PROSPECTUS
QUAKER MID-CAP VALUE FUND
Part of the Quaker Family of No Load Mutual Funds
The investment objective of the Quaker Mid-Cap Value Fund is to provide
long-term capital growth. The Fund strives to achieve this objective by
investing primarily in equity securities of domestic U.S. companies.
While there is no assurance that the Fund will achieve its investment objective,
the Fund endeavors to do so by following the investment policies described in
this Prospectus. The Fund has a net asset value that will fluctuate in
accordance with the value of its portfolio securities. An investor may invest,
reinvest, or redeem shares at any time.
Quaker Funds, Inc.
1288 Valley Forge Road
Post Office Box 987
Valley Forge, Pennsylvania 19482
The Fund is a no load diversified series of the Quaker Investment Trust (the
"Trust"), a registered open-end management investment company. This Prospectus
sets forth the information about the Fund that a prospective investor should
know before investing. Investors should read this Prospectus and retain it for
future reference. Additional information about the Fund has been filed with the
Securities and Exchange Commission (the "SEC") and is available upon request and
without charge. You may request the Statement of Additional Information, which
is incorporated in this Prospectus by reference, by writing the Fund at Post
Office Box 4365, Rocky Mount, North Carolina 27803-0365, or by calling
800-220-8888. The SEC also maintains an Internet Web site (http://www.sec.gov)
that contains the Statement of Additional Information, material incorporated by
reference, and other information regarding the Fund.
Investment in any of the Quaker Funds involves risks, including the possible
loss of principal. Shares of the Fund are not deposits or obligations of, or
guaranteed or endorsed by, any financial institution, and such shares are not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board, or any other agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus and the Statement of Additional Information is
December 31, 1997.
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUMMARY.......................................................... 1
FEE TABLE................................................................... 2
INVESTMENT OBJECTIVE AND POLICIES........................................... 3
RISK FACTORS................................................................ 7
INVESTMENT LIMITATIONS...................................................... 7
FEDERAL INCOME TAXES........................................................ 8
DIVIDENDS AND DISTRIBUTIONS................................................. 9
HOW SHARES ARE VALUED....................................................... 9
HOW SHARES MAY BE PURCHASED................................................. 10
HOW SHARES MAY BE REDEEMED.................................................. 12
MANAGEMENT OF THE FUND...................................................... 14
OTHER INFORMATION........................................................... 16
This Prospectus is not an offering of the securities herein described in any
state in which the offering is unauthorized. No sales representative, dealer or
other person is authorized to give any information or make any representations
other than those contained in this Prospectus.
<PAGE>
PROSPECTUS SUMMARY
The Fund. The Quaker Mid-Cap Value Fund (the "Fund") is a no load diversified
series of the Quaker Investment Trust (the "Trust"), a registered open-end
management investment company organized as a Massachusetts business trust. See
"Other Information - Description of Shares."
Offering Price. Shares in the Fund are offered at net asset value. The minimum
initial investment is $10,000. The minimum subsequent investment is $250. See
"How Shares May be Purchased."
Investment Objective. The Fund will invest primarily in equity securities of
domestic U.S. companies. The primary investment objective of the Fund is to
provide shareholders with long-term capital growth. Realization of current
income is not a significant investment consideration, and any income realized
will be incidental to the Fund's objective. For more detailed information
regarding the investment objectives and policies of the Fund, please see
"Investment Objective and Policies."
Special Risk Considerations. The Fund will invest primarily in common stocks
traded in U.S. securities markets, which will present both potential rewards and
special risk considerations. The Fund intends to focus on investments in small
to mid capitalization companies. Accordingly the Fund may be subject to greater
fluctuations in net asset value than those Funds which invest in larger
capitalization companies. The Fund may also engage in certain options and
futures transactions, which present special risks. See "Risk Factors."
Manager. Subject to the general supervision of the Trust's Board of Trustees and
in accordance with the Fund's investment policies, Compu-Val Investments, Inc.
(the "Advisor") of Wilmington, Delaware has been selected to direct the
day-to-day investment management of the Fund. The Advisor manages over $170
million in assets. For its advisory services, the Advisor receives a monthly fee
based on the Fund's daily net assets, at the annual rate of 0.75%. See
"Management of the Fund - Advisor."
Dividends. Capital gains, if any, are generally paid at least once each year by
the Fund. Income dividends, if any, are generally paid at least annually by the
Fund. Dividends and capital gains distributions are automatically reinvested in
additional shares at net asset value unless the shareholder elects to receive
cash.
See "Dividends and Distributions."
Distributor and Distribution Plan. Quaker Securities, Inc. (the "Distributor")
serves as distributor of shares of the Fund. Under the Fund's Distribution Plan,
expenditures by the Fund for distribution activities may not exceed 0.25% of
average net assets annually and will be funded entirely through investment
advisory fees payable to the Fund's investment advisor and will not be paid
directly by the Fund. See "How Shares May Be Purchased-Distribution Plan."
Sponsor and Shareholder Servicing. Shareholder servicing activities will be
performed by Quaker Funds, Inc. (the "Fund Sponsor"), an affiliate of the
Distributor. Shareholder servicing fees will generally be payable to the Fund
Sponsor in the amount of 0.25% of average net assets annually. See "Management
of the Fund-Sponsor of the Fund."
Redemption of Shares. There is no charge for redemptions, other than possible
charges associated with wire transfers of redemption proceeds. Shares may be
redeemed at any time at the net asset value next determined after receipt of a
redemption request by the Fund. A shareholder who submits appropriate written
authorization may redeem shares by telephone. See "How Shares May Be Redeemed."
Money Market Account. The Custodian and Distributor of the Fund have agreed to
make available the Evergreen Money Market Fund, a money market fund not
affiliated with the Fund, for automatic transfer of redemption proceeds and/or
dividends paid on a shareholder's account with the Fund. Further information and
a prospectus for the Evergreen Money Market Fund may be obtained by calling the
Fund at 800-220-8888. See "How Shares May Be Redeemed - Transfer on Redemption
to Money Market Account."
<PAGE>
FEE TABLE
The following table sets forth certain information in connection with the
expenses of the Fund for the current fiscal year. The information is intended to
assist the investor in understanding the various costs and expenses borne by the
Fund, and therefore indirectly by its investors, the payment of which will
reduce an investor's return on an annual basis.
Shareholder Transaction Expenses
Maximum sales load imposed on purchases
(as a percentage of offering price)........................................NONE
Maximum sales load imposed on reinvested dividends.........................NONE
Maximum deferred sales load................................................NONE
Redemption fee *...........................................................NONE
Exchange fee...............................................................NONE
* The Fund in its discretion may choose to pass through to redeeming
shareholders any charges imposed by the Custodian for wiring redemption
proceeds. The Custodian currently charges the Fund $7.00 per
transaction for wiring redemption proceeds.
Annual Fund Operating Expenses
(as a percentage of average net assets)
Investment advisory fees (after fee waivers 1,3).........................0.00%1
12b-1 fees...............................................................0.00%1
Shareholder servicing fees (after fee waivers 2,3).......................0.00%2
Other expenses...........................................................1.35%3
Total operating expenses.................................................1.35%3
EXAMPLE: You would pay the following expenses on a $1,000 investment, whether or
not you redeem at the end of the period, assuming a 5% annual return:
1 Year 3 Years
------ -------
$14 $43
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
1 Up to 25% of the investment advisory fee may be paid for distribution
activities relating to the Fund. The Fund has adopted a Distribution Plan
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended
(the "1940 Act"), which provides that the Fund may pay certain distribution
expenses up to 0.25% of its average net assets annually. All amounts paid for
distribution activities will be funded entirely through investment advisory
fees payable to the Fund's investment advisor and will not be paid directly by
the Fund. See "How Shares May Be Purchased - Distribution Plan."
2 The Fund has adopted a Shareholder Servicing Agreement, which provides that
the Fund will pay a shareholder servicing fee to the Fund's Sponsor, Quaker
Funds, Inc., in the amount of 0.25% of the average daily net assets of the
Fund. See "Management of the Fund-Sponsor of the Fund."
3 The "Total operating expenses" shown above are based upon estimates of actual
operating expenses expected to be incurred by the Fund for the current fiscal
year. The Advisor, the Administrator, and the Fund Sponsor have agreed to a
reduction in the fees payable to them in an amount that limits "Total
operating expenses" (exclusive of interest, taxes, brokerage fees and
commissions, and extraordinary expenses) to not more than 1.35% of the Fund's
average daily net assets. Absent such expected fee waivers, the percentages
shown above for "Investment advisory fees" and "Shareholder servicing fees"
would have been 0.75% and 0.25%, respectively, of the Fund's average daily
net assets. There can be no assurance that the Advisor's, Administrator's,
and Fund Sponsor's fee waivers will continue in the future.
See "How Shares May Be Purchased" and "Management of the Fund" below for more
information about the fees and costs of operating the Fund. The assumed 5%
annual return in the example is required by the Securities and Exchange
Commission. The hypothetical rate of return is not intended to be representative
of past or future performance of the Fund; the actual rate of return for the
Fund may be greater or less than 5%. Further information about the performance
of the Fund will be contained in the Annual Report of the Fund, a copy of which,
when available, may be obtained by calling the Fund.
INVESTMENT OBJECTIVE AND POLICIES
Investment Objective. The investment objective of the Fund is to provide
shareholders with long-term capital growth. Realization of current income will
not be a significant investment consideration, and any such income realized
should be considered incidental to the Fund's objective. The Fund strives to
achieve its investment objective by investing primarily in equity securities of
domestic U.S. companies. While there is no guarantee that the Fund will meet its
investment objective, it seeks to achieve its objective through the investment
policies and techniques described herein. The Fund's investment objective and
fundamental investment limitations may not be altered without the prior approval
of a majority of the Fund's shareholders.
Investment Selection. The Fund's portfolio will include investments in U.S.
equity securities of those companies which the Advisor believes show a high
probability of superior prospects for above average total return. The portfolio
companies will generally be mid capitalization companies, which may exhibit more
volatility than large capitalization companies. The universe of securities
eligible for inclusion in the Fund will be those equity securities with market
capitalizations consistent with the universe of securities included in the
Russell Mid-Cap Index, with an ultimate selection of 25-75 stocks for investment
by the Fund.
Under normal conditions, at least 65% of the Fund's total assets will be
invested in equity securities of mid capitalization companies. For these
purposes "mid capitalization" companies will be defined as those companies with
market capitalizations of up to $6 billion. The remaining portion of the Fund's
total assets may be invested in equity securities of other companies, and other
investments described herein, although under normal conditions the Advisor
anticipates that 65% to 80% of the Fund's assets will be invested in mid
capitalization companies.
In selecting portfolio companies, the Advisor screens for asset rich and
earnings rich companies, selling at relatively low market valuations, with
attractive growth and momentum characteristics. Analysis of those companies
selected for inclusion in the portfolio is undertaken by the Advisor using a
cash flow based, dividend discount model. The Advisor selects 50-100 securities
which it believes to be undervalued relative to comparable alternate
investments, then focuses on the fundamentals of these companies.
The Advisor's fundamental analysis is based on the foundation that accounting
data must be critically analyzed to derive meaningful investment conclusions.
Rather than rely on accounting based measures of performance such as return on
equity, a proprietary model is used to convert company income and balance sheet
data to a cash flow based return on investment. The Advisor calculates a
proprietary value/cost ratio for each company by determining the market value of
debt plus equity, and comparing it to the company's inflation adjusted net
assets.
The final analysis involves more subjective evaluations of management, often
involving conversations with top management. The long-term growth prospects and
competitive position within the company's industry sector are used to select
from those companies meeting the more quantitative selection criteria.
Investment Securities. Stocks held in the portfolio of the Fund will generally
be traded on either the New York Stock Exchange, American Stock Exchange or the
over-the-counter market. Foreign securities may be held in the form of American
Depository Receipts ("ADRs"). ADRs are foreign securities denominated in U.S.
dollars and traded on U.S. securities markets.
The equity securities in which the Fund may invest include common stock,
convertible preferred stock, straight preferred stock, real estate equities such
as REITs, and investment grade convertible bonds. The Fund may also invest up to
5% of its net assets in warrants or rights to acquire equity securities (other
than those acquired in units or attached to other securities). See "Investment
Limitations."
The Fund may make short sales against the box, i.e. short sales made when the
Fund owns securities identical to those sold short.
Because of the inherent risk of foreign securities over domestic issues, the
Fund will limit foreign investments to those traded domestically as American
Depository Receipts (ADRs). ADRs are receipts issued by a U.S. bank or trust
company evidencing ownership of securities of a foreign issuer. ADRs may be
listed on a national securities exchange or may trade on the over-the- counter
markets. The prices of ADRs are denominated in U.S. dollars while the underlying
security may be denominated in a foreign currency.
Under normal conditions, at least 90% of the Fund's total assets will be
invested in equity securities. Warrants and rights will be excluded for purposes
of this calculation. As a temporary defensive measure, however, the Fund may
invest up to 100% of its total assets in investment grade bonds, U.S. Government
Securities, repurchase agreements, or money market instruments. When the Fund
invests its assets in investment grade bonds, U.S. Government Securities,
repurchase agreements, or money market instruments as a temporary defensive
measure, it is not pursuing its stated investment objective. Under normal
circumstances, however, the Fund will hold money market or repurchase agreement
instruments for funds awaiting investment, to accumulate cash for anticipated
purchases of portfolio securities, to allow for shareholder redemptions and to
provide for Fund operating expenses.
The Fund may employ certain management techniques including options on equity
securities and securities indices, futures contracts, and options on futures
contracts as more fully described below. Each of these management techniques
involves transaction costs as well as (1) liquidity risk that contractual
positions cannot be easily closed out in the event of market changes or
generally in the absence of a liquid secondary market, (2) correlation risk that
changes in the value of hedging positions may not match the securities market
fluctuations intended to be hedged, and (3) market risk that an incorrect
prediction of securities prices by the Advisor may cause the Fund to perform
less well than if such positions had not been entered. The ability to terminate
over-the-counter options is more limited than with exchange-traded options and
may involve the risk that the counter-party to the option will not fulfill its
obligations. The Fund will treat purchased over-the-counter options as illiquid
securities. The use of options and futures contracts are highly specialized
activities, which involve investment techniques and risks that are different
from those associated with ordinary portfolio transactions. The loss that may be
incurred by the Fund in entering into futures contracts and written options
thereon is potentially unlimited. Certain limits on the percentage of the Fund's
assets that may be invested in options, futures contracts, and related options
are set forth below.
Options Transactions. The Fund may invest up to 10% of its total assets in
options on equity securities, options on equity indices, and options on equity
industry sector indices. These options may be utilized to hedge certain market
risks which the investment advisor may determine, from time to time, exist in
the equity markets or in individual equity issues, or may be used to provide a
viable substitute for direct investment in, and/or short sales of, specific
equity securities. Investments in call and put options are considered
speculative, due to the time premium imputed in the daily value of options, a
premium which declines with time, independent of the change and/or stability of
the underlying equity security, market index or industry sector index.
A call option gives the holder (buyer) the right to purchase a security at a
specified price (the exercise price) at any time before a certain date (the
expiration date). The writer receives a premium (less a commission) for writing
the option. This premium would partially or completely offset any decline in
price. A put gives the holder (buyer) the right to sell a security to the writer
(seller) at a predetermined price (the exercise price) on or before a set date
(the expiration date). The buyer pays a premium to the writer for the right to
sell the underlying shares at the exercise price instead of at the then
prevailing market price. A stock index option generally operates like an option
covering specific securities, except that delivery of cash rather than the
underlying securities is made. A stock index option obligates the seller
(writer) to deliver, and gives the holder (buyer) the right to take delivery of,
cash upon exercise of the option in an amount equal to the difference between
the exercise settlement value of the underlying index on the day the option is
exercised and the exercise price of the option, multiplied by the specified
index "multiplier". The stock index will fluctuate based on changes in the
market values of the stocks included in the index. The Fund will set aside
permissible liquid assets in a segregated account to secure its potential
obligations under its options positions, and such account will include only
cash, U.S. Government Securities, and other liquid high-grade debt securities.
The ability of the Fund to use options transactions successfully depends upon
the degree of correlation between the equity security or index on which the
option is written and the securities that the Fund owns or the market position
that it intends to acquire; the liquidity of the market for options, which
cannot be assured; and the Advisor's skill in predicting the movement of equity
securities and stock indices and implementing options transactions in
furtherance of the Fund's investment objectives. Successful use by the Fund of
stock or stock index options will depend primarily on the ability of the Advisor
to correctly predict movements in the direction of an individual stock or the
stock markets. For stock index options, this skill is different from the skills
and expertise needed to predict changes in the prices of individual stocks. If
the Advisor forecasts incorrectly the movement of interest rates, market values,
and other economic factors, the Fund would be better off without using this
hedging technique. The Fund will write (sell) stock or stock index options for
hedging purposes or to close out positions in stock or stock index options that
the Fund has purchased. The Fund may only write (sell) "covered" options. Risks
associated with options transactions generally, including options on futures
discussed below, include possible loss of the entire premium and the inability
to effect closing transactions at favorable prices. Brokerage commissions
associated with buying and selling options are proportionately higher than those
associated with general securities transactions. Additional information on
permitted options transactions of the Fund and the associated risks is contained
in the Statement of Additional Information.
Futures Contracts and Related Options. To hedge against changes in securities
prices or interest rates, the Fund may purchase and sell various kinds of
futures contracts, and purchase and write call and put options on any of such
futures contracts. The Fund may also enter into closing purchase and sale
transactions with respect to any of such contracts and options. The futures
contracts will be limited to futures on various equity securities and other
financial instruments and indices. The Fund will engage in futures and related
options transactions for bona-fide hedging or other non-hedging purposes as are
permitted by regulations of the Commodity Futures Trading Commission.
The Fund may not purchase or sell non-hedging futures contracts or purchase or
sell related non-hedging options, except for closing purchase or sale
transactions, if immediately thereafter the sum of the amount of initial margin
deposits on the Fund's existing non-hedging futures and related non-hedging
options positions and the amount of premiums paid for existing non-hedging
options on futures (net of the amount the positions are "in the money") would
exceed 5% of the market value of the Fund's total assets. Otherwise, the Fund
may invest up to 10% of its total assets in initial margins and premiums on
futures and related options. These transactions involve brokerage costs, require
margin deposits, and, in the case of contracts and options obligating the Fund
to purchase securities, require the Fund to segregate assets to cover such
contracts and options. Additional information on the permitted futures
transactions of the Fund and the associated risks is contained in the Statement
of Additional Information.
Money Market Instruments. Money market instruments may be purchased for
temporary defensive purposes, to accumulate cash for anticipated purchases of
portfolio securities and to provide for shareholder redemptions and operating
expenses of the Fund. Money market instruments mature in thirteen months or less
from the date of purchase and may include U.S. Government Securities, corporate
debt securities (including those subject to repurchase agreements), bankers
acceptances and certificates of deposit of domestic branches of U.S. banks, and
commercial paper (including variable amount demand master notes) rated in one of
the two highest rating categories by any of the nationally recognized
statistical rating organizations or if not rated, of equivalent quality in the
Advisor's opinion. The Advisor may, when it believes that unusually volatile or
unstable economic and market conditions exist, depart from the Fund's investment
approach and assume temporarily a defensive portfolio posture, increasing the
Fund's percentage investment in money market instruments, even to the extent
that 100% of the Fund's total assets may be so invested.
U.S. Government Securities. The Fund may invest a portion of the portfolio in
U.S. Government Securities, defined to be U.S. Government obligations such as
U.S. Treasury notes, U.S. Treasury bonds, and U.S. Treasury bills, obligations
guaranteed by the U.S. Government such as Government National Mortgage
Association ("GNMA") as well as obligations of U.S. Government authorities,
agencies and instrumentalities such as Federal National Mortgage Association
("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"), Federal Home
Administration ("FHA"), Federal Farm Credit Bank ("FFCB"), Federal Home Loan
Bank ("FHLB"), Student Loan Marketing Association ("SLMA"), and The Tennessee
Valley Authority. U.S. Government Securities may be acquired subject to
repurchase agreements. While obligations of some U.S. Government sponsored
entities are supported by the full faith and credit of the U.S. Government (e.g.
GNMA), several are supported by the right of the issuer to borrow from the U.S.
Government (e.g. FNMA, FHLMC), and still others are supported only by the credit
of the issuer itself (e.g. SLMA, FFCB). No assurances can be given that the U.S.
Government will provide financial support to U.S. Government agencies or
instrumentalities in the future, since it is not obligated to do so by law. The
guarantee of the U.S. Government does not extend to the yield or value of the
Fund's shares.
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 future date. The repurchase price exceeds the purchase price by an amount
which reflects an agreed upon market interest rate earned by the Fund effective
for the period of time during which the repurchase agreement is in effect.
Delivery pursuant to the resale typically will occur within one to seven days of
the purchase. The Fund will not enter into any repurchase agreement which will
cause more than 10% of its net assets to be invested in repurchase agreements
which extend beyond seven days or other illiquid securities. In the event of the
bankruptcy of the other party to a repurchase agreement, 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 1940 Act.
Investment Companies. In order to achieve its investment objective, the Fund may
invest up to 10% of the value of its total assets in securities of other
investment companies. The Fund may invest in any type of investment company
consistent with the Fund's investment objective and policies. The Fund will not
acquire securities of any one investment company if, immediately thereafter, the
Fund would own more than 3% of such company's total outstanding voting
securities, securities issued by such company would have an aggregate value in
excess of 5% of the Fund's total assets, or securities issued by such company
and securities held by the Fund issued by other investment companies would have
an aggregate value in excess of 10% of the Fund's total assets. To the extent
the Fund invests in other investment companies, the shareholders of the Fund
would indirectly pay a portion of the operating costs of the underlying
investment companies. These costs include advisory, management, brokerage,
shareholder servicing and other operational expenses. Shareholders of the Fund
would then indirectly pay higher operational costs than if they owned shares of
the underlying investment companies directly.
Real Estate Securities. The Fund will not invest directly in real estate
(including limited partnership interests), but may invest in readily marketable
securities secured by real estate or interests therein or issued by companies
that invest in real estate or interests therein. The Fund may also invest in
readily marketable interests in real estate investment trusts ("REITs"). REITs
are generally publicly traded on the national stock exchanges and in the
over-the-counter market and have varying degrees of liquidity. Although the Fund
is not limited in the amount of these types of real estate securities they may
acquire, it is not presently expected that within the next 12 months the Fund
will have in excess of 5% of its total assets in real estate securities. REITs
are pooled investment vehicles which invest primarily in income-producing real
estate or real estate related loans or interests. REITs are generally classified
as equity REITs, mortgage REITs or a combination of equity and mortgage REITs.
Equity REITs invest the majority of their assets directly in real property and
derive income primarily from the collection of rents. Equity REITs can also
realize capital gains by selling properties that have appreciated in value.
Mortgage REITs invest the majority of their assets in real estate mortgages and
derive income from the collection of interest payments. Like investment
companies such as the Fund, REITs are not taxed on income distributed to
shareholders provided they comply with several requirements of the Internal
Revenue Code.
Investing in REITs involves certain risks in addition to those risks associated
with investing in the real estate industry in general. Equity REITs may be
affected by changes in the value of the underlying property owned by the REITs,
while mortgage REITs may be affected by the quality of any credit extended
(which may also be affected by changes in the value of the underlying property).
REITs are dependent upon management skills, often have limited diversification,
and are subject to the risks of financing projects. REITs are subject to heavy
cash flow dependency, default by borrowers, self-liquidation, and the
possibilities of failing to qualify for the exemption from tax for distributed
income under the Internal Revenue Code and failing to maintain its exemptions
from the Investment Company Act. Certain REITs have relatively small market
capitalizations, which may result in less market liquidity and greater price
volatility of its securities.
RISK FACTORS
Investment Policies and Techniques. Reference should be made to "Investment
Objective and Policies" above for a description of special risks presented by
the investment policies of the Fund and the specific securities and investment
techniques that may be employed by the Fund, including the risks associated with
repurchase agreements, real estate securities, and options and futures
transactions. A more complete discussion of certain of these securities and
investment techniques and their associated risks is contained in the Statement
of Additional Information.
Fluctuations in Value. To the extent that the major portion of the Fund's
portfolio consists of common stocks, it may be expected that its net asset value
will be subject to greater fluctuation than a portfolio containing mostly fixed
income securities. Moreover, by focusing the Fund's investments on a specific
sector of the market, the Fund may be subject to greater share price
fluctuations than a more diversified fund. The Fund will invest primarily in mid
capitalization companies. Accordingly, the Fund may be subject to greater
fluctuations than funds that invest in larger capitalization companies. Because
there is risk in any investment, there can be no assurance that the Fund will
achieve its investment objective.
Portfolio Turnover. The Fund may sell portfolio securities without regard to the
length of time they have been held in order to take advantage of new investment
opportunities. Nevertheless, the Fund's portfolio turnover generally will not
exceed 100% in any one year. The degree of portfolio activity affects the
brokerage costs of the Fund and other transaction costs related to the sale of
securities and the reinvestment in other securities. Portfolio turnover may also
have capital gain tax consequences.
Borrowing. The Fund may borrow, temporarily, up to 5% of its total assets for
extraordinary or emergency purposes and 15% of its total assets to meet
redemption requests which might otherwise require untimely disposition of
portfolio holdings. To the extent the Fund borrows for these purposes, the
effects of market price fluctuations on portfolio net asset value will be
exaggerated. If, while such borrowing is in effect, the value of the Fund's
assets declines, the Fund could be forced to liquidate portfolio securities when
it is disadvantageous to do so. The Fund would incur interest and other
transaction costs in connection with borrowing. The Fund will borrow only from a
bank. The Fund will not make any investments if the borrowing exceeds 5% of its
total assets until such time as repayment has been made to bring the total
borrowing below 5% of its total assets.
Illiquid Investments. The Fund may invest up to 10% of its net assets in
illiquid securities. Illiquid securities are those that may not be sold or
disposed of in the ordinary course of business within seven days at
approximately the price at which they are valued. Under the supervision of the
Board of Trustees, the Advisor determines the liquidity of the Fund's
investments. The absence of a trading market can make it difficult to ascertain
a market value for illiquid investments. Disposing of illiquid securities before
maturity may be time consuming and expensive, and it may be difficult or
impossible for a Fund to sell illiquid investments promptly at an acceptable
price. Included within the category of illiquid securities will also be
restricted securities, which cannot be sold to the public without registration
under the federal securities laws. Unless registered for sale, these securities
can only be sold in privately negotiated transactions or pursuant to an
exemption from registration.
Advisor Experience. The Fund, organized in 1997, has no prior operating history.
The assets of the Fund are managed by the Advisor, a Delaware corporation
established in 1974. While the Advisor has no previous experience managing
mutual funds, it has been rendering investment counsel, utilizing investment
strategies similar to that of the Fund, to other individuals, banks and thrift
institutions, pension and profit sharing plans, trusts, estates, charitable
organizations, and corporations since its formation. See "Management of the Fund
- - Advisor."
INVESTMENT LIMITATIONS
To limit the Fund's exposure to risk, the Trust has adopted certain investment
limitations. Some of these restrictions are that the Fund will not: (1) issue
senior securities, borrow money or pledge its assets, except it may borrow from
banks as a temporary measure (a) for extraordinary or emergency purposes, in
amounts not exceeding 5% of the Fund's total assets or, (b) in order to meet
redemption requests, in amounts not exceeding 15% of its total assets (the Fund
will not make any investments if borrowing exceeds 5% of its total assets); (2)
make loans of money or securities, except that the Fund may invest in repurchase
agreements (but repurchase agreements having a maturity of longer than seven
days are subject to the limitation on investing in illiquid securities); (3)
invest more than 10% of its net assets in illiquid securities; (4) invest in
securities of issuers which have a record of less than three years' continuous
operation (including predecessors and, in the case of bonds, guarantors), if
more than 5% of its total assets would be invested in such securities; (5)
purchase or sell commodities, commodities contracts, real estate (including
limited partnership interests, but excluding readily marketable securities
secured by real estate or interests therein, readily marketable interests in
real estate investment trusts, or readily marketable securities issued by
companies that invest in real estate or interests therein) or interests in oil,
gas, or other mineral exploration or development programs or leases (although it
may invest in readily marketable securities of issuers that invest in or sponsor
such programs or leases); (6) with respect to 75% of Fund assets, invest more
than 5% of its total assets in the securities of any one issuer or purchase more
than 10% of the outstanding voting stock of any one issuer; (7) write, purchase,
or sell puts, calls, straddles, spreads, or combinations thereof, or futures
contracts or related options, except that the Fund may engage in certain
transactions in options and futures to the extent described herein; (8) invest
more than 5% of its net assets in warrants; and (9) make short sales of
securities or maintain a short position, except short sales "against the box".
Investment restrictions (1), (2), (5), (6), and (9) are deemed fundamental, that
is, they may not be changed without shareholder approval. See "Investment
Limitations" in the Statement of Additional Information for a complete list of
investment limitations.
If the Board of Trustees of the Trust determines that the Fund's investment
objective can best be achieved by a substantive change in a non-fundamental
investment limitation, the Board can make such change without shareholder
approval and will disclose any such material changes in the then current
Prospectus. Any limitation that is not specified in this Prospectus, or in the
Statement of Additional Information, as being fundamental, is non-fundamental.
If a percentage limitation is satisfied at the time of investment, a later
increase or decrease in such percentage resulting from a change in the value of
the Fund's portfolio securities generally will not constitute a violation of
such limitation. If the limitation on illiquid securities is exceeded, however,
through a change in values, net assets, or other circumstances, the Fund would
take appropriate steps to protect liquidity by changing its portfolio.
FEDERAL INCOME TAXES
Taxation of the Fund. The Internal Revenue Code of 1986, as amended (the
"Code"), treats each series in the Trust as a separate regulated investment
company. The Fund intends to qualify or remain qualified as a regulated
investment company under the Code by distributing substantially all of its "net
investment income" to shareholders and meeting other requirements of the Code.
For the purpose of calculating dividends, net investment income consists of
income accrued on portfolio assets, less accrued expenses. Upon qualification,
the Fund will not be liable for federal income taxes to the extent earnings are
distributed. The Board of Trustees retains the right for any series of the Trust
to determine for any particular year if it is advantageous not to qualify as a
regulated investment company. The Fund's tax year for federal income tax
purposes ends August 31, while the Fund's fiscal year for financial statement
and reporting purposes ends June 30. Regulated investment companies, such as
each series of the Trust, are subject to a non-deductible 4% excise tax to the
extent they do not distribute the statutorily required amount of investment
income, determined on a calendar year basis, and capital gain net income, using
an October 31 year-end measuring period. The Fund intends to declare or
distribute dividends during the calendar year in an amount sufficient to prevent
imposition of the 4% excise tax.
