 60 3,158
Oil & Gas - Equipment & Services - 1.27%
Baker Hughes, Inc. 80 2,760
Reading & Bates Corporation 10 265
Tidewater, Inc. 10 453
-- ---
3,478
Oil & Gas - Exploration - 4.11%
Burlington Resources, Inc. 50 2,525
Kerr-McGee Corporation 40 2,880
Murphy Oil Corporation 10 556
Noble Affiliates, Inc. 40 1,915
Seagull Energy Corporation 10 220
(a)Smith International, Inc. 20 898
Union Texas Petroleum Holdings, Inc. 100 2,238
--- -----
11,232
Oil & Gas - International - 5.12%
Atlantic Richfield Company 40 5,305
Chevron Corporation 40 2,600
Exxon Corporation 20 1,960
Helmerich & Payne, Inc. 20 1,048
Texaco Inc. 10 981
(a)Western Atlas, Inc. 30 2,126
-- -----
14,020
Packaging & Containers - 1.25%
Kimberly-Clark Corporation 30 2,858
Longview Fibre Company 30 551
-- ---
3,409
(Continued)
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
PORTFOLIO OF INVESTMENTS
December 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
Value
Shares (Note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Pharmaceuticals - 2.43%
Abbott Laboratories 10 $511
Bristol - Myers Squibb Company 20 2,175
Merck & Co., Inc. 50 3,962
-- -----
6,648
Retail - Apparel - 0.11%
Gap, Inc. 10 301
Retail - Department Stores - 4.14%
Dayton Hudson Corporation 100 3,925
Dollar General Corporation 60 1,912
Sears, Roebuck and Co. 70 3,228
(a)The Neiman Marcus Group, Inc. 20 510
(a)Woolworth Corporation 80 1,750
-- -----
11,325
Retail - General Merchandise - 0.29%
(a)Mac Frugals Bargains Close - Outs, Inc. 30 780
Retail - Grocery - 0.75%
American Stores Company 50 2,050
Retail - Specialty Line - 0.71%
(a)Lands' End, Inc. 20 530
Tiffany & Co. 30 1,099
(a)Toys "R" Us, Inc. 10 300
-- ---
1,929
Telecommunications Equipment - 1.84%
(a)AirTouch Communications, Inc. 100 2,513
(a)Clear Channel Communications, Inc. 70 2,520
-- -----
5,033
Transportation - Rail - 2.86%
Burlington Northern Santa Fe 60 5,198
Norfold Southern Corporation 30 2,640
-- -----
7,838
Utilities - Electric - 2.21%
American Electric Power Company 80 3,290
Illinova Corporation 100 2,750
--- -----
6,040
Utilities - Telecommunications - 5.03%
BellSouth Corporation 170 6,864
GTE Corporation 100 4,550
(a)WorldCom, Inc. 90 2,345
-- -----
13,759
Total Common Stocks (Cost $264,434) 267,731
(Continued)
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
PORTFOLIO OF INVESTMENTS
December 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
Value
Shares (Note 1)
- --------------------------------------------------------------------------------
INVESTMENT COMPANY - 0.96%
Fountain Square U.S. Treasury Oblig $2,645 $2,645
5.99%, due January 2, 1997
(Cost $2,645)
Total Value of Investments (Cost $267,079 (b)) 98.82% 270,376
Other Assets Less Liabilities 1.18% 3,219
------- --------
Net Assets 100.00% $273,595
======= ========
(a) Non-income producing investment.
(b) Aggregate cost for financial reporting and federal income tax purposes
is the same. Unrealized appreciation (depreciation) of investments for
financial reporting and federal income tax purposes is as follows:
Unrealized appreciation $5,843
Unrealized depreciation (2,546)
------
Net unrealized appreciation $3,297
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
(Unaudited)
ASSETS
Investments, at value (cost $267,079) $270,376
Interest receivable 46
Dividends receivable 112
Prepaid expenses 164
Deferred organization expenses, net (note 4) 32,658
----------
Total assets 303,356
LIABILITIES
Accrued expenses 3,229
Payable to fund sponsor 26,089
Disbursements in excess of cash on demand deposit 443
----------
Total liabilities 29,761
NET ASSETS
(applicable to 27,015 shares outstanding; unlimited
shares of no par value beneficial interest authorized) $273,595
==========
NET ASSET VALUE, OFFERING AND REPURCHASE PRICE PER SHARE
($273,595 / 27,015 shares) $10.13
==========
NET ASSETS CONSIST OF
Paid-in capital $270,280
Undistributed net investment income 18
Net unrealized appreciation on investments 3,297
----------
$273,595
==========
See accompanying notes to financial statements
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
STATEMENT OF OPERATIONS
For the period from November 25, 1996
(commencement of operations)
to December 31, 1996
(Unaudited)
INVESTMENT INCOME
Income
Interest $776
Dividends 111
----------
Total income 887
Expenses
Investment advisory fees (note 2) 123
Fund administration fees (note 2) 43
Service fees (note 3) 49
Custody fees 406
Registration and filing administration fees 51
Fund accounting fees (note 2) 2,600
Audit fees 811
Legal fees 608
Securities pricing fees 342
Shareholder recordkeeping fees 609
Shareholder servicing expenses 406
Registration and filing expenses 558
Printing expenses 121
Amortization of deferred organization expenses, (note 4) 666
Trustee fees and meeting expenses 304
Other operating expenses 406
----------
Total expenses 8,103
Less:
Expense reimbursements (note 3) (7,236)
Investment advisory fees waived (note 2) (123)
Fund administration fees waived (note 2) (553)
Service fees waived (49)
----------
Net expenses 142
----------
Net investment income 745
UNREALIZED GAIN ON INVESTMENTS
Increase in unrealized appreciation on investments 3,297
----------
Net increase in net assets resulting from operations $4,042
==========
See accompanying notes to financial statements
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
STATEMENTS OF CHANGES IN NET ASSETS
For the period from November 25, 1996
(commencement of operations)
to December 31, 1996
(Unaudited)
Operations
Net investment income $745
Increase in unrealized appreciation on investments 3,297
----------
Net increase in net assets resulting from operations 4,042
Distributions to shareholders from
Net investment income (727)
----------
Capital share transactions
Increase in net assets resulting from
capital share transactions 270,280
----------
Total increase in net assets 273,595
NET ASSETS
Beginning of period 0
----------
End of period (including undistributed net investment income $273,595
of $18 at December 31, 1996) ==========
(a) A summary of capital share activity follows:
---------------------------
Shares Value
---------------------------
Shares sold 26,943 $269,553
Shares issued for reinvestment of distributions 72 727
--------- ---------
Net increase 27,015 $270,280
========= =========
See accompanying notes to financial statements
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
For the period from November 25, 1996
(commencement of operations)
to December 31, 1996
(Unaudited)
Net asset value, beginning of period (initial offering price $10.00
Income from investment operations
Net investment income 0.03
Net realized and unrealized gain on investments 0.13
--------
Total from investment operations 0.16
--------
Distributions to shareholders from
Net investment income (0.03)
--------
Net asset value, end of period $10.13
========
Total return 1.57%
Ratios/supplemental data
Net assets, end of period $273,595
========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 32.95 %(a)
After expense reimbursements and waived fees 0.61 %(a)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees (29.30)%(a)
After expense reimbursements and waived fees 3.04 %(a)
Portfolio turnover rate 0.00 %
Average broker commission per share $0.02
(a) Annualized.
See accompanying notes to financial statements
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The Quaker Enhanced Stock Market Fund (the "Fund") is a diversified series
of shares of beneficial interest of the Quaker Investment Trust (the
"Trust"). The Trust, an open-end investment company, was organized on
October 24, 1990 as a Massachusetts Business Trust and is registered under
the Investment Company Act of 1940, as amended. The Fund began operations
on November 25, 1996. The investment objective of the Fund is to provide
long-term capital growth by investing primarily in equity securities of
domestic U.S. companies. The following is a summary of significant
accounting policies followed by the Fund.
A. Security Valuation - The Fund's investments in securities are carried
at value. Securities listed on an exchange or quoted on a national
market system are valued at 4:00 p.m., New York time on the day of
valuation. Other securities traded in the over-the-counter market and
listed securities for which no sale was reported on that date are
valued at the most recent bid price. Securities for which market
quotations are not readily available, if any, are valued by using an
independent pricing service or by following procedures approved by the
Board of Trustees. Short-term investments are valued at cost which
approximates value.
B. Federal Income Taxes - No provision has been made for federal income
taxes since it is the policy of the Fund to comply with the provisions
of the Internal Revenue Code applicable to regulated investment
companies and to make sufficient distributions of taxable income to
relieve it from all federal income taxes.
Net investment income (loss) and net realized gains (losses) may
differ for financial statement and income tax purposes primarily
because of losses incurred subsequent of October 31, which are
deferred for income tax purposes. The character of distributions made
during the year from net investment income or net realized gains may
differ from their ultimate characterization for federal income tax
purposes. Also, due to the timing of dividend distributions, the
fiscal year in which amounts are distributed may differ from the year
that the income or realized gains were recorded by the Fund.
C. Investment Transactions - Investment transactions are recorded on the
trade date. Realized gains and losses are determined using the
specific identification cost method. Interest income is recorded daily
on an accrual basis. Dividend income and distributions to shareholders
are recorded on the ex-dividend date.
D. Distributions to Shareholders - The Fund generally declares dividends
annually, payable in December, on a date selected by the Trust's
Trustees. In addition, distributions may be made annually in December
out of net realized gains through October 31 of that year. The Fund
may make a supplemental distribution subsequent to the end of its
fiscal year ending June 30.
E. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
of assets, liabilities, expenses and revenues reported in the
financial statements. Actual results could differ from those
estimates.
(Continued)
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(Unaudited)
F. Repurchase Agreements - The Fund may acquire U. S. Government
Securities or corporate debt securities subject to repurchase
agreements. A repurchase agreement transaction occurs when the 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 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 Fund will not enter into a repurchase agreement which
will cause more than 10% of its net assets to be invested in
repurchase agreements which extend beyond seven days.In the event of
bankruptcy of the other party to a repurchase agreement, the 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 Fund will not engage in
reverse repurchase transactions, which are considered to be borrowings
under the Investment Company Act of 1940, as amended.
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, Fiduciary Asset Management
Company (the "Advisor") provides the Fund with a continuous program of
supervision of the 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.
