As filed with the Securities and Exchange Commission on October 28, 1998.
Securities Act File number 33-38074.
Investment Company Act number 811-6260.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Amendment No. 12
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [X]
Post Effective Amendment No. 14
QUAKER INVESTMENT TRUST
(formerly Branch Cabell Investment Trust)
1288 Valley Forge Road, Suite 76
Post Office Box 987
Valley Forge, PA 19482
800-355-3553
AGENT FOR SERVICE
Terence P. Smith
555 North Lane, Suite 6160
Conshohocken, PA 19428
It is proposed that this filing will become effective:
[ ] Immediately upon filing pursuant to Rule 485(b), or
[ ] 60 days after filing pursuant to Rule 485(a)(1), or
[ ] 75 days after filing pursuant to Rule 485(a)(2), or
[ ] on ____________, pursuant to Rule 485(b), or
[X] 0n November 2, 1998, pursuant to Rule 485(a)(2)
<PAGE>
PART A
PROSPECTUS
Dated November 2, 1998
The Quaker Investment Trust
1288 Valley Forge Road
Post Office Box 987
Valley Forge, Pennsylvania 19482
The Quaker Investment Trust(TM) (the "Trust") is a diversified management
investment company currently consisting of five equity portfolios and one
fixed-income portfolio (each a "Fund", and collectively, the Funds"). The
investment objective of the QUAKER ENHANCED STOCK MARKET FUND, the QUAKER CORE
EQUITY FUND, the QUAKER AGGRESSIVE GROWTH FUND, the QUAKER MID-CAP VALUE FUND,
and the QUAKER SMALL-CAP VALUE FUND is to provide long-term capital growth by
investing primarily in a diversified portfolio of equity securities of domestic
U.S. companies. The QUAKER FIXED INCOME FUND'S investment objective is to
generate current income, preserve capital, and maximize total returns through
active management of investment grade, fixed income securities. Each Fund
pursues its investment objective by utilizing a different portfolio management
policy and portfolio composition.
The minimum investment in each Fund, or in any combination of Funds, is $10,000.
The minimum subsequent investment is $250. The Funds are all No-Load Funds. This
means that 100% of your initial investment is invested in shares of whichever
Fund you choose.
This Prospectus concisely sets forth the information you should know before you
invest. Please read this Prospectus and keep it for future reference. A
Statement of Additional Information (the "SAI") regarding the Trust, dated
November 1, 1998, has been filed with the Securities and Exchange Commission
("SEC") and is incorporated by reference into this Prospectus. You can get a
copy of the SAI at no charge by writing or calling the Trust at the address or
telephone number listed above. The SEC maintains a web site (www.sec.gov) that
contains the Statement of Additional Information and other information regarding
the Trust and other registrants who file electronically.
THE FUNDS DESCRIBED IN THIS PROSPECTUS SHALL NOT BE OFFERED IN ANY STATE IN
WHICH SUCH 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.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUMMARY.................................................
FEE TABLE..........................................................
FINANCIAL HIGHLIGHTS...............................................
INVESTMENT OBJECTIVE AND POLICIES..................................
RISK FACTORS.......................................................
INVESTMENT LIMITATIONS.............................................
FEDERAL INCOME TAXES...............................................
DIVIDENDS AND DISTRIBUTIONS........................................
HOW SHARES ARE VALUED..............................................
HOW SHARES MAY BE PURCHASED........................................
HOW SHARES MAY BE REDEEMED.........................................
MANAGEMENT OF THE FUND.............................................
OTHER INFORMATION..................................................
PROSPECTUS SUMMARY
Funds Offered by this Prospectus. The Funds offered by this Prospectus are the
QUAKER ENHANCED STOCK MARKET FUND, the QUAKER CORE EQUITY FUND, the QUAKER
AGGRESSIVE GROWTH FUND, the QUAKER MID-CAP VALUE FUND, the QUAKER SMALL-CAP
VALUE FUND (the "Equity Funds"), and the QUAKER FIXED INCOME FUND (the "Fixed
Income Fund"). The Funds are no load, diversified series of the Quaker
Investment Trust (the "Trust"), a registered open-end management investment
company organized as a Massachusetts business trust.
Offering Price. Shares in the Funds are offered at net asset value. There are no
sales or other transaction charges imposed on your purchase. This means that
100% of your money is invested in shares of your chosen Fund. The minimum
initial investment in the Funds is $10,000, which you may allocate in any way
you choose among some or all of the Funds. The minimum subsequent investment is
$250. See "How Shares May be Purchased."
Investment Objectives. The primary investment objective of each Equity Fund is
long-term capital growth. The investment objective of the Fixed Income Fund is
to generate current income, preserve capital, and maximize total returns through
active management of investment grade fixed income securities. Achievement of
any Fund's investment objective cannot, of course, be assured due to the risks
inherent in any investment. For more detailed information regarding the
investment objectives and policies of each Fund, please see "Investment
Objective and Policies."
1
<PAGE>
Risk Considerations. The Equity Funds will invest primarily in common stocks
traded on U.S. securities markets. However, each Equity Fund will utilize
specific portfolio management techniques unique to that Fund, resulting in both
potential rewards and special risk considerations. While the Fixed Income Fund
will invest primarily in "high quality" investment grade bonds, some of that
Fund's investments may include mortgage and asset-backed securities,
collateralized mortgage obligations, and other mortgage derivative products,
which involve certain risks. For a more complete discussion of the potential
risks of investing in the Funds, see "Risk Factors."