Taxation of Shareholders. For federal income tax purposes, any dividends and
distributions from short-term capital gains that a shareholder receives in cash
from the Fund or which are re-invested in additional shares will be taxable
ordinary income. If a shareholder is not required to pay a tax on income, he
will not be required to pay federal income taxes on the amounts distributed to
him. A dividend declared in October, November or December of a year and paid in
January of the following year will be considered to be paid on December 31 of
the year of declaration.
Distributions paid by the Fund from long-term capital gains, whether received in
cash or reinvested in additional shares, are taxable as long-term capital gains,
regardless of the length of time an investor has owned shares in the Fund.
Capital gain distributions are made when the Fund realizes net capital gains on
sales of portfolio securities during the year. Dividends and capital gain
distributions paid by the Fund shortly after shares have been purchased,
although in effect a return of investment, are subject to federal income
taxation.
The sale of shares of the Fund is a taxable event and may result in a capital
gain or loss. Capital gain or loss may be realized from an ordinary redemption
of shares or an exchange of shares between two mutual funds (or two series of
the Trust).
The Trust will inform shareholders of the Fund of the source of its dividends
and capital gains distributions at the time they are paid and, promptly after
the close of each calendar year, will issue an information return to advise
shareholders of the federal tax status of such distributions and dividends.
Dividends and distributions may also be subject to state and local taxes.
Shareholders should consult their tax advisors regarding specific questions as
to federal, state or local taxes.
Federal income tax law requires investors to certify that the social security
number or taxpayer identification number provided to the Fund is correct and
that the investor is not subject to 31% withholding for previous under-reporting
to the Internal Revenue Service (the "IRS"). Investors will be asked to make the
appropriate certification on its application to purchase shares. If a
shareholder of the Fund has not complied with the applicable statutory and IRS
requirements, the Fund is generally required by federal law to withhold and
remit to the IRS 31% of reportable payments (which may include dividends and
redemption amounts).
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to distribute substantially all of its net investment income,
if any, in the form of dividends. The Fund will generally pay income dividends,
if any, at least annually. The Fund will generally distribute net realized
capital gains, if any, at least annually.
Unless a shareholder elects to receive cash, dividends and capital gains will be
automatically reinvested in additional full and fractional shares of the Fund at
the net asset value per share next determined. Shareholders wishing to receive
their dividends or capital gains in cash may make their request in writing to
the Fund at 107 North Washington Street, Post Office Box 4365, Rocky Mount,
North Carolina 27803-0365. That request must be received by the Fund prior to
the record date to be effective as to the next dividend. Each shareholder will
receive a quarterly summary of his or her account, including information as to
any reinvested dividends. Tax consequences to shareholders of dividends and
distributions are the same if received in cash or in additional shares of the
Fund.
In order to satisfy certain requirements of the Internal Revenue Code, the Fund
may declare special year-end dividend and capital gains distribution during
December. Such distributions, if received by shareholders by January 31, are
deemed to have been paid by the Fund and received by shareholders on December 31
of the prior year.
There is no fixed dividend rate, and there can be no assurance of the payment of
any dividends or the realization of any gains.
HOW SHARES ARE VALUED
Net asset value of the Fund is determined at the time trading closes on the New
York Stock Exchange (currently 4:00 p.m., New York time, Monday through Friday)
except on business holidays when the New York Stock Exchange is closed. The net
asset value of the shares of the Fund for purposes of pricing sales and
redemptions is equal to the total market value of its investments and other
assets, less all of its liabilities, divided by the number of its outstanding
shares.
Securities that are listed on a securities exchange are valued at the last
quoted sales price at the time the valuation is made. Price information on
listed securities is taken from the exchange where the security is primarily
traded by the Fund. Securities that are listed on an exchange and which are not
traded on the valuation date are valued at the mean of the bid and asked prices.
Unlisted securities for which market quotations are readily available are valued
at the latest quoted sales price, if available, at the time of valuation,
otherwise, at the latest quoted bid price. Temporary cash investments with
maturities of 60 days or less will be valued at amortized cost, which
approximates market value. Securities for which no current quotations are
readily available are valued at fair value as determined in good faith using
methods approved by the Board of Trustees of the Trust. Securities may be valued
on the basis of prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities.
HOW SHARES MAY BE PURCHASED
Assistance in opening accounts and a purchase application may be obtained by
calling 800-220-8888, or by writing to the Fund at the address shown below for
purchases by mail. Assistance is also available through any broker-dealer
authorized to sell shares in the Fund. Payment for shares purchased may also be
made through your account at the broker-dealer processing your application and
order to purchase. Your investment will purchase shares at the Fund's net asset
value next determined after your order is received by the Fund in proper form as
indicated herein. Since the Fund is offered only on a no-load basis, a
broker-dealer may charge a transaction fee for settlement services.
The minimum initial investment is $10,000 in the Trust. Investors may allocate
their investment among the various series (Funds) of the Trust. If an initial
investment is made in only one Fund, the minimum initial investment is $10,000.
The minimum subsequent investment is $250 ($100 for those participating in the
automatic investment plan). The Fund may, in the Distributor's sole discretion,
accept certain accounts with less than the stated minimum initial investment.
You may invest in the following ways:
Purchases by Mail. Shares may be purchased initially by completing the
application accompanying this Prospectus and mailing it, together with a check
payable and addressed to the Fund, 107 North Washington Street, Post Office Box
4365, Rocky Mount, North Carolina 27803-0365. Subsequent investments in an
existing account in the Fund may be made at any time in minimum amounts of $250
by sending a check payable and addressed to the Fund, to the address stated
above. Please enclose the stub of your account statement and include the amount
of the investment, the name of the account for which the investment is to be
made and the account number.
Purchases by Wire. To purchase shares by wiring federal funds, the Fund must
first be notified by calling 800-220-8888 to request an account number and
furnish the Fund with your tax identification number. Following notification to
the Fund, federal funds and registration instructions should be wired through
the Federal Reserve System to:
First Union National Bank of North Carolina
Charlotte, North Carolina
ABA # 053000219
For the Quaker Mid-Cap Value Fund
Acct # 2000001067396
For further credit to (shareholder's name and SS# or EIN#)
It is important that the wire contain all the information and that the Fund
receive prior telephone notification to ensure proper credit. A completed
application with signature(s) of registrant(s) must be mailed to the Fund
immediately after the initial wire as described under "Purchases by Mail" above.
Investors should be aware that some banks may impose a wire service fee.
General. All purchases of shares are subject to acceptance and are not binding
until accepted. The Fund reserves the right to reject any application or
investment. Orders received by the Fund and effective prior to the time trading
closes on the New York Stock Exchange (currently 4:00 p.m. New York time, Monday
through Friday) will purchase shares at the net asset value determined at that
time. Orders received by the Fund and effective after the close of trading, or
on a day when the New York Stock Exchange is not open for business, will
purchase shares at the net asset value next determined. For orders placed
through a qualified broker-dealer, such firm is responsible for promptly
transmitting purchase orders to the Fund. Investors may be charged a fee if they
effect transactions in Fund shares through a broker or agent.
The Fund may enter into agreements with one or more brokers, including discount
brokers and other brokers associated with investment programs, including mutual
fund "supermarkets," pursuant to which such brokers may be authorized to accept
on the Fund's behalf purchase and redemption orders that are in "good form."
Such brokers may be authorized to designate other intermediaries to accept
purchase and redemption orders on the Fund's behalf. Under such circumstances,
the Fund will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order. Such orders will be priced at the Fund's net asset value next determined
after they are accepted by an authorized broker or the broker's designee.
If checks are returned unpaid due to nonsufficient funds, stop payment or other
reasons, the Trust will charge $20. To recover any such loss or charge, the
Trust reserves the right, without further notice, to redeem shares of any Fund
of the Trust already owned by any purchaser whose order is canceled, and such a
purchaser may be prohibited from placing further orders unless investments are
accompanied by full payment by wire or cashier's check.
Payment must be made by check or money order drawn on a U.S. bank and payable in
U.S. dollars. Under certain circumstances the Distributor, at its sole
discretion, may allow payment in kind for Fund shares purchased by accepting
securities in lieu of cash. Any securities so accepted would be valued on the
date received and included in the calculation of the net asset value of the
Fund. See the Statement of Additional Information for additional information on
purchases in kind.
The Administrator is required by federal law to withhold and remit to the IRS
31% of the dividends, capital gains distributions and, in certain cases,
proceeds of redemptions paid to any shareholder who fails to furnish the Fund
with a correct taxpayer identification number, who under-reports dividend or
interest income or who fails to provide certification of tax identification
number. Instructions to exchange or transfer shares held in established accounts
will be refused until the certification has been provided. In order to avoid
this withholding requirement, you must certify on your application, or on a
separate W-9 Form supplied by the Fund, that your taxpayer identification number
is correct and that you are not currently subject to backup withholding or you
are exempt from backup withholding. For individuals, your taxpayer
identification number is your social security number.
Distribution Plan. Quaker Securities, Inc., 1288 Valley Forge Road, Post Office
Box 987, Valley Forge, Pennsylvania 19482 (the "Distributor"), is the national
distributor for the Fund under a Distribution Agreement with the Trust. The
Distributor may sell Fund shares to or through qualified securities dealers or
others.
Jeffry H. King, a Trustee of the Trust, controls the Distributor.
The Trust has adopted a Distribution Plan (the "Plan") for the Fund pursuant to
Rule 12b-1 under the 1940 Act. Under the Plan the Fund may reimburse any
expenditures to finance any activity primarily intended to result in sale of the
shares of the Fund, including, but not limited to, the following: (i) payments
to the Distributor and its agents, securities dealers, and others for the sale
of shares of the Fund; (ii) payment of compensation to and expenses of personnel
who engage in or support distribution of shares of the Fund; and (iii)
formulation and implementation of marketing and promotional activities. The
categories of expenses for which reimbursement is made are approved by the Board
of Trustees of the Trust. Expenditures by the Fund pursuant to the Plan are
accrued based on the average daily net assets of the Fund and may not exceed
0.25% of average net assets for each year elapsed subsequent to adoption of the
Plan. All expenditures under the Plan will be funded entirely from investment
advisory fees payable to the Fund's investment advisor and will not be paid
directly by the Fund. The Investment Advisory Agreement entered into by the Fund
and the Investment Advisor provides for the payment of such distribution fees
and expenses from the investment advisory fees payable thereunder.
The Plan may not be amended to increase materially the amount to be spent under
the Plan without shareholder approval. The continuation of the Plan must be
approved by the Board of Trustees annually. At least quarterly the Board of
Trustees must review a written report of amounts expended pursuant to the Plan
and the purposes for which such expenditures were made.
The Distributor, at its expense, may also provide additional compensation to
dealers in connection with sales of shares of the Fund. Compensation may include
financial assistance to dealers in connection with conferences, sales or
training programs for their employees, seminars for the public, advertising
campaigns regarding the Fund, and/or other dealer-sponsored special events. In
some instances, this compensation may be made available only to certain dealers
whose representatives have sold or are expected to sell a significant amount of
such shares. Compensation may include payment for travel expenses, including
lodging, incurred in connection with trips taken by invited registered
representatives and members of their families to locations within or outside of
the United States for meetings or seminars of a business nature. Dealers may not
use sales of the Fund's shares to qualify for this compensation to the extent
such may be prohibited by the laws of any state or any self-regulatory agency,
such as the National Association of Securities Dealers, Inc. None of the
aforementioned compensation is paid for by the Fund or its shareholders.
Exchange Feature. Investors will have the privilege of exchanging shares of the
Fund for shares of any other Fund of the Trust. An exchange involves the
simultaneous redemption of shares of one series and purchase of shares of
another series at the respective closing net asset value next determined after a
request for redemption has been received, and is a taxable transaction. Shares
of the Fund may be exchanged for shares of any other series of the Trust at the
net asset value plus that series' sales charge, if any. Exchanges may only be
made by investors in states where shares of the other series are qualified for
sale. An investor may direct the Fund to exchange his shares by writing to the
Fund at its principal office. The request must be signed exactly as the
investor's name appears on the account, and it must also provide the account
number, number of shares to be exchanged, the name of the series to which the
exchange will take place and a statement as to whether the exchange is a full or
partial redemption of existing shares.
A pattern of frequent exchange transactions may be deemed by the Distributor to
be an abusive practice that is not in the best interests of the shareholders of
the Fund. Such a pattern may, at the discretion of the Distributor, be limited
by the Fund's refusal to accept further purchase and/or exchange orders from an
investor, after providing the investor with 60 days prior notice. The
Distributor will consider all factors it deems relevant in determining whether a
pattern of frequent purchases, redemptions and/or exchanges by a particular
investor is abusive and not in the best interests of the Fund or its other
shareholders.
A shareholder should consider the investment objectives and policies of any
series into which the shareholder will be making an exchange, as described in
the prospectus for that other series. The Board of Trustees of the Trust
reserves the right to suspend or terminate, or amend the terms of, the exchange
privilege upon 60 days written notice to the shareholders.
Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investments in shares through automatic
charges to their checking account. With shareholder authorization and bank
approval, the Fund will automatically charge the checking account for the amount
specified ($100 minimum), which will be automatically invested in shares at the
public offering price on or about the 21st day of the month. The shareholder may
change the amount of the investment or discontinue the plan at any time by
writing to the Fund.
Stock Certificates. Stock certificates will not be issued for your shares.
Evidence of ownership will be given by issuance of periodic account statements
that will show the number of shares owned.
HOW SHARES MAY BE REDEEMED
Shares of the Fund may be redeemed (the Fund will repurchase them from
shareholders) by mail or telephone. Any redemption may be more or less than the
purchase price of your shares depending on the market value of the Fund's
portfolio securities. Redemption orders received in proper form, as indicated
herein, by the Fund, whether by mail or telephone, prior to the time trading
closes on the New York Stock Exchange (currently 4:00 p.m. New York time, Monday
through Friday), will redeem shares at the net asset value next determined at
that time. Redemption orders received in proper form by the Fund after the close
of trading, or on a day when the New York Stock Exchange is not open for
business, will redeem shares at the net asset value next determined. There is no
charge for redemptions from the Fund, other than possible charges for wiring
redemption proceeds. You may also redeem your shares through a broker-dealer or
other institution, who may charge you a fee for its services.
The Board of Trustees reserves the right to involuntarily redeem any account
having a net asset value of less than $10,000 (due to redemptions, exchanges or
transfers, and not due to market action) upon 30 days written notice. If the
shareholder brings his account net asset value up to $10,000 or more during the
notice period, the account will not be redeemed. Redemptions from retirement
plans may be subject to tax withholding.
If you are uncertain of the requirements for redemption, please contact the Fund
at 800-220-8888, or write to the address shown below.
Your request should be addressed to the Fund at 107 North Washington Street,
Post Office Box 4365, Rocky Mount, North Carolina 27803-0365. Your request for
redemption must include:
1) Your letter of instruction specifying the account number, and the
number of shares or dollar amount to be redeemed. This request must be
signed by all registered shareholders in the exact names in which they
are registered;
2) Any required signature guarantees (see "Signature Guarantees" below);
and
3) Other supporting legal documents, if required in the case of estates,
trusts, guardianships, custodianships, corporations, partnerships,
pension or profit sharing plans, and other organizations.
Your redemption proceeds will be sent to you within seven days after receipt of
your redemption request. However, the Fund may delay forwarding a redemption
check for recently purchased shares while they determine whether the purchase
payment will be honored. Such delay (which may take up to 15 days from the date
of purchase) may be reduced or avoided if the purchase is made by certified
check or wire transfer. In all cases the net asset value next determined after
the receipt of the request for redemption will be used in processing the
redemption. The Fund may suspend redemption privileges or postpone the date of
payment (i) during any period that the New York Stock Exchange is closed, or
trading on the New York Stock Exchange is restricted as determined by the
Securities and Exchange Commission (the "Commission"), (ii) during any period
when an emergency exists as defined by the rules of the Commission as a result
of which it is not reasonably practicable for the Fund to dispose of securities
owned by them, or to fairly determine the value of their assets, and (iii) for
such other periods as the Commission may permit.
The Fund offers shareholders the option of redeeming shares by telephone under
certain limited conditions. The Fund will redeem shares when requested by the
shareholder if, and only if, the shareholder confirms redemption instructions in
writing.
The Fund may rely upon confirmation of redemption requests transmitted via
facsimile (FAX# 919-972-1908). The confirmation instructions must include:
1) Shareholder name, name of Fund, and account number;
2) Number of shares or dollar amount to be redeemed;
3) Instructions for transmittal of redemption funds to the shareholder;
and 4) Shareholder signature as it appears on the application then on
file with the Fund.
The net asset value used in processing the redemption will be the net asset
value next determined after the telephone request is received. Redemption
proceeds will not be distributed until written confirmation of the redemption
request is received, per the instructions above. You can choose to have
redemption proceeds mailed to you at your address of record, your bank, or to
any other authorized person, or you can have the proceeds sent by bank wire to
your bank ($5,000 minimum). Shares of the Fund may not be redeemed by wire on
days on which your bank, and/or the Fund's Custodian, is not open for business.
You can change your redemption instructions anytime you wish by filing a letter
including your new redemption instructions with the Fund. (See "Signature
Guarantees" below.) The Distributor reserves the right to restrict or cancel
telephone and bank wire redemption privileges for shareholders, without notice,
if the Distributor believes it to be in the best interest of the shareholders to
do so. During drastic economic and market conditions, telephone redemption
privileges may be difficult to implement.
The Fund in its discretion may choose to pass through to redeeming shareholders
any charges by the Custodian for wire redemptions. The Custodian currently
charges $7.00 per transaction for wiring redemption proceeds. If this cost is
passed through to redeeming shareholders by the Fund, the charge will be
deducted automatically from the shareholder's account by redemption of shares in
the account. The shareholder's bank or brokerage firm may also impose a charge
for processing the wire. If wire transfer of funds is impossible or impractical,
the redemption proceeds will be sent by mail to the designated account.
You may redeem shares, subject to the procedures outlined above, by calling the
Fund at 800-220-8888. Redemption proceeds will only be sent to the bank account
or person named in your Fund Shares Application currently on file with the Fund.
Telephone redemption privileges authorize the Fund to act on telephone
instructions from any person representing himself or herself to be the investor
and reasonably believed by the Fund to be genuine. The Fund will employ
reasonable procedures, such as requiring a form of personal identification, to
confirm that instructions are genuine, and if they do not follow such
procedures, the Fund will be liable for any losses due to fraudulent or
unauthorized instructions. The Fund will not be liable for following telephone
instructions reasonably believed to be genuine.
Transfer on Redemption to Money Market Account. Shareholders wishing to have
redemption proceeds and/or income and capital gain dividends from the Fund
reinvested in a money market fund may so indicate on their Account Application.
The Custodian and Distributor of the Fund have agreed to make available the
Evergreen Money Market Fund (the "Evergreen Fund"), a money market fund not
affiliated with the Fund, for use by Fund shareholders. The Distributor
maintains an omnibus account with the Evergreen Fund for the benefit of Fund
shareholders. Subaccounts are maintained by the Distributor in the names of each
shareholder participating in this option. Purchases and/or transfers into the
Evergreen Fund may only be made after the shareholder has received the current
prospectus for the Evergreen Fund and opened a subaccount in his or her name
with the Distributor. For further information and a prospectus please call the
Fund at 800-220-8888.
Systematic Withdrawal Plan. A shareholder who owns shares of the Fund valued at
$10,000 or more at current net asset value may establish a Systematic Withdrawal
Plan to receive a monthly or quarterly check in a stated amount not less than
$100. Each month or quarter as specified, the Fund will automatically redeem
sufficient shares from your account to meet the specified withdrawal amount.
Call or write the Fund for an application form. See the Statement of Additional
Information for further details.
Signature Guarantees. To protect your account and the Fund from fraud, signature
guarantees are required to be sure that you are the person who has authorized a
change in registration, or standing instructions, for your account. Signature
guarantees are required for (1) change of registration requests, (2) requests to
establish or change exchange privileges or telephone redemption service other
than through your initial account application, and (3) requests for redemptions
in excess of $50,000. Signature guarantees are acceptable from a member bank of
the Federal Reserve System, a savings and loan institution, credit union (if
authorized under state law), registered broker-dealer, securities exchange or
association clearing agency, and must appear on the written request for
redemption, establishment or change in exchange privileges, or change of
registration.
MANAGEMENT OF THE FUND
Trustees and Officers. The Fund is a series of the Quaker Investment Trust (the
"Trust"), an investment company organized as a Massachusetts business trust. The
Board of Trustees of the Trust is responsible for the management of the business
and affairs of the Trust. The Trustees and executive officers of the Trust and
their principal occupations for the last five years are set forth in the
Statement of Additional Information under "Management of the Fund - Trustees and
Officers." The Board of Trustees of the Trust is primarily responsible for
overseeing the conduct of the Trust's business. The Board of Trustees elects the
officers of the Trust who are responsible for its and the Fund's day-to-day
operations.
Advisor. Subject to the authority of the Board of Trustees, Compu-Val
Investments, Inc. (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, pursuant to an Investment
Advisory Agreement ("Advisory Agreement") with the Trust.
The Advisor is registered under the Investment Advisors Act of 1940, as amended.
Registration of the Advisor does not involve any supervision of management or
investment practices or policies by the Securities and Exchange Commission. The
Advisor (with its predecessor) was established as a Delaware corporation in
1974. The Advisor currently serves as investment advisor to over $170 million in
assets. The Advisor has been rendering investment counsel, utilizing investment
strategies substantially similar to that of the Fund, to individuals, banks and
thrift institutions, pension and profit sharing plans, trusts, estates,
charitable organizations and corporations since its inception in 1974. The
Advisor's address is 1702 Lovering Avenue, Wilmington, Delaware 19806. The
Advisor is controlled by James Kalil, Ph.D. and Donald J. Kalil. Christopher
O'Keefe, Director of Equity Research for the Advisor since 1995, is the Fund's
portfolio manager. Previously, Mr. O'Keefe was an investment analyst with
Corestates Investment Advisors, Philadelphia, Pennsylvania, since 1989.
Under the Advisory Agreement with the Trust, the Advisor receives a monthly
management fee equal to an annual rate of 0.75% of the average daily net asset
value of the Fund. See footnote 3 to the Fee Table regarding the Advisor's
agreement to reduce its fee, if necessary, to limit operating expenses and
maintain the expense ratio of the Fund.
The Advisor supervises and implements the investment activities of the Fund,
including the making of specific decisions as to the purchase and sale of
portfolio investments. Among the responsibilities of the Advisor under the
Advisory Agreement is the selection of brokers and dealers through whom
transactions in the Fund's portfolio investments will be effected. The Advisor
attempts to obtain the best execution for all such transactions. If it is
believed that more than one broker is able to provide the best execution, the
Advisor will consider the receipt of quotations and other market services and of
research, statistical and other data and the sale of shares of the Fund in
selecting a broker. Research services obtained through Fund brokerage
transactions may be used by the Advisor for its other clients and, conversely,
the Fund may benefit from research services obtained through the brokerage
transactions of the Advisor's other clients. The Advisor may also utilize a
brokerage firm affiliated with the Trust, such as the Distributor, if it
believes it can obtain the best execution of transactions from such broker,
subject to periodic review of such executions and procedures by the Board of
Trustees. For further information, see "Investment Objective and Policies -
Investment Transactions" in the Statement of Additional Information.
Administrator. The Trust has entered into a Fund Administration Agreement with
The Nottingham Company (the "Administrator"), 105 North Washington Street, Post
Office Drawer 69, Rocky Mount, North Carolina 27802-0069. Subject to the
authority of the Board of Trustees, the services the Administrator provides to
the Fund include coordinating and monitoring any third parties furnishing
services to the Fund; providing the necessary office space, equipment and
personnel to perform administrative and clerical functions for the Fund; and
preparing, filing and distributing proxy materials, periodic reports to
shareholders, registration statements and other documents. For these
administrative and oversight services, the Administrator receives a fee at the
annual rate of 0.175% of the average daily net assets of the Fund on the first
$50 million; 0.150% of the next $50 million; and 0.125% of its average daily net
assets in excess of $100 million.
The Administrator also performs certain accounting and pricing services for the
Fund as pricing agent, including the daily calculation of the Fund's net asset
value. For these services, the Administrator currently receives a base monthly
fee of $2,000 for accounting and recordkeeping services for the Fund. The
Administrator also charges the Fund for certain costs involved with the daily
valuation of investment securities and is reimbursed for out-of-pocket expenses.
Under the Agreement, the Administrator may charge a minimum fee of $3,000 per
month, analyzed monthly. See footnote 3 to the Fee Table regarding the
Administrator's agreement to reduce its fee, if necessary, to limit operating
expenses and maintain the expense ratio of the Fund.
The Administrator was formed as a North Carolina corporation in 1988. With it
affiliates and predecessors, the Administrator has been operating as a financial
services firm since 1985. Frank P. Meadows III is the firm's Managing Director
and controlling shareholder.
Transfer Agent. NC Shareholder Services, LLC (the "Transfer Agent") serves as
the Fund's transfer, dividend paying, and shareholder servicing agent. The
Transfer Agent, subject to the authority of the Board of Trustees, provides
transfer agency services pursuant to an agreement with the Administrator, which
has been approved by the Trust. The Transfer Agent maintains the records of each
shareholder's account, answers shareholder inquiries concerning accounts,
processes purchases and redemptions of Fund shares, acts as dividend and
distribution disbursing agent, and performs other shareholder servicing
functions. The Transfer Agent is compensated for its services by the
Administrator and not directly by the Fund. The Fund pays a monthly fee for
these services based on the number of shareholders in the Fund, subject to a
monthly minimum fee of $500.
The Transfer Agent, whose address is 107 North Washington Street, Post Office
Box 4365, Rocky Mount, North Carolina 27803-0365, was established as a North
Carolina limited liability company in 1997. John D. Marriott, Jr., is the firm's
controlling member.
Sponsor of the Fund. Quaker Funds, Inc. (the "Sponsor"), an entity affiliated
with the Fund's Distributor, will engage in shareholder servicing activities for
the Fund not otherwise provided by the Fund's Administrator or Custodian, for
which it will receive a fee at the annual rate of 0.25% of the average daily net
assets of the Fund. Pursuant to a Shareholder Servicing Agreement adopted by the
Trust for the Fund, the Sponsor will provide oversight with respect to the
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 provide other shareholder servicing tasks. Laurie Keyes, Jeffry H. King and
Peter F. Waitneight, each of whom is a Trustee of the Trust, control the
Sponsor. Mr. King also controls the Distributor. The Sponsor was formed as a
Pennsylvania corporation in 1996 and is located at 1288 Valley Forge Road, Suite
76, Valley Forge, Pennsylvania. See footnote 3 to the Fee Table regarding the
Sponsor's agreement to reduce its fee, if necessary, to limit operating expenses
and maintain the expense ratio of the Fund.
Custodian. First Union National Bank of North Carolina (the "Custodian"), Two
First Union Center, Charlotte, North Carolina 28288-1151, serves as Custodian of
the Fund's assets. The Custodian acts as the depository for the Fund, provides
safekeeping for their portfolio securities, collects all income and other
payments with respect to portfolio securities, disburses monies at the Fund's
request and maintains records in connection with its duties.
Other Expenses. The Fund is responsible for the payment of its expenses. These
include, for example, the fees payable to the Advisor, or expenses otherwise
incurred in connection with the management of the investment of the Fund's
assets, the fees and expenses of the Custodian, the fees and expenses of the
Administrator, the fees and expenses of Trustees, outside auditing and legal
expenses, all taxes and corporate fees payable by the Fund, Securities and
Exchange Commission fees, state securities qualification fees, costs of
preparing and printing prospectuses for regulatory purposes and for distribution
to shareholders, costs of shareholder reports and shareholder meetings, and any
extraordinary expenses. The Fund also pays for brokerage commissions and
transfer taxes (if any) in connection with the purchase and sale of portfolio
securities. Expenses attributable to a particular series of the Trust will be
charged to that series, and expenses not readily identifiable as belonging to a
particular series will be allocated by or under procedures approved by the Board
of Trustees among one or more series in such a manner as it deems fair and
equitable.
OTHER INFORMATION
Description of Shares. The Trust was organized as a Massachusetts business trust
on October 24, 1990, under a Declaration of Trust. The Declaration of Trust
permits the Board of Trustees to issue an unlimited number of full and
fractional shares and to create an unlimited number of series of shares. The
Board of Trustees may also classify and reclassify any unissued shares into one
or more classes of shares.
When issued, the shares of each series of the Trust will be fully paid,
nonassessable and redeemable. The Trust does not intend to hold annual
shareholder meetings; it may, however, hold special shareholder meetings for
purposes such as changing fundamental policies or electing Trustees. The Board
of Trustees shall promptly call a meeting for the purpose of electing or
removing Trustees when requested in writing to do so by the record holders of at
least 10% of the outstanding shares of the Trust. The term of office of each
Trustee is of unlimited duration. The holders of at least two-thirds of the
outstanding shares of the Trust may remove a Trustee from that position either
by declaration in writing filed with the Custodian or by votes cast in person or
by proxy at a meeting called for that purpose.
Shareholders of the Trust will vote in the aggregate and not by series (Fund) or
class, except as otherwise required by the 1940 Act or when the Board of
Trustees determines that the matter to be voted on affects only the interests of
the shareholders of a particular series or class. Matters affecting an
individual series, include, but are not limited to, the investment objectives,
policies and restrictions of that series. Shares have no subscription,
preemptive or conversion rights. Share certificates will not be issued. Each
share is entitled to one vote (and fractional shares are entitled to
proportionate fractional votes) on all matters submitted for a vote, and shares
have equal voting rights except that only shares of a particular series are
entitled to vote on matters affecting only that series. Shares do not have
cumulative voting rights. Therefore, the holders of more than 50% of the
aggregate number of shares of all series of the Trust may elect all the
Trustees.
Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable as partners for the obligations of the
trust. The Declaration of Trust, therefore, contains provisions which are
intended to mitigate such liability. See "Description of the Trust" in the
Statement of Additional Information for further information about the Trust and
its shares.
Reporting to Shareholders. The Fund will send to its shareholders annual and
semi-annual reports; independent accountants will audit the financial statements
appearing in annual reports for the Fund. In addition, the Fund will send to
each shareholder having an account directly with the Fund, a quarterly statement
showing transactions in the account, the total number of shares owned and any
dividends or distributions paid. Inquiries regarding the Fund may be directed in
writing to 107 North Washington Street, Post Office Box 4365, Rocky Mount, North
Carolina 27803-0365 or by calling 800-220-8888.