As compensation for its services, the Advisor receives a fee at the annual
rate of .50% of the Fund's average daily net assets. The Advisor has
voluntarily waived its fee amounting to $143 for the period ended December
31, 1996.
The Fund's administrator, The Nottingham Company (the "Administrator"),
provides administrative services to and is generally responsible for the
overall management and day-to-day operations of the Fund pursuant to an
accounting and administrative agreement with the Trust. As compensation for
its services, the Administrator receives a fee at the annual rate of 0.175%
of the Fund's first $50 million of average daily net assets, 0.150% of the
next $50 million of average daily net assets, 0.125% of its average daily
net assets in excess of $100 million. The Administrator also receives a
monthly fee of $2,000 for accounting and recordkeeping services.
Additionally, the Administrator charges the Fund for servicing of
shareholder accounts and registration of the Fund's shares. The
administrator also charges the Fund for certain expenses involved with the
daily valuation of portfolio securities. The administrator has voluntarily
waived a portion of its fee amounting to $553 ($0.02 per share) for the
period ended December 31, 1996.
Certain Trustees and officers of the Trust are also officers of the
Advisor, the Distributor or the Administrator.
NOTE 3 - SERVICE FEES
The Board of Trustees, including a majority of the Trustees who are not
"interested persons" of the Trust as defined in the Investment Company Act
of 1940 (the "Act"), adopted a Shareholder Servicing Agreement (the
"Agreement"). Pursuant to this Agreement, Quaker Funds, Inc. (the
"Sponsor") will provide oversight with respect to the Fund's investment
advisor, arrange for payment of investment advisory and administrative
fees, coordinate payments under the Fund's Distribution Plan, develop
(Continued)
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(Unaudited)
communications with existing Fund shareholders, assist in responding to
shareholder inquiries, and will provide other shareholder services. As
compensation for the services, Quaker Funds, Inc. receives 0.20% of the
Fund's average daily net assets. The Sponsor intends to voluntarily waive
all or a portion of its fee and reimburse expenses of the Fund to limit
total Fund operating expenses to 1.00% of the average daily net assets of
the Fund. There can be no assurance that the foregoing voluntary fee
waivers or reimbursements will continue. The Sponsor has voluntarily waived
its fee amounting to $49 and has reimbursed expenses totalling $7,236 for
the period ended December 31, 1996.
NOTE 4 - DEFERRED ORGANIZATION EXPENSES
Expenses totalling $33,324 incurred in connection with its organization and
the registration of its shares have been assumed by the Fund.
The organization expenses are being amortized over a period of sixty
months. Investors purchasing shares of the Fund bear such expenses only as
they are amortized against the Fund's investment income.
NOTE 5 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term investments,
aggregated $264,434 and $0, respectively, for the period ended December 31,
1996.
<PAGE>
QUAKER CORE EQUITY FUND
PORTFOLIO OF INVESTMENTS
December 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - 66.80%
Aerospace & Defense - 5.22%
The Boeing Company 100 $10,638
Computers - 4.23%
Electronic Data Systems 200 8,625
Computer Software & Services - 4.20%
Automatic Data Processing, Inc. 200 8,575
Electronics - 9.78%
General Electric Company 100 9,900
Hewlett-Packard Company 200 10,050
--- ------
19,950
Electronics - Semiconductor - 3.21%
Intel Corporation 50 6,547
Financial - Banks, Money Center - 10.80%
Citicorp 50 5,162
Mellon Bank Corporation 100 7,100
NationsBank Corporation 100 9,775
--- -----
22,037
Financial Services - 5.48%
Federal National Mortgage Association 300 11,175
Food - Processing - 5.57%
Philip Morris Companies, Inc. 100 11,350
Office & Business Equipment - 5.07%
Alco Standard Corporation 200 10,350
Oil & Gas - Domestic - 4.81%
Exxon Corporation 100 9,800
Pharmaceuticals - 3.89%
Merck & Co., Inc. 100 7,925
Telecommunications - 4.54%
Lucent Technologies, Inc. 200 9,250
TOTAL COMMON STOCKS (Cost $138,010) $136,222
(Continued)
<PAGE>
QUAKER CORE EQUITY FUND
PORTFOLIO OF INVESTMENTS
December 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
INVESTMENT COMPANY - 1.69%
Fountain Square U. S. Treasury Oblig 3,463 $3,463
(Cost $3,463)
Total Value of Investments (Cost $141,473 (a)) 68.49% 139,685
Other Assets Less Liabilities 31.51% 64,251
------ --------
Net Assets 100.00% $203,936
====== ========
(a) Aggregate cost for financial reporting and federal income tax purposes
is the same. Unrealized appreciation/depreciation of investments for
financial reporting and federal income tax purposes is as follows:
Unrealized appreciation $2,285
Unrealized depreciation (4,073)
--------
Net unrealized depreciation $(1,788)
========
See accompanying notes to financial statements
<PAGE>
QUAKER CORE EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
(Unaudited)
ASSETS
Investments, at value (cost $141,473) $139,685
Cash 60,417
Interest receivable 17
Dividends receivable 219
Prepaid expenses 263
Deferred organization expenses, net (note 4) 32,658
---------
Total assets 233,259
LIABILITIES
Accrued expenses 3,208
Payable to fund sponsor 26,115
---------
Total liabilities 29,323
NET ASSETS
(applicable to 20,846 shares outstanding; unlimited
shares of no par value beneficial interest authorized) $203,936
=========
NET ASSET VALUE, OFFERING AND REPURCHASE PRICE PER SHARE
($203,936 / 20,846 shares) $9.78
=========
NET ASSETS CONSIST OF
Paid-in capital $205,740
Undistributed net investment income 9
Undistributed net realized loss on investments (25)
Net unrealized depreciation on investments (1,788)
---------
$203,936
=========
See accompanying notes to financial statements
<PAGE>
QUAKER CORE EQUITY FUND
STATEMENT OF OPERATIONS
For the period from November 25, 1996
(commencement of operations)
to December 31, 1996
(Unaudited)
INVESTMENT INCOME
Income
Interest $121
Dividends 285
---------
Total income 406
Expenses
Investment advisory fees (note 2) 90
Fund administration fees (note 2) 21
Service fees (note 3) 30
Custody fees 406
Registration and filing administration fees 51
Fund accounting fees (note 2) 2,600
Audit Fees 811
Legal fees 608
Securities pricing fees 274
Shareholder recordkeeping fees 608
Shareholder servicing expenses 406
Registration and filing expenses 558
Printing expenses 122
Amortization of deferred organization expenses (note 4) 666
Trustee fees and meeting expenses 304
Other operating expenses 405
---------
Total expenses 7,960
Less:
Expense reimbursements (note 3) (7,208)
Investment advisory fees waived (note 2) (90)
Fund administration fees waived (note 2) (532)
Service fees waived (note 3) (30)
---------
Net expenses 100
---------
Net investment income 306
---------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss from investment transactions (25)
Increase in unrealized depreciation on investments (1,788)
----------
Net realized and unrealized loss on investments (1,813)
Net decrease in net assets resulting from operations $(1,507)
==========
See accompanying notes to financial statements
<PAGE>
QUAKER CORE EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
For the period from November 25, 1996
(commencement of operations)
to December 31, 1996
(Unaudited)
INCREASE IN NET ASSETS
Operations
Net investment income $306
Net realized loss from investment transactions (25)
Increase in unrealized depreciation on investments (1,788)
---------
Net decrease in net assets resulting from operations (1,507)
---------
Distributions to shareholders from
Net investment income (297)
---------
Capital share transactions
Increase in net assets resulting from
capital share transactions 205,740
---------
Total increase in net assets 203,936
NET ASSETS
Beginning of period 0
---------
End of period (including undistributed net investment income $203,936
of $9 at December 31, 1996) =========
(a) A summary of capital share activity follows:
--------------------
Shares Value
--------------------
Shares sold 20,815 $205,443
Shares issued for reinvestment of distributions 31 297
------ --------
Net increase 20,846 $205,740
====== ========
See accompanying notes to financial statements
<PAGE>
QUAKER CORE EQUITY FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
For the period from November 25, 1996
(commencement of operations)
to December 31, 1996
(Unaudited)
Net asset value, beginning of period (initial offering price) $10.00
Loss from investment operations
Net investment income 0.02
Net realized and unrealized loss on investments (0.22)
---------
Total from investment operations (0.20)
---------
Distributions to shareholders from
Net investment income (0.02)
---------
Net asset value, end of period $9.78
=========
Total return 2.00%
Ratios/supplemental data
Net assets, end of period $203,936
=========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 66.21 %(a)
After expense reimbursements and waived fees 0.81 %(a)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees (62.86)%(a)
After expense reimbursements and waived fees 2.53 %(a)
Portfolio turnover rate 4.63 %(a)
Average broker commissions per share $0.13
(a) Annualized.
See accompanying notes to financial statements
<PAGE>
QUAKER CORE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The Quaker Core Equity Fund (the "Fund") is a diversified series of shares
of beneficial interest of the Quaker Investment Trust (the "Trust"). The
Trust, an open-end investment company, was organized on October 24, 1990 as
a Massachusetts Business Trust and is registered under the Investment
Company Act of 1940, as amended. The Fund began operations on November 25,
1996. The investment objective of the Fund is to provide long-term capital
growth by investing primarily in equity securities of domestic U. S.
companies. The following is a summary of significant accounting policies
followed by the Fund.
A. Security Valuation - The Fund's investments in securities are carried
at value. Securities listed on an exchange or quoted on a national
market system are valued at 4:00 p.m., New York time on the day of
valuation. Other securities traded in the over-the-counter market and
listed securities for which no sale was reported on that date are
valued at the most recent bid price. Securities for which market
quotations are not readily available, if any, are valued by using an
independent pricing service or by following procedures approved by the
Board of Trustees. Short-term investments are valued at cost which
approximates value.
B. Federal Income Taxes - No provision has been made for federal income
taxes since it is the policy of the Fund to comply with the provisions
of the Internal Revenue Code applicable to regulated investment
companies and to make sufficient distributions of taxable income to
relieve it from all federal income taxes.
Net investment income (loss) and net realized gains (losses) may
differ for financial statement and income tax purposes primarily
because of losses incurred subsequent to October 31, which are
deferred for income tax purposes. The character of distributions made
during the year from net investment income or net realized gains may
differ from their ultimate characterization for federal income tax
purposes. Also, due to the timing of dividend distributions, the
fiscal year in which amounts are distributed may differ from the year
that the income or realized gains were recorded by the Fund.