Managers. Each Fund is managed by a professional investment management firm,
subject to the supervision and control of the Trust's Board of Trustees. The
managers for the Funds are:
Quaker Enhanced Stock Market Fund Fiduciary Asset Management Co. ("FAM")
Quaker Fixed Income Fund Fiduciary Asset Management Co. ("FAM")
Quaker Core Equity Fund Geewax, Terker & Co. (`GTC")
Quaker Aggressive Growth Fund DG Capital Management, Inc. ("DGCM")
Quaker Mid-Cap Value Fund Compu-Val Investments, Inc. ("CVI")
Quaker Small-Cap Value Fund Aronson + Partners ("Aronson")
See "Management of the Funds."
Dividends. Capital gains, if any, are generally paid at least once each year by
each Fund. Income dividends, if any, are generally paid at least annually by the
Equity Funds. The Fixed Income Fund normally will distribute income dividends
monthly. Your dividends and capital gains distributions are automatically
reinvested in additional shares of your Fund at net asset value unless you elect
to receive cash. See "Dividends and Distributions."
Distributor. Declaration Distributors, Inc. ("DDI") serves as distributor of
shares of the Funds.
Distribution Plan. The Funds have adopted Plans of Distribution (the "Plans")
pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the "Act").
Expenditures by a Fund under its Plan may not exceed 0.25% of average net assets
annually, but will not be paid directly by the Funds. Instead, they will be
funded entirely through investment advisory fees payable to a Fund's investment
advisor and. See "How Shares May Be Purchased" and "Distribution Plan."
Sponsor and Shareholder Servicing. Shareholder servicing activities will be
performed by Quaker Funds, Inc. (the "Fund Sponsor") for a fee in an amount not
to exceed 0.25% of average net assets annually. The shareholder service fee for
the Quaker Enhanced Stock Market Fund and the Fixed Income Fund will not exceed
0.20% and 0.15% of average net assets, respectively. See "Management of the
Funds-Sponsor of the Funds."
Redemption of Shares. There is no charge for redemptions, and you may redeem
your shares at any time. You may redeem shares by telephone upon submission of
appropriate authorization. See "How Shares May Be Redeemed."
Money Market Fund. The Custodian and Distributor of the Funds have agreed to
make available the Evergreen Money Market Fund, a money market fund not
affiliated with the Trust, for automatic transfer of redemption proceeds and/or
dividends paid on your account with the Funds. You can get more information and
a prospectus for the Evergreen Money Market Fund by calling the Trust at
800-220-8888.
2
<PAGE>
FEE TABLE
Shareholder Transaction Expenses:
- ---------------------------------
The Funds are all No-Load Funds. There are no sales loads, deferred sales loads
or other transaction charges imposed on purchases or reinvested dividends. This
means that 100% of your initial investment is invested in shares of the Fund.*
* The Funds in their discretion may choose to pass through to redeeming
shareholders any charges imposed by the Custodian for wiring redemption
proceeds. The Custodian currently charges the Funds $7.00 per transaction for
wiring redemption proceeds.
Annual Fund Operating Expenses: (as a percentage of net assets)
- -------------------------------
The following table sets forth the regular operating expenses that were paid out
of the Funds' average daily assets for the year ending June 30, 1998. These fees
are used to pay for services such as the investment management of the Fund,
maintaining shareholder records and furnishing shareholder statements.
Annual Fund Operating Expenses
After Fee Waivers and Expense Reimbursements 1,2,3
(as a percentage of average net assets)
<TABLE>
<CAPTION>
Enhanced Core Equity
Stock Aggressive Growth Mid-Cap Fixed
Market & Small-Cap Value Value Income
<S> <C> <C> <C> <C>
Investment advisory fees 0.00% 0.00% 0.23% 0.00%
Rule 12b-1 Fees 0.00% 0.00% 0.00% 0.00%
Shareholder servicing fees 0.00% 0.00% 0.00% 0.00%
Other expenses 1.00% 1.35% 1.12% 0.90%
----- ----- ----- -----
Total operating expenses 1.00% 1.35% 1.35% 0.90%
</TABLE>
Example of Shareholder Expenses Over Time.
- ------------------------------------------
Based on the fee schedule set forth above, you would pay the following expenses
on a $1,000 investment, assuming (1) a 5% annual rate of return and (2)
redemption at the end of each time period;
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
-------- --------- --------- ----------
<S> <C> <C> <C> <C>
Core Equity Fund $14 $43 $74 $162
Aggressive Growth Fund $14 $43 $74 $162
Mid-Cap Value Fund $14 $43 $74 $162
Small-Cap Value Fund @ 0.90% $15 $47 $82 $179
Enhanced Stock Market Fund $10 $32 $55 $122
Fixed Income Fund $ 9 $29 $50 $111
</TABLE>
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE
SHOWN.
1. All investment advisory fees were waived for the fiscal year ended June
30,1998 with the exception of the Quaker Mid-Cap Value Fund. Net of fee waivers,
the advisory fees for the Mid-Cap Value Fund totaled $16,418 for the fiscal year
ended June 30, 1998. Absent such fee waivers, the percentages for "Investment
advisory fees" for the fiscal year ended June 30, 1998, would have been 0.75%
for the Core Equity, Aggressive Growth, Mid-Cap Value and Small-Cap Value, 0.50%
for the Enhanced Stock Market Fund,
3
<PAGE>
and 0.45% for the Fixed Income Fund. Up to 25% of the investment advisory fee
for each fund may be paid for distribution activities relating to the Funds.