Calculation of Performance Data. From time to time the Fund may advertise its
average annual total return. The "average annual total return" of the Fund
refers to the average annual compounded rates of return over 1-, 5- and 10-year
periods that would equate an initial amount invested at the beginning of a
stated period to the ending redeemable value of the investment. The calculation
assumes the reinvestment of all dividends and distributions, includes all
recurring fees that are charged to all shareholder accounts and deducts all
nonrecurring charges at the end of each period. If the Fund has been operating
less than 1, 5 or 10 years, the time period during which the Fund has been
operating is substituted.
In addition, the Fund may advertise other total return performance data. This
data shows as a percentage rate of return encompassing all elements of return
(i.e. income and capital appreciation or depreciation); it assumes reinvestment
of all dividends and capital gain distributions. Such other total return data
may be quoted for the same or different periods as those for which average
annual total return is quoted. This data may consist of a cumulative percentage
rate of return, actual year-by-year rates or any combination thereof. Cumulative
total return represents the cumulative change in value of an investment in the
Fund for various periods.
The total return and yield of the Fund could be increased to the extent the
Advisor, the Administrator or the Fund Sponsor may waive all or a portion of
their fees. Total return and yield figures are based on the historical
performance of the Fund, show the performance of a hypothetical investment, and
are not intended to indicate future performance. The Fund's quotations may from
time to time be used in advertisements, sales literature, shareholder reports,
or other communications.
For further information, see "Additional Information on Performance" in the
Statement of Additional Information.
<PAGE>
DISTRIBUTOR
Quaker Securities, Inc.
1288 Valley Forge Road, Suite 75
Valley Forge, Pennsylvania 19482
CUSTODIAN
First Union National Bank of North Carolina
Two First Union Center
Charlotte, North Carolina 28288-1151
ADMINISTRATOR
The Nottingham Company
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
TRANSFER AGENT
NC Shareholder Services, LLC
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
INDEPENDENT AUDITORS
Goldenberg Rosenthal Friedlander, LLP
101 West Avenue
P.O. Box 458
Jenkintown, Pennsylvania 19046-0458
FUND SPONSOR
Quaker Funds, Inc.
1288 Valley Forge Road, Suite 76
Valley Forge, Pennsylvania 19482
INVESTMENT ADVISOR
Compu-Val Investments, Inc.
1702 Lovering Avenue
Wilmington, Delaware 19806
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
THE QUAKER FAMILY OF FUNDS
December 31, 1997
Series of
QUAKER INVESTMENT TRUST
107 North Washington Street, Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Telephone 800-220-8888
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Table of Contents
INVESTMENT OBJECTIVE AND POLICIES....................................................................................... 2
INVESTMENT LIMITATIONS.................................................................................................. 8
NET ASSET VALUE......................................................................................................... 9
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION.......................................................................... 10
DESCRIPTION OF THE TRUST................................................................................................ 11
ADDITIONAL INFORMATION CONCERNING TAXES................................................................................. 12
MANAGEMENT OF THE FUNDS................................................................................................. 13
QUAKER ENHANCED STOCK MARKET FUND....................................................................................... 15
QUAKER CORE EQUITY FUND................................................................................................. 16
QUAKER SECTOR ALLOCATION EQUITY FUND.................................................................................... 16
QUAKER SMALL-CAP VALUE FUND............................................................................................. 17
QUAKER AGGRESSIVE GROWTH FUND........................................................................................... 17
QUAKER FIXED INCOME FUND................................................................................................ 18
SPECIAL SHAREHOLDER SERVICES............................................................................................ 20
ADDITIONAL INFORMATION ON PERFORMANCE................................................................................... 22
APPENDIX A.............................................................................................................. 24
ANNUAL REPORTS OF THE FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 1997................................................ATTACHED
</TABLE>
This Statement of Additional Information (the "Additional Statement") is meant
to be read in conjunction with the Prospectus, dated September 5, 1997, for the
Quaker Enhanced Stock Market Fund, the Quaker Core Equity Fund, the Quaker
Aggressive Growth Fund, the Quaker Small-Cap Value Fund, the Quaker Sector
Allocation Equity Fund, the Quaker Mid-Cap Value Fund (Prospectus dated December
31, 1997) and the Quaker Fixed Income Fund (individually a "Fund" and
collectively the "Funds"), as the Prospectus may be amended or supplemented from
time to time, and is incorporated by reference in its entirety into the
Prospectus. Because this Additional Statement is not itself a prospectus, no
investment in shares of the Funds should be made solely upon the information
contained herein. Copies of the Funds' Prospectus may be obtained at no charge
by writing or calling the Funds at the address and phone number shown above.
Capitalized terms used but not defined herein have the same meanings as in the
Prospectus. The Quaker Mid-Cap Value Fund did not commence operations until
December 31, 1997.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The following policies supplement each Fund's investment objective and policies
as set forth in the Prospectus for each Fund. The Funds, organized in 1996, have
no prior operating history.
Additional Information on Fund Instruments. Attached to this Additional
Statement is Appendix A, which contains descriptions of the rating symbols used
by Rating Agencies for fixed income securities in which the Funds may invest.
Investment Transactions. Subject to the general supervision of the Trust's Board
of Trustees, the Advisor to each Fund is responsible for, makes decisions with
respect to, and places orders for all purchases and sales of portfolio
securities for the Fund managed by such Advisor.
The annualized portfolio turnover rate for each Fund is calculated by dividing
the lesser of purchases or sales of portfolio securities for the reporting
period by the monthly average value of the portfolio securities owned during the
reporting period. The calculation excludes all securities whose maturities or
expiration dates at the time of acquisition are one year or less. Portfolio
turnover of each Fund may vary greatly from year to year as well as within a
particular year, and may be affected by cash requirements for redemption of
shares and by requirements that enable the Fund to receive favorable tax
treatment. Portfolio turnover will not be a limiting factor in making Fund
decisions, and each Fund may engage in short term trading to achieve its
investment objectives.
Purchases of money market instruments by the Funds are made from dealers,
underwriters and issuers. The Funds currently do not expect to incur any
brokerage commission expense on such transactions because money market
instruments are generally traded on a "net" basis by a dealer acting as
principal for its own account without a stated commission. The price of the
security, however, usually includes a profit to the dealer. Securities purchased
in underwritten offerings include a fixed amount of compensation to the
underwriter, generally referred to as the underwriter's concession or discount.
When securities are purchased directly from or sold directly to an issuer, no
commissions or discounts are paid.
Transactions on U.S. stock exchanges involve the payment of negotiated brokerage
commissions. On exchanges on which commissions are negotiated, the cost of
transactions may vary among different brokers. Transactions in the
over-the-counter market are generally on a net basis (i.e., without commission)
through dealers, which may include a dealer mark-up, or otherwise involve
transactions directly with the issuer of an instrument.
Normally, most of the Funds' fixed income portfolio transactions will be
principal transactions executed in over the counter markets and will be executed
on a "net" basis, which may include a dealer mark-up. With respect to securities
traded only in the over the counter market, orders will be executed on a
principal basis with primary market makers in such securities except where
better prices or executions may be obtained on an agency basis or by dealing
with other than a primary market maker.
The Funds may participate, if and when practicable, in bidding for the purchase
of Fund securities directly from an issuer in order to take advantage of the
lower purchase price available to members of a bidding group. A Fund will engage
in this practice, however, only when the Advisor to each Fund, in its sole
discretion, believes such practice to be otherwise in the Fund's interest.
In executing Fund transactions and selecting brokers or dealers, the Advisor to
each Fund will seek to obtain the best overall terms available for each Fund. In
assessing the best overall terms available for any transaction, each Advisor
shall consider factors it deems relevant, including the breadth of the market in
the security, the price of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of the commission, if
any, both for the specific transaction and on a continuing basis. The sale of
Fund shares may be considered when determining the firms that are to execute
brokerage transactions for the Funds. In addition, the Advisor to each Fund is
authorized to cause the Fund to pay a broker-dealer which furnishes brokerage
and research services a higher commission than that which might be charged by
another broker-dealer for effecting the same transaction, provided that the
Advisor determines in good faith that such commission is reasonable in relation
to the value of the brokerage and research services provided by such
broker-dealer, viewed in terms of either the particular transaction or the
overall responsibilities of the Advisor to the Fund. Such brokerage and research
services might consist of reports and statistics relating to specific companies
or industries, general summaries of groups of stocks or bonds and their
comparative earnings and yields, or broad overviews of the stock, bond and
government securities markets and the economy.
Supplementary research information so received is in addition to, and not in
lieu of, services required to be performed by the Advisor to each Fund and does
not reduce the advisory fees payable by the Funds. The Trustees will
periodically review any commissions paid by the Funds to consider whether the
commissions paid over representative periods of time appear to be reasonable in
relation to the benefits inuring to the Funds. It is possible that certain of
the supplementary research or other services received will primarily benefit one
or more other investment companies or other accounts for which investment
discretion is exercised by an Advisor. Conversely, the Funds may be the primary
beneficiary of the research or services received as a result of securities
transactions effected for such other account or investment company.
The Advisor to each Fund may also utilize a brokerage firm affiliated with the
Trust or the Advisor if it believes it can obtain the best execution of
transactions from such broker. Since the Distributor is a registered securities
broker-dealer, it is anticipated that the Distributor may execute transactions
on behalf of the Funds, for which it will receive brokerage commissions and
fees, subject to the obligations of best execution.
The Funds will not execute portfolio transactions through, acquire securities
issued by, make savings deposits in or enter into repurchase agreements with an
Advisor or an affiliated person of an Advisor (as such term is defined in the
1940 Act) acting as principal, except to the extent permitted by the Securities
and Exchange Commission ("SEC"). In addition, a Fund will not purchase
securities during the existence of any underwriting or selling group relating
thereto of which the Advisor to the Fund, or an affiliated person of the Advisor
to the Fund, is a member, except to the extent permitted by the SEC. Under
certain circumstances, the Funds may be at a disadvantage because of these
limitations in comparison with other investment companies that have similar
investment objectives but are not subject to such limitations.
Investment decisions for each Fund will be made independently from those for any
other Fund and any other series of the Trust, if any, and for any other
investment companies and accounts advised or managed by the Advisor to each
Fund. Such other investment companies and accounts may also invest in the same
securities as a Fund. To the extent permitted by law, an Advisor may aggregate
the securities to be sold or purchased for a Fund with those to be sold or
purchased for another Fund or other investment companies or accounts in
executing transactions. When a purchase or sale of the same security is made at
substantially the same time on behalf of a Fund and another Fund or another
investment company or account, the transaction will be averaged as to price and
available investments allocated as to amount, in a manner which the Advisor to
each Fund believes to be equitable to the Funds and such other investment
company or account. In some instances, this investment procedure may adversely
affect the price paid or received by a Fund or the size of the position obtained
or sold by a Fund.
For the fiscal year ended June 30, 1997, the total dollar amount of brokerage
commissions paid by the Enhanced Stock Market Fund was $416, all of which was
paid during such period to the Distributor. Transactions in which the Enhanced
Stock Market Fund used the Distributor as broker involved 100% of the aggregate
dollar amount of transactions involving the payment of commissions and 100% of
the aggregate brokerage commissions paid by the Enhanced Stock Market Fund for
the fiscal year ended June 30, 1997.
For the fiscal year ended June 30, 1997, the total dollar amount of brokerage
commissions paid by the Core Equity Fund was $1,979, all of which was paid
during such period to the Distributor. Transactions in which the Core Equity
Fund used the Distributor as broker involved 100% of the aggregate dollar amount
of transactions involving the payment of commissions and 100% of the aggregate
brokerage commissions paid by the Core Equity Fund for the fiscal year ended
June 30, 1997.
For the fiscal year ended June 30, 1997, the total dollar amount of brokerage
commissions paid by the Aggressive Growth Fund was $18,569, of which $16,817 was
paid during such period to the Distributor. Transactions in which the Aggressive
Growth Fund used the Distributor as broker involved 93.90% of the aggregate
dollar amount of transactions involving the payment of commissions and 90.56% of
the aggregate brokerage commissions paid by the Aggressive Growth Fund for the
fiscal year ended June 30, 1997.
For the fiscal year ended June 30, 1997, the total dollar amount of brokerage
commissions paid by the Small-Cap Value Fund was $4,864, none of which was paid
during such period to the Distributor. Transactions in which the Small-Cap Value
Fund used the Distributor as broker involved 00.00% of the aggregate dollar
amount of transactions involving the payment of commissions and 00.00% of the
aggregate brokerage commissions paid by the Small-Cap Value Fund for the fiscal
year ended June 30, 1997.
For the fiscal year ended June 30, 1997, the total dollar amount of brokerage
commissions paid by the Sector Allocation Equity Fund was $2,789, all of which
was paid during such period to the Distributor. Transactions in which the Sector
Allocation Equity Fund used the Distributor as broker involved 100% of the
aggregate dollar amount of transactions involving the payment of commissions and
100% of the aggregate brokerage commissions paid by the Sector Allocation Equity
Fund for the fiscal year ended June 30, 1997.
Repurchase Agreements. Each Fund may acquire U.S. Government Securities or
corporate debt securities subject to repurchase agreements. A repurchase
transaction occurs when, at the time the Fund purchases a security (normally a
U.S. Treasury obligation), it also resells it to the vendor (normally a member
bank of the Federal Reserve or a registered Government Securities dealer) and
must deliver the security (and/or securities substituted for them under the
repurchase agreement) to the vendor on an agreed upon date in the future. The
repurchase price exceeds the purchase price by an amount which reflects an
agreed upon market interest rate effective for the period of time during which
the repurchase agreement is in effect. Delivery pursuant to the resale will
occur within one to five days of the purchase.
Repurchase agreements are considered "loans" under the Investment Company Act of
1940, as amended (the "1940 Act"), collateralized by the underlying security.
The Trust will implement procedures to monitor on a continuous basis the value
of the collateral serving as security for repurchase obligations. Additionally,
the Advisor to each Fund will consider the creditworthiness of the vendor. If
the vendor fails to pay the agreed upon resale price on the delivery date, the
Fund will retain or attempt to dispose of the collateral. A Fund's risk is that
such default may include any decline in value of the collateral to an amount
which is less than 100% of the repurchase price, any costs of disposing of such
collateral, and any loss resulting from any delay in foreclosing on the
collateral. The Funds will not enter into any repurchase agreement which will
cause more than 10% of their net assets to be invested in repurchase agreements
which extend beyond seven days and other illiquid securities.
Description of Money Market Instruments. Money market instruments may include
U.S. Government Securities or corporate debt securities (including those subject
to repurchase agreements), provided that they mature in thirteen months or less
from the date of acquisition and are otherwise eligible for purchase by the
Funds. Money market instruments also may include Banker's Acceptances and
Certificates of Deposit of domestic branches of U.S. banks, Commercial Paper and
Variable Amount Demand Master Notes ("Master Notes"). Banker's Acceptances are
time drafts drawn on and "accepted" by a bank. When a bank "accepts" such a time
draft, it assumes liability for its payment. When a Fund acquires a Banker's
Acceptance the bank which "accepted" the time draft is liable for payment of
interest and principal when due. The Banker's Acceptance carries the full faith
and credit of such bank. A Certificate of Deposit ("CD") is an unsecured
interest bearing debt obligation of a bank. Commercial Paper is an unsecured,
short term debt obligation of a bank, corporation or other borrower. Commercial
Paper maturity generally ranges from two to 270 days and is usually sold on a
discounted basis rather than as an interest bearing instrument. The Funds will
invest in Commercial Paper only if it is rated one of the top two rating
categories by Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's
Ratings Group ("S&P"), Fitch Investors Service, Inc. ("Fitch") or Duff & Phelps
("D&P") or, if not rated, of equivalent quality in the Advisor's opinion.
Commercial Paper may include Master Notes of the same quality. Master Notes are
unsecured obligations which are redeemable upon demand of the holder and which
permit the investment of fluctuating amounts at varying rates of interest.
Master Notes are acquired by the Funds only through the Master Note program of
the Funds' custodian bank, acting as administrator thereof. The Advisor to each
Fund will monitor, on a continuous basis, the earnings power, cash flow and
other liquidity ratios of the issuer of a Master Note held by a Fund.
Illiquid Investments. Each Fund may invest up to 10% of its net assets in
illiquid securities, which are investments that cannot be sold or disposed of in
the ordinary course of business within seven days at approximately the prices at
which they are valued. Under the supervision of the Board of Trustees, the
Advisor to each Fund determines the liquidity of a Fund's investments and,
through reports from each Advisor, the Board monitors investments in illiquid
instruments. In determining the liquidity of a Fund's investments, the Advisor
to each Fund may consider various factors including (1) the frequency of trades
and quotations, (2) the number of dealers and prospective purchasers in the
marketplace, (3) dealer undertakings to make a market, (4) the nature of the
security (including any demand or tender features) and (5) the nature of the
marketplace for trades (including the ability to assign or offset the Fund's
rights and obligations relating to the investment). Investments currently
considered by the Funds to be illiquid include repurchase agreements not
entitling the holder to payment of principal and interest within seven days and
over-the-counter options. If through a change in values, net assets or other
circumstances, a Fund were in a position where more than 10% of its net assets
were invested in illiquid securities, it would seek to take appropriate steps to
protect liquidity.
Restricted Securities. Within its limitation on investment in illiquid
securities, the Fund may purchase restricted securities that generally can be
sold in privately negotiated transactions, pursuant to an exemption from
registration under the federal securities laws, or in a registered public
offering. Where registration is required, the Fund may be obligated to pay all
or part of the registration expense and a considerable period may elapse between
the time it decides to seek registration and the time the Fund may be permitted
to sell a security under an effective registration statement. If during such a
period, adverse market conditions were to develop, the Fund might obtain a less
favorable price than prevailed when it decided to seek registration of the
security.
Options Trading. The Equity Funds may also purchase or sell certain put and call
options for hedging purposes. This is a highly specialized activity that entails
greater than ordinary investment risks. Regardless of how much the market price
of the underlying security increases or decreases, the option buyer's risk is
limited to the amount of the original investment for the purchase of the option.
However, options may be more volatile than the underlying securities, and
therefore, on a percentage basis, an investment in options may be subject to
greater fluctuation than an investment in the underlying securities. A listed
call option gives the purchaser of the option the right to buy from a clearing
corporation, and a writer has the obligation to sell to the clearing
corporation, the underlying security at the stated exercise price at any time
prior to the expiration of the option, regardless of the market price of the
security. The premium paid to the writer is in consideration for undertaking the
obligations under the option contract. A listed put option gives the purchaser
the right to sell to a clearing corporation the underlying security at the
stated exercise price at any time prior to the expiration date of the option,
regardless of the market price of the security. Put and call options purchased
by the Equity Funds will be valued at the last sale price or, in the absence of
such a price, at the mean between bid and asked prices.
The obligation of an Equity Fund to sell a security subject to a covered call
option written by it, or to purchase a security subject to a secured put option
written by it, may be terminated prior to the expiration date of the option by
the Fund executing a closing purchase transaction, which is effected by
purchasing on an exchange an option of the same series (i.e., same underlying
security, exercise price and expiration date) as the option previously written.
Such a purchase does not result in the ownership of an option. A closing
purchase transaction will ordinarily be effected to realize a profit on an
outstanding option, to prevent an underlying security from being called, to
permit the sale of the underlying security or to permit the writing of a new
option containing different terms on such underlying security. The cost of such
a liquidation purchase plus transaction costs may be greater than the premium
received upon the original option, in which event that Fund will have incurred a
loss in the transaction. An option position may be closed out only on an
exchange that provides a secondary market for an option of the same series.
There is no assurance that a liquid secondary market on an exchange will exist
for any particular option. A covered call option writer, unable to effect a
closing purchase transaction, will not be able to sell the underlying security
until the option expires or the underlying security is delivered upon exercise
with the result that the writer in such circumstances will be subject to the
risk of market decline in the underlying security during such period. An Equity
Fund will write an option on a particular security only if that Fund's Advisor
believes that a liquid secondary market will exist on an exchange for options of
the same series which will permit the Fund to make a closing purchase
transaction in order to close out its position.
When an Equity Fund writes a covered call option, an amount equal to the net
premium (the premium less the commission) received by the Fund is included in
the liability section of the Fund's statement of assets and liabilities as a
deferred credit. The amount of the deferred credit will be subsequently
marked-to-market to reflect the current value of the option written. The current
value of the traded option is the last sale price or, in the absence of a sale,
the average of the closing bid and asked prices. If an option expires on the
stipulated expiration date or if the Fund enters into a closing purchase
transaction, it will realize a gain (or loss if the cost of a closing purchase
transaction exceeds the net premium received when the option is sold), and the
deferred credit related to such option will be eliminated. Any gain on a covered
call option may be offset by a decline in the market price of the underlying
security during the option period. If a covered call option is exercised, an
Equity Fund may deliver the underlying security held by it or purchase the
underlying security in the open market. In either event, the proceeds of the
sale will be increased by the net premium originally received, and the Fund will
realize a gain or loss. If a secured put option is exercised, the amount paid by
the Fund for the underlying security will be partially offset by the amount of
the premium previously paid to the Fund. Premiums from expired options written
by an Equity Fund and net gains from closing purchase transactions are treated
as short-term capital gains for federal income tax purposes, and losses on
closing purchase transactions are short-term capital losses.
Stock Index Options. The Equity Funds may purchase or sell put and call stock
index options for hedging purposes. Stock index options are put options and call
options on various stock indexes. In most respects, they are identical to listed
options on common stocks. The primary difference between stock options and index
options occurs when index options are exercised. In the case of stock options,
the underlying security, common stock, is delivered. However, upon the exercise
of an index option, settlement does not occur by delivery of the securities
comprising the index. The option holder who exercises the index option receives
an amount of cash if the closing level of the stock index upon which the option
is based is greater than, in the case of a call, or less than, in the case of a
put, the exercise price of the option. This amount of cash is equal to the
difference between the closing price of the stock index and the exercise price
of the option expressed in dollars times a specified multiple. A stock index
fluctuates with changes in the market values of the stocks included in the
index.
The Equity Funds may purchase call and put stock index options in an attempt to
either hedge against the risk of unfavorable price movements adversely affecting
the value of a Fund's securities, or securities the Fund intends to buy, or
otherwise in furtherance of that Fund's investment objectives. The Equity Funds
will sell (write) stock index options for hedging purposes or in order to close
out positions in stock index options which that Fund has purchased.
The use by an Equity Fund of stock index options is subject to certain risks.
Successful use by the Equity Funds of options on stock indexes will be subject
to the ability of each Advisor to correctly predict movements in the directions
of the stock market. This requires different skills and techniques than
predicting changes in the prices of individual securities. In addition, an
Equity Fund's ability to effectively hedge all or a portion of the securities in
its portfolio, in anticipation of or during a market decline through
transactions in put options on stock indexes, depends on the degree to which
price movements in the underlying index correlate with the price movements in
that Fund's portfolio securities. Inasmuch as each Equity Fund's portfolio
securities will not duplicate the components of an index, the correlation will
not be perfect. Consequently, each Equity Fund will bear the risk that the
prices of its portfolio securities being hedged will not move in the same amount
as the prices of that Fund's put options on the stock indexes. It is also
possible that there may be a negative correlation between the index and each
Equity Fund's portfolio securities that would result in a loss on both such
portfolio securities and the options on stock indexes acquired by the Equity
Fund.
Futures Contracts and Related Options. To hedge against changes in securities
prices, each Equity Fund may purchase and sell various kinds of futures
contracts, and purchase and write (sell) call and put options on any of such
futures contracts. The futures contracts will be limited to futures on various
securities (such as U.S. Government securities), securities indices, and other
financial instruments and indices. An Equity Fund may engage in futures and
related options transactions for bona-fide hedging and non-hedging purposes as
described below. All futures contracts entered into by an Equity Fund will be
traded on U.S. exchanges or boards of trade that are licensed and regulated by
the Commodity Futures Trading Commission (the "CFTC").
A futures contract may generally be described as an agreement between two
parties to buy and sell particular financial instruments for an agreed price
during a designated month (or to deliver the final cash settlement price, in the
case of a contract relating to an index or otherwise not calling for physical
delivery at the end of trading in the contract).
When interest rates are rising or securities prices are falling, an Equity Fund
can seek to offset a decline in the value of its current portfolio securities
through the sale of futures contracts. When interest rates are falling or
securities prices are rising, an Equity Fund, through the purchase of futures
contracts, can attempt to secure better rates or prices than might later be
available in the market when it effects anticipated purchases.
Positions taken in the futures markets are not normally held to maturity but are
instead liquidated through offsetting transactions, which may result in a profit
or a loss. A clearing corporation associated with the exchange on which futures
on securities are traded guarantees that, if still open, the sale or purchase
will be performed on the settlement date.
Hedging, by use of futures contracts, seeks to establish with more certainty the
effective price and rate of return on portfolio securities and securities that
an Equity Fund owns or proposes to acquire. An Equity Fund may, for example,
take a "short" position in the futures market by selling futures contracts in
order to hedge against an anticipated rise in interest rates that would
adversely affect the value of the Fund's portfolio securities. Such futures
contracts may include contracts for the future delivery of securities held by an
Equity Fund or securities with characteristics similar to those of an Equity
Fund's portfolio securities. If, in the opinion of the Advisor to the particular
Equity Fund in question, there is a sufficient degree of correlation between
price trends for the Fund's portfolio securities and futures contracts based on
securities indices, the Fund may also enter into such futures contracts as part
of its hedging strategy. Although under some circumstances prices of securities
in an Equity Fund's portfolio may be more or less volatile than prices of such
futures contracts, the Advisor will attempt to estimate the extent of this
volatility difference based on historical patterns and compensate for any such
differential by having the Fund enter into a greater or lesser number of futures
contracts or by attempting to achieve only a partial hedge against price changes
affecting the Fund's securities portfolio. When hedging of this character is
successful, any depreciation in the value of portfolio securities will be
substantially offset by appreciation in the value of the futures position. On
the other hand, any unanticipated appreciation in the value of the Fund's
portfolio securities would be substantially offset by a decline in the value of
the futures position. On other occasions, an Equity Fund may take a "long"
position by purchasing futures contracts. This would be done, for example, when
an Equity Fund anticipates the subsequent purchase of particular securities when
it has the necessary cash, but expects the prices or currency exchange rates
then available in the applicable market to be less favorable than prices or
rates that are currently available.
The acquisition of put and call options on futures contracts will give an Equity
Fund the right (but not the obligation) for a specified price to sell or to
purchase, respectively, the underlying futures contract at any time during the
option period. As the purchaser of an option on a futures contract, an Equity
Fund obtains the benefit of the futures position if prices move in a favorable
direction but limits its risk of loss in the event of an unfavorable price
movement to the loss of the premium and transaction costs.
The writing of a call option on a futures contract generates a premium, which
may partially offset a decline in the value of the Fund's assets. By writing a
call option, an Equity Fund becomes obligated, in exchange for the premium, to
sell a futures contract, which may have a value higher than the exercise price.
Conversely, the writing of a put option on a futures contract generates a
premium, which may partially offset an increase in the price of securities that
the Fund intends to purchase; however, the Fund becomes obligated to purchase a
futures contract, which may have a value lower than the exercise price. Thus,
the loss incurred by an Equity Fund in writing options on futures is potentially
unlimited and may exceed the amount of the premium received. An Equity Fund will
incur transaction costs in connection with the writing of options on futures.
The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option on the same series. There
is no guarantee that such closing transactions can be effected. An Equity Fund's
ability to establish and close out positions on such options will be subject to
the development and maintenance of a liquid market.
An Equity Fund may use options on futures contracts for bona-fide hedging or
non-hedging purposes as discussed below.
An Equity Fund will engage in futures and related options transactions only for
bona-fide hedging or non-hedging purposes in accordance with CFTC regulations,
which permit investment companies registered under the 1940 Act to engage in
such transactions without requiring their sponsors to be registered as commodity
pool operators. No Equity Fund is permitted to engage in speculative futures
trading. An Equity Fund will determine that the price fluctuations in the
futures contracts and options on futures used for hedging purposes are
substantially related to price fluctuations in securities held by the Fund or in
securities which it expects to purchase. Except for the limited amount of
permitted non-hedging transactions stated in the Prospectus, an Equity Fund's
futures transactions will be entered into for traditional hedging purposes --
i.e., futures contracts will be sold to protect against a decline in the price
of securities that the Fund owns, or futures contracts will be purchased to
protect the Fund against an increase in the price of securities it intends to
purchase. In particular cases, when it is economically advantageous for an
Equity Fund to do so, a long futures position may be terminated or an option may
expire without the corresponding purchase of securities or other assets.
INVESTMENT LIMITATIONS
Each Fund has adopted the following fundamental investment limitations, which
cannot be changed without approval by holders of a majority of the outstanding
voting shares of the Fund. A "majority" for this purpose, means, with respect to
a Fund, the lesser of (i) 67% of the Fund's outstanding shares represented in
person or by proxy at a meeting at which more than 50% of its outstanding shares
are represented, or (ii) more than 50% of its outstanding shares. Unless
otherwise indicated, percentage limitations apply at the time of purchase.
As a matter of fundamental policy, each Fund may not:
(1) Issue senior securities, borrow money, or pledge its assets, except
that it may borrow from banks as a temporary measure (a) for
extraordinary or emergency purposes, in amounts not exceeding 5% of its
total assets or (b) in order to meet redemption requests, in amounts
not exceeding 15% of its total assets; the Fund will not make any
investments if borrowing exceeds 5% of its total assets until such time
as total borrowing represents less than 5% of Fund assets (except that
the Aggressive Growth Fund may engage in short sales of securities to
the extent described in the Prospectus);
(2) With respect to 75% of its assets, invest more than 5% of the value of
its total assets in the securities of any one issuer or purchase more
than 10% of the outstanding voting securities of any class of
securities of any one issuer (except that securities of the U.S.