C. Investment Transactions - Investment transactions are recorded on the
trade date. Realized gains and losses are determined using the
specific identification cost method. Interest income is recorded daily
on an accrual basis. Dividend income and distributions to shareholders
are recorded on the ex-dividend date.
D. Distributions to Shareholders - The Fund generally declares dividends
annually, payable in December, on a date selected by the Trust's
Trustees. In addition, distributions may be made annually in December
out of net realized gains through October 31 of that year. The Fund
may make a supplemental distribution subsequent to the end of its
fiscal year ending June 30.
E. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
of assets, liabilities, expenses and revenues reported in the
financial statements. Actual results could differ from those
estimates.
(Continued)
<PAGE>
QUAKER CORE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(Unaudited)
F. Repurchase Agreements - The Fund may acquire U. S. Government
Securities or corporate debt securities subject to repurchase
agreements. A repurchase agreement transaction occurs when the 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 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 Fund will not enter into a repurchase agreement which
will cause more than 10% of its net assets to be invested in
repurchase agreements which extend beyond seven days. In the event of
bankruptcy of the other party to a repurchase agreement, the 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 Fund will not engage in
reverse repurchase transactions, which are considered to be borrowings
under the Investment Company Act of 1940, as amended.
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, Fiduciary Asset Management
(the "Advisor") provides the Fund with a continuous program of supervision
of the 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. As
compensation for its services, the Advisor receives a fee at the annual
rate of 0.75% of the Fund's average daily net assets.
Currently, the Fund does not offer its shares for sale in states which
require limitations to be placed on its expenses. The Advisor intends to
voluntarily waive all or a portion of its fee. There can be no assurance
that the foregoing voluntary fee waivers will continue. The Advisor has
voluntarily waived its fee amounting to $90 ($0.01 per share) for the
period ended December 31, 1996.
The Fund's administrator, The Nottingham Company (the "Administrator"),
provides administrative services to and is generally responsible for the
overall management and day-to-day operations of the Fund pursuant to an
accounting and administrative agreement with the Trust. As compensation for
its services, the Administrator receives a fee at the annual rate of 0.175%
of the Fund's first $50 million of average daily net assets, 0.150% of the
next $50 million of average daily net assets, 0.125% of its average daily
net assets in excess of $100 million. The Administrator also receives a
monthly fee of $2,000 for accounting and recordkeeping services.
Additionally, the Administrator charges the Fund for servicing of
shareholder accounts and registration of the Fund's shares. The
Administrator also charges the Fund for certain expenses involved with the
daily valuation of portfolio securities. The Administrator has voluntarily
waived a portion of its fees amounting to $532 ($0.04 per share) for the
period ended December 31, 1996.
Certain Trustees and officers of the Trust are also officers of the
Advisor, the Distributor or the Administrator.
(Continued)
<PAGE>
QUAKER CORE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(Unaudited)
NOTE 3 - SERVICE FEES
The Board of Trustees, including a majority of the Trustees who are not
"interested persons" of the Trust as defined in the Investment Company Act
of 1940 (the "Act"), adopted a Shareholder Servicing Agreement (the
"Agreement"). Pursuant to this Agreement, Quaker Funds, Inc. (the
"Sponsor") will provide oversight with respect to the Fund's investment
advisor, arrange for payment of investment advisory and administrative
fees, coordinate payments under the Fund's Distribution Plan, develop
communications with existing Fund shareholders, assist in responding to
shareholder inquiries, and will provide other shareholder services. As
compensation for these services, Quaker Funds, Inc. receives 0.25% of the
Fund's average daily net assets. The Sponsor intends to voluntarily waive
all or a portion of its fee and reimburse expenses of the Fund to limit
total Fund operating expenses to 1.35% of the average daily net assets of
the Fund. There can be no assurance that the foregoing voluntary fee
waivers or reimbursements will continue. The Sponsor has voluntarily waived
its fee amounting to $30 and has reimbursed expenses totalling $7,208 for
the period ended December 31, 1996.
NOTE 4 - DEFERRED ORGANIZATION EXPENSES
Expenses totalling $33,324 incurred in connection with its organization and
the registration of its shares have been assumed by the Fund.
NOTE 5 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term investments,
aggregated $143,091 and $5,056, respectively, for the period ended December
31, 1996. (Continued)
<PAGE>
QUAKER AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS
December 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - 80.93%
Computers - 12.37%
(a)IKOS Systems, Inc. 500 $10,000
(a)MICROS Systems, Inc. 500 15,375
(a)Zitel Corporation 200 8,875
--- -----
34,250
Environmental Control - 5.24%
(a)Philip Environmental, Inc. 1,000 14,500
Electronic Components - Semiconductor - 4.67%
(a)Advanced Micro Devices, Inc. 500 12,937
Foreign Securities - 4.15%
Oy Nokia Ab 200 11,500
Household Products & Housewares - 4.97%
(a)U.S. Industries, Inc. 400 13,750
Insurance - Multiline - 4.85%
(a)Chubb Corporation 250 13,438
Medical - Biotechnology - 20.96%
ADAC Laboratories 500 11,937
(a)Bio-Technology General Corporation Wa 2,100 18,637
(a)Molecular Devices Corporation 1,000 15,563
(a)Sonus Pharmaceuticals 400 11,900
--- ------
58,037
Oil & Gas - Exploration - 6.53%
(a)Nuevo Energy Company 200 10,400
(a)Pool Energy Services Co. 500 7,688
--- -----
18,088
Retail - General Merchandise - 4.69%
(a)Mac Frugals Bargains Close-Outs, Inc. 500 13,000
Telecommunications - 4.71% 500
(a)WorldCom, Inc. 13,031
Telecommunications Equipment - 7.79%
Access Beyond, Inc. 1,000 7,625
Digital Microwave Corporation 500 13,938
--- ------
21,563
Total Common Stocks (Cost $215,509) 224,094
(Continued)
<PAGE>
QUAKER AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS
December 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
INVESTMENT COMPANY - 5.65%
Fountain Square U. S. Treasury Obligation 15,661 $15,661
(Cost $ 15,661)
Total Value of Investments (Cost $231,170 (b)) 86.58% 239,755
Other Assets Less Liabilities 13.42% 37,177
------ --------
Net Assets 100.00% $276,932
====== ========
(a) Non-income producing investment
(b) Aggregate cost for financial reporting and federal income tax purposes
is appreciation (depreciation) of investments for financial reporting
and fed is as follows:
Unrealized appreciation $11,833
Unrealized depreciation (3,248)
------
Net unrealized appreciation $8,585
See accompanying notes to financial statements
<PAGE>
QUAKER AGGRESSIVE GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
(Unaudited)
ASSETS
Investments, at value (cost $231,170) $239,755
Cash 18,501
Dividends receivable 135
Receivable for investments sold 81,078
Prepaid expenses 164
Deferred organization expenses, net (note 4) 32,658
-----------
Total assets 372,291
LIABILITIES
Accrued expenses 3,223
Payable to fund sponsor 26,118
Payable for investment purchases 66,018
-----------
Total liabilities 95,359
NET ASSETS
(applicable to 26,817 shares outstanding; unlimited
shares of no par value beneficial interest authorized) $276,932
===========
NET ASSET VALUE, OFFERING AND REPURCHASE PRICE PER SHARE
($276,932 / 26,817 shares) $10.33
===========
NET ASSETS CONSIST OF
Paid-in capital $260,883
Undistributed net investment income 1
Undistributed net realized gain on investments 7,463
Net unrealized appreciation on investments 8,585
-----------
$276,932
===========
See accompanying notes to financial statements
<PAGE>
QUAKER AGGRESSIVE GROWTH FUND
STATEMENT OF OPERATIONS
For the period from November 25, 1996
(commencement of operations)
to December 31, 1996
(Unaudited)
INVESTMENT INCOME
Income
Interest $385
Dividends 135
-----------
Total income 520
Expenses
Investment advisory fees (note 2) 133
Fund administration fees (note 2) 31
Service fees (note 3) 44
Custody fees 406
Registration and filing administration fees 51
Fund accounting fees (note 2) 2,600
Audit fees 811
Legal fees 608
Securities pricing fees 342
Shareholder recordkeeping fees 608
Shareholder servicing expenses 406
Registration and filing expenses 558
Printing expenses 122
Amortization of deferred organization expenses (note 4) 666
Trustee fees and meeting expenses 304
Other operating expenses 405
Total expenses 8,095
-----------
Less:
Expense reimbursements (note 3) (7,206)
Investment advisory fees waived (note 2) (133)
Fund administration fees waived (note 2) (541)
Service fees waived (note 3) (44)
Net expenses 171
-----------
Net investment income 349
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investment transactions 7,463
Increase in unrealized appreciation on investments 8,585
-----------
Net realized and unrealized gain on investments 16,048
-----------
Net increase in net assets resulting from operations $16,397
-----------
See accompanying notes to financial statements
<PAGE>
QUAKER AGGRESSIVE GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
For the period from November 25, 1996
(commencement of operations)
to December 31, 1996
(Unaudited)
INCREASE IN NET ASSETS
Operations
Net investment income $349
Net realized gain from investment transactions 7,463
Increase in unrealized appreciation on investments 8,585
-----------
Net increase in net assets resulting from operations 16,397
-----------
Distributions to shareholders from
Net investment income (348)
-----------
Capital share transactions
Increase in net assets resulting from
capital share transactions 260,883
-----------
Total increase in net assets $276,932
NET ASSETS
Beginning of period 0
-----------
End of period (including undistributed net investment income $276,932
of $1 at December 31, 1996) ===========
(a) A summary of capital share activity follows:
---------------------
Shares Value
---------------------
Shares sold 26,783 $260,535
Shares issued for reinvestment of distributions 34 348
-------- --------
Net increase 26,817 $260,883
======== ========
See accompanying notes to financial statements
<PAGE>
QUAKER AGGRESSIVE GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
For the period from November 25, 1996
(commencement of operations)
to December 31, 1996
(Unaudited)
Net asset value, beginning of period (initial offering price) $10.00
Income from investment operations
Net investment income 0.01
Net realized and unrealized gain on investments 0.33
----------
Total from investment operations 0.34
----------
Distributions to shareholders from
Net investment income (0.01)
----------
Net asset value, end of period $10.33
==========
Total return 3.43%
Ratios/supplemental data
Net assets, end of period $276,932
==========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 45.73%(a)
After expense reimbursements and waived fees 1.01%(a)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees (42.79)%(a)
After expense reimbursements and waived fees 1.93%(a)
Portfolio turnover rate 73.49%
Average broker commission per share $0.06
(a) Annualized.