Each Fund has adopted a Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "1940 Act"), which provides that
a Fund may pay up to 0.25% of its average net assets annually for certain
distribution expenses which have been properly submitted to the fund for
reimbursement. All amounts paid under the plan for distribution activities will
be are funded entirely through A reduction in investment advisory fees payable
to the Funds' investment advisers and will not be paid directly by the Funds.
Further, any amounts paid to an adviser pursuant to a Plan may not exceed 0.25%
of a particular Fund's net assets in any year in which the Plan is in effect.
For the fiscal year ending June 30, 1998, no 12b-1 disbursements were paid
pursuant to any Plan. See "How Shares May Be Purchased - Distribution Plan."
2. Each Fund has adopted a Shareholder Servicing Agreement, which provides that
the Fund will pay a shareholder servicing fee to the Funds' Sponsor, Quaker
Funds, Inc., in the amount of 0.25% of the average daily net assets of the Fund,
except the shareholder servicing fee will be limited to 0.20% for the Enhanced
Stock Market Fund and 0.15% for the Fixed Income Fund. See "Management of the
Funds-Sponsor of the Funds." All shareholder servicing fees were waived for the
fiscal year ended June 30, 1998. Absent such fee waivers, the percentages for
"Shareholder servicing fees" for the fiscal year ended June 30, 1998, would have
been 0.25% for the Core Equity, Aggressive Growth, Small-Cap Value, and Mid-Cap
Value Funds, 0.20% for the Enhanced Stock Market Fund, and 0.15% for the Fixed
Income Fund.
3. The "Total operating expenses" shown above are based upon actual operating
expenses incurred by each Fund for the fiscal year ended June 30, 1998 after fee
waivers and expense reimbursements. Absent such waivers and reimbursements,
"Total operating expenses" for the fiscal year ended June 30, 1998, would have
been 3.48% for the Core Equity Fund, 8.09% for the Aggressive Growth Fund, 4.20%
for the Small-Cap Value Fund, 1.97% for the Mid-Cap Value Fund, 5.58% for the
Enhanced Stock Market Fund, and 2.53% for the Fixed Income Fund. The Advisors
and the Fund Sponsor have agreed to reduce or waive their fees in order to limit
"Total operating expenses" (exclusive of interest, taxes, brokerage fees and
commissions, and extraordinary expenses) to expense ratios noted in each column.
There can be no assurance that the Advisors' and Fund Sponsor's fee waivers, or
the Fund Sponsor's voluntary expense reimbursements, will continue in the
future.
See "How Shares May Be Purchased" and "Management of the Funds" below for more
information about the fees and costs of operating the Funds. The assumed 5%
annual return in the example is required by the Securities and Exchange
Commission. The hypothetical rate of return is not intended to be representative
of past or future performance of the Funds; the actual rate of return for the
Funds may be greater or less than 5%.
FINANCIAL HIGHLIGHTS
The financial data included in the table below for the fiscal year ended June
30, 1998 has been audited by Goldenberg Rosenthal Friedlander, LLP, independent
auditors, whose reports covering such period are included in the Statement of
Additional Information. The information in the table below should be read in
conjunction with each Fund's latest audited financial statements and notes
thereto, which are also included in the Statement of Additional Information.
Further information about the performance of the Funds is contained in the
Annual Report of the Funds, a copy of which may be obtained at no charge by
calling the Funds.
QUAKER FAMILY OF FUNDS
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
CORE AGGRESSIVE ENHANCED
EQUITY GROWTH STOCK
FUND FUND MARKET FUND
---------- ---------- ----------
YEAR YEAR YEAR
ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30,
1998 1998 1998
---------- ---------- ----------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.99 $ 11.16 $ 11.99
---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (0.05) 0.00 (0.05)
Net realized and unrealized gain (loss) on
investments 2.02 2.70 2.02
---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 1.97 2.70 1.97
---------- ---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (0.01) 0.00 (0.01)
Net realized gain from investment transactions (0.01) (1.38) (0.01)
Distribution in excess of net realized gain (0.67) (0.46) (0.67)
---------- ---------- ----------
TOTAL DISTRIBUTIONS (0.69) (1.84) (0.69)
---------- ---------- ----------
NET ASSET VALUE - END OF PERIOD $ 13.27 $ 12.02 $ 13.27
========== ========== ==========
TOTAL RETURN (B) 17.30% 26.68% 17.30%
RATIOS/SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $ 61,938 $1,613,803 $ 61,938
RATIO OF EXPENSES TO AVERAGE NET ASSETS
Before expense reimbursements and waived fees 1.25% 8.07%(a) 1.25%
After expense reimbursements and waived fees 0.69% 1.35%(a) 0.69%
RATIO OF NET INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS
Before expense reimbursements and waived fees 1.25% 6.68%(a) 1.25%
After expense reimbursements and waived fees 0.69% (0.04%)(a) 0.69%
PORTFOLIO TURNOVER RATE 46.58% 887.13% 46.58%
AVERAGE BROKER COMMISSIONS PER SHARE $ 0.0304 $ 0.0304
</TABLE>
(a) Annualized.
(b) Aggregate total return, not annualized.
(c) Represents total commissions paid on portfolio securities divided by total
shares purchased or sold on which commissions were charged.