Government, its agencies and instrumentalities are not subject to this
limitation);
(3) Invest 25% or more of the value of its total assets in any one industry
or group of industries (except that securities of the U.S. Government,
its agencies and instrumentalities are not subject to this limitation);
(4) Invest for the purpose of exercising control or management of another
issuer;
(5) Purchase or sell commodities or commodities contracts, real estate
(including limited partnership interests, but excluding readily
marketable securities secured by real estate or interests therein,
readily marketable interests in real estate investment trusts, readily
marketable securities issued by companies that invest in real estate or
interests therein, or mortgage-backed securities for the Fixed Income
Fund as described in the Prospectus) or interests in oil, gas, or other
mineral exploration or development programs or leases (although it may
invest in readily marketable securities of issuers that invest in or
sponsor such programs or leases);
(6) Underwrite securities issued by others, except to the extent that the
disposition of portfolio securities, either directly from an issuer or
from an underwriter for an issuer, may be deemed to be an underwriting
under the federal securities laws;
(7) Make short sales of securities or maintain a short position, except
short sales "against the box", and except that the Aggressive Growth
Fund may engage in short sales of securities to the extent described in
the Prospectus; (a short sale is made by selling a security the Fund
does not own; a short sale is "against the box" to the extent that the
Fund contemporaneously owns or has the right to obtain at no additional
cost securities identical to those sold short) (while each Fund has
reserved the right to make short sales "against the box", the Advisor
to each Fund (other than the Aggressive Growth Fund) has no present
intention of engaging in such transactions);
(8) Participate on a joint or joint and several basis in any trading
account in securities; or
(9) Make loans of money or securities, except that the Fund may (i) invest
in repurchase agreements and commercial paper; (ii) purchase a portion
of an issue of publicity distributed bonds, debentures or other debt
securities; and (iii) acquire private issues of debt securities subject
to the limitations on investments in illiquid securities.
The following investment limitations are not fundamental, and may be changed
without shareholder approval. As a matter of non-fundamental policy, each Fund
may not:
(1) Invest in securities of issuers which have a record of less than three
years' continuous operation (including predecessors and, in the case of
bonds, guarantors) if more than 5% of its total assets would be
invested in such securities;
(2) Invest more than 10% of its net assets in illiquid securities; for this
purpose, illiquid securities include, among others (a) securities for
which no readily available market exists or which have legal or
contractual restrictions on resale, (b) fixed time deposits that are
subject to withdrawal penalties and have maturities of more than seven
days, and (c) repurchase agreements not terminable within seven days;
(3) Invest in the securities of any issuer if those officers or Trustees of
the Trust and those officers and directors of the Advisor who
individually own more than 1/2 of 1% of the outstanding securities of
such issuer together own more than 5% of such issuer's securities;
(4) Write, purchase, or sell puts, calls, straddles, spreads, or
combinations thereof or futures contracts or related options (except
that the Equity Funds may engage in certain transactions in options and
futures to the extent described in the Prospectus);
(5) Invest in warrants, valued at the lower of cost or market, exceeding
more than 5% of the value of the Fund's net assets; included within
this amount, but not to exceed 2% of the value of the Fund's net
assets, may be warrants which are not listed on the New York or
American Stock Exchange; warrants acquired by the Fund in units or
attached to securities may be deemed to be without value; or
(6) Purchase any securities on margin except in connection with such
short-term credits as may be necessary for the clearance of
transactions.
Whenever any fundamental investment policy or investment restriction states a
maximum percentage of assets, it is intended that if the percentage limitation
is met at the time the investment is made, a later change in percentage
resulting from changing total or net assets values will not be considered a
violation of such policy.
NET ASSET VALUE
The net asset value per share of each Fund is determined at the time trading
closes on the New York Stock Exchange for the Equity Funds (currently 4 p.m.,
New York time, Monday through Friday) and the closing time of the fixed income
futures markets for the Fixed Income Fund (currently 3:00 p.m., New York time,
Monday through Friday), except for holidays and days in which trading limits may
be implemented), Monday through Friday, except on business holidays when the New
York Stock Exchange, or the Federal Reserve Banking System for the Fixed Income
Fund, is closed. The New York Stock Exchange recognizes the following holidays:
New Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday,
Memorial Day, Fourth of July, Labor Day, Thanksgiving Day, and Christmas Day.
Any other holiday recognized by the New York Stock Exchange will be considered a
business holiday on which each Fund's net asset value will not be determined.
The net asset value per share of each Fund is calculated separately by adding
the value of the Fund's securities and other assets belonging to the Fund,
subtracting the liabilities charged to the Fund, and dividing the result by the
number of outstanding shares. "Assets belonging to" a Fund consist of the
consideration received upon the issuance of shares of the Fund together with all
net investment income, realized gains/losses and proceeds derived from the
investment thereof, including any proceeds from the sale of such investments,
any funds or payments derived from any reinvestment of such proceeds, and a
portion of any general assets of the Trust not belonging to a particular
investment Fund. Assets belonging to a Fund are charged with the direct
liabilities of the Fund and with a share of the general liabilities of the
Trust, which are normally allocated in proportion to the number of or the
relative net asset values of all of the Trust's series at the time of allocation
or in accordance with other allocation methods approved by the Board of
Trustees. Subject to the provisions of the Declaration of Trust, determinations
by the Board of Trustees as to the direct and allocable liabilities, and the
allocable portion of any general assets, with respect to a Fund are conclusive.
For the fiscal year ended June 30, 1997, the net expenses after fee waivers and
expense reimbursements were $3,161 for the Enhanced Stock Market Fund, $2,861
for the Core Equity Fund, $6,181 for the Aggressive Growth Fund, $7,327 for the
Small-Cap Value Fund, $4,271 for the Sector Allocation Equity Fund, and $2,305
for the Fixed Income Fund.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Purchases. Shares of each Fund are offered and sold on a continuous basis and
may be purchased through authorized investment dealers or directly by contacting
the Distributor or the Funds. Selling dealers have the responsibility of
transmitting orders promptly to the Funds. The public offering price of shares
of each Fund equals net asset value. Quaker Securities, Inc. (the "Distributor")
serves as Distributor of shares of the Funds. See "How Shares May Be Purchased"
in the Prospectus.
Plan Under Rule 12b-1. The Trust has adopted a Plan of Distribution (the "Plan")
for each Fund pursuant to Rule 12b-1 under the 1940 Act (see "How Shares May Be
Purchased - Distribution Plan" in the Prospectus). Under the Plan each Fund may
expend up to 0.25% of its average net assets annually to finance any activity
which is primarily intended to result in the sale of shares of the Fund,
provided the Trust's Board of Trustees has approved the category of expenses for
which payment is being made. All expenditures under the Plan will be paid
entirely through the investment advisory fees payable to the Fund's investment
advisors. Potential benefits of the Plan to the Funds include savings to the
Funds in transfer agency costs, benefits to the investment process from growth
and stability of assets and maintenance of a financially healthy sponsoring
organization. No amounts were expended under the Plan for the fiscal year ended
June 30, 1997.
All of the distribution expenses incurred by the Distributor and others, such as
broker-dealers, in excess of the amount paid by the Funds will be borne by such
persons without any reimbursement from the Funds. Subject to seeking best
execution, the Funds may, from time to time, buy or sell portfolio securities
from or to firms that receive payments under the Plan.
From time to time the Distributor may pay additional amounts from its own
resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.
The Plan for each Fund and the Distribution Agreement with the Distributor have
been approved by the Board of Trustees of the Trust, including a majority of the
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Trust and who have no direct or indirect financial interest in the Plan or any
related agreements, by vote cast in person or at a meeting duly called for the
purpose of voting on the Plan and such Agreement. Continuation of the Plan and
the Distribution Agreement must be approved annually by the Board of Trustees in
the same manner as specified above.
Each year the Trustees must determine whether continuation of the Plan with
respect to each Fund is in the best interest of shareholders of that Fund and
that there is a reasonable likelihood of its providing a benefit to such Fund,
and the Board of Trustees has made such a determination for the current year of
operations under the Plan. The Plan and the Distribution Agreement may be
terminated at any time without penalty by a majority of those trustees who are
not "interested persons" or by a majority vote of the Fund's outstanding voting
stock. Any amendment materially increasing the maximum percentage payable under
the Plan must likewise be approved with respect to any Fund by a majority vote
of the Fund's outstanding voting stock, as well as by a majority vote of those
trustees who are not "interested persons." Also, any other material amendment to
the Plan must be approved by a majority vote of the trustees including a
majority of the independent Trustees of the Trust having no interest in the
Plan. In addition, in order for the Plan to remain effective, the selection and
nomination of Trustees who are not "interested persons" of the Trust must be
effected by the Trustees who themselves are not "interested persons" and who
have no direct or indirect financial interest in the Plan. Persons authorized to
make payments under the Plan must provide written reports at least quarterly to
the Board of Trustees for their review.
Redemptions. Under the 1940 Act, each Fund may suspend the right of redemption
or postpone the date of payment for shares during any period when (a) trading on
the New York Stock Exchange is restricted by applicable rules and regulations of
the SEC; (b) the Exchange is closed for other than customary weekend and holiday
closings; (c) the SEC has by order permitted such suspension; or (d) an
emergency exists as determined by the SEC. Each Fund may also suspend or
postpone the recordation of the transfer of shares upon the occurrence of any of
the foregoing conditions.
In addition to the situations described in the Prospectus under "How Shares may
be Redeemed," each Fund may redeem shares involuntarily to reimburse the Fund
for any loss sustained by reason of the failure of a shareholder to make full
payment for shares purchased by the shareholder or to collect any charge
relating to a transaction effected for the benefit of a shareholder which is
applicable to Fund shares as provided in the Prospectus from time to time.
DESCRIPTION OF THE TRUST
The Trust is an unincorporated business trust organized under Massachusetts law
on October 24, 1990. The Trust's Declaration of Trust authorizes the Board of
Trustees to divide shares into series, each series relating to a separate
portfolio of investments, and to classify and reclassify any unissued shares
into one or more classes of shares of each such series. The Declaration of Trust
currently provides for the shares of seven series, as follows: the Quaker
Enhanced Stock Market Fund and the Quaker Fixed Income Fund, both managed by
Fiduciary Asset Management, Inc. of St. Louis, Missouri; the Quaker Core Equity
Fund managed by West Chester Capital Advisors, Inc. of West Chester,
Pennsylvania; the Quaker Aggressive Growth Fund managed by DG Capital
Management, Inc. of Wayland, Massachusetts; the Quaker Small-Cap Value Fund
managed by Aronson + Partners of Philadelphia, Pennsylvania; the Quaker Sector
Allocation Equity Fund managed by Logan Capital Management, Inc. of
Philadelphia, Pennsylvania; and the Quaker Mid-Cap Value Fund managed by
Compu-Val Investments, Inc. of Wilmington, Delaware. The number of shares of
each series shall be unlimited. The Trust does not intend to issue share
certificates.
In the event of a liquidation or dissolution of the Trust or an individual
series, such as each Fund, shareholders of a particular series would be entitled
to receive the assets available for distribution belonging to such series.
Shareholders of a series are entitled to participate equally in the net
distributable assets of the particular series involved on liquidation, based on
the number of shares of the series that are held by each shareholder. If there
are any assets, income, earnings, proceeds, funds or payments, that are not
readily identifiable as belonging to any particular series, the Trustees shall
allocate them among any one or more of the series as they, in their sole
discretion, deem fair and equitable.
Shareholders of all of the series of the Trust, including the Funds, will vote
together and not separately on a series-by-series or class-by-class basis,
except as otherwise required by law or when the Board of Trustees determines
that the matter to be voted upon affects only the interests of the shareholders
of a particular series or class. Rule 18f-2 under the 1940 Act provides that any
matter required to be submitted to the holders of the outstanding voting
securities of an investment company such as the Trust shall not be deemed to
have been effectively acted upon unless approved by the holders of a majority of
the outstanding shares of each series or class affected by the matter. A series
or class is affected by a matter unless it is clear that the interests of each
series or class in the matter are substantially identical or that the matter
does not affect any interest of the series or class. Under Rule 18f-2, the
approval of an investment advisory agreement, a Rule 12b-1 plan, or any change
in a fundamental investment policy would be effectively acted upon with respect
to a series only if approved by a majority of the outstanding shares of such
series. However, the Rule also provides that the ratification of the appointment
of independent accountants, the approval of principal underwriting contracts and
the election of Trustees may be effectively acted upon by shareholders of the
Trust voting together, without regard to a particular series or class.
When used in the Prospectus or this Additional Statement, a "majority" of
shareholders means the vote of the lesser of (1) 67% of the shares of the Trust
or the applicable series or class present at a meeting if the holders of more
than 50% of the outstanding shares are present in person or by proxy, or (2)
more than 50% of the outstanding shares of the Trust or the applicable series or
class.
When issued for payment as described in the Prospectus and this Additional
Statement, shares of each Fund will be fully paid and non-assessable.
The Declaration of Trust provides that the Trustees of the Trust will not be
liable in any event in connection with the affairs of the Trust, except as such
liability may arise from his or her own bad faith, willful misfeasance, gross
negligence, or reckless disregard of duties. It also provides that all third
parties shall look solely to the Trust property for satisfaction of claims
arising in connection with the affairs of the Trust. With the exceptions stated,
the Declaration of Trust provides that a Trustee or officer is entitled to be
indemnified against all liability in connection with the affairs of the Trust.
ADDITIONAL INFORMATION CONCERNING TAXES
The following summarizes certain additional tax considerations generally
affecting each Fund and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of each Fund or its shareholders, and the discussion here and in the
Prospectus is not intended as a substitute for careful tax planning and is based
on tax laws and regulations that are in effect on the date hereof; such laws and
regulations may be changed by legislative, judicial, or administrative action.
Investors are advised to consult their tax advisors with specific reference to
their own tax situations.
Each series of the Trust, including each Fund, will be treated as a separate
corporate entity under the Code and intends to qualify or remain qualified as a
regulated investment company. In order to so qualify, each series must elect to
be a regulated investment company or have made such an election for a previous
year and must satisfy, in addition to the distribution requirement described in
the Prospectus, certain requirements with respect to the source of its income
for a taxable year. At least 90% of the gross income of each series must be
derived from dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of stocks, securities or foreign
currencies, and other income derived with respect to the series' business of
investing in such stock, securities or currencies. Any income derived by a
series from a partnership or trust is treated as derived with respect to the
series' business of investing in stock, securities or currencies only to the
extent that such income is attributable to items of income that would have been
qualifying income if realized by the series in the same manner as by the
partnership or trust.
An investment company may not qualify as a regulated investment company for any
taxable year unless it satisfies certain requirements with respect to the
diversification of its investments at the close of each quarter of the taxable
year. In general, at least 50% of the value of its total assets must be
represented by cash, cash items, government securities, securities of other
regulated investment companies and other securities which, with respect to any
one issuer, do not represent more than 5% of the total assets of the investment
company nor more than 10% of the outstanding voting securities of such issuer.
In addition, not more than 25% of the value of the investment company's total
assets may be invested in the securities (other than government securities or
the securities of other regulated investment companies) of any one issuer. Each
Fund intends to satisfy all requirements on an ongoing basis for continued
qualification as a regulated investment company.
Each series of the Trust, including each Fund, will designate any distribution
of long term capital gains as a capital gain dividend in a written notice mailed
to shareholders within 60 days after the close of the series' taxable year.
Shareholders should note that, upon the sale or exchange of series shares, if
the shareholder has not held such shares for at least six months, any loss on
the sale or exchange of those shares will be treated as long term capital loss
to the extent of the capital gain dividends received with respect to the shares.
A 4% nondeductible excise tax is imposed on regulated investment companies that
fail to currently distribute an amount equal to specified percentages of their
ordinary taxable income and capital gain net income (excess of capital gains
over capital losses). Each series of the Trust, including each Fund, intends to
make sufficient distributions or deemed distributions of its ordinary taxable
income and any capital gain net income prior to the end of each calendar year to
avoid liability for this excise tax.
If for any taxable year a series does not qualify for the special federal income
tax treatment afforded regulated investment companies, all of its taxable income
will be subject to federal income tax at regular corporate rates (without any
deduction for distributions to its shareholders). In such event, dividend
distributions (whether or not derived from interest on tax-exempt securities)
would be taxable as ordinary income to shareholders to the extent of the series'
current and accumulated earnings and profits, and would be eligible for the
dividends received deduction for corporations.
Each series of the Trust, including each Fund, will be required in certain cases
to withhold and remit to the U.S. Treasury 31% of taxable dividends or 31% of
gross proceeds realized upon sale paid to shareholders who have failed to
provide a correct tax identification number in the manner required, or who are
subject to withholding by the Internal Revenue Service for failure properly to
include on their return payments of taxable interest or dividends, or who have
failed to certify to the Fund that they are not subject to backup withholding
when required to do so or that they are "exempt recipients."
Depending upon the extent of each Fund's activities in states and localities in
which its offices are maintained, in which its agents or independent contractors
are located or in which it is otherwise deemed to be conducting business, each
Fund may be subject to the tax laws of such states or localities. In addition,
in those states and localities that have income tax laws, the treatment of a
Fund and its shareholders under such laws may differ from their treatment under
federal income tax laws.
MANAGEMENT OF THE FUNDS
Trustees and Officers. The Trustees and executive officers of the Trust, their
ages, and their principal occupations for the last five years are as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Name, Age, Position(s) Principal Occupation(s)
and Address During Past 5 Years
Howard L. Gleit, 57 Of Counsel
Trustee Connolly Epstein Chicco
1515 Market Street Foxman Engelmyer & Ewing
Philadelphia, Pennsylvania Philadelphia, Pennsylvania since 1997;
previously, Of Counsel
Zapruder & Odell
Bala Cynwyd, Pennsylvania since 1994;
previously, Partner
Pepper, Hamilton & Scheetz
Philadelphia, Pennsylvania
Everett T. Keech, 57 Chairman and CEO
Trustee Pico Products, Inc.
One Tower Bridge, Suite 501 Lakeview Terrace, California
West Conshohocken, Pennsylvania
Laurie Keyes, 47* Chief Operating Officer
Trustee and Vice Chairman Quaker Securities, Inc.
Suite 75 Valley Forge, Pennsylvania
1288 Valley Forge Road (Distributor to the Quaker Family of Funds)
Valley Forge, Pennsylvania
Jeffry H. King, 54* Chairman and CEO
Trustee Quaker Securities, Inc.
Suite 75 Valley Forge, Pennsylvania
1288 Valley Forge Road (Distributor to the Quaker Family of Funds)
Valley Forge, Pennsylvania
Louis P. Pektor III, 46 President
Trustee Ashley Development Company
961 Marcon Boulevard, Suite 300 Allentown, Pennsylvania since 1993;
Allentown, Pennsylvania President
Greystone Capital
Allentown, Pennsylvania since 1993;
previously, Executive Vice President
Wall Street Mergers & Acquisitions
Allentown, Pennsylvania
J. Hope Reese, 36 Comptroller, The Nottingham Company
Treasurer and Assistant Rocky Mount, North Carolina
Secretary (Administrator to the Quaker Family of Funds),
105 North Washington Street since 1995; previously, Cash Manager, Law Companies
Rocky Mount, North Carolina 27802 Group, Atlanta, Georgia, since 1993; previously,
Financial Manager, MGR Food Services, Atlanta, Georgia
C. Frank Watson III, 27 Vice President
Secretary and Assistant Treasurer The Nottingham Company
105 North Washington Street Rocky Mount, North Carolina (Administrator to
Rocky Mount, North Carolina 27802 the Quaker Family of Funds)
Peter F. Waitneight, 55* President
Trustee, Chairman and President Quaker Funds, Inc.
Suite 76 Valley Forge, Pennsylvania since 1996
1288 Valley Forge Road (Sponsor to the Quaker Family of Funds) ;
Valley Forge, Pennsylvania previously, President, Paragon Financial Consulting
Malvern, Pennsylvania 1995-96;
previously, Marketing Director
Turner Investment Partners
Berwyn, Pennsylvania 1993-95;
previously, Chief Financial Officer
Radnor Corporation
Radnor, Pennsylvania
</TABLE>
- ----------------------------
* Indicates that Trustee is an "interested person" of the Trust for
purposes of the 1940 Act because of his or her position with one of the
Advisors, the Distributor, or the Sponsor to the Trust.
There are no family relationships between the Trustees and executive officers of
the Trust, except between Ms. Keyes and Mr. King, who are married.
Compensation. The officers of the Trust will not receive compensation from the
Trust for performing the duties of their offices. Each Trustee who is not an
"interested person" of the Trust receives a fee of $2,000 each year plus $250
per meeting attended in person and $100 per meeting attended by telephone. Each
such Trustee voluntarily waived his fee for the fiscal year ended June 30, 1997.
All Trustees are reimbursed for any out-of-pocket expenses incurred in
connection with attendance at meetings.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Compensation Table
Pension Total
Retirement Compensation
Aggregate Benefits Estimated from the
Compensation Accrued As Annual Trust
Name of Person, from the Part of Fund Benefits Upon Paid to
Position Trust Expenses Retirement Trustees
Howard L. Gleit $0.00 None None $0.00
Trustee
Everett T. Keech $0.00 None None $0.00
Trustee
Laurie Keyes None None None None
Trustee
Jeffry H. King None None None None
Trustee
Louis P. Pektor III $0.00 None None $0.00
Trustee
Peter F. Waitneight None None None None
Trustee
</TABLE>
Figures are for the fiscal year ended June 30, 1997.
Principal Holders of Voting Securities. As of December 18, 1997, the Trustees
and Officers of the Trust as a group owned beneficially (i.e., had voting and/or
investment power) 39.319% of the then outstanding shares of the Enhanced Stock
Market Fund, 27.016% of the then outstanding shares of the Core Equity Fund,
22.275% of the then outstanding shares of the Aggressive Growth Fund, 13.964% of
the then outstanding shares of the Small-Cap Value Fund, 5.440% of the then
outstanding shares of the Sector Allocation Equity Fund, and 30.801% of the then
outstanding shares of the Fixed Income Fund. On the same date the following
shareholders owned of record more than 5% of the outstanding shares of
beneficial interest of the Funds. Except as provided below, no person is known
by the Trust to be the beneficial owner of more than 5% of the outstanding
shares of the Funds as of December 18, 1997.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
QUAKER ENHANCED STOCK MARKET FUND
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership* Percent
Peter Waitneight IR 16,107.893 shares 16.230%
One Hunt Club Lane
Malvern, PA 19355
Laurie Keyes 8,747.302 shares 8.814%
402 Chester Rd
Devon, PA 19333
Charles Cook IRA 8,472.763 shares 8.537%
26 Broadway
New York, NY 10004
Anthony Cirillo 11,655.570 shares 11.744%
726 Floyd Street
Englewood Cliffs, NJ 07632
QUAKER CORE EQUITY FUND
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership* Percent
Harris McLean Financial Group 7,250.681 shares 12.553%
PO Box 30758
Cayman Islands, CJ
Peter Waitneight IRA 6,277.439 shares 10.868%
One Hunt Club Lane
Malvern, PA 19355
Robert Chorba 6,137.320 shares 10.626%
National Imaging Systems
1100 East Hector St, Ste 319
Conshohocken, PA 19428
Krister Hjelm IRA 5,987.438 shares 10.366%
223 Hedgemere Dr
Devon, PA 19333
Laurie Keyes 6,217.165 shares 10.764%
402 Chester Rd
Devon, PA 19333
Jane Mayo 3,635.918 shares 6.295%
104 Curtis Court
Wayne, PA 19087
QUAKER SECTOR ALLOCATION EQUITY FUND
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership* Percent
Securities Corp. 26,163.132 shares 19.481%
P.O. Box 2052
Jersey City, NJ 07303-9998
Securities Corp. 19,672.104 shares 14.648%
P.O. Box 2052
Jersey City, NJ 07303-9998
Edward Leblanc 11,721.385 shares 8.728%
333 South Camal St.
Philadelphia, PA 19107
William Gallagher 15,998.205 shares 11.912%
1902 Silver Ave
Abington, PA 19001-1115
Alain T. Drooz 7,363.803 shares 5.483%
1901 Upper Chelsea Road
Upper Arlington, OH 43212
Peter Waitneight 7,305.268 shares 5.440%
One Hunt Club Lane
Malvern, PA 19355
QUAKER SMALL-CAP VALUE FUND
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership* Percent
Altru Company 44,155.522 shares 29.433%**
c/o Keystone Financial Trust Operations
P.O. Box 2450
Altoona, PA 16603-2450
Theodore Aronson IRA 41,304.551 shares 27.533%**
1234 Country Club Lane
Gladwyn, PA 19035
QUAKER AGGRESSIVE GROWTH FUND
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership* Percent
Manu Daftary IRA 30,871.490 shares 26.753%**
8 Waybridge Lane
Wayland, MA 0177-4550
Peter Schofield 9,926.772 shares 8.602%
111 Cratin Lane
West Chester, PA 19380
Laurie Keyes 9,621.084 shares 8.338%
402 Chester Rd
Devon, PA 19333
Carolyn/William Stewart 7,466.182 shares 6.470%
357 Berkeley Road
Devon, PA 19333
Peter Waitneight IRA 6,837.700 shares 5.926%
One Hunt Club Lane
Malvern, PA 19355
QUAKER FIXED INCOME FUND
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership* Percent
Peter Waitneight IRA 22,917.830 shares 23.316%
One Hunt Club Lane
Malvern, PA 19355
F. P. Meadows Jr. IRA 13,356.978 shares 13.589%
P.O. Box 353
Rocky Mount, NC 27802
Laurie Keyes 5,653.112 shares 5.751%
402 Chester Rd
Devon, PA 19333
Ian Kravitz 5,288.916 shares 5.381%
140 Ocean Park Blvd #629
Santa Monica, CA 90405
Raymond Keyes 5,081.069 shares 5.169%
620 Pelican Bay Blvd #133
Naples, FL 34108-8231
</TABLE>
* The shares indicated are believed by the Trust to be owned both of
record and beneficially.
** Pursuant to applicable SEC regulations, this shareholder is deemed to
control the indicated Fund.
Investment Advisor. Information about the investment advisor to each Fund (each
the "Advisor") and its duties and compensation as Advisor is contained in the
Prospectus.
Compensation of the Advisor with regards to the Quaker Core Equity Fund, the
Quaker Aggressive Growth Fund, the Quaker Small-Cap Value Fund, the Quaker
Sector Allocation Equity Fund, and the Quaker Mid-Cap Value Fund, based upon
each Fund's average daily net assets, is at the annual rate of 0.75%.
Compensation of the Advisor with regards to the Quaker Enhanced Stock Market
Fund, based upon the Fund's average daily net assets, is at the annual rate of
0.50%. Compensation of the Advisor with regards to the Quaker Fixed Income Fund,
based upon the Fund's average daily net assets, is at the annual rate of 0.45%.
For the fiscal year ended June 30, 1997, the Advisor waived all advisory fees.
The total fees waived amounted to $1,589 for the Core Equity Fund, $3,457 for
the Aggressive Growth Fund, $4,183 for the Small-Cap Value Fund, $2,387 for the
Sector Allocation Equity Fund, $1,596 for the Enhanced Stock Market Fund, and
$1,153 for the Fixed Income Fund.
Under each Advisory Agreement, the Advisor to each Fund is not liable for any
error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the performance of such Agreement, except a loss resulting from
a breach of fiduciary duty with respect to the receipt of compensation for
services or a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Advisor in the performance of its duties or from
its reckless disregard of its duties and obligations under the Agreement.
Administrator and Transfer Agent. The Trust has entered into a Fund Accounting,
Dividend Disbursing & Transfer Agent and Administration Agreement with The
Nottingham Company (the "Administrator"), 105 North Washington Street, Post
Office Drawer 69, Rocky Mount, North Carolina 27802-0069, pursuant to which the
Administrator receives a fee at the annual rate of 0.175% of the average daily
net assets of each Fund on the first $50 million; 0.150% of the next $50
million; and 0.125% of its average daily net assets in excess of $100 million.
In addition, the Administrator currently receives a base monthly fee of $2,000
for accounting and recordkeeping services for each Fund. The Administrator also
charges each Fund for certain costs involved with the daily valuation of
investment securities and is reimbursed for out-of-pocket expenses. The
Administrator charges a minimum fee of $3,000 per month per Fund for all of its
fees taken in the aggregate, analyzed monthly.
For the fiscal year ended June 30, 1997, the Administrator received a portion of
its aggregate administration fee in the amount of $11,511 for the Core Equity
Fund (waiving $7,797 of its fees), $11,642 for the Aggressive Growth Fund
(waiving $8,151 of its fees), $11,643 for the Small-Cap Value Fund (waiving
$8,295 of its fees), $11,603 for the Sector Allocation Equity Fund (waiving
$7,915 of its fees), $11,545 for the Enhanced Stock Market Fund (waiving $7,950
of its fees), and $11,513 for the Fixed Income Fund (waiving $7,872 of its
fees).
The Administrator will perform the following services for each Fund: (1)
coordinate with the Custodian and monitor the services it provides to the Fund;
(2) coordinate with and monitor any other third parties furnishing services to
the Fund; (3) provide the Fund with necessary office space, telephones and other
communications facilities and personnel competent to perform administrative and
clerical functions for the Fund; (4) supervise the maintenance by third parties
of such books and records of the Fund as may be required by applicable federal
or state law; (5) prepare or supervise the preparation by third parties of all
federal, state and local tax returns and reports of the Fund required by
applicable law; (6) prepare and, after approval by the Trust, file and arrange
for the distribution of proxy materials and periodic reports to shareholders of
the Fund as required by applicable law; (7) prepare and, after approval by the
Trust, arrange for the filing of such registration statements and other
documents with the Securities and Exchange Commission and other federal and
state regulatory authorities as may be required by applicable law; (8) review
and submit to the officers of the Trust for their approval invoices or other
requests for payment of Fund expenses and instruct the Custodian to issue checks
in payment thereof; and (9) take such other action with respect to the Fund as
may be necessary in the opinion of the Administrator to perform its duties under
the agreement. The Administrator also will provide certain accounting and
pricing services for each Fund.
With the approval of the Trust, the Administrator has contracted with NC
Shareholder Services, LLC (the "Transfer Agent"), a North Carolina limited
liability company, to serve as transfer, dividend paying, and shareholder
servicing agent for the Funds. The address of the Transfer Agent is 107 North
Washington Street, Post Office Box 4365, Rocky Mount, North Carolina 27803-0365.
The Transfer Agent is compensated for its services by the Administrator and not
directly by the Funds. The Administration Agreement with the Administrator
provides for a monthly transfer agent fee based on the number of shareholders in
each Fund, subject to a monthly minimum fee of $500. For the fiscal year ended
June 30, 1997, the amounts paid by the Funds for transfer agency fees were
included in the amount of Fund administration fees paid (and waived) as
described above.
Distributor. Quaker Securities, Inc. (the "Distributor"), 1288 Valley Forge
Road, Post Office Box 987, Valley Forge, Pennsylvania 19482, acts as an
underwriter and distributor of each Fund's shares for the purpose of
facilitating the registration of shares of the Fund under state securities laws
and to assist in sales of Fund shares pursuant to a Distribution Agreement (the
"Distribution Agreement") approved by the Board of Trustees of the Trust.