See accompanying notes to financial statements
<PAGE>
QUAKER AGGRESSIVE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The Quaker Aggressive Growth Fund (the "Fund") is a diversified series of
shares of beneficial interest of the Quaker Investment Trust (the "Trust").
The Trust, an open-end investment company, was organized on October 24,
1990, as a Massachusetts Business Trust and is registered under the
Investment Company Act of 1940, as amended. The Fund began operations on
November 25, 1996. The investment objective of the Fund is to provide
shareholders with long-term capital growth by investing primarily in equity
securities of domestic U.S. companies. The following is a summary of
significant accounting policies followed by the Fund.
A. Security Valuation - The Fund's investments in securities are carried
at value. Securities listed on an exchange or quoted on a national
market system are valued at 4:00 p.m., New York time on the day of
valuation. Other securities traded in the over-the-counter market and
listed securities for which no sale was reported on that date are
valued at the most recent bid price. Securities for which market
quotations are not readily available, if any, are valued by using an
independent pricing service or by following procedures approved by the
Board of Trustees. Short-term investments are valued at cost which
approximates value.
B. Federal Income Taxes - No provision has been made for federal income
taxes since it is the policy of the Fund to comply with the provisions
of the Internal Revenue Code applicable to regulated investment
companies and to make sufficient distributions of taxable income to
relieve it from all federal income taxes.
Net investment income (loss) and net realized gains (losses) may
differ for financial statement and income tax purposes primarily
because of losses incurred subsequent to October 31, which are
deferred for income tax purposes. The character of distributions made
during the year from net investment income or net realized gains may
differ from their ultimate characterization for federal income tax
purposes. Also, due to the timing of dividend distributions, the
fiscal year in which amounts are distributed may differ from the year
that the income or realized gains were recorded by the Fund.
C. Investment Transactions - Investment transactions are recorded on the
trade date. Realized gains and losses are determined using the
specific identification cost method. Interest income is recorded daily
on an accrual basis. Dividend income and distributions to shareholders
are recorded on the ex-dividend date.
D. Distributions to Shareholders - The Fund generally declares dividends
annually, payable in December, on a date selected by the Trust's
Trustees. In addition, distributions may be made annually in December
out of net realized gains through October 31 of that year. The Fund
may make a supplemental distribution subsequent to its fiscal year
ending June 30.
E. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
of assets, liabilities, expenses and revenues reported in the
financial statements. Actual results could differ from those
estimates.
(Continued)
<PAGE>
QUAKER AGGRESSIVE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(Unaudited)
F. Repurchase Agreements - The Fund may acquire U. S. Government
Securities or corporate debt securities subject to repurchase
agreements. A repurchase agreement transaction occurs when the 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 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 Fund will not enter into a repurchase agreement which
will cause more than 10% of its net assets to be invested in
repurchase agreements which extend beyond seven days. In the event of
bankruptcy of the other party to a repurchase agreement, the 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 Fund will not engage in
reverse repurchase transactions, which are considered to be borrowings
under the Investment Company Act of 1940, as amended.
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, DG Capital Management (the
"Advisor") provides the Fund with a continuous program of supervision of
the 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. As
compensation for its services, the Advisor receives a fee at the annual
rate of 0.75% of the Fund's average daily net assets.
Currently, the Fund does not offer its shares for sale in states which
require limitations to be placed on its expenses. The Advisor intends to
voluntarily waive all or a portion of its fee. There can be no assurance
that the foregoing voluntary fee waivers will continue. The Advisor has
voluntarily waived its fee amounting to $133 ($0.005 per share) for the
period ended December 31, 1996.
The Fund's administrator, The Nottingham Company (the "Administrator"),
provides administrative services to and is generally responsible for the
overall management and day-to-day operations of the Fund pursuant to an
accounting and administrative agreement with the Trust. As compensation for
its services, the Administrator receives a fee at the annual rate of 0.175%
of the Fund's first $50 million of average daily net assets, 0.150% of the
next $50 million of average daily net assets, 0.125% of its average daily
net assets in excess of $100 million. The Administrator also receives a
monthly fee of $2,000 for accounting and recordkeeping services.
Additionally, the Administrator charges the Fund for servicing of
shareholder accounts and registration of the Fund's shares. The
Administrator also charges the Fund for certain expenses involved with the
daily valuation of portfolio securities. The Administrator has voluntarily
waived a portion of its total fees amounting to $541 ($.02 per share) for
the period ended December 31, 1996.
Certain Trustees and officers of the Trust are also officers of the
Advisor, the Distributor or the Administrator.
<PAGE>
QUAKER AGGRESSIVE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(Unaudited)
NOTE 3 - SERVICE FEES
The Board of Trustees, including a majority of the Trustees who are not
"interested persons" of the Trust as defined in the Investment Company Act
of 1940 (the "Act"), adopted a Shareholder Servicing Agreement (the
"Agreement"). Pursuant to this Agreement, Quaker Funds, Inc. (the
"Sponsor") will provide oversight with respect to the Fund's investment
advisor, arrange for payment of investment advisory and administrative
fees, coordinate payments under the Fund's Distribution Plan, develop
communications with existing Fund shareholders, assist in responding to
shareholder inquiries, and will provide other shareholder services. As
compensation for these services, Quaker Funds, Inc. receives 0.25% of the
Fund's average daily net assets. The Sponsor intends to voluntarily waive
all or a portion of its fee and reimburse expenses of the Fund to limit
total Fund operating expenses to 1.35% of the average daily net assets of
the Fund. There can be no assurance that the foregoing voluntary fee
waivers or reimbursements will continue. The Sponsor has voluntarily waived
its fee amounting to $44 and has reimbursed expenses totalling $7,206 for
the period ended December 31, 1996.
NOTE 4 - DEFERRED ORGANIZATION EXPENSES
Expenses totalling $33,324 incurred in connection with its organization and
the registration of its shares have been assumed by the Fund.
The organization expenses are being amortized over a period of sixty
months. Investors purchasing shares of the Fund bear such expenses only as
they are amortized against the Fund's investment income.
NOTE 5 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term investments,
aggregated $372,725 and $164,679, respectively, for the period ended
December 31, 1996.
<PAGE>
QUAKER SMALL-CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
December 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - 98.31%
Aerospace & Defense - 1.43%
AAR Corporation 100 $3,050
(a) Rohr Industries, Inc. 300 6,787
--- -----
9,837
Agriculture - 0.70%
Mississippi Chemical Corporation 200 4,800
Auto Parts - Original Equipment - 2.07%
A.O. Smith Corporation 200 5,975
Arvin Industries, Inc. 200 4,950
Excel Industries, Inc. 200 3,325
--- -----
14,250
Auto Parts - Replacement Equipment - 0.67%
Exide Corporation 200 4,600
Auto & Trucks - 0.99%
PACCAR Inc. 100 6,800
Building Materials - 2.32%
Lone Star Industries, Inc. 100 3,687
Southdown, Inc. 200 6,225
Vulcan Materials Company 100 6,088
--- -----
16,000
Chemicals - 0.64%
Terra Industries, Inc. 300 4,425
Computers - 3.59%
Comdisco, Inc. 200 6,375
(a) Hutchinson Technology, Inc. 100 7,600
(a) Read-Rite Corporation 200 5,050
(a) Western Digital Corporation 100 5,687
--- -----
24,712
Computer Software & Services - 1.02%
(a) Applied Magnetics Corporation 100 3,000
(a) MicroAge, Inc. 200 4,000
7,000
Electrical Equipment - 0.64%
(a) Dynatech Corporation 100 4,425
Electronics - 0.96%
(a) SCI Systems, Inc. 100 4,463
(a) Tracor, Inc. 100 2,125
--- -----
6,588
(Continued)
<PAGE>
QUAKER SMALL-CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
December 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Electronics - Semiconductor - 2.09%
(a) Hadco Corporation 100 $4,900
(a) Standard Microsystems Corporation 500 4,750
(a) VLSI Technology, Inc. 200 4,775
--- -----
14,425
Engineering & Construction - 1.33%
Cummins Engine Company, Inc. 100 4,600
Mark IV Industries, Inc. 200 4,525
--- -----
9,125
Environmental Control - 0.69%
Watts Industries, Inc. 200 4,775
Financial - Banks, Commercial - 1.09%
Aames Financial Corporation 100 3,575
North American Mortgage Company 200 3,950
--- -----
7,525
Financial - Banks, Money Center - 0.62%
Advanta Corporation 100 4,275
Financial - Savings/Loans/Thrift - 3.73%
Commercial Federal Corporation 100 4,775
ONBANCorp, Inc. 100 3,713
Peoples Heritage Financial Group, Inc. 200 5,600
St. Paul Bancorp, Inc. 200 5,875
Standard Federal Bancorporation 100 5,687
--- -----
25,650
Financial - Securities Brokers - 4.22%
Alex. Brown, Inc. 100 7,250
Edwards (A.G.), Inc. 200 6,700
Inter-Regional Financial Group, Inc. 100 3,512
Paine Webber Group Inc. 200 5,625
Quick & Reilly Group, Inc. 200 5,975
--- -----
29,062
Financial Services - 2.22%
AMBAC, Inc. 100 6,650
(a) Olympic Financial Ltd. 300 4,313
PHH Corporation 100 4,300
--- -----
15,263
Food - Processing - 1.27%
Interstate Bakeries Corporation 100 4,913
(a) Smithfield Foods, Inc. 100 3,800
--- -----
8,713
(Continued)
<PAGE>
QUAKER SMALL-CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
December 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Food - Wholesale - 1.22%
Hormel Foods Corporation 100 $2,700
SUPERVALU, INC. 200 5,675
--- -----
8,375
Forest Products & Paper - 0.87%