4
<PAGE>
QUAKER FAMILY OF FUNDS
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
SMALL CAP MID-CAP VALUE FIXED INCOME
EQUITY FUND FUND FUND
---------- ---------- ----------
YEAR YEAR YEAR
ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30,
1998 1998 1998
---------- ---------- ----------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.99 $ 11.99 $ 11.99
---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (0.05) (0.05) (0.05)
Net realized and unrealized gain (loss) on
investments 2.02 2.02 2.02
---------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 1.97 1.97 1.97
---------- ---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (0.01) (0.01) (0.01)
Net realized capital gain (0.67) (0.67) (0.67)
---------- ---------- ----------
TOTAL DISTRIBUTIONS (0.68) (0.68) (0.68)
---------- ---------- ----------
NET ASSET VALUE - END OF PERIOD $ 13.28 $ 13.28 $ 13.28
========== ========== ==========
TOTAL RETURN (B) 17.30% 17.30% 17.30%
RATIOS/SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $ 61,938 $ 61,938 $ 61,938
RATIO OF EXPENSES TO AVERAGE NET ASSETS
Before expense reimbursements and waived fees 1.25% 1.25% 1.25%
After expense reimbursements and waived fees 0.69% 0.69% 0.69%
RATIO OF NET INVESTMENT INCOME (LOSS) TO AVERAGE NET ASSETS
Before expense reimbursements and waived fees 1.25% 1.25% 1.25%
After expense reimbursements and waived fees 0.69% 0.69% 0.69%
PORTFOLIO TURNOVER RATE 46.58% 46.58% 46.58%
AVERAGE COMMISSION RATE PAID $ 0.0304 $ 0.0304 $ 0.0304
</TABLE>
5
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
Quaker Enhanced Stock Market Fund
Quaker Core Equity Fund
Quaker Aggressive Growth Fund
Quaker Mid-Cap Value Fund
Quaker Small-Cap Value Fund
The investment objective of the Quaker Enhanced Stock Market Fund ("Enhanced
Fund"), the Quaker Core Equity Fund ("Core Equity"), the Quaker Aggressive
Growth Fund ("Aggressive Growth"), the Quaker Mid-Cap Value Fund ("Mid-Cap"),
and the Quaker Small-Cap Value Fund ("Small-Cap") is long-term capital growth.
Current income is not a significant investment consideration, and any such
income realized will be considered incidental to the Fund's investment
objective. The Funds seek to achieve their investment objective by investing
primarily in equity securities of domestic U.S. companies, and by utilizing each
Fund's unique investment policies and techniques described below. The Funds'
investment objective and fundamental investment limitations may not be altered
without the prior approval of a majority of the Funds' shareholders. There is no
guarantee that any Equity Fund will meet its investment objective.
THE ENHANCED FUND invests in a portfolio of securities whose diversification,
market capitalization and volatility risk characteristics approximate those of
the Standard & Poors 500 Index (the "S&P 500"), while also seeking to identify
industry sectors and individual securities which offer the opportunity to exceed
the total return of the S&P 500. The Enhanced Fund may contain up to 300 issues,
and may not contain a representation of all sectors comprising the S&P 500. In
contrast to other funds whose stated investment objective is to passively track
the performance of S&P 500 by maintaining an investment portfolio substantially
identical to the S&P 500, the Enhanced Fund is actively managed with constant
attention to proprietary models designed to track the S&P 500 in risk and
volatility, yet exceed the S&P 500 in potential price appreciation.
Construction of the Enhanced Fund is highly quantitative. The Adviser to the
Enhanced Fund, FAM, utilizes a proprietary statistical model of historical and
current data to achieve the Enhanced Fund's objective. Using these models, FAM
develops for the Fund a diverse portfolio of approximately 200 to 300 equities
selected from approximately 1200 domestic equity securities with market
capitalizations similar to the market capitalization of the companies in the S&P
500.
6
<PAGE>
CORE EQUITY invests primarily (at least 65% of the portfolio) in large
capitaliztion equity securities. Companies with strong fundamentals, increasing
sales and earnings, a conservative balance sheet and reasonable expectations of
continuing earnings increases will be included in the portfolio.
GTC, investment advisor to Core Equity, also seeks to reduce capital gains taxes
by controlling portfolio turnover. Core Equity's investment portfolio may
contain from 60 to 200 stocks, and not all industries will be represented in the
portfolio. On average, Core Equity's investment portfolio will have a higher
price/earnings ratio and lower yield than the S&P 500. Up to 25% of the
investment portfolio may be invested in securities that do not satisfy some or
all of the above criteria.
AGGRESSIVE GROWTH invests the Fund's portfolio in a limited number of equity
securities of companies which DGCM, investment advisor to Aggressive Growth,
believes show a high probability of superior prospects for growth.
In selecting portfolio companies for Aggressive Growth, DGCM seeks a balance
between "special situation" investments (spin-offs, corporate restructurings and
tracking stocks) and large to mid-capitalization equities with high or
accelerating profitability, an element of franchise value, and reasonable
valuations. In purchasing "special situation" securities, DGCM looks for two
primary characteristics: 1) superior risk/reward due to inefficient pricing of
the security due to lack of research coverage; and 2) a measure of downside risk
protection due to the company's low correlation to the capital markets.
DGCM utilizes a broad spectrum of qualitative and quantitative investment tools
to select portfolio companies. Aggressive Growth also utilizes a conservative
investment strategy of short selling securities to reduce volatility and enhance
potential investment gain. Aggressive Growth limits short selling to 25% of its
net assets. In addition, DGCM employs tight trading stops on securities sold
short to reduce trading risk. Short selling involves the sale of securities not
presently owned by the Fund. If the Fund does not purchase that security on the
same day as the sale, the security must be borrowed. At the time a short sale is
effected, the Fund incurs an obligation to replace the security borrowed at
whatever its price may be at the time the Fund purchases the security for
delivery to the lender. Any gain or loss on the transaction is taxable as a
short term capital gain or loss.