In this regard, the Distributor has agreed at its own expense to qualify as a
broker-dealer under all applicable federal or state laws in those states which
each Fund shall from time to time identify to the Distributor as states in which
it wishes to offer its shares for sale, in order that state registrations may be
maintained for the Fund.
The Distributor is a broker-dealer registered with the Securities and Exchange
Commission and a member in good standing of the National Association of
Securities Dealers, Inc.
The Distribution Agreement may be terminated by either party upon 60 days prior
written notice to the other party.
Sponsor. Quaker Funds, Inc. (the "Sponsor"), 1288 Valley Forge Road, Post Office
Box 987, Valley Forge, Pennsylvania 19482, acts as sponsor for each Fund and
provides certain shareholder services (more thoroughly described in the
Prospectus) pursuant to a Shareholder Servicing Agreement between the Trust and
the Sponsor for each Fund approved by the Board of Trustees of the Trust. The
Shareholder Servicing Agreement may be terminated by each party upon 60 days
prior written notice to the other party. No amounts were paid by the Funds to
the Sponsor for shareholder services for the fiscal year ended June 30, 1997,
the Sponsor having waived its fee in the amount of $530 for the Core Equity
Fund, $1,153 for the Aggressive Growth Fund, $1,394 for the Small-Cap Value
Fund, $796 for the Sector Allocation Equity Fund, $638 for the Enhanced Stock
Market Fund, and $384 for the Fixed Income Fund. In addition, the Sponsor
voluntarily reimbursed a portion of each Fund's operating expenses for the
fiscal year ended June 30, 1997. The amount voluntarily reimbursed was $32,372
for the Core Equity Fund, $31,935 for the Aggressive Growth Fund (plus an
additional amount of $11,100 as reimbursement for income taxes), $37,354 for the
Small-Cap Value Fund, $31,733 for the Sector Allocation Equity Fund, $39,103 for
the Enhanced Stock Market Fund, and $30,723 for the Fixed Income Fund.
Custodian. First Union National Bank of North Carolina (the "Custodian"), Two
First Union Center, Charlotte, North Carolina 28288-1151, serves as custodian
for each Fund's assets. The Custodian acts as the depository for each Fund,
holds in safekeeping its portfolio securities, collects all income and other
payments with respect to portfolio securities, disburses monies at the Fund's
request and maintains records in connection with its duties as Custodian. For
its services as Custodian, the Custodian is entitled to receive from each Fund
an annual fee based on the average net assets of the Fund held by the Custodian.
Independent Accountants. The firm of Goldenberg Rosenthal Friedlander, LLP, 101
West Avenue, P.O. Box 458, Jenkintown, Pennsylvania 19046-0468, serves as
independent accountants for the Funds, and will audit the annual financial
statements of the Funds, prepare each Fund's federal and state tax returns, and
consult with the Funds on matters of accounting and federal and state income
taxation.
SPECIAL SHAREHOLDER SERVICES
Each Fund offers the following shareholder services:
Regular Account. The regular account allows for voluntary investments to be made
at any time. Available to individuals, custodians, corporations, trusts,
estates, corporate retirement plans and others, investors are free to make
additions and withdrawals to or from their account as often as they wish. When
an investor makes an initial investment in the Fund, a shareholder account is
opened in accordance with the investor's registration instructions. Each time
there is a transaction in a shareholder account, such as an additional
investment or the reinvestment of a dividend or distribution, the shareholder
will receive a confirmation statement showing the current transaction and all
prior transactions in the shareholder account during the calendar year to date,
along with a summary of the status of the account as of the transaction date. As
stated in the Prospectus, share certificates are not issued.
Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investment in shares through automatic charges
to their checking account. With shareholder authorization and bank approval, the
Funds will automatically charge the checking account for the amount specified
($100 minimum) which will be automatically invested in shares at the net asset
value on or about the 21st day of the month. The shareholder may change the
amount of the investment or discontinue the plan at any time by writing to the
Funds.
Systematic Withdrawal Plan. Shareholders owning shares with a value of $10,000
or more may establish a Systematic Withdrawal Plan. A shareholder may receive
monthly or quarterly payments, in amounts of not less than $100 per payment, by
authorizing the Funds to redeem the necessary number of shares periodically
(each month, or quarterly in the months of March, June, September and December)
in order to make the payments requested. Each Fund has the capacity of
electronically depositing the proceeds of the systematic withdrawal directly to
the shareholder's personal bank account ($5,000 minimum per bank wire).
Instructions for establishing this service are included in the Fund Shares
Application, enclosed in the Prospectus, or available by calling the Funds. If
the shareholder prefers to receive his systematic withdrawal proceeds in cash,
or if such proceeds are less than the $5,000 minimum for a bank wire, checks
will be made payable to the designated recipient and mailed within 7 days of the
valuation date. If the designated recipient is other than the registered
shareholder, the signature of each shareholder must be guaranteed on the
application (see "Signature Guarantees" in the Prospectus). A corporation (or
partnership) must also submit a "Corporate Resolution" (or "Certification of
Partnership") indicating the names, titles and required number of signatures
authorized to act on its behalf. The application must be signed by a duly
authorized officer(s) and the corporate seal affixed. No redemption fees are
charged to shareholders under this plan. Costs in conjunction with the
administration of the plan are borne by the Funds. Shareholders should be aware
that such systematic withdrawals may deplete or use up entirely their initial
investment and may result in realized long-term or short-term capital gains or
losses. The Systematic Withdrawal Plan may be terminated at any time by the
Funds upon sixty days written notice or by a shareholder upon written notice to
the Funds. Applications and further details may be obtained by calling the Funds
at 800-220-8888, or by writing to:
The Quaker Family of Funds
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Purchases in Kind. Each Fund may accept securities in lieu of cash in payment
for the purchase of shares in the Fund. The acceptance of such securities is at
the sole discretion of the Advisor to each Fund based upon the suitability of
the securities accepted for inclusion as a long term investment of the Fund, the
marketability of such securities, and other factors which the Advisor may deem
appropriate. If accepted, the securities will be valued using the same criteria
and methods as described in "How Shares are Valued" in the Prospectus.
Redemptions in Kind. The Funds do not intend, under normal circumstances, to
redeem their securities by payment in kind. It is possible, however, that
conditions may arise in the future which would, in the opinion of the Trustees,
make it undesirable for the Funds to pay for all redemptions in cash. In such
case, the Board of Trustees may authorize payment to be made in readily
marketable portfolio securities of the Fund. Securities delivered in payment of
redemptions would be valued at the same value assigned to them in computing the
net asset value per share. Shareholders receiving them would incur brokerage
costs when these securities are sold. An irrevocable election has been filed
under Rule 18f-1 of the 1940 Act, wherein each Fund committed itself to pay
redemptions in cash, rather than in kind, to any shareholder of record of the
Fund who redeems during any ninety-day period, the lesser of (a) $250,000 or (b)
one percent (1%) of the Fund's net asset value at the beginning of such period.
Transfer of Registration. To transfer shares to another owner, send a written
request to the applicable Fund at the address shown herein. Your request should
include the following: (1) the Fund name and existing account registration; (2)
signature(s) of the registered owner(s) exactly as the signature(s) appear(s) on
the account registration; (3) the new account registration, address, social
security or taxpayer identification number and how dividends and capital gains
are to be distributed; (4) signature guarantees (See the Prospectus under the
heading "Signature Guarantees"); and (5) any additional documents which are
required for transfer by corporations, administrators, executors, trustees,
guardians, etc. If you have any questions about transferring shares, call or
write the Funds.
ADDITIONAL INFORMATION ON PERFORMANCE
From time to time, the total return of each Fund and the yield of the Fixed
Income Fund may be quoted in advertisements, sales literature, shareholder
reports or other communications to shareholders. Each Fund computes the "average
annual total return" of each Fund by determining the average annual compounded
rates of return during specified periods that equate the initial amount invested
to the ending redeemable value of such investment. This is done by determining
the ending redeemable value of a hypothetical $1,000 initial payment. This
calculation is as follows:
P(1+T)n = ERV
Where: T = average annual total return.
ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical $1,000
payment made at the beginning of the period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed in terms
of years.
Each Fund may also compute the aggregate total return of each Fund, which is
calculated in a similar manner, except that the results are not annualized. The
calculation of average annual total return and aggregate total return assume
that there is a reinvestment of all dividends and capital gain distributions on
the reinvestment dates during the period. The ending redeemable value is
determined by assuming complete redemption of the hypothetical investment and
the deduction of all nonrecurring charges at the end of the period covered by
the computations.
The aggregate total return for the fiscal year from the inception of each Fund
(November 25, 1996) through June 30, 1997, was 16.50% for the Core Equity Fund,
12.68% for the Aggressive Growth Fund, 20.35% for the Small-Cap Value Fund,
6.51% for the Sector Allocation Equity Fund, 19.04% for the Enhanced Stock
Market Fund, and 1.57% for the Fixed Income Fund. These performance quotations
should not be considered as representative of the performance of the Funds for
any specified period in the future. Aggregate total return is calculated
similarly to annual total return, except that the return is aggregated, rather
than annualized.
The yield of the Fixed Income Fund is computed by dividing the net investment
income per share earned during the period stated in the advertisement by the
maximum offering price per share on the last day of the period. For the purpose
of determining net investment income, the calculation includes, among expenses
of the Fund, all recurring fees that are charged to all shareholder accounts and
any nonrecurring charges for the period stated. In particular, yield is
determined according to the following formula:
Yield = 2[(A - B + 1)6-1]
-----------------
CD
Where: A equals dividends and interest earned during the period; B equals
expenses accrued for the period (net of reimbursements); C equals average daily
number of shares outstanding during the period that were entitled to receive
dividends; D equals the maximum offering price per share on the last day of the
period.
For the thirty days ended June 30, 1997, the yield for the Fixed Income Fund was
5.35%.
Each Fund's performance may be compared in advertisements, sales literature,
shareholder reports, and other communications to the performance of other mutual
funds having similar objectives or to standardized indices or other measures of
investment performance. In particular, each Fund may compare its performance to
the S&P 500 Index. The Fixed Income Fund may also compare its performance with
the Salomon Brothers Broad Investment Grade Index. The Small-Cap Value Fund may
also compare its performance with the Russell 2000 Index. The Mid-Cap Value Fund
may also compare its performance with the Russell Mid-Cap Index. Comparative
performance may also be expressed by reference to a ranking prepared by a mutual
fund monitoring service or by one or more newspapers, newsletters or financial
periodicals. Each Fund may also occasionally cite statistics to reflect its
volatility and risk. Each Fund may also compare its performance to other
published reports of the performance of unmanaged portfolios of companies. The
performance of such unmanaged portfolios generally does not reflect the effects
of dividends or dividend reinvestment. Of course, there can be no assurance that
any Fund will experience the same results. Performance comparisons may be useful
to investors who wish to compare a Fund's past performance to that of other
mutual funds and investment products. Of course, past performance is not a
guarantee of future results.
Each Fund's performance fluctuates on a daily basis largely because net earnings
and net asset value per share fluctuate daily. Both net earnings and net asset
value per share are factors in the computation of total return as described
above.
As indicated, from time to time, each Fund may advertise its performance
compared to similar funds or portfolios using certain indices, reporting
services, and financial publications. These may include the following:
o Lipper Analytical Services, Inc. ranks funds in various fund categories
by making comparative calculations using total return. Total return
assumes the reinvestment of all capital gains distributions and income
dividends and takes into account any change in net asset value over a
specific period of time.
o Morningstar, Inc., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for
two weeks.
Investors may use such indices in addition to the Funds' Prospectus to obtain a
more complete view of each Fund's performance before investing. Of course, when
comparing a Fund's performance to any index, factors such as composition of the
index and prevailing market conditions should be considered in assessing the
significance of such comparisons. When comparing funds using reporting services,
or total return, investors should take into consideration any relevant
differences in funds such as permitted portfolio compositions and methods used
to value portfolio securities and compute offering price. Advertisements and
other sales literature for each Fund may quote total returns that are calculated
on non-standardized base periods. The total returns represent the historic
change in the value of an investment in the Fund based on monthly reinvestment
of dividends over a specified period of time.
From time to time each Fund may include in advertisements and other
communications information, charts, and illustrations relating to inflation and
the reflects of inflation on the dollar, including the purchasing power of the
dollar at various rates of inflation. Each Fund may also disclose from time to
time information about its portfolio allocation and holdings at a particular
date (including ratings of securities assigned by independent rating services
such as S&P and Moody's). Each Fund may also depict the historical performance
of the securities in which the Fund may invest over periods reflecting a variety
of market or economic conditions either alone or in comparison with alternative
investments, performance indices of those investments, or economic indicators.
Each Fund may also include in advertisements and in materials furnished to
present and prospective shareholders statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds that may be employed
to meet specific financial goals, such as saving for retirement, children's
education, or other future needs.
Comparative information about the yield of the Fixed Income Fund and about
average rates of return on certificates of deposits, bank money market deposit
accounts, money market mutual funds, and other similar types of investments may
be included in Fixed Income Fund communications. A bank certificate of deposit,
unlike the Fixed Income Fund's shares, pays a fixed rate of interest and
entitles the depositor to receive the face amount of the certificate at
maturity. A bank money market deposit account is a form of savings account which
pays a variable rate of interest. Unlike the Fixed Income Fund's shares, bank
certificates of deposit and bank money market deposit accounts are insured by
the Federal Deposit Insurance Corporation. A money market mutual fund is
designed to maintain a constant value of $1.00 per share and, thus, a money
market fund's shares are subject to less price fluctuation than the Fixed Income
Fund's shares.
<PAGE>
APPENDIX A
DESCRIPTION OF RATINGS
The Funds may generally acquire from time to time fixed income securities that
meet the following minimum rating criteria ("Investment Grade Debt Securities")
or, if unrated, are in the Advisor's opinion comparable in quality to Investment
Grade Debt Securities. The Fixed Income Fund, however, intends to limit its
portfolio to a more restrictive quality criteria, limiting portfolio investment
to those securities in the three highest ratings, as described below, or if not
rated, of equivalent quality as determined by the Advisor to the Fixed Income
Fund. The various ratings used by the nationally recognized securities rating
services are described below.
A rating by a rating service represents the service's opinion as to the credit
quality of the security being rated. However, the ratings are general and are
not absolute standards of quality or guarantees as to the creditworthiness of an
issuer. Consequently, the Advisor believes that the quality of fixed income
securities in which the Fund may invest should be continuously reviewed and that
individual analysts give different weightings to the various factors involved in
credit analysis. A rating is not a recommendation to purchase, sell or hold a
security because it does not take into account market value or suitability for a
particular investor. When a security has received a rating from more than one
service, each rating is evaluated independently. Ratings are based on current
information furnished by the issuer or obtained by the rating services from
other sources that they consider reliable. Ratings may be changed, suspended or
withdrawn as a result of changes in or unavailability of such information, or
for other reasons.
Standard & Poor's Ratings Services. The following summarizes the highest four
ratings used by Standard & Poor's Ratings Services ("S&P") for bonds which are
deemed to be "Investment-Grade Debt Securities" by the Advisor:
AAA - This is the highest rating assigned by S&P to a debt obligation
and indicates an extremely strong capacity of the obligor to meet its
financial commitment on the obligation.
AA - Debt rated AA differs from AAA issues only in a small degree. The
obligor's capacity to meet its financial commitment on the obligation
is very strong.
A - Debt rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in
higher-rated categories. However, the obligor's capacity to meet its
financial commitment on the obligation is still strong.
BBB - Debt rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
Bonds rated BB, B, CCC, CC and C are not considered by the Advisor to be
"Investment-Grade Debt Securities" and are regarded, on balance, as having
significant speculative characteristics with respect to the obligor's capacity
to meet its financial commitment on the obligation. BB indicates the lowest
degree of speculation and C the highest degree of speculation. While such bonds
may have some quality and protective characteristics, these may be outweighed by
large uncertainties or major risk exposures to adverse conditions.
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1.
The rating SP-1 is the highest rating assigned by S&P to short term notes and
indicates strong capacity to pay principal and interest. An issue determined to
possess a very strong capacity to pay debt service is given a plus (+)
designation. The rating SP-2 indicates a satisfactory capacity to pay principal
and interest, with some vulnerability to adverse financial and economic changes
over the term of the notes. Moody's Investors Service, Inc. The following
summarizes the highest four ratings used by Moody's Investors Service, Inc.
("Moody's") for bonds which are deemed to be "Investment-Grade Debt Securities"
by the Advisor:
Aaa - Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A - Debt which is rated A possesses many favorable investment attributes
and is to be considered as an upper medium grade obligation. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa - Debt which is rated Baa is considered as a medium grade obligation,
i.e., it is neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such debt lacks outstanding
investment characteristics and in fact has speculative characteristics as
well.
Moody's applies numerical modifiers (l, 2 and 3) with respect to bonds rated Aa,
A and Baa. The modifier 1 indicates that the bond being rated ranks in the
higher end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the bond ranks in the lower end of
its generic rating category. Bonds which are rated Ba, B, Caa, Ca or C by
Moody's are not considered "Investment-Grade Debt Securities" by the Advisor.
Bonds rated Ba are judged to have speculative elements because their future
cannot be considered as well assured. Uncertainty of position characterizes
bonds in this class, because the protection of interest and principal payments
often may be very moderate and not well safeguarded.
Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the security over any long period for time may be small. Bonds
which are rated Caa are of poor standing. Such securities may be in default or
there may be present elements of danger with respect to principal or interest.
Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
Bonds which are rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or supporting institutions) are considered to have a
superior ability for repayment of short-term promissory obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structures with
moderate reliance on debt and ample asset protection; broad margins in earning
coverage of fixed financial charges and high internal cash generation; and well
established access to a range of financial markets and assured sources of
alternative liquidity. Issuers rated Prime-2 (or supporting institutions) are
considered to have a strong ability for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics of
issuers rated Prime-1 but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriated may be more affected by external
conditions. Ample alternate liquidity is maintained.
The following summarizes the two highest ratings used by Moody's for short-term
notes and variable rate demand obligations:
MIG-l; VMIG-l - Obligations bearing these designations are of the best
quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
MIG-2; VMIG-2 - Obligations bearing these designations are of a high
quality with ample margins of protection.
Duff & Phelps Credit Rating Co. The following summarizes the highest
four ratings used by Duff & Phelps Credit Rating Co. ("D&P") for bonds
which are deemed to be "Investment-Grade Debt Securities" by the
Advisor:
AAA - Bonds that are rated AAA are of the highest credit quality. The
risk factors are considered to be negligible, being only slightly more
than for risk-free U.S. Treasury debt.
AA - Bonds that are rated AA are of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to
time because of economic conditions.
A - Bonds rated A have average but adequate protection factors. The
risk factors are more variable and greater in periods of economic
stress.
BBB - Bonds rated BBB have below average protection factors but are
still considered sufficient for prudent investment. There is
considerable variability in risk during economic cycles.
Bonds rated BB, B and CCC by D&P are not considered "Investment-Grade Debt
Securities" and are regarded, on balance, as predominantly speculative with
respect to the issuer's ability to pay interest and make principal payments in
accordance with the terms of the obligations. BB indicates the lowest degree of
speculation and CCC the highest degree of speculation.
The rating Duff l is the highest rating assigned by D&P for short-term debt,
including commercial paper. D&P employs three designations, Duff l+, Duff 1 and
Duff 1- within the highest rating category. Duff l+ indicates highest certainty
of timely payment. Short-term liquidity, including internal operating factors
and/or access to alternative sources of funds, is judged to be "outstanding, and
safety is just below risk-free U.S. Treasury short-term obligations." Duff 1
indicates very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
considered to be minor. Duff 1- indicates high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are very small.
Fitch Investors Service, Inc. The following summarizes the highest four ratings
used by Fitch Investors Service, Inc. ("Fitch") for bonds which are deemed to be
"Investment-Grade Debt Securities" by the Advisor:
AAA - Bonds are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA - Bonds are considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated AAA. Because
bonds rated in the AAA and AA categories are not significantly vulnerable
to foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
A - Bonds that are rated A are considered to be investment grade and of
high credit quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more vulnerable to
adverse changes in economic conditions and circumstances than bonds with
higher ratings.
BBB - Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and
repay principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have adverse
impact on these bonds, and therefore impair timely payment. The
likelihood that the ratings of these bonds will fall below investment
grade is higher than for bonds with higher ratings.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within a rating category. A "ratings outlook" is used to describe the
most likely direction of any rating change over the intermediate term. It is
described as "Positive" or "Negative". The absence of a designation indicates a
stable outlook.
Bonds rated BB, B and CCC by Fitch are not considered "Investment-Grade Debt
Securities" and are regarded, on balance, as predominantly speculative with
respect to the issuer's ability to pay interest and make principal payments in
accordance with the terms of the obligations. BB indicates the lowest degree of
speculation and CCC the highest degree of speculation.
The following summarizes the two highest ratings used by Fitch for short-term
notes, municipal notes, variable rate demand instruments and commercial paper:
F-1+ - Instruments assigned this rating are regarded as having the
strongest degree of assurance for timely payment.
F-1 - Instruments assigned this rating reflect an assurance of timely
payment only slightly less in degree than issues rated F-1+.
The term symbol "LOC" indicates that the rating is based on a letter of credit
issued by a commercial bank.
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
Performance Update - $25,000 Investment
For the period from November 25, 1996
(commencement of operations) to June 30, 1997
- ------------------------------------------
Quaker Enhanced
Stock Market Fund S&P 500
- ------------------------------------------
11/25/96 25000 25000
11/30/96 25000 24943
12/31/96 25393 24515
1/31/97 26621 26047
2/28/97 26746 26251
3/31/97 25518 25173
4/30/97 26997 26675
5/31/97 28551 28299
6/30/97 29761 29639
This graph depicts the performance of the Quaker Enhanced Stock Market Fund
versus the S & P 500 Total Return Index. It is important to note that the Quaker
Enhanced Stock Market Fund is a professionally managed mutual fund while the
indexes are not available for investment and are unmanaged. The comparison is
shown for illustrative purposes only.
Total Return
- -------------------------------
Commencement of operations
through 6/30/97
- -------------------------------
19.04%
- -------------------------------
The graph assumes an initial $25,000 investment at November 25, 1996. All
dividends and distributions are reinvested.
At June 30, 1997, the Fund would have grown to $29,761- total investment return
of 19.04% since November 25, 1996.
At June 30, 1997, a similar investment in the S & P 500 Total Return Index would
have grown to $29,639 - total investment return of 18.56% since November 25,
1996.
Past performance is not a guarantee of future performance. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost.
<PAGE>
July 31, 1997
Dear Shareholder:
The Quaker Family of Funds reached the end of its first fiscal year on June 30,
1997. Substantial progress was achieved during this initial business period.
Each of the six mutual funds in the Quaker Family opened for business on
November 25, 1996. Since then, many new investors have joined the Quaker Family
and the assets under management are growing steadily.
Our management philosophy remains very straightforward. We have chosen seasoned
investment professionals to manage each of the Quaker Funds. Each manager has a
clearly defined investment strategy unique to a particular mutual fund, and will
stick with that discipline in the future. The fees paid by our investors have
been set at competitive levels, and we will make every effort to reduce them as
assets grow in the future. And most important of all, we are dedicated to
providing each of our shareholders with quality service at all times.
Financial markets have been very favorable during the life of the Quaker Family
of Funds. Domestic equity markets have shown particular strength during the
first half of 1997, while fixed income results have been modestly positive. The
Quaker Enhanced Stock Market Fund, managed by John Dorian of Fiduciary Asset
Management, has outperformed the S&P 500 Index from the inception of the Fund on
November 25, 1996 through June 30, 1997. During that period, the Fund returned
19.0% while the Index grew by 18.6%. For three months ending with June, the Fund
returned 16.6% compared with 17.7% for the Index.
We appreciate your investment in the Quaker Family of Funds and we will work
hard to earn your continued support.
Sincerely,
/s/ Peter F. Waitneight
Peter F. Waitneight
President
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - 96.87%
Advertising - 0.63%
Gannett Company, Inc. 50 $4,937
-- ------
Aerospace & Defense - 2.81%
The Boeing Company 20 1,061
Lockheed Martin Corporation 50 5,178
United Technologies Corporation 190 15,770
--- ------
22,009
Agriculture - 0.70%
Deere & Company 100 5,488
Auto Parts - Original Equipment - 1.20%
Cummins Engine Company 50 3,528
Federal-Mogul Corporation 50 1,750
Honeywell, Inc. 30 2,276
PACCAR Inc. 40 1,858
-- -----
9,412
Auto & Trucks - 2.73%
Arvin Industries, Inc. 40 1,090
Borg-Warner Automotive, Inc. 30 1,621
Chrysler Corporation 180 5,917
Ford Motor Company 130 4,940
General Motors Corporation 90 5,011
(a)Navistar International Corporation 160 2,760
--- -----
21,339
Beverages - 5.07%
The Coca-Cola Company 380 26,528
PepsiCo, Inc. 350 13,169
--- ------
39,697
Building Materials - 0.19%
Lowe's Companies, Inc. 40 1,490
Chemicals - 3.88%
Air Products and Chemicals, Inc. 30 2,438
Dow Chemical Company 100 8,744
E.I. du Pont de Nemours and Company 220 13,833
Monsanto Company 50 2,153
Rohm & Haas Company 20 1,801
Union Carbide Corporation 30 1,412
-- -----
30,381
(Continued)
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Commercial Services - 0.52%
Dun & Bradstreet Corporation 90 $2,363
Ogden Corporation 80 1,740
-- -----
4,103
Computers - 4.37%
(a)Applied Magnetics Corporation 10 226
(a)Compaq Computer Corporation 40 3,970
(a)Data General Corporation 30 780
(a)Dell Computer Corporation 20 2,348
(a)Gateway 2000, Inc. 20 648
International Business Machines Corp 140 12,626
Quantum Corporation 200 4,075
(a)Seagate Technology, Inc. 30 1,057
(a)Stratus Computer, Inc. 60 3,000
(a)Sun Microsystems, Inc. 70 2,605
(a)Tandem Computers, Inc. 140 2,835
--- -----
34,170
Computer Software & Services - 2.77%
Adobe Systems, Inc. 20 701
(a)Microsoft Corporation 150 18,956
(a)Oracle Corporation 40 2,015
-- -----
21,672
Cosmetics & Personal Care - 1.32%
Alberto-Culver Company 180 5,040
Avon Products, Inc. 60 4,253
(a)Blythe Industries, Inc. 30 1,003
-- -----
10,296
Electrical Equipment - 0.87%
GPU, Inc. 20 718
(a)Niagara Mohawk Power Corporation 400 3,425
Public Service Company of New Mexico 150 2,681
--- -----
6,824
Electronics - 3.17%
General Electric Company 300 19,613
Motorola, Inc. 60 4,560
(a)National Semiconductor Corporation 20 613
-- ---
24,786
Electronics - Semiconductor - 2.11%
(a)Applied Materials, Inc. 30 2,124
Intel Corporation 90 12,763
Micron Technology, Inc. 40 1,598
-- -----
16,485
(Continued)
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Entertainment - 2.90%
King World Productions, Inc. 40 $1,400
The Walt Disney Company 270 21,296
--- ------
22,696
Financial - Banks, Commercial - 5.39%
AmSouth Bancorporation 315 11,970
BankAmerica Corporation 20 1,290
Citicorp 30 3,617
First of America Bank Corporation 70 3,220
First Union Corporation 50 4,650
NationsBank Corporation 50 3,225
Norwest Corporation 30 1,688
State Street Corporation 20 941
SunTrust Banks, Inc. 20 1,101
Wachovia Corporation 180 10,496
--- ------
42,198
Financial - Banks, Money Center - 0.27%
J.P. Morgan & Company Incorporated 10 1,044
Republic New York Corporation 10 1,075
-- -----
2,119
Financial - Commodities Trading - 0.40%
Countrywide Credit Industries, Inc. 100 3,106
Financial - Savings/Loans/Thrift - 0.99%
H.F. Ahmanson & Company 150 6,450
Student Loan Marketing Association 10 1,270
-- -----
7,720
Financial - Securities Brokers - 3.12%
Bear Stearns Companies, Inc. 150 5,128
Franklin Resources, Inc. 20 1,451
Lehman Brothers Holdings, Inc. 40 1,620
Merrill Lynch & Company, Inc. 160 9,540
Salomon, Inc. 120 6,645
--- -----
24,384
Financial Services - 0.38%
American Express Company 40 2,980
(Continued)
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Food - Processing - 1.72%
Campbell Soup Company 50 $2,444
Dean Foods Company 30 1,211
Heinz (H.J.) Company 40 1,845
Philip Morris Companies Inc. 180 7,976
--- -----
13,476
Food - Wholesale - 0.81%
Fleming Companies, Inc. 30 540
Quaker Oats Company 20 888
Ralston-Ralston Purina Group 60 4,931
-- -----
6,359
Foreign Securities - 2.52%
British Telecommunications plc 30 2,227
Canadian Pacific, Ltd. 100 2,843
Northern Telecom Limited 90 8,190
Royal Dutch Petroleum Company 120 6,443
--- -----
19,703
Homebuilders - 0.46%
Centex Corporation 80 3,285
Pulte Corporation 10 346
-- ---
3,631
Household Products & Housewares - 3.40%
Procter & Gamble Company 190 26,624
Insurance - Life & Health - 0.38%
AFLAC, Inc. 30 1,478
SunAmerica, Inc. 30 1,463
-- -----
2,941
Insurance - Multiline - 4.84%
Aetna, Inc. 30 3,071
Allstate Corporation 60 4,380
American International Group, Inc. 110 16,431
Chubb Corporation 20 1,338
CIGNA Corporation 30 5,325
General Re Corporation 30 5,460
Travelers Group, Inc. 30 1,892
-- -----
37,897
Insurance - Property & Casualty - 0.47%
Everest Reinsurance Holdings, Inc. 70 2,774
Progressive Corporation 10 870
-- ---
3,644
(Continued)
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Leisure Time - 0.64%
Brunswick Corporation 160 $5,000
Machine - Construction & Mining - 0.83%
Caterpillar Inc. 50 5,381
(a)USG Corporation 30 1,088
-- -----
6,469
Machine - Diversified - 1.15%
Cooper Industries, Inc. 130 6,468
Crane Company 60 2,509
-- -----
8,977
Medical - Biotechnology - 0.37%
(a)Amgen, Inc. 50 2,906
Medical - Hospital Management & Service - 0.99%
(a)Beverly Enterprises, Inc. 200 3,250
Columbia/HCA Healthcare Corporation 50 1,966
Guidant Corporation 30 2,550
-- -----
7,766
Medical Supplies - 3.29%
(a)Acuson Corporation 40 920
American Home Products Corporation 20 1,530
Johnson & Johnson 110 7,013
Pfizer Inc. 80 9,560
Schering-Plough Corporation 140 6,720
--- -----
25,743
Metals - Diversified - 0.44%
Phelps Dodge Corporation 40 3,408
Mining - 0.63%
Asarco, Inc. 160 4,900
Miscellaneous - Distribution & Wholesale - 0.07%
Corning Inc. 10 556
Office & Business Equipment - 1.91%
Xerox Corporation 190 14,986
Oil & Gas - Domestic - 0.48%
Sun Company, Inc. 120 3,720
(Continued)
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Oil & Gas - Equipment & Services - 1.66%
Baker Hughes Incorporated 80 $3,095
(a)Global Marine Inc. 30 699
Schlumberger Ltd. 70 8,750
Tidewater, Inc. 10 440
-- ---
12,984
Oil & Gas - Exploration - 1.92%
Burlington Resources, Inc. 50 2,206
Columbia Gas System, Inc. 40 2,610
Kerr-McGee Corporation 40 2,535
Mobil Corporation 80 5,590
Union Texas Petroleum Holdings, Inc. 100 2,087
--- -----
15,028
Oil & Gas - International - 4.62%
Amerada Hess Corporation 110 6,111
Chevron Corporation 40 2,958
Exxon Corporation 320 19,680
Helmerich & Payne, Inc. 20 1,153
Texaco Inc. 10 1,088
USX-Marathon Group 180 5,198
--- -----
36,188
Packaging & Containers - 0.38%
Kimberly-Clark Corporation 60 2,985
Pharmaceuticals - 6.34%
Abbott Laboratories 90 6,008
Bristol-Myers Squibb Company 170 13,770
Merck & Co., Inc. 180 18,630
Warner-Lambert Company 90 11,183
-- ------
49,591
Retail - Apparel - 0.37%
Nike, Inc. 50 2,919
Retail - Department Stores - 2.97%
Dayton Hudson Corporation 100 5,319
(a)Kmart Corporation 90 1,103
Sears, Roebuck and Co. 220 11,825
Wal-Mart Stores, Inc. 90 3,043
(a)Woolworth Corporation 80 1,920
-- -----
23,210
(Continued)
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Retail - General Merchandise - 0.11%
(a)Mac Frugals Bargains Close-Outs, Inc 30 $853
Retail - Grocery - 0.36%
(a)Costco Companies, Inc. 30 986
(a)Safeway, Inc. 40 1,845
-- -----
2,831
Retail - Specialty Line - 0.50%
Home Depot, Inc. 10 691
Jostens, Inc. 20 526
(a)Lands' End, Inc. 20 590
Tiffany & Co. 30 1,386
(a)Toys "R" Us, Inc. 20 700
-- ---
3,893
Telecommunications - 0.31%
Lucent Technologies, Inc. 20 1,441
Time Warner, Inc. 20 965
-- ---
2,406
Textiles - 0.04%
Russell Corporation 10 296
Tire & Rubber - 0.14%
Cooper Tire and Rubber Company 50 1,100
Tobacco - 0.63%
RJR Nabisco Holdings Corp. 150 4,950
Transportation - Air - 0.63%
Delta Air Lines, Inc. 60 4,920
Utilities - Electric - 0.47%
Montana Power Company 160 3,710
Utilities - Telecommunications - 4.23%
Ameritech Corporation 170 11,549
AT & T Corporation 200 7,013
BellSouth Corporation 220 10,203
GTE Corporation 50 2,194
US WEST Communications Group 60 2,261
-- -----
33,220
Total Common Stocks (Cost $661,818) 758,082
(Continued)
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
INVESTMENT COMPANY - 0.96%
Evergreen Money Market Treasury Institutional Money
Market Fund Institutional Service Shares
(Cost $7,492) 7,492 $7,492
Total Value of Investments (Cost $669,310 (b)) 97.83% $765,574
Other Assets Less Liabilities 2.17% 17,000
---- ------
Net Assets 100.00% $782,574
====== ========
(a) Non-income producing investment.