(a) Paragon Trade Brands, Inc. 200 6,000
Holding Companies - Diversified - 0.78%
Old Republic International Corporation 200 5,375
Homebuilders - 3.08%
Centex Corporation 100 3,763
(a) Champion Enterprises, Inc. 100 1,937
Continental Homes Holding Corporation 200 4,275
Del Webb Corporation 200 3,275
Fleetwood Enterprises, Inc. 100 2,750
(a) U.S. Home Corporation 200 5,200
--- -----
21,200
Household Products & Housewares - 0.33%
Haverty Furniture Company, Inc. 200 2,275
Insurance - Life & Health - 1.76%
USLIFE Corporation 200 6,650
Washington National Corporation 200 5,500
--- -----
12,150
Insurance - Multiline - 3.30%
American Bankers Insurance Group, Inc. 100 5,113
American National Insurance Company 100 7,375
Fremont General Corporation 200 6,200
Horace Mann Educators Corporation 100 4,037
--- -----
22,725
Insurance - Property & Casualty - 4.76%
ACE, Ltd. 100 6,000
NAC Re Corp. 100 3,387
Orion Capital Corporation 100 6,113
PXRE Corporation 100 2,475
TIG Holdings, Inc. 200 6,775
Transatlantic Holdings, Inc. 100 8,050
--- -----
32,800
Iron & Steel - 2.69%
(a) Coastcast Corporation 300 4,350
Oregon Steel Mills, Inc. 300 5,025
Pohang Iron & Steel Company Ltd. 200 4,050
Texas Industries, Inc. 100 5,063
--- -----
18,488
(Continued)
<PAGE>
QUAKER SMALL-CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
December 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Investment Company - 2.16%
S & P Mid-Cap 400 Depositary Receipts 300 $14,850
Machine - Diversified - 0.97%
Gleason Corporation 200 6,650
Medical - Biotechnology - 0.87%
(a) Bio-Rad Laboratories, Inc. 200 5,975
Medical - Hospital Management & Service - 6.65%
(a) Beverly Enterprises 400 5,100
(a) FHP International Corporation 100 3,713
(a) Health Systems International, Inc. 200 4,950
(a) Horizon/CMS Healthcare Corporation 500 6,313
Integrated Health Services, Inc. 200 4,875
(a) Living Centers of America, Inc. 200 5,550
(a) NovaCare, Inc. 300 3,300
(a) OrNda HealthCorp 200 5,850
(a) Sun Healthcare Group, Inc. 200 2,700
(a) Wellpoint Health Networks, Inc. 100 3,437
--- -----
45,788
Medical Supplies - 0.41%
Bergen Brunswig Corporation 100 2,838
Metal Fabrication & Hardware - 4.22%
Amcast Industrial Corporation 200 4,950
Commercial Metals Company 100 3,013
LTV Corporation 400 4,750
Quanex Corporation 200 5,475
Timken Company 100 4,587
USX-US Steel Group, Inc. 200 6,275
--- -----
29,050
Metals - Diversified - 1.60%
Asarco, Inc. 200 5,000
Inland Steel Industries, Inc. 300 6,000
--- -----
11,000
Miscellaneous - Manufacturing - 2.50%
Dexter Corporation 200 6,375
TRINOVA Corporation 200 7,275
(a) WHX Corporation 400 3,550
--- -----
17,200
(Continued)
<PAGE>
QUAKER SMALL-CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
December 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Office & Business Equipment - 1.82%
Harris Corporation 100 $6,863
Herman Miller, Inc. 100 5,662
--- -----
12,525
Oil & Gas - Domestic - 0.61%
(a) Tesoro Petroleum Corporation 300 4,200
Oil & Gas - Equipment & Services - 0.87%
ONEOK Inc. 200 6,000
Oil & Gas - Exploration - 4.33%
Cross Timbers Oil Company 200 5,025
Devon Energy Corporation 100 3,475
(a) Oryx Energy Company 200 4,950
Parker & Parsley Petroleum Company 200 7,350
(a) Santa Fe Energy Resources, Inc. 200 2,775
Snyder Oil Corporation 100 1,737
Union Texas Petroleum Holdings, Inc. 200 4,475
--- -----
29,787
Pharmaceuticals - 0.81%
McKesson Corporation 100 5,600
Publishing - Printing - 0.40%
(a) Devon Group, Inc. 100 2,750
Restaurants & Food Service - 0.77%
(a) Foodmaker, Inc. 600 5,325
Retail - Apparel - 1.53%
(a) AnnTaylor Stores Corporation 300 5,250
(a) Lands' End, Inc. 200 5,300
--- -----
10,550
Retail - Department Stores - 1.77%
(a) Meyer (Fred) , Inc. 200 7,100
(a) The Neiman Marcus Group, Inc. 200 5,100
--- -----
12,200
Retail - Drug Stores - 0.71%
Longs Drug Stores, Inc. 100 4,913
Retail - General Merchandise - 0.35%
Fingerhut Companies, Inc. 200 2,425
(Continued)
<PAGE>
QUAKER SMALL-CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
December 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Retail - Grocery - 1.36%
Great Atlantic & Pacific Tea Company, I 100 $3,187
(a) Smith's Food & Drug Centers, Inc. 200 6,200
--- -----
9,387
Retail - Specialty Line - 0.83%
(a) Zale Corporation 300 5,737
Telecommunications - 0.56%
Southern New England Telecommunications 100 3,887
Tobacco - 0.94%
Universal Corporation 200 6,450
Transportation - Miscellaneous - 0.45%
Sea Containers, Ltd. 200 3,125
Trucking & Leasing - 1.27%
Consolidated Freightways, Inc. 200 4,450
(a) Yellow Corporation 300 4,313
--- -----
8,763
Utilities - Electric - 6.06%
Boston Edison Company 200 5,375
Centerior Energy Corporation 500 5,313
(a) Kulicle & Soffa Industries, Inc. 200 3,800
Long Island Lighting Company 200 4,425
New York State Electric & Gas Corporati 200 4,325
Pinnacle West Capital Corporation 200 6,350
Public Service Company of New Mexico 300 5,887
United Illuminating Company 200 6,275
--- -----
41,750
Utilities - Gas - 0.73%
Westcoast Energy, Inc. 300 5,025
Wholesale - Special Line - 1.68%
Bindley Western Industries, Inc. 100 1,937
(a) Eagle Hardware & Garden, Inc. 200 4,150
(a) Tech Data Corporation 200 5,475
--- -----
11,562
Total Common Stock (Cost $665,833) 676,950
(Continued)
<PAGE>
QUAKER SMALL-CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
December 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
Principal Value
Amount (note 1)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT (b) - 1.19%
Fifth Third Bank 2 Party $8,160 $8,160
5.00%, due January 2, 1997
(Cost $8,160)
Total Value of Investments (Cost $673,993 (c)) 99.50% 685,110
Other Assets Less Liabilities 0.50% 3,448
------ --------
Net Assets 100.00% $688,558
====== ========
(a) Non-income producing investment.
(b) The repurchase agreement is fully collateralized by U. S. government and/or
agency obligations based on market prices at the date of the portfolio.
(c) Aggregate cost for financial reporting and federal income tax purposes is
the same. Unrealized appreciation (depreciation) of investments for
financial reporting and federal income tax purposes is as follows:
Unrealized appreciation $17,460
Unrealized depreciation (6,343)
--------
Net unrealized appreciation $11,117
See accompanying notes to financial statements
<PAGE>
QUAKER SMALL-CAP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
(Unaudited)
ASSETS
Investments, at value (cost $665,833) $676,950
Repurchase agreement (cost $8,160) 8,160
Interest receivable 26
Dividends receivable 210
Prepaid expenses 147
Deferred organization expenses, net (note 4) 32,658
---------
Total assets 718,151
LIABILITIES
Distribution in excess of cash 451
Accrued expenses 3,218
Payable to fund sponsor 25,924
---------
Total liabilities 29,593
NET ASSETS
(applicable to 69,225 shares outstanding; unlimited
shares of no par value beneficial interest authorized) $688,558
=========
NET ASSET VALUE, OFFERING AND REPURCHASE PRICE PER SHARE
($688,558 / 69,225 shares) $9.95
=========
NET ASSETS CONSIST OF
Paid-in capital $678,667
Undistributed net investment income 54
Undistributed net realized loss on investments (1,280)
Net unrealized appreciation on investments 11,117
---------
$688,558
=========
See accompanying notes to financial statements
<PAGE>
QUAKER SMALL-CAP VALUE FUND
STATEMENT OF OPERATIONS
For the period from November 25, 1996
(commencement of operations)
to December 31, 1996
(Unaudited)
INVESTMENT INCOME
Income
Interest $328
Dividends 210
----------
Total income 538
Expenses
Investment advisory fees (note 2) 218
Fund administration fees (note 2) 51
Service fees (note 3) 73
Custody fees 405
Registration and filing administration fees 51
Fund accounting fees (note 2) 2,600
Audit fees 811
Legal fees 608
Securities pricing fees 365
Shareholder recordkeeping fees 608
Shareholder servicing expenses 405
Registration and filing expenses 558
Printing expenses 122
Amortization of deferred organization expenses (note 4) 666
Trustee fees and meeting expenses 304
Other operating expenses 405
----------
Total expenses 8,250
Less:
Expense reimbursements (note 3) (7,400)
Investment advisory fees waived (note 2) (218)
Fund administration fees waived (note 2) (559)
Service fees waived (note 3) (73)
----------
Net expenses (0)
----------
Net investment income 538
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss from investment transactions (1,280)
Increase in unrealized appreciation on investments 11,117
----------
Net realized and unrealized gain on investments 9,837
----------
Net increase in net assets resulting from operations $10,375
==========
See accompanying notes to financial statements
<PAGE>
QUAKER SMALL-CAP VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
For the period from November 25,1996
(commencement of operations)
to December 31,1996
(Unaudited)
INCREASE IN NET ASSETS
Operations
Net investment income $538
Net realized loss from investment transactions (1,280)
Increase in unrealized appreciation on investments 11,117
----------
Net increase in net assets resulting from operations 10,375
Distributions to shareholders from
Net investment income (484)
----------
Capital share transactions
Increase in net assets resulting from
capital share transactions 678,667
----------
Total increase in net assets 688,558
----------
NET ASSETS
Beginning of period 0
----------
End of pe(including undistributed net investment income $688,558
of $54 at December 31, 1996 ) ==========
(a) A summary of capital share activity follows:
------------------------
Shares Value
------------------------
Shares sold 69,176 $678,183
Shares issued for reinvestment of distributions 49 484
------- --------
Net increase 69,225 $678,667
======= ========
See accompanying notes to financial statements
<PAGE>
QUAKER SMALL-CAP VALUE FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
For the period from November 25, 1996
(commencement of operations)
to December 31,1996
(Unaudited)
Net asset value, beginning of period (initial offering price) $10.00
Loss from investment operations
Net investment income 0.01
Net unrealized loss on investments (0.05)
-----------
Total from investment operations (0.04)
-----------
Distributions to shareholders from
Net investment income (0.01)
-----------
Net asset value, end of period $9.95
===========
Total return (0.43)%
Ratios/supplemental data
Net assets, end of period $688,558
===========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 28.39 %(a)
After expense reimbursements and waived fees 0.00 %(a)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees (26.56)%(a)
After expense reimbursements and waived fees 1.83 %(a)
Portfolio turnover rate 25.34 %
Average broker commissions per share $0.05
(a) Annualized.