Since short selling involves special risks, and the Fund could at any time,
suffer both a loss on the purchase or retention of one security, if that
security should decline in value, and a loss on a short sale of another
security, if the security sold short should increase in value. When a short
position is closed out, it may result in a short term capital gain or loss for
federal income tax purposes. To the extent that in a generally rising market the
Fund maintains short positions in securities rising with the market, the net
asset value of the Fund would be expected to increase to a lesser extent than
the net asset value of a fund that does not engage in short sales.
7
<PAGE>
No short sale will be effected if, at the time of making the short sale, the
aggregate market value of all securities sold short will exceed 25% of the value
of Aggressive Growth's net assets. Short sales by the Fund are further limited
to 2% of the securities of any class of the issuer. To secure the Fund's
obligation to replace any borrowed security, the Fund will place in a segregated
account an amount of cash or U.S. Government Securities equal to the difference
between the market value of the securities sold short at the time of the short
sale and any cash or U.S. Government Securities originally deposited with the
broker in connection with the short sale (excluding the proceeds of the short
sale). The Fund will thereafter maintain daily the segregated amount at such a
level that the amount deposited in the account plus the amount originally
deposited with the broker as collateral will equal the greater of the current
market value of the securities sold short, or the market value of the securities
at the time they were sold short. Aggressive Growth may only engage in short
sale transactions in securities listed on one or more national securities
exchanges or on the NASDAQ.
MID-CAP invests in U.S. equity securities of companies which CVI, investment
advisor to the Fund, believes show a high probability of superior prospects for
above average total return. The universe of securities eligible for inclusion in
Mid-Cap are those equity securities with market capitalizations similar to the
market capitalizations of the companies 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 Mid-Cap's total assets will be invested
in equity securities of mid capitalization companies. For these purposes "mid
capitalization" companies are 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 below.
Under normal conditions CVI anticipates that 65% to 80% of the Fund's assets
will be invested in mid capitalization companies.
In selecting portfolio companies, CVI screens for asset rich and earnings rich
companies, selling at relatively low market valuations, with attractive growth
and momentum characteristics. CVI selects the companies for inclusion in the
portfolio using a cash flow based, dividend discount model. CVI selects 50-100
securities which it believes to be undervalued relative to comparable alternate
investments, then focuses on the fundamentals of these companies to choose which
companies will ultimately be included in the Fund.
SMALL-CAP invests in a portfolio of securities which includes a broadly
diversified number of U.S. equity securities which Aronson, investment advisor
to Small-Cap, believes show a high probability of superior prospects for above
average total return. The universe of securities eligible for inclusion in
Small-Cap consists of those equity securities with market capitalizations
similar to the market capitalizations of companies included in the Russell 2500
Index, with an ultimate selection of 140-160 stocks for investment by Small-Cap.
Under normal conditions, at least 65% of Small-Cap's total assets will be
invested in equity securities of small capitalization companies. "Small
capitalization" companies are those companies with market capitalizations of up
to $1.5 billion. The remaining portion of Small-Cap's total assets may be
invested in equity securities of medium and large capitalization companies, and
other investments described below.
In selecting portfolio companies, Aronson focuses on asset rich and earnings
rich companies selling at relatively low market valuations, with attractive
growth and momentum characteristics. Small-Cap intends to remain fully invested
in these securities at all times, subject to a minimum cash balance maintained
for operational purposes.
Aronson screens a broad universe of U.S. securities to identify a subset of
issues with ample trading volume, a number of years of operating history, and
capitalizations no larger than the companies in the Russell 2500 Index. The
resulting stocks are divided into 11 peer groups or sectors. Within each group,
Aronson identifies the most attractive stocks by considering a number of balance
sheet and income statement criteria. A diversified portfolio is created with
sector weights aligned to the Russell 2500 Index and individual security
weightings determined to balance industry and other risk characteristics.
8
<PAGE>
Investment Securities Common to all Equity Funds
Equity Securities. The Equity Funds may invest in common stock, convertible
preferred stock, straight preferred stock, and investment grade convertible
bonds. Each Equity Fund may also invest up to 5% of its net assets in warrants
or rights to acquire equity securities (other than those acquired in units or
attached to other securities). Stocks held in the portfolios of the Equity Funds
will generally be traded on either the New York Stock Exchange, American Stock
Exchange or the NASDAQ over-the-counter market. Under normal conditions, at
least 90% of the Equity Funds' total assets will be invested in equity
securities. Warrants and rights are excluded for purposes of this calculation.
Foreign Securities. Because of the inherent risk of foreign securities over
domestic issues, the Equity Funds will only purchase foreign securities 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. . See
"Investment Limitations."
Short-Term Investments. The Equity Funds also will normally 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. As a temporary defensive
measure, the Equity Funds may invest up to 100% of their respective total assets
in investment grade bonds, U.S. Government Securities, repurchase agreements, or
money market instruments. When the Equity Funds invest their assets in such
securities as a temporary defensive measure, they will not be not pursuing their
stated investment objective. See, "Quaker Fixed Income Fund" below.
All of the Equity Funds may make short sales against the box, i.e. short sales
made when a particular Fund owns securities identical those sold short.