(b) Aggregate cost for financial reporting and federal income tax purposes is t
appreciation (depreciation) of investments for financial reporting and fede
is as follows:
Unrealized appreciation $99,877
Unrealized depreciation (3,613)
------
Net unrealized appreciation $96,264
=======
See accompanying notes to financial statements
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997
ASSETS
Investments, at value (cost $669,310) ......................... $ 765,574
Cash .......................................................... 3,251
Income receivable ............................................. 1,164
Deferred organization expenses, net (notes 2 and 4) ........... 29,289
---------
Total assets ............................................... 799,278
---------
LIABILITIES
Accrued expenses .............................................. 9,212
Due to fund sponsor (note 3) .................................. 7,492
---------
Total liabilities .......................................... 16,704
---------
NET ASSETS
(applicable to 66,160 shares outstanding; unlimited
shares of $ 0.01 par value beneficial interest authorized) .... $ 782,574
=========
NET ASSET VALUE, REDEMPTION AND OFFERING PRICE PER SHARE
($782,574 / 66,160 shares) .................................... $ 11.83
=========
NET ASSETS CONSIST OF
Paid-in capital ............................................... $ 689,394
Undistributed net investment income ........................... 65
Accumulated net realized loss on investments .................. (3,149)
Net unrealized oappreciation on investments ................... 96,264
---------
$ 782,574
=========
See accompanying notes to financial statements
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
STATEMENT OF OPERATIONS
Period from November 25, 1996
(commencement of operations) to
June 30, 1997
INVESTMENT INCOME
Income
Interest .................................................... $ 1,408
Dividends ................................................... 5,360
--------
Total income ............................................. 6,768
--------
Expenses
Investment advisory fees (note 2) ........................... 1,596
Fund administration fees (note 2) ........................... 558
Custody fees ................................................ 5,303
Registration and filing administration fees (note 2) ........ 733
Fund accounting fees (note 2) ............................... 14,600
Audit fees .................................................. 4,500
Legal fees .................................................. 2,779
Securities pricing fees ..................................... 6,514
Shareholder servicing fees (note 3) ......................... 638
Shareholder recordkeeping fees (note 2) ..................... 3,604
Shareholder servicing expenses .............................. 1,165
Registration and filing expenses ............................ 300
Printing expenses ........................................... 1,910
Amortization of deferred organization expenses (note 4) ..... 4,035
Trustee fees and meeting expenses ........................... 269
Other operating expenses .................................... 3,944
--------
Total expenses ........................................... 52,448
--------
Less:
Expense reimbursements (note 3) ....................... (39,103)
Investment advisory fees waived (note 2) .............. (1,596)
Fund administration fees waived (note 2) .............. (7,950)
Shareholder servicing fees waived (note 3) ............ (638)
--------
Net expenses ............................................. 3,161
--------
Net investment income ................................. 3,607
--------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss from investment transactions ................. (3,149)
Increase in unrealized appreciation on investments ............. 96,264
--------
Net realized and unrealized gain on investments ............. 93,115
--------
Net increase in net assets resulting from operations ..... $ 96,722
========
See accompanying notes to financial statements
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
Period from November 25, 1996
(commencement of operations) to
June 30, 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income .............................................. $ 3,607
Net realized loss from investment transactions ..................... (3,149)
Increase in unrealized appreciation on investments ................. 96,264
---------
Net increase in net assets resulting from operations ............ 96,722
---------
Distributions to shareholders from
Net investment income .............................................. (3,542)
---------
Capital share transactions
Increase in net assets resulting from capital share transactions (a) 689,394
---------
Total increase in net assets ................................. 782,574
---------
NET ASSETS
Beginning of period ................................................... 0
---------
End of period (including undistributed net investment income .......... $ 782,574
of $65) =========
(a) A summary of capital share activity follows:
----------------------
Shares Value
----------------------
Shares sold ................................................. 67,743 $ 707,083
Shares issued for reinvestment of distributions ............. 301 3,442
------- ---------
68,044 710,525
Shares redeemed ............................................. (1,884) (21,131)
------- ---------
Net increase .............................................. 66,160 $ 689,394
======= =========
</TABLE>
See accompanying notes to financial statements
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
Period from November 25, 1996
(Commencement of operations) to
June 30, 1997
Net asset value, beginning of period ........................ $10.00
--------
Income from investment operations
Net investment income ................................... 0.07
Net realized and unrealized gain on investments ......... 1.83
--------
Total from investment operations ..................... 1.90
--------
Distributions to shareholders from
Net investment income ................................... (0.07)
--------
Net asset value, end of period .............................. $11.83
========
Total return ................................................ 19.04 %(c)
========
Ratios/supplemental data
Net assets, end of period ................................. $782,574
========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ........... 16.44 %(a)
After expense reimbursements and waived fees ............ 1.00 %(a)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees ........... (14.32)%(a)
After expense reimbursements and waived fees ............ 1.14 %(a)
Portfolio turnover rate ................................... 34.26 %
Average broker commissions per share ...................... $0.0203(b)
(a) Annualized.
(b) Represents total commission paid on portfolio securities divided by total
port commissions were charged.
(c) Aggregate total return, not annualized.
See accompanying notes to financial statements
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
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 investment objective of the Fund is to provide
long-term 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
or personal holding company 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 personal holding companies and to make
sufficient distributions of taxable income to relieve it from substantially
all federal income taxes.
Due to a concentration of shareholders at June 30, 1997 the Fund is subject
to the provisions of the Internal Revenue Code applicable to personal
holding companies.
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 is 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. Distributions to
shareholders are recorded on ex-dividend date. 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
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
results could differ from those estimates.
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 0.50% 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 $1,596 ($0.03 per share) for the period ended June 30, 1997.
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, and 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 $7,950 ($0.16 per share)
for the period ended June 30, 1997.
Certain organization expenses totaling $23,333 and $833 were paid to a company
controlled by the Administrator and to an officer of the Fund, respectively, for
the period ended June 30, 1997.
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
The Fund's Distributor, Quaker Securities, Inc. (the "Distributor") was paid
commissions of $416 for purchases and sales of investments, other than
short-term investments for the period ended June 30, 1997.
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 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 $638 and has reimbursed expenses totaling $39,103 for the period
ended June 30, 1997.
NOTE 4 - DEFERRED ORGANIZATION EXPENSES
Expenses totaling $33,324 incurred in connection with its organization and the
registration of its shares, which were originally paid by the Fund's Sponsor,
have been assumed by the Fund.
The organization expenses are being amortized using the straight-line method
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 $842,561 and $170,102, respectively, for the period ended June 30,
1997.
<PAGE>
Independent Auditor's Report
July 28, 1997
To the Shareholders and Board of Trustees
Quaker Enhanced Stock Market Fund
Rocky Mount, North Carolina
We have audited the statements of assets and liabilities, including the
schedules of investments, of the QUAKER ENHANCED STOCK MARKET FUND (one of the
portfolios constituting the Quaker Investment Trust series of funds) as of June
30, 1997, and the related statements of operations and of changes in net assets
and the selected per share data and ratios for the period from November 25, 1996
(commencement of operations) to June 30, 1997. These financial statements and
per share data and ratios are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
per share data and ratios based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and per share data and ratios
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of June 30, 1997, by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and selected per share data and ratios
referred to above present fairly, in all material respects, the financial
position of the QUAKER ENHANCED STOCK MARKET FUND (one of the portfolios
constituting the Quaker Investment Trust series of funds) as of June 30, 1997,
and the results of its operations and changes in its net assets and the selected
per share data and ratios for the period from November 25, 1996 (commencement of
operations) to June 30, 1997 in conformity with generally accepted accounting
principles.
/s/ Goldenberg Rosenthal Friedlander, LLP
Jenkintown, Pennsylvania
<PAGE>
QUAKER CORE EQUITY FUND
Performance Update - $25,000 Investment
For the period from November 25, 1996
(commencement of operations) to June 30, 1997
- -------------------------------------------
Quaker
Core
Equity S & P 500
- -------------------------------------------
11/25/96 25000 25000
11/30/96 24875 24943
12/31/96 24500 24515
1/31/97 25928 26047
2/28/97 26229 26251
3/31/97 24575 25173
4/30/97 26028 26675
5/31/97 27807 28299
6/30/97 29125 29639
This graph depicts the performance of the Quaker Core Equity Fund versus the S &
P 500 Total Return Index. It is important to note that the Quaker Core Equity
Fund is a professionally managed mutual fund while the indexes are not available
for investment and are unmanaged. The comparison is shown for illustrative
purposes only.
Total Return
- -------------------------------
Commencement of operations
through 6/30/97
- -------------------------------
16.50%
- -------------------------------
The graph assumes an initial $25,000 investment at November 25, 1996. All
dividends and distributions are reinvested.
At June 30, 1997, the Fund would have grown to $29,125- total investment return
of 16.50% since November 25, 1996.
At June 30, 1997, a similar investment in the S & P 500 Total Return Index would
have grown to $29,639 - total investment return of 18.56% since November 25,
1996.
Past performance is not a guarantee of future performance. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost.
<PAGE>
July 31, 1997
Dear Shareholder:
The Quaker Family of Funds reached the end of its first fiscal year on June 30,
1997. Substantial progress was achieved during this initial business period.
Each of the six mutual funds in the Quaker Family opened for business on
November 25, 1996. Since then, many new investors have joined the Quaker Family
and the assets under management are growing steadily.
Our management philosophy remains very straightforward. We have chosen seasoned
investment professionals to manage each of the Quaker Funds. Each manager has a
clearly defined investment strategy unique to a particular mutual fund, and will
stick with that discipline in the future. The fees paid by our investors have
been set at competitive levels, and we will make every effort to reduce them as
assets grow in the future. And most important of all, we are dedicated to
providing each of our shareholders with quality service at all times.
Financial markets have been very favorable during the life of the Quaker Family
of Funds. Domestic equity markets have shown particular strength during the
first half of 1997, while fixed income results have been modestly positive. The
Quaker Core Equity Fund, managed by Bruce Marra of West Chester Capital
Advisors, has performed well from the inception of the Fund on November 25, 1996
through June 30, 1997. During that period, the Fund returned 16.5% while the S&P
500 Index grew by 18.6%. For three months ending with June, the Fund returned
18.5% compared with 17.7% for the Index.
We appreciate your investment in the Quaker Family of Funds and we will work
hard to earn your continued support.
Sincerely,
/s/ Peter F. Waitneight
Peter F. Waitneight
President
<PAGE>
QUAKER CORE EQUITY FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - 96.77%
Aerospace & Defense - 5.07%
The Boeing Company 300 $15,919
Lockheed Martin Corporation 100 10,356
--- ------
26,275
Beverages - 2.18%
PepsiCo, Inc. 300 11,287
Computer Software & Services - 13.50%
Automatic Data Processing, Inc. 200 9,325
(a)Ceridian Corporation 300 12,675
(a)Cisco Systems, Inc. 200 13,425
Computer Associates International, I 400 22,275
Electronic Data Systems 300 12,300
--- ------
70,000
Cosmetics & Personal Care - 2.52%
Colgate-Palmolive Company 200 13,050
Electronics - 5.76%
General Electric Company 200 13,075
Hewlett-Packard Company 300 16,800
--- ------
29,875
Electronics - Semiconductor - 4.20%
Intel Corporation 100 14,181
Motorola, Inc. 100 7,600
--- -----
21,781
Engineering & Construction - 2.13%
Fluor Corporation 200 11,025
Financial Services - 9.46%
Fannie Mae 300 13,087
Franklin Resources, Inc. 300 21,769
Morgan Stanley, Dean Witter, Discove 330 14,211
--- ------
49,067
Financial - Banks, Money Center - 8.57%
Citicorp 100 12,056
J. P. Morgan & Company, Incorporated 100 10,437
Mellon Bank Corporation 200 9,025
NationsBank Corporation 200 12,900
--- ------
44,418
(Continued)
<PAGE>
QUAKER CORE EQUITY FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Food - Processing - 7.76%
Heinz (H.J) Company 200 $9,225
Hershey Foods Corporation 200 11,062
Philip Morris Companies, Inc. 450 19,941
--- ------
40,228
Household Products & Housewares - 2.70%
Procter & Gamble Company 100 14,013
Insurance - Life & Health - 1.90%
AFLAC, Inc. 200 9,850
Insurance - Multiline - 2.88%
American International Group, Inc. 100 14,937
Medical - Biotechnology - 4.61%
Pfizer, Inc. 200 23,900
Office & Business Equipment - 5.24%
Ikon Office Solutions 300 7,463
Xerox Corporation 250 19,719
--- ------
27,182
Oil & Gas - Equipment & Services - 3.62%
Schlumberger, Ltd. 150 18,750
Oil & Gas - Exploration - 1.06%
El Paso Natural Gas Company 100 5,500
Oil & Gas - International - 3.80%
Chevron Corporation 100 7,394
Exxon Corporation 200 12,300
--- ------
19,694
Pharmaceuticals - 2.00%
Merck & Co., Inc. 100 10,350
Restaurants & Food Service - 0.93%
McDonald's Corporation 100 4,831
Retail- Apparel - 1.12%
Nike, Inc. 100 5,838
(Continued)
<PAGE>
QUAKER CORE EQUITY FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Telecommunications Equipment - 4.53%
Lucent Technologies, Inc. 200 $14,413
Northern Telecom Limited 100 9,100
--- -----
23,513
Wholesale - Special Line - 1.23%
Unisource Worldwide, Inc. 400 6,400
TOTAL COMMON STOCKS (Cost $433,404) 501,764
-------
INVESTMENT COMPANY - 1.28%
Evergreen Money Market Treasury Institutional Money
Market Fund Institutional Service Sh 6,669 6,669
(Cost $6,669)
Total Value of Investments (Cost $440,073 (b)) 98.05% 508,433
Other Assets 1.95% 10,092
---- ------
Net Assets 100.00% $518,525
====== ========
(a) Non-income producing investment.
(b) Aggregate cost for federal income tax purposes is $440,098. Unrealized a
investments for federal income tax purposes is as follows:
Unrealized appreciation $76,310
Unrealized depreciation (7,975)
-------
Net unrealized appreciation $68,335
=======
See accompanying notes to financial statements
<PAGE>
QUAKER CORE EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997
ASSETS
Investments, at value (cost $440,073) .................... $ 508,433
Cash ..................................................... 132
Income receivable ........................................ 594
Deferred organization expenses, net (notes 2 and 4) ...... 29,289
---------
Total assets .......................................... 538,448
---------
LIABILITIES
Accrued expenses ......................................... 8,044
Due to fund sponsor (note 3) ............................. 11,879
---------
Total liabilities ..................................... 19,923
---------
NET ASSETS
(applicable to 44,663 shares outstanding; unlimited
shares of $ 0.01 par value beneficial interest authorized) $ 518,525
=========
NET ASSET VALUE, REDEMPTION AND OFFERING PRICE PER SHARE
($518,525 / 44,663 shares) ............................... $ 11.61
=========
NET ASSETS CONSIST OF
Paid-in capital .......................................... $ 454,167
Accumulated net realized loss on investments ............. (4,002)
Net unrealized appreciation on investments ............... 68,360
---------
$ 518,525
=========
See accompanying notes to financial statements
<PAGE>
QUAKER CORE EQUITY FUND
STATEMENT OF OPERATIONS
Period from November 25, 1996
(commencement of operations) to
June 30, 1997
INVESTMENT INCOME
Income
Dividends ............................................. $ 3,288
Interest .............................................. 597
--------
Total income ....................................... 3,885
--------
Expenses
Investment advisory fees (note 2) ..................... 1,589
Fund administration fees (note 2) ..................... 371
Custody fees .......................................... 2,646
Registration and filing administration fees (note 2 ) . 733
Fund accounting fees (note 2) ......................... 14,600
Audit fees ............................................ 4,500
Legal fees ............................................ 2,779
Securities pricing fees ............................... 2,206
Shareholder servicing fees (note 3) ................... 530
Shareholder recordkeeping fees (note 2) ............... 3,604
Shareholder servicing expenses ........................ 1,143
Registration and filing expenses ...................... 300
Printing expenses ..................................... 1,908
Amortization of deferred organization expenses (note 4) 4,035
Trustee fees and meeting expenses ..................... 269
Other operating expenses .............................. 3,936
--------
Total expenses ..................................... 45,149
--------
Less:
Expense reimbursements (note 3) ................. (32,372)
Investment advisory fees waived (note 2) ........ (1,589)
Fund administration fees waived (note 2) ........ (7,797)
Shareholder servicing fees waived (note 3) ...... (530)
--------
Net expenses ....................................... 2,861
--------
Net investment income ........................... 1,024
--------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss from investment transactions ........... (4,002)
Increase in unrealized appreciation on investments ...... 68,360
--------
Net realized and unrealized gain on investments ....... 64,358
--------
Net increase in net assets resulting from operations $ 65,382
========
See accompanying notes to financial statements
<PAGE>
QUAKER CORE EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
Period from November 25, 1996
(commencement of operations) to
June 30, 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income ................................................. $ 1,024
Net realized loss from investment transactions ........................ (4,002)
Increase in unrealized appreciation on investments .................... 68,360
---------
Net increase in net assets resulting from operations ............... 65,382
---------
Distributions to shareholders from
Net investment income ................................................. (1,024)
---------
Capital share transactions
Increase in net assets resulting from capital share transactions (a) .. 454,167
---------
Total increase in net assets .................................... 518,525
NET ASSETS
Beginning of period ...................................................... 0
---------
End of period ............................................................ $ 518,525
=========
(a) A summary of capital share activity follows:
-------------------
Shares Value
-------------------
Shares sold ....................................................... 45,060 $ 458,899
Shares issued for reinvestment of distributions ................... 93 1,024
------ ---------
45,153 459,923
Shares redeemed ................................................... (490) (5,756)
------ ---------
Net increase .................................................... 44,663 $ 454,167
====== =========
</TABLE>
See accompanying notes to financial statements
<PAGE>
QUAKER CORE EQUITY FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
Period from November 25, 1996
(commencement of operations) to
June 30, 1997
Net asset value, beginning of period ......................... $10.00
---------
Income from investment operations
Net investment income .................................. 0.04
Net realized and unrealized gain on investments ........ 1.61
---------
Total from investment operations .................... 1.65
---------
Distributions to shareholders from
Net investment income .................................. (0.04)
---------
Net asset value, end of period ............................... $11.61
=========
Total return ................................................. 16.50%(c)
=========
Ratios/supplemental data
Net assets, end of period ................................. $518,525
=========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees .......... 21.30 %(a)
After expense reimbursements and waived fees ........... 1.35 %(a)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees .......... (19.47)%(a)
After expense reimbursements and waived fees ........... 0.49 %(a)
Portfolio turnover rate ................................... 11.49 %(a)
Average broker commissions per share ...................... $0.2356(b)
(a) Annualized.
(b) Represents total commission paid on portfolio securities divided by total
portfolio commissions were charged.
(c) Aggregate total return, not annualized.
See accompanying notes to financial statements
<PAGE>
QUAKER CORE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
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 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 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
or personal holding company 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 personal holding companies and to make
sufficient distributions of taxable income to relieve it from substantially
all federal income taxes.
Due to a concentration of shareholders at June 30, 1997 the Fund is subject
to the provisions of the Internal Revenue Code applicable to personal
holding companies.
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 is 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. Distributions to
shareholders are recorded on the ex-dividend date. 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.
<PAGE>
QUAKER CORE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
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, West Chester Capital Advisors,
Inc. (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 $1,589 ($0.05 per share) for the period ended June 30, 1997.
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, and 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 $7,797 ($.23 per
share) for the period ended June 30, 1997.
Certain organization expenses totaling $23,333 and $833 were paid to a company
controlled by the Administrator and to an officer of the Fund, respectively, for
the period ended June 30, 1997.
The Fund's Distributor, Quaker Securities, Inc. (the "Distributor") was paid
commissions of $1,979 for purchases and sales of investments, other than
short-term investments for the period ended June 30, 1997.
<PAGE>
QUAKER CORE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
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 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 $530 and has reimbursed expenses totaling $32,372 for the
period ended June 30, 1997.
NOTE 4 - DEFERRED ORGANIZATION EXPENSES
Expenses totaling $33,324 incurred in connection with its organization and the
registration of its shares, which were originally paid by the Fund's Sponsor,
have been assumed by the Fund.
The organization expenses are being amortized using the straight-line method
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 $475,085 and $37,680 respectively, for the period ended June 30,
1997.
<PAGE>
Independent Auditor's Report
July 28, 1997
To the Shareholders and Board of Trustees
Quaker Core Equity Fund
Rocky Mount, North Carolina
We have audited the statements of assets and liabilities, including the
schedules of investments, of the QUAKER CORE EQUITY FUND (one of the portfolios
constituting the Quaker Investment Trust series of funds) as of June 30, 1997,
and the related statements of operations and of changes in net assets and the
selected per share data and ratios for the period from November 25, 1996
(commencement of operations) to June 30, 1997. These financial statements and
per share data and ratios are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
per share data and ratios based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and per share data and ratios
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of June 30, 1997, by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and selected per share data and ratios
referred to above present fairly, in all material respects, the financial
position of the QUAKER CORE EQUITY FUND (one of the portfolios constituting the
Quaker Investment Trust series of funds) as of June 30, 1997, and the results of
its operations and changes in its net assets and the selected per share data and
ratios for the period from November 25, 1996 (commencement of operations) to
June 30, 1997 in conformity with generally accepted accounting principles.
/s/ Goldenberg Rosenthal Friedlander, LLP
Jenkintown, Pennsylvania
<PAGE>
QUAKER AGRESSIVE GROWTH FUND
Performance Update - $25,000 Investment
For the period from November 25, 1996
(commencement of operations) to June 30, 1997
- -------------------------------------------
Quaker
Aggressive
Growth
Fund S&P 500
- -------------------------------------------
11/25/96 25000 25000
11/30/96 25000 24943
12/31/96 25858 24515
1/31/97 27660 26047
2/28/97 27560 26251
3/31/97 26133 25173
4/30/97 24581 26675
5/31/97 26383 28299
6/30/97 28169 29639
This graph depicts the performance of the Quaker Aggressive Growth Fund versus
the S & P 500 Total Return Index. It is important to note that the Quaker
Agressive Growth Fund is a professionally managed mutual fund while the indexes
are not available for investment and are unmanaged. The comparison is shown for
illustrative purposes only.
Total Return
- -------------------------------
Commencement of operations
through 6/30/97
- -------------------------------
12.68%
- -------------------------------
The graph assumes an initial $25,000 investment at November 25, 1996. All
dividends and distributions are reinvested.
At June 30, 1997, the Fund would have grown to $28,169 - total investment return
of 12.68% since November 25, 1996.
At June 30, 1997, a similar investment in the S & P 500 Total Return Index would
have grown to $29,639 - total investment return of 18.56% since November 25,
1996.
Past performance is not a guarantee of future performance. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost.
<PAGE>
July 31, 1997
Dear Shareholder:
The Quaker Family of Funds reached the end of its first fiscal year on June 30,
1997. Substantial progress was achieved during this initial business period.
Each of the six mutual funds in the Quaker Family opened for business on
November 25, 1996. Since then, many new investors have joined the Quaker Family
and the assets under management are growing steadily.
Our management philosophy remains very straightforward. We have chosen seasoned
investment professionals to manage each of the Quaker Funds. Each manager has a
clearly defined investment strategy unique to a particular mutual fund, and will
stick with that discipline in the future. The fees paid by our investors have
been set at competitive levels, and we will make every effort to reduce them as
assets grow in the future. And most important of all, we are dedicated to
providing each of our shareholders with quality service at all times.
Financial markets have been very favorable during the life of the Quaker Family
of Funds. Domestic equity markets have shown particular strength during the
first half of 1997, while fixed income results have been modestly positive. The
Quaker Aggressive Growth Fund, managed by Manu Daftary of DG Capital Management,
has not fully participated in the rise of the market from the inception of the
Fund on November 25, 1996 through June 30, 1997. During that period, the Fund
returned 12.7% while the S&P 500 Index grew by 18.6%. For three months ending
with June, the Fund returned 7.8% compared with 17.7% for the Index. The Fund
became defensive and raised cash in April when the market moved downward, and
did not fully participate in the strong recovery later in the quarter.
We appreciate your investment in the Quaker Family of Funds and we will work
hard to earn your continued support.