See accompanying notes to financial statements
<PAGE>
QUAKER SMALL-CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The Quaker Small-Cap Value Fund (the "Fund") is a diversified series of
shares of beneficial interest of the Quaker Investment Trust (the "Trust").
The Trust, an open-end investment company, was organized on October 24,
1990, as a Massachusetts Business Trust and is registered under the
Investment Company Act of 1940, as amended. The investment objective of the
Fund is to provide long-tern capital growth by investing primarily in
equity securities of domestic U.S. companies. The Fund began operations on
November 25, 1996. The following is a summary of significant accounting
policies followed by the Fund.
A. Security Valuation - The Fund's investments in securities are carried
at value. Securities listed on an exchange or quoted on a national
market system are valued at 4:00 p.m., New York time on the day of
valuation. Other securities traded in the over-the-counter market and
listed securities for which no sale was reported on that date are
valued at the most recent bid price. Securities for which market
quotations are not readily available, if any, are valued by using an
independent pricing service or by following procedures approved by the
Board of Trustees. Short-term investments are valued at cost which
approximates value.
B. Federal Income Taxes - No provision has been made for federal income
taxes since it is the policy of the Fund to comply with the provisions
of the Internal Revenue Code applicable to regulated investment
companies and to make sufficient distributions of taxable income to
relieve it from all federal income taxes.
Net investment income (loss) and net realized gains (losses) differ
for financial statements and tax purposes primarily because of losses
incurred subsequent to October 31, which are deferred for tax
purposes. The character of distributions made during the year from net
investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to the
timing of dividend distributions, the fiscal year in which amounts are
distributed may differ from the year that the income or realized gains
were recorded by the Fund.
C. Investment Transactions - Investment transactions are recorded on the
trade date. Realized gains and losses are determined using the
specific identification cost method. Interest income is recorded daily
on an accrual basis. Dividend income and distributions to shareholders
are recorded on the ex-dividend date.
D. Distributions to Shareholders - The Fund generally declares dividends
annually, payable in December, on a date selected by the Trust's
Trustees. In addition, distributions may be made annually in December
out of net realized gains through October 31 of that year. The Fund
may make a supplemental distribution subsequent to its fiscal year
ending June 30.
E. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
of assets, liabilities, expenses and revenues reported in the
financial statements. Actual results could differ from those
estimates.
(Continued)
<PAGE>
QUAKER SMALL-CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(Unaudited)
F. Repurchase Agreements - The Fund may acquire U. S. Government
Securities or corporate debt securities subject to repurchase
agreements. A repurchase agreement transaction occurs when the 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 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 Fund will not enter into a repurchase agreement which
will cause more than 10% of its net assets to be invested in
repurchase agreements which extend beyond seven days. In the event of
bankruptcy of the other party to a repurchase agreement, the 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 Fund will not engage in
reverse repurchase transactions, which are considered to be borrowings
under the Investment Company Act of 1940, as amended.
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, Aronson & Partners (the
"Advisor") provides the Fund with a continuous program of supervision of
the 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. As
compensation for its services, the Advisor receives a fee at the annual
rate of 0.75% of the Fund's average daily net assets.
Currently, the Fund does not offer its shares for sale in states which
require limitations to be placed on its expenses. The Advisor intends to
voluntarily waive all or a portion of its fee. There can be no assurance
that the foregoing voluntary fee waivers will continue. The Advisor has
voluntarily waived its fee amounting to $218 for the period ended December
31, 1996.
The Fund's administrator, The Nottingham Company (the "Administrator"),
provides administrative services to and is generally responsible for the
overall management and day-to-day operations of the Fund pursuant to an
accounting and administrative agreement with the Trust. As compensation for
its services, the Administrator receives a fee at the annual rate of 0.175%
of the Fund's first $50 million of average daily net assets, 0.150% of the
next $50 million of average daily net assets, 0.125% of its average daily
net assets in excess of $100 million. The Administrator also receives a
monthly fee of $2,000 for accounting and recordkeeping services.
Additionally, the Administrator charges the Fund for servicing of
shareholder accounts and registration of the Fund's shares. The
administrator also charges the Fund for certain expenses involved with the
daily valuation of portfolio securities. The Administrator has voluntarily
waived a portion of its total fees amounting to $559 for the period ended
December 31, 1996.
Certain Trustees and officers of the Trust are also officers of the
Advisor, the Distributor or the Administrator.
(Continued)
<PAGE>
QUAKER SMALL-CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(Unaudited)
NOTE 3 - SERVICE FEES
The Board of Trustees, including a majority of the Trustees who are not
"interested persons" of the Trust as defined in the Investment Company Act
of 1940 (the "Act"), adopted a Shareholder Servicing Agreement (the
"Agreement"). Pursuant to this Agreement, Quaker Funds, Inc. (the
"Sponsor") will provide oversight with respect to the Fund's investment
advisor, arrange for payment of investment advisory and administrative
fees, coordinate payments under the Fund's Distribution Plan, develop
communications with existing Fund shareholders, assist in responding to
shareholder inquiries, and will provide other shareholder services. As
compensation for these services, Quaker Funds, Inc. receives 0.25% of the
Fund's average daily net assets. The Sponsor intends to voluntarily waive
all or a portion of its fee and reimburse expenses of the Fund to limit
total Fund operating expenses to 1.35% of the average daily net assets of
the Fund. There can be no assurance that the foregoing voluntary fee
waivers or reimbursements will continue. The Sponsor has voluntarily waived
its fee amounting to $73 and has reimbursed expenses totalling $7,400 for
the period ended December 31, 1996.
NOTE 4 - DEFERRED ORGANIZATION EXPENSES
Expenses totalling $33,324 incurred in connection with its organization and
the registration of its shares have been assumed by the Fund.
The organization expenses are being amortized over a period of sixty
months. Investors purchasing shares of the Fund bear such expenses only as
they are amortized against the Fund's investment income.
NOTE 5 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term investments,
aggregated $762,587 and $95,474 respectively, for the period ended December
31, 1996.
<PAGE>
QUAKER SECTOR ALLOCATION FUND
PORTFOLIO OF INVESTMENTS
December 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - 79.97%
Building Materials - 2.29%
(a)NCI Building Systems, Inc. 55 $1,897
Computer Software & Services - 8.42%
Computer Associates International, Inc. 55 2,736
(a)Microsoft Corporation 28 2,314
(a)Safeguard Scientifics, Inc. 60 1,905
-- -----
6,955
Electrical Equipment - 2.82%
(a)Silicon Valley Group, Inc. 116 2,335
Electronics - 2.82%
(a)ADT Ltd. 102 2,333
Electronics - Semiconductor - 2.30%
(a)LSI Logic Corporation 71 1,899
Financial - Banks, Commercial - 2.94%
The Money Store, Inc. 88 2,431
Financial - Banks, Money Center - 2.12%
Citicorp 17 1,755
Financial Services - 3.22%
SunAmerica, Inc. 60 2,663
Foreign Securities - 2.30%
SmithKline Beecham Plc 28 1,904
Medical - Biotechnology - 2.76%
(a)Amgen, Inc. 42 2,286
Miscellaneous - Manufacturing - 2.51%
Innovex, Inc. 77 2,079
Oil & Gas - Domestic - 2.73%
Pennzoil Company 40 2,260
Oil & Gas - Exploration - 15.68%
Anadarko Petroleum Corporation 36 2,268
Apache Corporation 65 2,283
(a)Chesapeake Energy Corporation 35 1,947
(a)Nabors Industries, Inc. 96 1,848
(Continued)
<PAGE>
QUAKER SECTOR ALLOCATION FUND
PORTFOLIO OF INVESTMENTS
December 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Oil & Gas - Exploration - (Continued)
(a)Oryx Energy Company 94 $2,327
Union Pacific Resources Group Inc. 78 2,282
-- -----
12,955
Pharmaceuticals - 11.28%
(a)Interneuron Pharmaceuticals, Inc. 97 2,522
Rhone-Poulenc Rorer, Inc. 30 2,344
Schering-Plough Corporation 34 2,201
Warner-Lambert Company 30 2,250
-- -----
9,317
Real Estate Investment Trust - 8.78%
Arden Realty Group, Inc. 87 2,403
Boykin Lodging Company 103 2,472
Simon DeBartolo Group, Inc. 77 2,387
-- -----
7,262
Retail - Apparel - 2.31%
Nike, Inc. 32 1,912
Retail - Department Stores - 2.31%
(a)Price/Costco, Inc. 76 1,910
Retail - General Merchandise - 2.38%
Aaron Rents, Inc. 166 1,971
Total Common Stocks (Cost $67,547) 66,124
INVESTMENT COMPANY - 5.17%
Fountain Square U. S. Treasury Obligation 4,278 4,278
(Cost $4,278)
Total Value of Investments (Cost $71,825) 85.14% $70,402
Other Assets Less Liabilities 14.86% 12,285
----- ------
Net Assets 100.00% $82,687
====== =======
(Continued)
<PAGE>
QUAKER SECTOR ALLOCATION FUND
PORTFOLIO OF INVESTMENTS
December 31, 1996
(Unaudited)
(a) Non-income producing investment.