Options. Each Equity Fund may invest in options on equity securities and
securities indices, and options on futures contacts. The primary risks
associated with these investments are; (1) the risk that a position cannot be
easily closed out due to the lack of a liquid secondary market, and (2) the risk
that changes in the value of the investment will not correlate to changes in the
value of the underlying security. Further. over-the-counter options can be less
liquid than exchange-traded options. Accordingly, an Equity Fund will treat
over-the-counter options as illiquid securities. Investing in options involves
specialized skills and techniques different from those associated with ordinary
portfolio transactions. Each Equity Fund may invest not more than 10% of its
total assets in options transactions. Options may be purchased for hedging
purposes, or to provide a viable substitute for direct investment in, and/or
short sales of, specific equity securities. The Equity Funds will write (sell)
stock or stock index options only for hedging purposes or to close out positions
in stock or stock index options that an Equity Fund has purchased. The Equity
Funds may only write (sell) "covered" options.
Futures Contracts and Related Options. To hedge against changes in securities
prices or interest rates, each Equity Fund may purchase and sell various kinds
of futures contracts, and purchase and write call and put options on such
futures contracts. Permissible futures contracts investments are limited to
futures on various equity securities and other financial instruments and
indices. An Equity Fund will engage in futures and related options transactions
for bona-fide hedging or other non-hedging purposes as permitted by regulations
of the Commodity Futures Trading Commission.
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An Equity Fund may only 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 Equity 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") does not exceed 5% of the market value of the Fund's total assets.
Otherwise, each Equity Fund may invest up to 10% of its total assets in initial
margins and premiums on futures and related options. Additional information on
permitted futures transactions of the Equity Funds and their associated risks is
contained in the Statement of Additional Information.
QUAKER FIXED INCOME FUND
The investment objective of the Quaker Fixed Income Fund ("Fixed Income Fund")
is to generate current income, preserve capital and maximize total returns
through a portfolio of investment grade fixed income securities. There is no
guarantee that the Fixed Income Fund will meet its investment objective. Fixed
Income's investment objective and fundamental investment limitations may not be
altered without the prior approval of a majority of the Fund's shareholders.
Anyone may invest in Fixed Income, but the Fund is designed for tax-exempt
institutional investors such as pension and profit-sharing plans, endowments,
foundations, employee benefit trusts, and certain individuals. The Fund invests
without regard to federal tax considerations other than those that apply to
Fixed Income's status as a tax-exempt entity.
FAM, investment advisor to Fixed Income, seeks to achieve the Fund's investment
objective by normally establishing a duration target for the Fund's portfolio
similar to the duration of the popular bond market indices (e.g. Salomon
Brother's Broad Investment Grade Index). However, FAM may lengthen the duration
of the portfolio when yields appear abnormally high, and shorten duration when
yields appear abnormally low. FAM also looks for value in the shape of the yield
curve. FAM also examines the relative valuation of U.S. Treasury securities
versus mortgage backed securities, asset backed securities, corporate bonds and
U.S. agency securities.
Duration. Duration is an important concept in FAM's fixed income management
philosophy. "Duration" is not the same thing as "maturity". Whereas maturity
takes into account only the final principal payments to determine the price risk
of a particular fixed income security, duration weights all potential cash flows
- - principal, interest and reinvestment income - on an expected present value
basis, to determine the `effective life' of the security. Once FAM has
determined the optimal duration target for the Fund, and determined which of the
Fund's permissible investments has the highest relative valuations, FAM
constructs and closely monitors a portfolio of the securities described below to
achieve its anticipated performance.
U.S. Government Securities. Fixed Income may invest in U.S. Government
Securities, such as U.S. Treasury notes, U.S. Treasury bonds, and U.S. Treasury
bills; securities guaranteed by the U.S. Government such as Government National
Mortgage Association ("GNMA"); and securities issued by U.S. Government agencies
and instrumentalities. Securities of some U.S. Government sponsored entities are
supported by the full faith and credit of the U.S. Government (e.g. GNMA), some
are supported by the right of the issuer to borrow from the U.S. Government
(e.g. FNMA, FHLMC), and some are supported only by the credit of the issuer
itself (e.g. SLMA, FFCB). You should be aware that the U.S. Government is not
obligated to support U.S. Government agencies or instrumentalities in the
future, other than as set forth above.
Mortgage Pass-Through Certificates. Are securities representing undivided
ownership interests in pools of mortgages. Such certificates are guaranteed as
to payment of principal by the issuer. For securities issued by GNMA, the
payment of principal is also backed by the full faith and credit of the U.S.
Government. Mortgage pass-through certificates issued by FNMA or FHLMC are
guaranteed as to payment of principal by the credit of the issuing U.S.
Government agency. Securities issued by other non-governmental entities (such as
commercial banks or mortgage bankers) may offer credit enhancement such as
guarantees, insurance, or letters of credit. Mortgage pass-through certificates
are subject to more rapid prepayment than their stated maturity date would
indicate; their rate of prepayment tends to accelerate during periods of
declining interest rates or increased property transfers and, as a result, the
proceeds from such prepayments may be reinvested in instruments which have lower
yields.
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Collateralized Mortgage Obligations. Fixed Income may invest in collateralized
mortgage obligations ("CMOs"), which are generally securities backed by mortgage
pass-through certificates or whole mortgage loans. CMOs are usually structured
into classes of varying maturities and principal payment priorities. CMOs pay
interest and principal (including prepayments) monthly, quarterly or
semi-annually. FAM will invest in CMOs when it determines that such securities
fit the investment objective and policies of the Fund.