Sincerely,
/s/ Peter F. Waitneight
Peter F. Waitneight
President
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
QUAKER AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997
- ---------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ---------------------------------------------------------------------------------------------
COMMON STOCKS - 83.68%
Auto Parts - Replacement Equipment - 3.12%
Federal Mogul Corporation 1,000 $35,000
Chemicals - Specialty - 2.34%
Great Lakes Chemical Corporation 500 26,187
Computers - 1.75%
(a)Zitel Corporation 1,000 19,625
Computer Software & Services - 7.27%
Autodesk, Inc. 400 15,325
(a)BMC Software, Inc. 300 16,612
(a)Cisco Systems, Inc. 400 26,850
(a)Netscape Communications Corporation 200 6,413
(a)Summit Design, Inc. 2,000 16,250
----- ------
81,450
Diversified Operations - 3.86%
Corning Inc. 300 16,687
Textron, Inc. 400 26,550
--- ------
43,237
Electronics - 1.41%
(a)Lo-Jack Corporation 1,100 15,812
Electronics - Semiconductor - 8.15%
(a)Asyst Technologies, Inc. 600 26,400
(a)Dupont Photomasks, Inc. 500 27,000
(a)PRI Automation, Inc. 1,000 37,938
----- ------
91,338
Financial - Banks, Commercial - 4.57%
MBNA Corporation 1,000 36,625
Northern Trust Corporation 300 14,513
--- ------
51,138
Financial - Savings/Loans/Thrifts - 1.60%
Washington Mutual, Inc. 300 17,925
Financial Services - 4.31%
Federal Home Loan Mortgage 700 24,544
Stifel Financial Corporation 2,000 23,750
----- ------
48,294
Food Processing - 1.20%
Wrigley (WM) Jr. Company 200 13,450
Food - Wholesale - 1.97%
(a)Ralcorp Holdings, Inc. 1,500 22,125
(Continued)
<PAGE>
QUAKER AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997
- ---------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ---------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Furniture & Home Appliances - 2.19%
Windmere-Durable Holdings Inc. 1,500 $24,562
Insurance - Multiline - 2.61%
The Hartford Financial Services Group Inc. 200 16,625
Travelers Group, Inc. 200 12,612
--- ------
29,237
Insurance - Property & Casualty - 2.84%
Reliance Group Holdings, Inc. 1,000 11,875
Travelers Property Casualty Corporation 500 19,938
--- ------
31,813
Imaging - 1.37%
Eastman Kodak Company 200 15,350
Lodging - 1.33%
(a)Extended Stay America, Inc. 1,000 14,875
Machine - Diversified - 5.61%
AGCO Corporation 500 17,937
Deere & Company 300 16,463
(a)ITEQ, Inc. 3,000 28,500
----- ------
62,900
Medical - Biotechnology - 1.56%
(a)Molecular Devices Corporation 1,000 17,500
Medical Supplies - 2.74%
(a)Boston Scientific Corporation 500 30,719
Oil & Gas - Equipment & Services - 1.19%
(a)Reading & Bates Corporation 500 13,375
Oil & Gas - Exploration - 1.67%
(a)Frontier Natural Gas Corporation 10,000 18,750
Packaging & Containers - 1.38%
(a)Owens-Illinois, Inc. 500 15,500
Pharmaceuticals - 6.07%
American Home Products Corporation 300 22,950
(a)Astra AB 1,067 20,267
Warner-Lambert Company 200 24,850
--- ------
68,067
(Continued)
<PAGE>
QUAKER AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997
- ---------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ---------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Retail - Apparel - 0.94%
TJX Companies, Inc. 400 $10,550
Retail - Department Stores - 1.42%
Dayton Hudson Corporation 300 15,956
Telecommunications - 3.14%
(a)SmarTalk Teleservices Inc. 1,000 15,500
Telefonaktiebolaget LM Ericsson 500 19,688
--- ------
35,188
Telecommunications Equipment - 1.29%
Lucent Technologies, Inc. 200 14,413
Tobacco - 1.98%
Philip Morris Companies, Inc. 500 22,156
Transportation - Rail - 1.60%
Burlington Northern Santa Fe 200 17,975
Trucking & Leasing - 1.20%
CNF Transportation Inc. 400 13,475
Total Common Stocks (Cost $884,905) 937,942
-------
INVESTMENT COMPANY - 11.92%
Evergreen Money Market Treasury Institutional Money 66,825 66,825
Market Fund Institutional Service Shares
Evergreen Money Market Treasury Instititutional Treasury 66,825 66,825
Money Market Fund Institutional Service Shares ------ -------
Total Investment Company (Cost $133,650) 133,650
-------
Total Value of Investments (Cost $1,018,555 (b)) 95.60 % 1,071,592
Other Assets less Liabilities 4.40 % 49,364
------ ---------
Net Assets 100.00 % $1,120,956
====== ==========
</TABLE>
(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 is as follows:
Unrealized appreciation $71,985
Unrealized depreciation (18,948)
---------
Net unrealized appreciation $53,037
=========
<PAGE>
QUAKER AGGRESSIVE GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997
ASSETS
Investments, at value (cost $1,018,555) .................. $1,071,592
Cash ..................................................... 45,863
Income receivable ........................................ 1,077
Receivable for investments sold .......................... 137,762
Prepaid expenses ......................................... 379
Deferred organization expenses, net (notes 2 and 4) ...... 29,289
----------
Total assets .......................................... 1,285,962
----------
LIABILITIES
Accrued expenses ......................................... 7,660
Payable for investment purchases ......................... 145,614
Due to fund sponsor (note 3) ............................. 632
Accrued income taxes (notes 1 and 3) ..................... 1,800
Deferred income taxes (note 6) ........................... 9,300
----------
Total liabilities ..................................... 165,006
----------
NET ASSETS
(applicable to 100,487 shares outstanding; unlimited
shares of $ 0.01 par value beneficial interest authorized) $1,120,956
==========
NET ASSET VALUE AND REPURCHASE PRICE PER SHARE
($1,120,956 / 100,487 shares) ............................ $ 11.16
==========
NET ASSETS CONSIST OF
Paid-in capital .......................................... $1,067,907
Undistributed net investment income ...................... 12
Net unrealized appreciation on investments ............... 53,037
----------
$1,120,956
==========
See accompanying notes to financial statements
<PAGE>
QUAKER AGGRESSIVE GROWTH FUND
STATEMENT OF OPERATIONS
Period from November 25, 1996
(commencement of operations) to
June 30, 1997
INVESTMENT INCOME
Income
Interest .............................................. $ 6,241
Dividends ............................................. 2,879
--------
Total income ....................................... 9,120
--------
Expenses
Investment advisory fees (note 2) ..................... 3,457
Fund administration fees (note 2) ..................... 807
Custody fees .......................................... 4,587
Registration and filing administration fees (note 2) .. 782
Fund accounting fees (note 2) ......................... 14,600
Audit fees ............................................ 4,500
Legal fees ............................................ 2,779
Securities pricing fees ............................... 2,208
Shareholder servicing fees (note 3) ................... 1,153
Shareholder recordkeeping fees (note 2) ............... 3,604
Shareholder servicing expenses ........................ 1,201
Registration and filing expenses ...................... 1,017
Printing expenses ..................................... 1,923
Amortization of deferred organization expenses (note 4) 4,035
Trustee fees and meeting expenses ..................... 269
Other operating expenses .............................. 3,955
--------
Total expenses ..................................... 50,877
--------
Less:
Expense reimbursements (note 3) ................. (31,935)
Investment advisory fees waived (note 2) ........ (3,457)
Fund administration and other fees waived (note 2 (8,151)
Shareholder service fees waived (note 3) ........ (1,153)
--------
Net expenses ....................................... 6,181
--------
Net investment income before income taxes ....... 2,939
--------
Income taxes (note 1) ........................... 550
Less reimbursement (note 1 and 3) ............... (550)
--------
Net income taxes ............................. 0
Net investment income ........................... 2,939
--------
(Continued)
<PAGE>
QUAKER AGGRESSIVE GROWTH FUND
STATEMENT OF OPERATIONS
Period from November 25, 1996
(commencement of operations) to
June 30, 1997
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investment transactions
before income taxes ..................................... $ 6,734
--------
Income taxes (note 1) .................................... 1,250
Less reimbursement (note 1 and 3) ........................ (1,250)
--------
Net income taxes ...................................... 0
--------
Net realized gain from investment transactions ........... 6,734
--------
Increase in unrealized appreciation on investments
before deferred income taxes 53,037
--------
Deferred income taxes (note 1 and 6) ..................... 9,300
Less reimbursement (note 1 and 3) ........................ (9,300)
--------
Net deferred income taxes ............................. 0
--------
Increase in unrealized appreciation on investments ....... 53,037
--------
Net realized and unrealized gain on investments ....... 59,771
--------
Net increase in net assets resulting from operations $ 62,710
========
See accompanying notes to financial statements
<PAGE>
QUAKER AGGRESSIVE GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
Period from November 25, 1996
(commencement of operations) to
June 30, 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income .............................................. $2,939
Net realized gain from investment transactions ..................... 6,734
Increase in unrealized appreciation on investments ................. 53,037
----------
Net increase in net assets resulting from operations ............ 62,710
----------
Distributions to shareholders from
Net investment income .............................................. (2,927)
Net realized gain from investment transactions ..................... (6,734)
----------
Decrease in net assets resulting from distributions ............. (9,661)
----------
Capital share transactions
Increase in net assets resulting from capital share transactions (a) 1,067,907
----------
Total increase in net assets ................................. 1,120,956
NET ASSETS
Beginning of period ................................................... 0
----------
End of period (including undistributed net investment income .......... $1,120,956
of $12) ==========
</TABLE>
(a) A summary of capital share activity follows:
-------------------------
Shares Value
-------------------------
Shares sold ........................................... 101,462 $ 1,078,209
Shares issued for reinvestment of distributions ....... 868 9,661
------- -----------
102,330 1,087,870
Shares redeemed ....................................... (1,843) (19,963)
------- -----------
Net increase ........................................ 100,487 $ 1,067,907
======= ===========
See accompanying notes to financial statements
<PAGE>
QUAKER AGGRESSIVE GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
Period from November 25, 1996
(commencement of operations) to
June 30, 1997
Net asset value, beginning of period ......................... $10.00
--------
Income from investment operations
Net investment income .................................. 0.04
Net realized and unrealized gain on investments ........ 1.23
--------
Total from investment operations .................... 1.27
--------
Distributions to shareholders from
Net investment income .................................. (0.04)
Net realized gain from investment transactions ......... (0.07)
--------
Total distributions ................................. (0.11)
--------
Net asset value, end of period ............................... $11.16
========
Total return ................................................. 12.68%(c)
========
Ratios/supplemental data
Net assets, end of period ................................. $1,120,956
==========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees .......... 13.44 % (a)
After expense reimbursements and waived fees ........... 1.34 % (a)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees .......... (9.18)% (a)
After expense reimbursements and waived fees ........... 0.64 % (a)
Portfolio turnover rate ................................... 778.01 %
Average broker commissions per share ...................... $0.06 (b)
(a) Annualized.
(b) Represents total commission paid on portfolio securities divided by total
portfolio commissions were charged.
(c) Aggregate total return, not annualized.
See accompanying notes to financial statements
<PAGE>
QUAKER AGGRESSIVE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
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 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 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 - The Fund did not comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies for the
period ended June 30, 1997. Consequently, a provision for federal and state
income taxes on net investment income and net realized gains has been
included in the financial statements. Deferred income taxes have been
provided on the unrealized appreciation on investments for the period from
November 25, 1996 (commencement of operations) to June 30, 1997. It is the
intent on the Fund to comply with the provisions of the Internal Revenue
Service Code applicable to regulated investment companies in the future.
Quaker Funds, Inc. (the "Sponsor") has agreed to pay all taxes associated
with the Fund's current year tax status.
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.
Due to a concentration of shareholders at June 30, 1997, the Fund is
subject to the provisions of Internal Revenue Code applicable to personal
holding companies. No provision has been made for personal holding company
taxes since it is the policy of the Fund to make sufficient distributions
of income to relieve it from substantially all personal holding company
taxes.
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 is recorded on the ex-dividend date.
<PAGE>
QUAKER AGGRESSIVE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
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. Distributions to
shareholders are recorded on the ex-dividend date. 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.
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, Inc. (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 $3,457 ($0.05 per share) for the period ended June 30, 1997.
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, and 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
<PAGE>
QUAKER AGGRESSIVE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
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 $8,151 ($.11 per share) for the period ended June 30,
1997.
Certain organization expenses totaling $23,333 and $833 were paid to a company
controlled by the Administrator and to an officer of the Fund, respectively, for
the period ended June 30, 1997.
The Fund's distributor, Quaker Securities, Inc. (the "Distributor") was paid
commissions of $17,165 for purchases and sales of investments other than
short-term investments for the period ended June 30, 1997.
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, 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 $1,153
and has reimbursed expenses and income taxes totaling $43,035 for the period
ended June 30, 1997.
NOTE 4 - DEFERRED ORGANIZATION EXPENSES
Expenses totaling $33,324 incurred in connection with its organization and the
registration of its shares, which were originally paid by the Fund's Sponsor,
have been assumed by the Fund.
The organization expenses are being amortized using the straight-line method
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 $5,784,011 and $4,905,840, respectively, for the period ended June
30, 1997.
<PAGE>
QUAKER AGGRESSIVE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
NOTE 6 - DEFERRED INCOME TAXES
As discussed in note 1, the Fund did not comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies for the
period ended June 30, 1997. Deferred income taxes have been provided on the net
unrealized appreciation on investments for the period from November 25, 1996
(commencement of operations) to June 30, 1997.
The Fund's total deferred tax assets, deferred tax liabilities and deferred tax
valuation allowances as of June 30, 1997 are as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Deferred tax asset arising from unrealized depreciation on investments $ 3,300
Less valuation allowance 0
----------
3,300
Deferred tax liability arising from unrealized appreciation on investments (12,600)
Net deferred tax liability $(9,300)
</TABLE>
The valuation allowance of $0 did not change for the period ended June 30, 1997.
The Fund Sponsor has agreed to pay all taxes associated with the Fund's current
year tax status.
<PAGE>
Independent Auditor's Report
July 28, 1997
To the Shareholders and Board of Trustees
Quaker Aggressive Growth Fund
Rocky Mount, North Carolina
We have audited the statements of assets and liabilities, including the
schedules of investments, of the QUAKER AGGRESSIVE GROWTH FUND (one of the
portfolios constituting the Quaker Investment Trust series of funds) as of June
30, 1997, and the related statements of operations and of changes in net assets
and the selected per share data and ratios for the period from November 25, 1996
(commencement of operations) to June 30, 1997. These financial statements and
per share data and ratios are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
per share data and ratios based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and per share data and ratios
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of June 30, 1997, by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and selected per share data and ratios
referred to above present fairly, in all material respects, the financial
position of the QUAKER AGGRESSIVE GROWTH FUND (one of the portfolios
constituting the Quaker Investment Trust series of funds) as of June 30, 1997,
and the results of its operations and changes in its net assets and the selected
per share data and ratios for the period from November 25, 1996 (commencement of
operations) to June 30, 1997 in conformity with generally accepted accounting
principles.
/s/ Goldenberg Rosenthal Friedlander, LLP
Jenkintown, Pennsylvania
<PAGE>
QUAKER SMALL-CAP VALUE FUND
Performance Update - $25,000 Investment
For the period from November 25, 1996
(commencement of operations) to June 30, 1997
- ------------------------------------------
Quaker
Small-Cap
Value
Fund Russell 2000
- ------------------------------------------
11/25/96 25000 25000
11/30/96 24925 25308
12/31/96 24893 25958
1/31/97 25818 26472
2/28/97 26018 25831
3/31/97 25043 24620
4/30/97 25593 24681
5/31/97 28270 27433
6/30/97 30087 28598
Total Return
- -------------------------------
Commencement of operations
through 6/30/97
- -------------------------------
20.35%
- -------------------------------
The graph assumes an initial $25,000 investment at November 25, 1996. All
dividends and distributions are reinvested.
At June 30, 1997, the Fund would have grown to $30,087 - total investment return
of 20.35% since November 25, 1996.
At June 30, 1997, a similar investment in the Russell 2000 Index would have
grown to $28,598 - total investment return of 14.39% since November 25, 1996.
Past performance is not a guarantee of future performance. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost.
<PAGE>
July 31, 1997
Dear Shareholder:
The Quaker Family of Funds reached the end of its first fiscal year on June 30,
1997. Substantial progress was achieved during this initial business period.
Each of the six mutual funds in the Quaker Family opened for business on
November 25, 1996. Since then, many new investors have joined the Quaker Family
and the assets under management are growing steadily.
Our management philosophy remains very straightforward. We have chosen seasoned
investment professionals to manage each of the Quaker Funds. Each manager has a
clearly defined investment strategy unique to a particular mutual fund, and will
stick with that discipline in the future. The fees paid by our investors have
been set at competitive levels, and we will make every effort to reduce them as
assets grow in the future. And most important of all, we are dedicated to
providing each of our shareholders with quality service at all times.
Financial markets have been very favorable during the life of the Quaker Family
of Funds. Domestic equity markets have shown particular strength during the
first half of 1997, while fixed income results have been modestly positive. The
Quaker Small-Cap Value Fund, managed by Ted Aronson of Aronson + Partners, has
outperformed the Russell 2000 Index from the inception of the Fund on November
25, 1996 through June 30, 1997. During that period, the Fund returned 20.4%
while the Index grew by 14.4%. For three months ending with June, the Fund
returned 20.2% compared with 16.2% for the Index.
We appreciate your investment in the Quaker Family of Funds and we will work
hard to earn your continued support.
Sincerely,
/s/ Peter F. Waitneight
Peter F. Waitneight
President
<PAGE>
THE QUAKER SMALL-CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - 97.60%
Aerospace & Defense - 0.77%
AAR Corporation 100 $3,231
Thiokol Corporation 100 7,000
--- -----
10,231
Auto Parts - Original Equipment - 1.69%
Arvin Industries, Inc. 300 8,175
Borg-Warner Automotive, Inc. 100 5,406
Excel Industries, Inc. 200 3,925
Mark IV Industries, Inc. 210 5,040
--- -----
22,546
Auto Parts - Replacement Equipment - 1.35%
Exide Corporation 500 10,969
Timken Company 200 7,050
--- -----
18,019
Auto & Trucks - 1.47%
(a)Navistar International Corporation 600 10,350
PACCAR Inc. 200 9,287
--- -----
19,637
Brewery - 0.79%
Adolph Coors Company 400 10,650
Building Materials - 1.98%
Lone Star Industries, Inc. 100 4,531
Southdown, Inc. 200 8,725
Texas Industries, Inc. 200 5,312
Vulcan Materials Company 100 7,850
--- -----
26,418
Chemicals - 1.64%
Lyondell Petrochemical Company 300 6,544
The Geon Company 500 10,125
Wellman, Inc. 300 5,212
--- -----
21,881
Computers - 4.16%
(a)Applied Magnetics Corporation 100 2,262
(a)Data General Corporation 200 5,200
(a)Exabyte Corporation 600 7,687
(a)Hutchinson Technology, Inc. 300 7,312
(a)Quantum Corporation 400 8,150
(a)Read-Rite Corporation 300 6,262
(a)Tandem Computers, Inc. 300 6,075
(a)Western Digital Corporation 400 12,650
--- ------
55,598
(Continued)
<PAGE>
THE QUAKER SMALL-CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Computer Software & Services - 1.33%
Comdisco, Inc. 300 $7,800
(a)Stratus Computer, Inc. 200 10,000
--- ------
17,800
Cosmetics & Personal Care - 0.91%
Herbalife International, Inc. 400 6,500
(a)NBTY, Inc. 200 5,600
--- -----
12,100
Electronics - 0.65%
(a)SCI Systems, Inc. 100 6,100
(a)Tracor, Inc. 100 2,512
--- -----
8,612
Electronics - Semiconductor - 1.31%
(a)Fusion Systems Corporation 100 3,956
(a)Novellus Systems, Inc. 100 8,650
(a)Oak Technology, Inc. 500 4,875
--- -----
17,481
Engineering & Construction - 0.69%
(a)Grupo Tribasa, S.A. de C.V. 1,700 9,138
Entertainment - 0.73%
(a)Carmike Cinemas, Inc. 200 6,525
(a)GTECH Holdings Corporation 100 3,225
--- -----
9,750
Financial - Banks, Commercial - 0.92%
AmSouth Bancorporation 200 7,600
Pacific Century Financial Corporation 100 4,625
--- -----
12,225
Financial - Savings/Loans/Thrift - 3.51%
Astoria Financial Corporation 200 9,500
Commercial Federal Corporation 150 5,587
Countrywide Credit Industries, Inc. 200 6,212
(a)Imperial Credit Industries, Inc. 300 6,169
ONBANCorp, Inc. 200 10,200
Webster Financial Corporation 200 9,100
--- -----
46,768
Financial - Securities Brokers - 2.65%
Donaldson, Lufkin & Jenrette, Inc. 200 11,950
Edwards (A.G.), Inc. 200 8,625
Interra Financial, Inc. 100 4,244
Paine Webber Group Inc. 300 10,500
--- ------
35,319
(Continued)
<PAGE>
THE QUAKER SMALL-CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Financial Services - 3.37%
Aames Financial Corporation 500 $9,250
AMBAC, Inc. 100 7,787
(a)AMRESCO, Inc. 500 10,750
(a)First Merchants Acceptance Corporation 300 1,462
North American Mortgage Company 300 7,125
The Money Store, Inc. 300 8,606
--- -----
44,980
Food - Processing - 1.34%
Interstate Bakeries Corporation 200 11,850
(a)Smithfield Foods, Inc. 100 6,150
--- -----
18,000
Food - Wholesale - 1.66%
Dean Foods Company 200 8,075
Fleming Companies, Inc. 400 7,200
SUPERVALU, INC. 200 6,900
--- -----
22,175
Forest Products & Paper - 0.25%
Chesapeake Corporation 100 3,375
Holding Companies - Diversified - 0.98%
(a)Anixter International Inc. 400 6,950
Old Republic International Corporation 200 6,063
--- -----
13,013
Homebuilders - 2.74%
Centex Corporation 200 8,212
(a)Champion Enterprises, Inc. 100 1,475
Continental Homes Holding Corporation 300 5,287
Del Webb Corporation 200 3,250
Pulte Corporation 300 10,369
(a)U.S. Home Corporation 300 7,969
--- -----
36,562
Household Products & Housewares - 1.70%
(a)Furniture Brands International, Inc. 400 7,750
Haverty Furniture Company, Inc. 200 2,500
(a)Mohawk Industries, Inc. 400 9,100
Stanhome, Inc. 100 3,287
--- -----
22,637
Insurance - Life & Health - 0.64%
Washington National Corporation 300 8,550
(Continued)
<PAGE>
THE QUAKER SMALL-CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Insurance - Multiline - 3.04%
Allmerica Financial Corporation 300 $11,925
American Bankers Insurance Group, In 100 6,325
American Financial Group, Inc. 200 8,488
American National Insurance Company 100 8,925
Horace Mann Educators Corporation 100 4,900
--- -----
40,563
Insurance - Property & Casualty - 7.24%
Everest Reinsurance Holdings, Inc. 300 11,888
Fremont General Corporation 200 8,050
NAC Re Corp. 200 9,675
Ohio Casualty Corporation 200 8,800
Orion Capital Corporation 100 7,375
PartnerRe Ltd. 300 11,438
PXRE Corporation 100 3,100
Reliance Group Holdings, Inc. 800 9,500
TIG Holdings, Inc. 200 6,250
Vesta Insurance Group, Inc. 200 8,650
W. R. Berkley Corporation 200 11,775
--- ------
96,501
Iron & Steel - 2.84%
(a)Bethlehem Steel Corporation 800 8,350
Inland Steel Industries, Inc. 400 10,450
LTV Corporation 600 8,550
USX-US Steel Group, Inc. 300 10,519
--- ------
37,869
Lodging - 0.43%
(a)Primadonna Resorts, Inc. 300 5,794
Machine - Construction & Mining - 1.06%
Cummins Engine Company, Inc. 200 14,113
Machine - Diversified - 0.68%
Gleason Corporation 200 9,100
Medical - Hospital Management & Service - 6.66%
(a)Beverly Enterprises, Inc. 600 9,750
(a)Foundation Health Systems, Inc. 200 6,063
(a)GranCare, Inc. 1,100 11,825
(a)Horizon/CMS Healthcare Corporation 500 10,031
--- ------
Integrated Health Services, Inc. 300 11,550
(Continued)
<PAGE>
THE QUAKER SMALL-CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Medical - Hospital Management & Service - (Continued)
(a)Living Centers of America, Inc. 300 $11,850
(a)NovaCare, Inc. 300 4,163
(a)PacifiCare Health Systems, Inc. 35 2,236
(a)RoTech Medical Coporation 400 8,025
(a)Sun Healthcare Group, Inc. 200 4,163
(a)Wellpoint Health Networks, Inc. 200 9,175
--- -----
88,831
Medical Supplies - 1.37%
Bergen Brunswig Corporation 375 10,500
McKesson Corporation 100 7,750
--- -----
18,250
Metals - Diversified - 2.08%
AK Steel Holding Corporation 200 8,812
Asarco, Inc. 300 9,187
Cyprus Amax Minerals Company 400 9,800
--- -----
27,799
Metal Fabrication & Hardware - 1.08%
Amcast Industrial Corporation 200 5,000
Commercial Metals Company 100 3,225
Quanex Corporation 200 6,113
--- -----
14,338
Miscellaneous - Manufacturing - 2.65%
Aeroquip-Vickers Inc. 200 9,725
Dexter Corporation 200 6,400
NACCO Industries, Inc. 200 11,288
(a)Vitro SA 700 7,875
--- -----
35,288
Office & Business Equipment - 0.54%
Herman Miller, Inc. 200 7,200
Oil & Gas - Domestic - 1.84%
Sun Company, Inc. 200 6,200
(a)Tesoro Petroleum Corporation 500 7,406
Valero Energy Corporation 300 10,875
--- ------
24,481
Oil & Gas - Equipment & Services - 1.60%
ONEOK Inc. 200 6,438
(a)SEACOR SMIT Inc. 200 10,462
Tidewater, Inc. 100 4,400
--- -----
21,300
(Continued)
<PAGE>
THE QUAKER SMALL-CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Oil & Gas - Exploration - 2.84%
(a)Oryx Energy Company 200 $4,225
Parker & Parsley Petroleum Company 200 7,075
Pennzoil Company 200 15,475
(a)Santa Fe Energy Resources, Inc. 200 2,938
Snyder Oil Corporation 100 1,838
Union Texas Petroleum Holdings, Inc. 300 6,263
--- -----
37,814
Packaging & Containers - 0.70%
(a)Owens-Illinois, Inc. 300 9,300
Publishing - Printing - 0.27%
(a)Devon Group, Inc. 100 3,575
Restaurants & Food Service - 1.31%
(a)Foodmaker, Inc. 600 9,825
(a)Ryan's Family Steak Houses, Inc. 900 7,706
--- -----
17,531
Retail - Apparel - 2.27%
Brown Group, Inc. 300 5,606
(a)Genesco Inc. 400 5,650
Lands' End, Inc. 200 5,900
Ross Stores, Inc. 400 13,075
--- ------
30,231
Retail - Department Stores - 2.75%
(a)Carson Pirie Scott & Company 200 6,350
(a)Fred Meyer, Inc. 200 10,338
(a)Proffitt's, Inc. 200 8,775
(a)Woolworth Corporation 300 7,200
(a)Zale Corporation 200 3,963
--- -----
36,626
Retail - General Merchandise - 1.04%
(a)Best Buy Company, Inc. 700 10,412
Fingerhut Companies, Inc. 200 3,488
--- -----
13,900
Retail - Grocery - 1.21%
(a)Smith's Food & Drug Centers, Inc. 200 10,725
The Great Atlantic & Pacific Tea Com 200 5,438
--- -----
16,163
(Continued)
<PAGE>
THE QUAKER SMALL-CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Retail - Specialty Line - 0.36%
Fisher Scientific International 100 $4,750
Telecommunications - 1.56%
Century Telephone Enterprises, Inc. 100 3,369
Koor Industries Limited 400 7,050
(a)U.S. Long Distance Corporation 600 10,350
--- ------
20,769
Technology - 0.69%
(a)MicroAge, Inc. 500 9,188
Tobacco - 1.51%
DIMON, Inc. 400 10,600
Universal Corporation 300 9,525
--- -----
20,125
Transportation - Air - 1.27%
Airborne Freight Corporation 100 4,186
(a)America West Holdings Corporation 400 5,800
(a)Continental Airlines, Inc. 200 6,987
--- -----
16,973
Transportation - Miscellaneous - 0.34%
Sea Containers, Ltd. 200 4,525
Trucking & Leasing - 0.50%
(a)Yellow Corporation 300 6,713
Utilities - Electric - 4.98%
Centerior Energy Corporation 700 7,831
Central Maine Power Company 600 7,425
Commonwealth Energy System 200 4,837
Illinova Corporation 200 4,400
Long Island Lighting Company 200 4,600
New York State Electric & Gas Corpor 500 10,438
Pinnacel West Capital Corporation 100 3,006
Public Service Company of New Mexico 500 8,938
United Illuminating Company 200 6,175
UtiliCorp United, Inc. 300 8,719
--- -----
66,369
Utilities - Gas - 0.41%
Westcoast Energy, Inc. 300 5,456
(Continued)
<PAGE>
THE QUAKER SMALL-CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Wholesale - Special Line - 1.25%
Bindley Western Industries, Inc. 100 $2,294
(a)InaCom Corp. 300 9,338
(a)Perrigo Company 400 5,000
--- -----
16,632
Total Common Stocks (Cost $1,136,658) 1,301,532
---------
INVESTMENT COMPANY - 2.18%
Evergreen Money Market Treasury
Institutional Money Market Fund
Institutional Service Shares 17,828 17,828
S & P Mid-Cap 400 Depositary Receipts 200 11,228
--- --- ------
Total Investment Company (Cost $28,957) 29,056
------
Total Value of Investments (Cost $ 1,165,615 (b)) 99.78% 1,330,588
Other Assets Less Liabilities 0.22% 2,885
---- -----
Net Assets 100.00% $1,333,473
====== ==========
(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 $180,749
Unrealized depreciation (15,776)
-------
Net unrealized appreciation $164,973
========
See accompanying notes to financial statements
<PAGE>
QUAKER SMALL-CAP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
ASSETS
Investments, at value (cost $1,165,615) ....................... $1,330,588
Income receivable ............................................. 1,154
Receivable for investments sold ............................... 9,360
Prepaid expenses .............................................. 231
Deferred organization expenses, net (notes 2 and 4) ........... 29,289
----------
Total assets ............................................... 1,370,622
----------
LIABILITIES
Accrued expenses .............................................. 9,585
Payable for investment purchases .............................. 11,129
Due to fund sponsor (note 3) .................................. 9,006
Disbursements in excess of cash on demand deposit ............. 7,429
----------
Total liabilities .......................................... 37,149
----------
NET ASSETS
(applicable to 115,660 shares outstanding; unlimited
shares of $ 0.01 par value beneficial interest authorized) .... $1,333,473
==========
NET ASSET VALUE AND REPURCHASE PRICE PER SHARE
($1,333,473 /115,660 shares) ................................. $11.53
==========
NET ASSETS CONSIST OF
Paid-in capital ............................................... $1,168,351
Undistributed net investment income ........................... 149
Net unrealized appreciation on investments .................... 164,973
----------
$1,333,473
==========
See accompanying notes to financial statements
<PAGE>
QUAKER SMALL-CAP VALUE FUND
STATEMENT OF OPERATIONS
Period from November 25, 1996
(commencement of operations) to
June 30, 1997
INVESTMENT INCOME
Income
Interest ................................................... $ 1,046
Dividends .................................................. 7,511
----------
Total income ............................................ 8,557
----------
Expenses
Investment advisory fees (note 2) .......................... 4,183
Fund administration fees (note 2) .......................... 976
Custody fees ............................................... 6,030
Registration and filing administration fees (note 2) ....... 758
Fund accounting fees (note 2) .............................. 14,600
Audit fees ................................................. 4,500
Legal fees ................................................. 2,778
Securities pricing fees .................................... 7,283
Shareholder servicing fees (note 3) ........................ 1,394
Shareholder recordkeeping fees (note 2) .................... 3,604
Shareholder servicing expenses ............................. 1,244
Registration and filing expenses ........................... 1,017
Printing expenses .......................................... 1,924
Amortization of deferred organization expenses (note 4) .... 4,035
Trustee fees and meeting expenses .......................... 269
Other operating expenses ................................... 3,958
----------
Total expenses .......................................... 58,553
----------
Less:
Expense reimbursements (note 3) ...................... (37,354)
Investment advisory fees waived (note 2) ............. (4,183)
Fund administration fees waived (note 2) ............. (8,295)
Shareholder servicing fees waived (note 3) ........... (1,394)
----------
Net expenses ............................................ 7,327
----------
Net investment income ................................ 1,230
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investment transactions ................ 54,417
Increase in unrealized appreciation on investments ............ 164,973
----------
Net realized and unrealized gain on investments ............ 219,390
----------
Net increase in net assets resulting from operations .... $ 220,620
==========
See accompanying notes to financial statements
<PAGE>
QUAKER SMALL-CAP VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
Period from November 25, 1996
(commencement of operations) to
June 30, 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income ................................................ $1,230
Net realized gain from investment transactions ....................... 54,417
Increase in unrealized appreciation on investments ................... 164,973
---------
Net increase in net assets resulting from operations .............. 220,620
---------
Distributions to shareholders from
Net investment income ................................................ (1,081)
Net realized gain from investment transactions ....................... (54,417)
---------
Decrease in net assets resulting from distributions ............... (55,498)
---------
Capital share transactions
Increase in net assets resulting from capital share transactions (a) . 1,168,351
---------
Total increase in net assets ................................... 1,333,473
NET ASSETS
Beginning of period ..................................................... 0
---------
End of period (including undistributed net investment income ............ $1,333,473
of $149) =========
(a) A summary of capital share activity follows:
-----------------------
Shares Value
-----------------------
Shares sold ............................................. 110,840 $1,112,853
Shares issued for reinvestment of distributions ......... 4,820 55,498
------- -----------
Net increase .......................................... 115,660 $1,168,351
======= ===========
</TABLE>
See accompanying notes to financial statements
<PAGE>
QUAKER SMALL-CAP VALUE FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
Period from November 25, 1996
(commencement of operations) to
June 30, 1997
Net asset value, beginning of period ......................... $10.00
------
Income from investment operations
Net investment income .................................. 0.01
Net realized and unrealized gain on investments ........ 2.02
------
Total from investment operations .................... 2.03
------
Distributions to shareholders from
Net investment income .................................. (0.01)
Net realized gain from investment transactions ......... (0.49)
------
Total distributions ................................. (0.50)
------
Net asset value, end of period ............................... $11.53
======
Total return ................................................. 20.35 % (c)
======
Ratios/supplemental data
Net assets, end of period ................................$1,333,473
==========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees .......... 10.50 % (a)
After expense reimbursements and waived fees ........... 1.31 % (a)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees .......... (8.96)% (a)
After expense reimbursements and waived fees ........... 0.22 % (a)
Portfolio turnover rate ................................... 90.63 %
Average broker commissions per share ...................... $0.0453 (b)
(a) Annualized.