(b) Aggregate cost for financial reporting and federal income tax purposes
i appreciation (depreciation) of investments for financial reporting
and f is as follows:
Unrealized appreciation $277
Unrealized depreciation (1,700)
--------
Net unrealized depreciation ($1,423)
========
See accompanying notes to financial statements
<PAGE>
QUAKER SECTOR ALLOCATION FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
(Unaudited)
ASSETS
Investments, at value (cost $71,825) $70,402
Cash 76,225
Interest receivable 19
Prepaid expenses 279
Deferred organization expenses, net (note 4) 32,658
--------
Total assets 179,583
LIABILITIES
Accrued expenses 3,229
Payable for investment purchases 67,547
Payable to fund sponsor 26,120
--------
Total liabilities 96,896
--------
NET ASSETS
(applicable to 8,407 shares outstanding; unlimited
shares of no par value beneficial interest authorized) $82,687
========
NET ASSET VALUE, OFFERING AND REPURCHASE PRICE PER SHARE
($82,687 / 8,407 shares) $9.83
========
NET ASSETS CONSIST OF
Paid-in capital $84,110
Net unrealized depreciation on investments (1,423)
--------
$82,687
========
See accompanying notes to financial statements
<PAGE>
QUAKER SECTOR ALLOCATION FUND
STATEMENT OF OPERATIONS
For the period from November 25, 1996
(commencement of operations)
to December 31, 1996
(Unaudited)
INVESTMENT INCOME
Income
Interest $310
-------
Expenses
Investment advisory fees (note 2) 55
Fund administration fees (note 2) 13
Service fees (note 3) 18
Custody fees 406
Registration and filing administration fees 51
Fund accounting fees (note 2) 2,600
Audit fees 811
Legal fees 608
Securities pricing fees 228
Shareholder recordkeeping fees 608
Shareholder servicing expenses 406
Registration and filing expenses 558
Printing expenses 122
Amortization of deferred organization expenses (note 4) 666
Trustee fees and meeting expenses 304
Other operating expenses 405
-------
Total expenses 7,859
-------
Less:
Expense reimbursements (note 3) (7,204)
Investment advisory fees waived (note 2) (55)
Fund administration fees waived (note 2) (523)
Service fees waived (note 3) (18)
-------
Net expenses 59
-------
Net investment income 251
-------
UNREALIZED LOSS ON INVESTMENTS
Increase in unrealized depreciation on investments (1,423)
-------
Net decrease in net assets resulting from operations $(1,172)
=======
See accompanying notes to financial statements
<PAGE>
QUAKER SECTOR ALLOCATION FUND
STATEMENTS OF CHANGES IN NET ASSETS
For the period from November 25, 1996
(commencement of operations)
to December 31, 1996
(Unaudited)
INCREASE IN NET ASSETS
Operations
Net investment income $251
Increase in unrealized depreciation on investments (1,423)
-------
Net decrease in net assets resulting from operations (1,172)
-------
Distributions to shareholders from
Net investment income (251)
-------
Capital share transactions
Increase in net assets resulting from capital share transacti 84,110
-------
Total increase in net assets 82,687
NET ASSETS
Beginning of period 0
-------
End of pe(including undistributed net investment income of $82,687
$0 at December 31, 1996) =======
(a) A summary of capital share activity follows:
-------------------
Shares Value
-------------------
Shares sold 8,381 $83,859
Shares issued for reinvestment of distributions 26 251
------- -------
Net increase 8,407 $84,110
======= =======
See accompanying notes to financial statements
<PAGE>
QUAKER SECTOR ALLOCATION FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
For the period from November 25, 1996
(commencement of operations)
to December 31, 1996
(Unaudited)
Net asset value, beginning of period $10.00
Loss from investment operations
Net investment income 0.03
Net unrealized loss on investments (0.17)
-----------
Total from investment operations (0.14)
-----------
Distributions to shareholders from
Net investment income (0.03)
-----------
Net asset value, end of period $9.83
===========
Total return (1.40)%
Ratios/supplemental data
Net assets, end of period $82,687
===========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 106.97 %(a)
After expense reimbursements and waived fees 0.81 %(a)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees (102.71)%(a)
After expense reimbursements and waived fees 3.45 %(a)
Portfolio turnover rate 0.00 %
Average broker commission per share $0.30
(a) Annualized.
See accompanying notes to financial statements
<PAGE>
QUAKER FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The Quaker Fixed Income Fund (the "Fund") is a diversified series of shares
of beneficial interest of the Quaker Investment Trust (the "Trust"). The
Trust, an open-end investment company, was organized on October 24, 1990,
as a Massachusetts Business Trust and is registered under the Investment
Company Act of 1940, as amended. The investment objective of the Fund is to
generate current income, preserve capital and maximize total returns
through active management of investment grade income securities. The Fund
began operations on November 25, 1996. The following is a summary of
significant accounting policies followed by the Fund.
A. Security Valuation - The Fund's investments in securities are carried
at value. Securities listed on an exchange or quoted on a national
market system are valued at 3:00 p.m., New York time on the day of
valuation. Other securities traded in the over-the-counter market and
listed securities for which no sale was reported on that date are
valued at the most recent bid price. Securities for which market
quotations are not readily available, if any, are valued by using an
independent pricing service or by following procedures approved by the
Board of Trustees. Short-term investments are valued at cost which
approximates value.
B. Federal Income Taxes - No provision has been made for federal income
taxes since it is the policy of the Fund to comply with the provisions
of the Internal Revenue Code applicable to regulated investment
companies and to make sufficient distributions of taxable income to
relieve it from all federal income taxes.
Net investment income (loss) and net realized gains (losses) may
differ for financial statement and income tax purposes primarily
because of losses incurred subsequent to October 31, which are
deferred for income tax purposes. The character of distributions made
during the year from net investment income or net realized gains may
differ from their ultimate characterization for federal income tax
purposes. Also, due to the timing of dividend distributions, the
fiscal year in which amounts are distributed may differ from the year
that the income or realized gains were recorded by the Fund.
C. Investment Transactions - Investment transactions are recorded on the
trade date. Realized gains and losses are determined using the
specific identification cost method. Interest income is recorded daily
on an accrual basis. Dividend income and distributions to shareholders
are recorded on the ex-dividend date.
D. Distributions to Shareholders - The Fund generally declares dividends
monthly, on a date selected by the Trust's Trustees. In addition,
distributions may be made annually in December out of net realized
gains through October 31 of that year. The Fund may make a
supplemental distribution subsequent to the end of its fiscal year
ending June 30.
E. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
of assets, liabilities, expenses and revenues reported in the
financial statements. Actual results could differ from those
estimates.
(Continued)
<PAGE>
QUAKER FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(Unaudited)
F. Repurchase Agreements - The Fund may acquire U. S. Government
Securities or corporate debt securities subject to repurchase
agreements. A repurchase agreement transaction occurs when the 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 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 Fund will not enter into a repurchase agreement which
will cause more than 10% of its net assets to be invested in
repurchase agreements which extend beyond seven days. In the event of
bankruptcy of the other party to a repurchase agreement, the 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 Fund will not engage in
reverse repurchase transactions, which are considered to be borrowings
under the Investment Company Act of 1940, as amended.
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, Fiduciary Asset Management
Co. (the "Advisor") provides the Fund with a continuous program of
supervision of the 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.
As compensation for its services, the Advisor receives a fee at the annual
rate of 0.45% of the Fund's average daily net assets.
Currently, the Fund does not offer its shares for sale in states which
require limitations to be placed on its expenses. The Advisor intends to
voluntarily waive all or a portion of its fee. There can be no assurance
that the foregoing voluntary fee waivers will continue. The Advisor has
voluntarily waived its fee amounting to $118 ($0.005 per share) for the
period ended December 31, 1996.
The Fund's administrator, The Nottingham Company (the "Administrator"),
provides administrative services to and is generally responsible for the
overall management and day-to-day operations of the Fund pursuant to an
accounting and administrative agreement with the Trust. As compensation for
its services, the Administrator receives a fee at the annual rate of 0.175%
of the Fund's first $50 million of average daily net assets, 0.150% of the
next $50 million of average daily net assets, 0.125% of its average daily
net assets in excess of $100 million. The Administrator also receives a
monthly fee of $2,000 for accounting and recordkeeping services.
Additionally, the Administrator charges the Fund for servicing of
shareholder accounts and registration of the Fund's shares. The
Administrator also charges the Fund for certain expenses involved with the
daily valuation of portfolio securities. The Administrator has voluntarily
waived a portion of its total fees amounting to $556 ($.02 per share) for
the period ended December 31, 1996.
Certain Trustees and officers of the Trust are also officers of the
Advisor, the Distributor or the Administrator.
(Continued)
<PAGE>
QUAKER FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(Unaudited)
NOTE 3 - SERVICE FEES
The Board of Trustees, including a majority of the Trustees who are not
"interested persons" of the Trust as defined in the Investment Company Act
of 1940 (the "Act"), adopted a Shareholder Servicing Agreement (the
"Agreement"). Pursuant to this Agreement, Quaker Funds, Inc. (the
"Sponsor") will provide oversight with respect to the Fund's investment
advisor, arrange for payment of investment advisory and administrative
fees, coordinate payments under the Fund's Distribution Plan, develop
communications with existing Fund shareholders, assist in responding to
shareholder inquiries, and will provide other shareholder services. As
compensation for these services, Quaker Funds, Inc. receives 0.15% of the
Fund's average daily net assets. The Sponsor intends to voluntarily waive
all or a portion of its fee and reimburse expenses of the Fund to limit
total Fund operating expenses to 0.90% of the average daily net assets of
the Fund. There can be no assurance that the foregoing voluntary fee
waivers or reimbursements will continue. The Sponsor has voluntarily waived
its fee amounting to $38 and has reimbursed expenses totalling $7,641 for
the period ended December 31, 1996.
NOTE 4 - DEFERRED ORGANIZATION EXPENSES
Expenses totalling $33,324 incurred in connection with its organization and
the registration of its shares have been assumed by the Fund.
The organization expenses are being amortized over a period of sixty
months. Investors purchasing shares of the Fund bear such expenses only as
they are amortized against the Fund's investment income.
NOTE 5 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term investments,
aggregated $222,714 and $0, respectively, for the period ended December 31,
1996.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
QUAKER FIXED INCOME FUND
PORTFOLIO OF INVESTMENTS
December 31, 1996
(Unaudited)
- -----------------------------------------------------------------------------------------
Value
Shares (note 1)
- -----------------------------------------------------------------------------------------
INVESTMENT COMPANY - 5.05%
Fountain Square U. S. Treasury Obligations Fund 13,835 $13,835
(Cost $13,835)
Principal Interest Maturity
Amount Rate Date
U. S. GOVERNMENT AND AGENCY OBLIGATIONS - 80.25%
U. S. Treasury Bond $175,000 11.125% 08/15/03 220,008
(Cost $222,285)
REPURCHASE AGREEMENT (a) - 5.44%
Fifth Third Bank 2 Party 14,910 5.000% 01/02/97 14,910
(Cost $14,910)
Total Value of Investments (Cost $251,030 (b)) 90.74% $248,753
Other Assets Less Liabilities 9.26% 25,394
------ ------
Net Assets 100.00% $274,147
====== =======
(a) The repurchase agreement is fully collateralized by U. S. government and/or
agenc based on market prices at the date of the portfolio.