Asset-Backed Securities. In addition to CMOs, the Fund may also invest in other
asset-backed securities, such as securities backed by automobile loans, credit
card receivables, marine loans, recreational vehicle loans and manufactured
housing loans. Typically, asset-backed securities represent undivided fractional
interests in a trust whose assets consist of a pool of loans and security
interests in the collateral securing the loans. Payments of principal and
interest on asset-backed securities are passed through monthly to certificate
holders and are usually guaranteed up to a certain amount and time period by a
letter of credit issued by a financial institution. You should be aware that if
the letter of credit is exhausted and the full amounts due on underlying loans
are not received because of unanticipated costs, depreciation, damage or loss of
the collateral securing the contracts, or other factors, certificate holders may
experience delays in payment or losses on asset-backed securities. In some
cases, asset-backed securities are divided into senior and subordinated classes
so as to enhance the quality of the senior class. Underlying loans are subject
to prepayment, which may reduce the overall return to certificate holders. Fixed
Income will invest only in asset-backed securities rated A or better by Moody's,
S&P, Fitch, or D&P, or if not rated, of equivalent quality as determined by FAM.
Floating Rate Securities. The Fund may invest in variable or floating rate
securities that adjust the interest rate paid at periodic intervals based on an
interest rate index. Typically, floating rate securities use as their benchmark
an index such as the 1, 3 or 6 month LIBOR, 3, 6 or 12 month Treasury bills, or
the Federal Funds rate. Resets of the rates can occur at predetermined intervals
or whenever changes in the benchmark index occur.
Corporate Bonds. Fixed Income may invest in notes and bonds issued by U.S.
Corporations and foreign corporations rated by a U.S. rating service and traded
on a U.S. exchange. All corporate securities will be of investment grade quality
as determined by Moody's, S&P, Fitch, and D&P, or if no rating exists, of
equivalent quality as determined by FAM. See, "Investment Limitations -
Investment Grade Securities". FAM will monitor continuously the ratings of
securities held by the Fund and the creditworthiness of their issuers.
All securities purchased for the Fund will be of investment grade quality as
determined by Moody's Investors Service, Inc. ("Moodys"), Standard & Poor's
Ratings Group ("S&P"), Fitch Investors Service, Inc. ("Fitch"), or Duff & Phelps
("D&P"), or if no rating exists, of equivalent quality as determined by FAM,
under the Supervision of the Board of Trustees. For a more complete description
of the various bond ratings for Moody's, S&P, Fitch and D&P, see Appendix A to
the Statement of Additional Information.
Forward Commitments and When-Issued Securities. Fixed Income may purchase
when-issued securities and commit to purchase securities for a fixed price at a
future date beyond customary settlement time. The Fund is required to hold and
maintain in a segregated account until settlement date, cash, U.S. Government
Securities or high-grade debt obligations in an amount sufficient to meet the
purchase price. Purchasing securities on a when-issued or forward commitment
basis involves a risk of loss if the value of the security to be purchased
declines prior to the settlement date, which risk is in addition to the risk of
decline in value of the Fund's other assets. In addition, no income accrues to
the purchaser of when-issued securities during the period prior to issuance.
Although the Fixed Income Fund would generally purchase securities on a
when-issued or forward commitment basis with the intention of acquiring
securities for its portfolio, the Fund may dispose of a when-issued security or
forward commitment prior to settlement if FAM deems it appropriate to do so. The
Fund may realize short-term gains or losses upon such sales.
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Permissible Investments Common to all Quaker Funds
Money Market Instruments. Money market instruments mature in thirteen months or
less from the date of purchase and include U.S. Government Securities, corporate
debt securities, bankers acceptances and certificates of deposit of domestic
branches of U.S. banks, and commercial paper 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 Adviser's opinion.
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 a Fund. An Adviser may,
when it believes that unusually volatile or unstable economic and market
conditions exists, depart from a Fund's normal investment approach and invest up
to 100% of the net assets of a Fund in these instruments for temporary and
defensive purposes.
U.S. Government Securities. Each Fund may invest a portion of its portfolio in
U.S. Government Securities, as defined under "Quaker Fixed Income Fund-U.S.
Government Securities" above.
Repurchase Agreements. The Funds may acquire U.S. Government Securities or
corporate debt securities subject to repurchase agreements. A repurchase
agreement transaction occurs when a Fund acquires a security and simultaneously
resells it to the vendor (normally a member bank of the Federal Reserve or a
registered Government Securities dealer) for delivery on an agreed upon future
date. The repurchase price exceeds the purchase price by an amount which
reflects an agreed upon market interest rate earned by the Fund effective for
the period of time during which the repurchase agreement is in effect. Delivery
pursuant to the resale typically will occur within one to seven days of the
purchase. A Fund will not enter into any repurchase agreement which will cause
more than 10% of its net assets to be invested seven days. In the event of the
bankruptcy of the other party to a repurchase agreement, a Fund could experience
delays in recovering its cash, or a loss in value due to a decline in the value
of the securities held.
Investment Companies. In order to achieve its investment objective, a Fund may
invest up to 10% of the value of its total assets in securities of other
investment companies. Each Fund may invest in any type of investment company
consistent with the Fund's investment objective and policies. A Fund will not
acquire securities of any one investment company if, immediately thereafter, the
Fund would own more than 3% of such company's total outstanding voting
securities, securities issued by such company would have an aggregate value in
excess of 5% of the Fund's total assets, or securities issued by such company
and securities held by the Fund issued by other investment companies would have
an aggregate value in excess of 10% of the Fund's total assets. To the extent a
Fund invests in other investment companies, the shareholders of that Fund would
indirectly pay a portion of the operating costs of the underlying investment
companies.