(b) Represents total commission paid on portfolio securities divided by total
portfolio commissions were charged.
(c)Aggregate total return, not annualized.
See accompanying notes to financial statements
<PAGE>
QUAKER SMALL-CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
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
shareholders with long-term 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
or personal holding company 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 personal holding companies and to make
sufficient distributions of taxable income to relieve it from substantially
all federal income taxes.
Due to a concentration of shareholders at June 30, 1997 the Fund is subject
to the provisions of the Internal Revenue Code applicable to personal
holding companies.
Net investment income (loss) and net realized gains (losses) may 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 is 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. Distributions to
shareholders are recorded on the ex-dividend date. 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.
<PAGE>
QUAKER SMALL-CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
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 $4,183 for the period ended June 30, 1997.
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, and 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 $8,295 ($ 0.09 per
share) for the period ended June 30, 1997.
Certain organization expenses totaling $23,333 and $833 were paid to a company
controlled by the Administrator and to an officer of the Fund, respectively, for
the period ended June 30, 1997.
Certain Trustees and officers of the Trust are also officers of the Advisor,
Quaker Securities, Inc. (the "Distributor") or the Administrator.
<PAGE>
QUAKER SMALL-CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
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 $1,394 and has reimbursed expenses totaling $37,354 for the
period ended June 30, 1997.
NOTE 4 - DEFERRED ORGANIZATION EXPENSES
Expenses totaling $33,324 incurred in connection with its organization and the
registration of its shares, which were originally paid by the Fund's Sponsor,
have been assumed by the Fund.
The organization expenses are being amortized using the straight-line method
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 $1,916,760 and $819,890 respectively, for the period ended June 30,
1997.
<PAGE>
Independent Auditor's Report
July 28, 1997
To the Shareholders and Board of Trustees
Quaker Small-Cap Value Fund
Rocky Mount, North Carolina
We have audited the statements of assets and liabilities, including the
schedules of investments, of the QUAKER SMALL-CAP VALUE FUND (one of the
portfolios constituting the Quaker Investment Trust series of funds) as of June
30, 1997, and the related statements of operations and of changes in net assets
and the selected per share data and ratios for the period from November 25, 1996
(commencement of operations) to June 30, 1997. These financial statements and
per share data and ratios are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
per share data and ratios based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and per share data and ratios
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of June 30, 1997, by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and selected per share data and ratios
referred to above present fairly, in all material respects, the financial
position of the QUAKER SMALL-CAP VALUE FUND (one of the portfolios constituting
the Quaker Investment Trust series of funds) as of June 30, 1997, and the
results of its operations and changes in its net assets and the selected per
share data and ratios for the period from November 25, 1996 (commencement of
operations) to June 30, 1997 in conformity with generally accepted accounting
principles.
/s/ Goldenberg Rosenthal Friedlander, LLP
Jenkintown, Pennsylvania
<PAGE>
QUAKER SECTOR ALLOCATION EQUITY FUND
Performance Update - $25,000 Investment
For the period from November 25, 1996
(commencement of operations) to June 30, 1997
- ----------------------------------------------------------------
Quaker
Sector
Allocation S&P 500
- ----------------------------------------------------------------
11/25/96 25000 25000
11/30/96 25025 24943
12/31/96 24650 24515
1/31/97 25402 26047
2/28/97 24048 26251
3/31/97 23446 25173
4/30/97 24450 26675
5/31/97 26004 28299
6/30/97 26628 29639
This graph depicts the performance of the Quaker Sector Allocation Equity Fund
versus the S & P 500 Total Return Index. It is important to note that the Quaker
Sector Allocation Equity Fund is a professionally managed mutual fund while the
indexes are not available for investment and are unmanaged. The comparison is
shown for illustrative purposes only.
Total Return
- -------------------------------
Commencement of operations
through 6/30/97
- -------------------------------
6.51%
- -------------------------------
The graph assumes an initial $25,000 investment at November 25, 1996. All
dividends and distributions are reinvested.
At June 30, 1997, the Fund would have grown to $26,628 - total investment return
of 6.51% since November 25, 1996.
At June 30, 1997, a similar investment in the S & P 500 Total Return Index would
have grown to $29,639 - total investment return of 18.56% since November 25,
1996.
Past performance is not a guarantee of future performance. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost.
<PAGE>
July 31, 1997
Dear Shareholder:
The Quaker Family of Funds reached the end of its first fiscal year on June 30,
1997. Substantial progress was achieved during this initial business period.
Each of the six mutual funds in the Quaker Family opened for business on
November 25, 1996. Since then, many new investors have joined the Quaker Family
and the assets under management are growing steadily.
Our management philosophy remains very straightforward. We have chosen seasoned
investment professionals to manage each of the Quaker Funds. Each manager has a
clearly defined investment strategy unique to a particular mutual fund, and will
stick with that discipline in the future. The fees paid by our investors have
been set at competitive levels, and we will make every effort to reduce them as
assets grow in the future. And most important of all, we are dedicated to
providing each of our shareholders with quality service at all times.
Financial markets have been very favorable during the life of the Quaker Family
of Funds. Domestic equity markets have shown particular strength during the
first half of 1997, while fixed income results have been modestly positive. The
Quaker Sector Allocation Equity Fund, managed by Charlie Knott, of Logan Capital
Management, has not fully participated in the rise of the market from the
inception of the Fund on November 25, 1996 through June 30, 1997. During that
period, the Fund returned 6.5% while the S&P 500 Index grew by 18.6%. For three
months ending with June, the Fund returned 13.6% compared with 17.7% for the
Index. But during the first quarter of 1997, a commitment to oil and gas stocks
and real estate investment trusts did not produce positive results.
We appreciate your investment in the Quaker Family of Funds and we will work
hard to earn your continued support.
Sincerely,
/s/ Peter F. Waitneight
Peter F. Waitneight
President
<PAGE>
QUAKER SECTOR ALLOCATION EQUITY FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - 94.96%
Aerospace & Defense - 2.07%
The Boeing Company 415 $22,021
Agriculture - 2.27%
Deere & Company 440 24,145
Building Materials - 2.57%
(a)NCI Building Systems, Inc. 845 27,357
Chemicals - 4.38%
E .I. du Pont de Nemours and Company 740 46,528
Computers - 2.63%
(a)Sun Microsystems, Inc. 750 27,914
Computer Software & Services - 13.27%
Computer Associates International, Inc. 724 40,318
(a)Microsoft Corporation 558 70,517
(a)Oracle Corporation 600 30,225
--- ------
141,060
Electronics - Semiconductor - 2.60%
Intel Corporation 195 27,653
Financial - Banks, Commercial - 6.13%
Barnett Banks, Inc. 500 26,250
The Money Store, Inc. 1,355 38,872
----- ------
65,122
Financial - Banks, Money Center - 3.23%
Citicorp 285 34,360
Financial Services - 6.17%
Fannie Mae 520 22,685
SunAmerica, Inc. 880 42,900
--- ------
65,585
Foreign Securities - 4.08%
SmithKline Beecham Plc - ADR 473 43,339
Insurance - Property & Casualty - 2.23%
Reliance Group Holdings, Inc. 2,000 23,750
(Continued)
<PAGE>
QUAKER SECTOR ALLOCATION EQUITY FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997
- --------------------------------------------------------------------------------
Value
Shares (note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Medical - Biotechnology - 3.42%
(a)Amgen, Inc. 625 $36,328
Oil & Gas - Domestic - 0.47%
Pennzoil Company 65 4,956
Oil & Gas - Exploration - 12.36%
Anadarko Petroleum Corporation 461 27,660
Apache Corporation 845 27,463
Chesapeake Energy Corporation 1,950 19,134
(a)Oryx Energy Company 1,474 31,138
Union Pacific Resources Group Inc. 1,042 25,920
----- ------
131,315
Pharmaceuticals - 9.78%
American Home Products Corporation 390 29,835
Schering-Plough Corporation 833 39,984
Warner-Lambert Company 275 34,169
--- ------
103,988
Real Estate Investment Trust - 13.03%
Arden Realty Group, Inc. 1,287 33,462
Boykin Lodging Company 1,710 40,933
Simon DeBartolo Group, Inc. 997 31,904
Sun Communities, Inc. 955 32,052
--- ------
138,351
Retail - Apparel - 1.92%
Nike, Inc. 350 20,431
Retail - Department Stores - 2.35%
Wal-Mart Stores, Inc. 740 25,021
Total Common Stocks (Cost $974,002) 1,009,224
---------
INVESTMENT COMPANY - 3.97%
Evergreen Money Market Treasury
Institutional Money Market Fund
Institutional Service Shares 42,213 42,213
(Cost $42,213) ------ ------
(Continued)
<PAGE>
QUAKER SECTOR ALLOCATION EQUITY FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997
Total Value of Investments (Cost $1,016,215 (b)) 98.93% $1,051,437
Other Assets Less Liabilities 1.07% 11,396
------ ----------
Net Assets 100.00% $1,062,833
====== ==========
(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 $65,830
Unrealized depreciation (30,608)
--------
Net unrealized appreciation $35,222
========
The following acronym is used throughout this portfolio:
ADR - American Depositary Receipt
See accompanying notes to financial statements
<PAGE>
QUAKER SECTOR ALLOCATION EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997
ASSETS
Investments, at value (cost $1,016,215) ................... $1,051,437
Income receivable ......................................... 2,003
Prepaid expenses .......................................... 231
Deferred organization expenses, net (notes 2 and 4) ....... 29,289
-----------
Total assets ........................................... 1,082,960
-----------
LIABILITIES
Accrued expenses .......................................... 7,911
Due to fund sponsor (note 3) .............................. 12,129
Disbursements in excess of cash on demand deposit ......... 87
-----------
Total liabilities ...................................... 20,127
-----------
NET ASSETS
(applicable to 103,384 shares outstanding; unlimited
shares of $ 0.01 par value beneficial interest authorized) $1,062,833
===========
NET ASSET VALUE, REDEMPTION AND OFFERING PRICE PER SHARE
($1,062,833 / 103,384 shares) ............................. $10.28
===========
NET ASSETS CONSIST OF
Paid-in capital ........................................... $1,027,610
Undistributed net investment income ....................... 1
Net unrealized appreciation on investments ................ 35,222
-----------
$1,062,833
===========
See accompanying notes to financial statements
<PAGE>
QUAKER SECTOR ALLOCATION EQUITY FUND
STATEMENT OF OPERATIONS
Period from November 25, 1996
(commencement of operations) to
June 30, 1997
INVESTMENT INCOME
Income
Interest .............................................. $ 1,943
Dividends ............................................. 5,057
--------
Total income ....................................... 7,000
--------
Expenses
Investment advisory fees (note 2) ..................... 2,387
Fund administration fees (note 2) ..................... 557
Custody fees .......................................... 2,698
Registration and filing administration fees (note 2) .. 757
Fund accounting fees (note 2) ......................... 14,600
Audit fees ............................................ 4,500
Legal fees ............................................ 2,778
Securities pricing fees ............................... 2,092
Shareholder servicing fees (note 3) ................... 796
Shareholder recordkeeping fees (note 2) ............... 3,604
Shareholder servicing expenses ........................ 1,170
Registration and filing expenses ...................... 1,017
Printing expenses ..................................... 1,894
Amortization of deferred organization expenses (note 4) 4,035
Trustee fees and meeting expenses ..................... 269
Other operating expenses .............................. 3,948
--------
Total expenses ..................................... 47,102
--------
Less:
Expense reimbursements (note 3) ................. (31,733)
Investment advisory fees waived (note 2) ........ (2,387)
Fund administration fees waived (note 2) ........ (7,915)
Shareholder servicing fees waived (note 3) ...... (796)
--------
Net expenses ....................................... 4,271
--------
Net investment income ........................... 2,729
--------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investment transactions ........... 31,441
Increase in unrealized appreciation on investments ....... 35,222
--------
Net realized and unrealized gain on investments ....... 66,663
--------
Net increase in net assets resulting from operations $ 69,392
========
See accompanying notes to financial statements
<PAGE>
QUAKER SECTOR ALLOCATION EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
Period from November 25, 1996
(commencement of operations) to
June 30, 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income .............................................. $2,729
Net realized gain from investment transactions ..................... 31,441
Increase in unrealized appreciation on investments ................. 35,222
---------
Net increase in net assets resulting from operations ............ 69,392
---------
Distributions to shareholders from
Net investment income .............................................. (2,728)
Net realized gain from investment transactions ..................... (31,441)
---------
Decrease in net assets resulting from distributions ............. (34,169)
---------
Capital share transactions
Increase in net assets resulting from capital share transactions (a) 1,027,610
---------
Total increase in net assets ................................. 1,062,833
NET ASSETS
Beginning of period ................................................... 0
----------
End of pe(including undistributed net investment income ............... $1,062,833
of $1) ==========
(a) A summary of capital share activity follows:
----------------------
Shares Value
----------------------
Shares sold ................................................. 100,067 $993,528
Shares issued for reinvestment of distributions ............. 3,317 34,082
------- ----------
Net increase .............................................. 103,384 $1,027,610
======= ==========
</TABLE>
See accompanying notes to financial statements
<PAGE>
QUAKER SECTOR ALLOCATION EQUITY FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
Period from November 25, 1996
(commencement of operations) to
June 30, 1997
Net asset value, beginning of period .......................... $10.00
Income from investment operations
Net investment income ................................... 0.05
Net realized and unrealized gain on investments ......... 0.59
Total from investment operations ..................... 0.64
Distributions to shareholders from
Net investment income ................................... (0.05)
Net realized gain from investment transactions .......... (0.31)
Total distributions .................................. (0.36)
Net asset value, end of period ................................ $10.28
Total return .................................................. 6.51 % (c)
Ratios/supplemental data
Net assets, end of period .................................. $1,062,833
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ........... 14.80 % (a)
After expense reimbursements and waived fees ............ 1.34 % (a)
Ratio of net investment oincome (loss) to average net assets
Before expense reimbursements and waived fees ........... (12.61)% (a)
After expense reimbursements and waived fees ............ 0.85 % (a)
Portfolio turnover rate .................................... 54.52 %
Average broker commissions per share ....................... $0.1215 (b)
(a) Annualized.
(b) Represents total commission paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(c) Aggregate total return, not annualized.
See accompanying notes to financial statements
<PAGE>
QUAKER SECTOR ALLOCATION EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The Quaker Sector Allocation 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 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 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
or personal holding company 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 personal holding companies and to make
sufficient distributions of taxable income to relieve it from substantially
all federal income taxes.
Due to a concentration of shareholders at June 30, 1997 the Fund is subject
to the provisions of the Internal Revenue Code applicable to personal
holding companies.
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 is 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. Distributions to
shareholders are recorded on the ex-dividend date. 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.
<PAGE>
QUAKER SECTOR ALLOCATION EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
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, Logan Capital Management, Inc.
(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 $2,387 ($0.04 per share) for the period ended June 30, 1997.
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, and 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 $7,915 ($.15 per
share) for the period ended June 30, 1997.
Certain organization expenses totaling $23,333 and $833 were paid to a company
controlled by the Administrator and to an officer of the Fund, respectively, for
the period ended June 30, 1997.
The Fund's Distributor, Quaker Securities, Inc. (the "Distributor") was paid
commissions of $2,789 for purchases and sales of investments, other than
short-term investments for the period ended June 30, 1997.
Certain Trustees and officers of the Trust are also officers of the Advisor, the
Distributor or the Administrator.
<PAGE>
QUAKER SECTOR ALLOCATION EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
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 $796 and has reimbursed expenses totaling $31,733 for the
period ended June 30, 1997.
NOTE 4 - DEFERRED ORGANIZATION EXPENSES
Expenses totaling $33,324 incurred in connection with its organization and the
registration of its shares, which were originally paid by the Fund's Sponsor,
have been assumed by the Fund.
The organization expenses are being amortized using the straight-line method
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 $1,253,091 and $310,530 respectively, for the period ended June 30,
1997.
<PAGE>
Independent Auditor's Report
July 28, 1997
To the Shareholders and Board of Trustees
Quaker Sector Allocation Equity Fund
Rocky Mount, North Carolina
We have audited the statements of assets and liabilities, including the
schedules of investments, of the QUAKER SECTOR ALLOCATION EQUITY FUND (one of
the portfolios constituting the Quaker Investment Trust series of funds) as of
June 30, 1997, and the related statements of operations and of changes in net
assets and the selected per share data and ratios for the period from November
25, 1996 (commencement of operations) to June 30, 1997. These financial
statements and per share data and ratios are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and per share data and ratios based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and per share data and ratios
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of June 30, 1997, by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and selected per share data and ratios
referred to above present fairly, in all material respects, the financial
position of the QUAKER SECTOR ALLOCATION EQUITY FUND (one of the portfolios
constituting the Quaker Investment Trust series of funds) as of June 30, 1997,
and the results of its operations and changes in its net assets and the selected
per share data and ratios for the period from November 25, 1996 (commencement of
operations) to June 30, 1997 in conformity with generally accepted accounting
principles.
/s/ Goldenberg Rosenthal Friedlander, LLP
Jenkintown, Pennsylvania
<PAGE>
QUAKER FIXED INCOME FUND
Performance Update - $25,000 Investment
For the period from November 25, 1996
(commencement of operations) to June 30, 1997
- ------------------------------------------------------
Quaker
Fixed
Income Salomon BIG
- ------------------------------------------------------
11/25/96 25000 25000
11/30/96 25025 25103
12/31/96 24908 24882
1/31/97 24933 24977
2/28/97 24907 25005
3/31/97 24630 24753
4/30/97 24934 25106
5/31/97 25138 25248
6/30/97 25392 25646
This graph depicts the performance of the Quaker Fixed Income Fund versus the
Salomon Brothers Broad Investment-Grade Index. It is important to note that the
Quaker Fixed Income Fund is a professionally managed mutual fund while the
indexes are not available for investment and are unmanaged. The comparison is
shown for illustrative purposes only.
Total Return
- -------------------------------
Commencement of operations
through 6/30/97
- -------------------------------
1.57%
- -------------------------------
The graph assumes an initial $25,000 investment at November 25, 1996. All
dividends and distributions are reinvested.
At June 30, 1997, the Fund would have grown to $25,392 - total investment return
of 1.57% since November 25, 1996.
At June 30, 1997, a similar investment in the Salomon Brothers Broad
Investment-Grade Index would have grown to $25,646 - total investment return of
2.58% since November 25, 1996.
Past performance is not a guarantee of future performance. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost.
<PAGE>
July 31, 1997
Dear Shareholder:
The Quaker Family of Funds reached the end of its first fiscal year on June 30,
1997. Substantial progress was achieved during this initial business period.
Each of the six mutual funds in the Quaker Family opened for business on
November 25, 1996. Since then, many new investors have joined the Quaker Family
and the assets under management are growing steadily.
Our management philosophy remains very straightforward. We have chosen seasoned
investment professionals to manage each of the Quaker Funds. Each manager has a
clearly defined investment strategy unique to a particular mutual fund, and will
stick with that discipline in the future. The fees paid by our investors have
been set at competitive levels, and we will make every effort to reduce them as
assets grow in the future. And most important of all, we are dedicated to
providing each of our shareholders with quality service at all times.
Financial markets have been very favorable during the life of the Quaker Family
of Funds. Domestic equity markets have shown particular strength during the
first half of 1997, while fixed income results have been modestly positive. The
Quaker Fixed Income Fund, managed by Wiley Angell of Fiduciary Asset Management,
remained somewhat behind the Salomon Broad Investment Grade Index from the
inception of the Fund on November 25, 1996 through June 30, 1997. During that
period, the Fund returned 1.6% while the Index grew by 2.6%. For three months
ending with June, the Fund returned 3.1% compared with 3.6% for the Index.
We appreciate your investment in the Quaker Family of Funds and we will work
hard to earn your continued support.
Sincerely,
/s/ Peter F. Waitneight
Peter F. Waitneight
President
<PAGE>
QUAKER FIXED INCOME FUND
PORTFOLIO OF INVESTMENTS
June 30, 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Interest Maturity Value
Principal Rate Date (note 1)
- ----------------------------------------------------------------------------------------------------
U. S. GOVERNMENT OBLIGATIONS - 87.65%
U. S. Treasury Bond $150,000 10.375% 11/15/12 $190,359
U. S. Treasury Note 255,000 11.125% 08/15/03 314,447
------- -------
Total U. S. Government Obligations (Cost $506,814) 504,806
-------
Shares
INVESTMENT COMPANIES - 8.59%
Evergreen Money Market Treasury Institutional Money
Market Fund Institutional Service Shares 20,192 20,192
Evergreen Money Market Treasury Instititutional Treasury
Money Market Fund Institutional Service Shares 29,273 29,273
------
Total Investment Company (Cost $49,465) 49,465
Total Value of Investments (Cost $556,279 (a)) 96.24% $554,271
Other Assets Less Liabilities 3.76% 21,659
---- ------
Net Assets 100.00% $575,930
====== ========
</TABLE>
(a) Aggregate cost for financial reporting and federal income tax purposes is
the same. Unrealize appreciation (depreciation) of investments for
financial reporting and federal income tax purp is as follows:
Unrealized appreciation $0
Unrealized depreciation (2,008)
-------
Net unrealized depreciation $(2,008)
=======
See accompanying notes to financial statements
<PAGE>
QUAKER FIXED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1997
ASSETS
Investments, at value (cost $556,279) ......................... $554,271
Cash .......................................................... 50
Interest receivable ........................................... 12,820
Deferred organization expenses, net (notes 2 and 4) ........... 29,289
---------
Total assets ............................................... 596,430
---------
LIABILITIES
Accrued expenses .............................................. 7,626
Due to fund sponsor (note 3) .................................. 12,874
---------
Total liabilities .......................................... 20,500
---------
NET ASSETS
(applicable to 58,205 shares outstanding; unlimited
shares of $ 0.01 par value beneficial interest authorized) .... $575,930
=========
NET ASSET VALUE, REDEMPTION AND OFFERING PRICE PER SHARE
($575,930 / 58,205 shares) .................................... $9.89
=========
NET ASSETS CONSIST OF
Paid-in capital ............................................... $577,929
Undistributed net investment income ........................... 9
Net unrealized depreciation on investments .................... (2,008)
---------
$575,930
=========
See accompanying notes to financial statements
<PAGE>
QUAKER FIXED INCOME FUND
STATEMENT OF OPERATIONS
Period from November 25, 1996
(commencement of operations) to
June 30, 1997
INVESTMENT INCOME
Income
Interest .................................................... $14,582
---------
Expenses
Investment advisory fees (note 2) ........................... 1,153
Fund administration fees (note 2) ........................... 448
Custody fees ................................................ 1,770
Registration and filing administration fees (note 2) ........ 733
Fund accounting fees (note 2) ............................... 14,600
Audit fees .................................................. 4,500
Legal fees .................................................. 2,779
Securities pricing fees ..................................... 993
Shareholder servicing fees (note 3) ......................... 384
Shareholder recordkeeping fees (note 2) ..................... 3,604
Shareholder servicing expenses .............................. 1,024
Registration and filing expenses ............................ 300
Printing expenses ........................................... 1,906
Amortization of deferred organization expenses (note 4) ..... 4,035
Trustee fees and meeting expenses ........................... 269
Other operating expenses .................................... 3,939
---------
Total expenses ........................................... 42,437
---------
Less:
Expense reimbursements (note 3) ....................... (30,723)
Investment advisory fees waived (note 2) .............. (1,153)
Fund administration fees waived (note 2) .............. (7,872)
Shareholder servicing fees waived (note 3) ............ (384)
---------
Net expenses ............................................. 2,305
---------
Net investment income ................................. 12,277
---------
UNREALIZED LOSS ON INVESTMENTS
Decrease in unrealized appreciation on investments ............. (2,008)
---------
Net increase in net assets resulting from operations ..... $10,269
=========
See accompanying notes to financial statements
<PAGE>
QUAKER FIXED INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
Period from November 25, 1996
(commencement of operations) to
June 30, 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
Operations
Net investment income ................................................ $12,277
Decrease in unrealized appreciation on investments ................... (2,008)
-------
Net increase in net assets resulting from operations .............. 10,269
-------
Distributions to shareholders from
Net investment income ................................................ (12,268)
-------
Capital share transactions
Increase in net assets resulting from capital share transactions (a) . 577,929
-------
Total increase in net assets ................................... 575,930
NET ASSETS
Beginning of period ..................................................... 0
-------
End of period (including undistributed net investment income ............ $575,930
of $9) =======
(a) A summary of capital share activity follows:
--------------------
Shares Value
--------------------
Shares sold ..................................................... 56,957 $565,661
Shares issued for reinvestment of distributions ................. 1,248 12,268
------ --------
Net increase .................................................. 58,205 $577,929
====== ========
</TABLE>
See accompanying notes to financial statements
<PAGE>
QUAKER FIXED INCOME FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
Period from November 25, 1996
(commencement of operations) to
June 30, 1997
Net asset value, beginning of period ............................ $10.00
Income from investment operations
Net investment income ..................................... 0.26
Net realized and unrealized gain on investments ........... (0.11)
Total from investment operations ....................... 0.15
Distributions to shareholders from
Net investment income ..................................... (0.26)
Net asset value, end of period .................................. $9.89
Total return .................................................... 1.57 %(b)
Ratios/supplemental data
Net assets, end of period .................................... $575,930
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ............. 16.56 % (a)
After expense reimbursements and waived fees .............. 0.90 % (a)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees ............. (10.87)% (a)
After expense reimbursements and waived fees .............. 4.79 % (a)
Portfolio turnover rate ...................................... 0.00 %
(a) Annualized.
(b) Aggregate total return, not annualized.
See accompanying notes to financial statements
<PAGE>
QUAKER FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
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 fixed 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
or personal holding company 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 personal holding companies and to make
sufficient distributions of taxable income to relieve it from substantially
all federal income taxes.
Due to a concentration of shareholders at June 30, 1997 the Fund is subject
to the provisions of the Internal Revenue Code applicable to personal
holding companies.
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. Bond discounts and premiums are amortized using the straight-line
method on a daily basis, which does not materially vary from the
yield-to-maturity method, from the date acquired through scheduled
maturity. 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.
<PAGE>
QUAKER FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
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.
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 $1,153 ($0.03 per share) for the period ended June 30, 1997.
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, and 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 $7,872 ($.18 per
share) for the period ended June 30, 1997.
Certain organization expenses totaling $23,333 and $833 were paid to a company
controlled by the Administrator and to an officer of the Fund, respectively, for
the period ended June 30, 1997.
<PAGE>
QUAKER FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
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 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 $384 and has reimbursed expenses totaling $30,723 for the
period ended June 30, 1997.
NOTE 4 - DEFERRED ORGANIZATION EXPENSES
Expenses totaling $33,324 incurred in connection with its organization and the
registration of its shares, which were originally paid by the Fund's Sponsor,
have been assumed by the Fund.
The organization expenses are being amortized using the straight-line method
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 $512,020 and $0, respectively, for the period ended June 30, 1997.
<PAGE>
Independent Auditor's Report
July 28, 1997
To the Shareholders and Board of Trustees
Quaker Fixed Income Fund
Rocky Mount, North Carolina
We have audited the statements of assets and liabilities, including the
schedules of investments, of the QUAKER FIXED INCOME FUND (one of the portfolios
constituting the Quaker Investment Trust series of funds) as of June 30, 1997,
and the related statements of operations and of changes in net assets and the
selected per share data and ratios for the period from November 25, 1996
(commencement of operations) to June 30, 1997. These financial statements and
per share data and ratios are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
per share data and ratios based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and per share data and ratios
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of June 30, 1997, by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and selected per share data and ratios
referred to above present fairly, in all material respects, the financial
position of the QUAKER FIXED INCOME FUND (one of the portfolios constituting the
Quaker Investment Trust series of funds) as of June 30, 1997, and the results of
its operations and changes in its net assets and the selected per share data and
ratios for the period from November 25, 1996 (commencement of operations) to
June 30, 1997 in conformity with generally accepted accounting principles.
/s/ Goldenberg Rosenthal Friedlander, LLP
Jenkintown, Pennsylvania