(b) Aggregate cost for financial reporting and federal income tax purposes is
the sam appreciation (depreciation) of investments for financial reporting
and federal in is as follows:
Unrealized appreciation $0
Unrealized depreciation (2,277)
---------
Net unrealized depreciation $(2,277)
See accompanying notes to financial statements
</TABLE>
<PAGE>
QUAKER FIXED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
(Unaudited)
ASSETS
Investments, at value (cost $236,120) $233,843
Repurchase agreement (cost $14,910) 14,910
Cash 14,522
Interest receivable 7,353
Prepaid expenses 113
Deferred organization expenses, net (note 4) 32,658
-----------
Total assets 303,399
-----------
LIABILITIES
Accrued expenses 3,570
Payable to fund sponsor 25,682
-----------
Total liabilities 29,252
-----------
NET ASSETS
(applicable to 27,646 shares outstanding; unlimited
shares of no par value beneficial interest authorized) $274,147
===========
NET ASSET VALUE, OFFERING AND REPURCHASE PRICE PER SHARE
($274,147 / 27,646 shares) $9.92
===========
NET ASSETS CONSIST OF
Paid-in capital $276,415
Undistributed net investment income 9
Net unrealized depreciation on investments (2,277)
-----------
$274,147
===========
See accompanying notes to financial statements
<PAGE>
QUAKER FIXED INCOME FUND
STATEMENT OF OPERATIONS
For the period from November 25, 1996
(commencement of operations)
to December 31, 1996
(Unaudited)
INVESTMENT INCOME
Income
Interest $1,316
----------
Expenses
Investment advisory fees (note 2) 118
Fund administration fees (note 2) 45
Service fees (note 3) 38
Custody fees 406
Registration and filing administration fees 51
Fund accounting fees (note 2) 2,600
Audit fees 811
Legal fees 608
Securities pricing fees 730
Shareholder recordkeeping fees 608
Shareholder servicing expenses 406
Registration and filing expenses 558
Printing expenses 122
Amortization of deferred organization expenses (note 4) 666
Trustee fees and meeting expenses 304
Other operating expenses 405
----------
Total expenses 8,476
----------
Less:
Expense reimbursements (note 3) (7,641)
Investment advisory fees waived (note 2) (118)
Fund administration fees waived (note 2) (556)
Service fees waived (note 3) (38)
----------
Net expenses 123
----------
Net investment income 1,193
UNREALIZED LOSS ON INVESTMENTS
Increase in unrealized depreciation on investments (2,277)
----------
Net decrease in net assets resulting from operations ($1,084)
==========
See accompanying notes to financial statements
<PAGE>
QUAKER FIXED INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
For the period from November 25, 1996
(commencement of operations)
to December 31, 1996
(Unaudited)
INCREASE IN NET ASSETS
Operations
Net investment income $1,193
Increase in unrealized depreciation on investments (2,277)
----------
Net decrease in net assets resulting from operations (1,084)
----------
Distributions to shareholders from
Net investment income (1,184)
----------
Capital share transactions
Increase in net assets resulting from capital share transact 276,415
----------
Total increase in net assets 274,147
NET ASSETS
Beginning of period 0
----------
End of pe(including undistributed net investment income of $274,147
$9 at December 31, 1996) ==========
(a) A summary of capital share activity follows:
-------------------
Shares Value
-------------------
Shares sold 27,527 $275,231
Shares issued for reinvestment of distributions 119 1,184
-------- --------
Net increase 27,646 $276,415
======== ========
<PAGE>
QUAKER FIXED INCOME FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
For the period from November 25, 1996
(commencement of operations)
to December 31, 1996
(Unaudited)
Net asset value, beginning of period (initial offering price) $10.00
Loss from investment operations
Net investment income 0.04
Net unrealized loss on investments (0.08)
----------
Total from investment operations (0.04)
----------
Distributions to shareholders from
Net investment income (0.04)
----------
Net asset value, end of period $9.92
==========
Total return (0.37)%
Ratios/supplemental data
Net assets, end of period $274,147
==========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 33.15 % (a)
After expense reimbursements and waived fees 0.51 % (a)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees (26.36)% (a)
After expense reimbursements and waived fees 6.39 % (a)
Portfolio turnover rate 0.00 %
Average broker commissions per share $0.00
(a) Annualized.
See accompanying notes to financial statements
<PAGE>
QUAKER FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The Quaker Fixed Income Fund (the "Fund") is a diversified series of shares
of beneficial interest of the Quaker Investment Trust (the "Trust"). The
Trust, an open-end investment company, was organized on October 24, 1990,
as a Massachusetts Business Trust and is registered under the Investment
Company Act of 1940, as amended. The investment objective of the Fund is to
generate current income, preserve capital and maximize total returns
through active management of investment grade income securities. The Fund
began operations on November 25, 1996. The following is a summary of
significant accounting policies followed by the Fund.
A. Security Valuation - The Fund's investments in securities are carried
at value. Securities listed on an exchange or quoted on a national
market system are valued at 3:00 p.m., New York time on the day of
valuation. Other securities traded in the over-the-counter market and
listed securities for which no sale was reported on that date are
valued at the most recent bid price. Securities for which market
quotations are not readily available, if any, are valued by using an
independent pricing service or by following procedures approved by the
Board of Trustees. Short-term investments are valued at cost which
approximates value.
B. Federal Income Taxes - No provision has been made for federal income
taxes since it is the policy of the Fund to comply with the provisions
of the Internal Revenue Code applicable to regulated investment
companies and to make sufficient distributions of taxable income to
relieve it from all federal income taxes.
Net investment income (loss) and net realized gains (losses) may
differ for financial statement and income tax purposes primarily
because of losses incurred subsequent to October 31, which are
deferred for income tax purposes. The character of distributions made
during the year from net investment income or net realized gains may
differ from their ultimate characterization for federal income tax
purposes. Also, due to the timing of dividend distributions, the
fiscal year in which amounts are distributed may differ from the year
that the income or realized gains were recorded by the Fund.
C. Investment Transactions - Investment transactions are recorded on the
trade date. Realized gains and losses are determined using the
specific identification cost method. Interest income is recorded daily
on an accrual basis. Dividend income and distributions to shareholders
are recorded on the ex-dividend date.
D. Distributions to Shareholders - The Fund generally declares dividends
monthly, on a date selected by the Trust's Trustees. In addition,
distributions may be made annually in December out of net realized
gains through October 31 of that year. The Fund may make a
supplemental distribution subsequent to the end of its fiscal year
ending June 30.
E. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
of assets, liabilities, expenses and revenues reported in the
financial statements. Actual results could differ from those
estimates.
(Continued)
<PAGE>
QUAKER FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(Unaudited)
F. Repurchase Agreements - The Fund may acquire U. S. Government
Securities or corporate debt securities subject to repurchase
agreements. A repurchase agreement transaction occurs when the 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 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 Fund will not enter into a repurchase agreement which
will cause more than 10% of its net assets to be invested in
repurchase agreements which extend beyond seven days. In the event of
bankruptcy of the other party to a repurchase agreement, the 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 Fund will not engage in
reverse repurchase transactions, which are considered to be borrowings
under the Investment Company Act of 1940, as amended.
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, Fiduciary Asset Management
Co. (the "Advisor") provides the Fund with a continuous program of
supervision of the 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.
As compensation for its services, the Advisor receives a fee at the annual
rate of 0.45% of the Fund's average daily net assets.
Currently, the Fund does not offer its shares for sale in states which
require limitations to be placed on its expenses. The Advisor intends to
voluntarily waive all or a portion of its fee. There can be no assurance
that the foregoing voluntary fee waivers will continue. The Advisor has
voluntarily waived its fee amounting to $118 ($0.005 per share) for the
period ended December 31, 1996.
The Fund's administrator, The Nottingham Company (the "Administrator"),
provides administrative services to and is generally responsible for the
overall management and day-to-day operations of the Fund pursuant to an
accounting and administrative agreement with the Trust. As compensation for
its services, the Administrator receives a fee at the annual rate of 0.175%
of the Fund's first $50 million of average daily net assets, 0.150% of the
next $50 million of average daily net assets, 0.125% of its average daily
net assets in excess of $100 million. The Administrator also receives a
monthly fee of $2,000 for accounting and recordkeeping services.
Additionally, the Administrator charges the Fund for servicing of
shareholder accounts and registration of the Fund's shares. The
Administrator also charges the Fund for certain expenses involved with the
daily valuation of portfolio securities. The Administrator has voluntarily
waived a portion of its total fees amounting to $556 ($.02 per share) for
the period ended December 31, 1996.
Certain Trustees and officers of the Trust are also officers of the
Advisor, the Distributor or the Administrator.
(Continued)
<PAGE>
QUAKER FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
(Unaudited)
NOTE 3 - SERVICE FEES
The Board of Trustees, including a majority of the Trustees who are not
"interested persons" of the Trust as defined in the Investment Company Act
of 1940 (the "Act"), adopted a Shareholder Servicing Agreement (the
"Agreement"). Pursuant to this Agreement, Quaker Funds, Inc. (the
"Sponsor") will provide oversight with respect to the Fund's investment
advisor, arrange for payment of investment advisory and administrative
fees, coordinate payments under the Fund's Distribution Plan, develop
communications with existing Fund shareholders, assist in responding to
shareholder inquiries, and will provide other shareholder services. As
compensation for these services, Quaker Funds, Inc. receives 0.15% of the
Fund's average daily net assets. The Sponsor intends to voluntarily waive
all or a portion of its fee and reimburse expenses of the Fund to limit
total Fund operating expenses to 0.90% of the average daily net assets of
the Fund. There can be no assurance that the foregoing voluntary fee
waivers or reimbursements will continue. The Sponsor has voluntarily waived
its fee amounting to $38 and has reimbursed expenses totalling $7,641 for
the period ended December 31, 1996.
NOTE 4 - DEFERRED ORGANIZATION EXPENSES
Expenses totalling $33,324 incurred in connection with its organization and
the registration of its shares have been assumed by the Fund.
The organization expenses are being amortized over a period of sixty
months. Investors purchasing shares of the Fund bear such expenses only as
they are amortized against the Fund's investment income.
NOTE 5 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term investments,
aggregated $222,714 and $0, respectively, for the period ended December 31,
1996.
<PAGE>