Real Estate Securities. The Funds may invest in readily marketable interests in
real estate investment trusts ("REITs"). 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. REITs are generally publicly traded on the
national stock exchanges and in the over-the-counter market and have varying
degrees of liquidity. Although the Funds are not limited in the amount of these
types of securities they may acquire, it is not presently expected that within
the next 12 months a Fund will have in excess of 5% of its total assets in real
estate securities.
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You should be aware that 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
exemption from tax for distributed income under the Internal Revenue Code and
failing to maintain their 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 their securities.
Illiquid Investments. Each Fund may invest up to 10% of its net assets in
illiquid securities. Illiquid securities are those that may not be sold or
disposed of in the ordinary course of business within seven days at
approximately the price at which they are valued. Under the supervision of the
Board of Trustees, each Advisor determines the liquidity of its Fund's
investments. Included within the category of illiquid securities are 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.
RISK FACTORS
You may lose money by investing in the Funds. Your risk of loss is greater if
you invest for shorter periods. Special risk considerations for the Funds are
discussed at length in the Section entitled "Investment Objective and Policies"
A more complete discussion of certain of these securities and investment
techniques and their associated risks is also contained in the Statement of
Additional Information.
Fluctuations in Value. The Funds' net asset value will fluctuate with rises and
falls in the prices of the securities comprising each Fund's portfolio. Some
Funds will exhibit more price volatility than others. Your shares may be worth
more or less than you paid for them when you redeem them. Because there is risk
in any investment, there can be no assurance that any Fund will achieve its
investment objective.
Portfolio Turnover. The Funds sell portfolio securities without regard to the
length of time they have been held in order to take advantage of new investment
opportunities. The degree of portfolio activity affects the brokerage costs of
the Funds and other transaction costs related to the sale of securities and the
reinvestment in other securities. Portfolio turnover may also have capital gain
tax consequences. The portfolio turnover rate for each Fund is set forth under
"Financial Highlights" above.
INVESTMENT LIMITATIONS
Investment Grade Securities. Fixed Income limits its investment purchases to
high quality investment grade securities. The securities industry defines
investment grade securities as obligations which have the characteristics
described by S&P, Fitch, Moody's, D&P or other recognized rating services in
their four highest rating grades. For S&P, Fitch and D&P those ratings are AAA,
AA, A and BBB. For Moody's those ratings are Aaa, Aa, A and Baa. Although
considered to be of "investment grade" quality, securities rated BBB by S&P,
Fitch, and D&P or Baa by Moody's, while normally exhibiting adequate protection
parameters, have speculative characteristics. For a description of each rating
grade, see Appendix A to the Statement of Additional Information. Fixed Income
limits portfolio investments to those securities in the three highest ratings,
rated at least A by Moody's, S&P, Fitch or D&P, or if not rated, of equivalent
quality as determined by the Adviser. There may also be instances in which FAM
purchases bonds that are rated A by one rating agency and not rated or rated
lower than A by other rating agencies.
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Other Investment Limitations. The investment objective of each Fund is
fundamental, and may only be changed upon approval of a "majority" of that
Fund's outstanding shares, as defined in the Investment Company Act of 1940. For
a complete listing of the Funds' limitations, both fundamental and those which
may be changed by vote of the Board of Trustees, See "Investment Limitations" in
the Statement of Additional Information.
FEDERAL INCOME TAXES
Taxation of the Funds. The Internal Revenue Code of 1986, as amended (the
"Code"), treats each series in the Trust as a separate regulated investment
company. Each series of the Trust (each of the Funds) intends to qualify or
remain qualified as a regulated investment company under the Code by
distributing substantially all of its "net investment income" to shareholders
and meeting other requirements of the Code. Regulated investment companies 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. The Funds intend to declare or
distribute dividends during the calendar year in an amount sufficient to prevent
imposition of the 4% excise tax.
For the fiscal year ended June 30, 1998, each Fund was considered a "personal
holding company" under the Code since 50% of the value of each Fund's shares was
owned directly or indirectly by five or fewer individuals at certain times. As a
result, each Fund was unable to meet the requirements for taxation as a
regulated investment company and will be unable to meet such requirements as
long as it is classified as a personal holding company. As a personal holding
company, each Fund is subject to federal income taxes on undistributed personal
holding company income at the maximum individual income tax rate. For the fiscal
year ended June 30, 1998, however, no provision was made for federal income
taxes for any of the Funds, since substantially all taxable income was
distributed to shareholders. For the current fiscal year, each Fund anticipates
that either it will qualify as a regulated investment company under the Code or,
if still considered a personal holding company, distribute substantially all of
its taxable income for the current fiscal year to shareholders in order to avoid
individual income taxes.
Taxation of Shareholders. For federal income tax purposes, any dividends and
distributions from short-term capital gains that a shareholder receives in cash
from the Funds or which are re-invested in additional shares will be taxable as
ordinary income. If you are not required to pay a tax on income, you will not be
required to pay federal income taxes on the amounts distributed to you. A
dividend declared in October, November or December of a year and paid in January
of the following year will be considered to be paid on December 31 of the year
of declaration.
Distributions paid by the Funds from long-term capital gains, whether received
in cash or reinvested in additional shares, are taxable as long-term capital
gains, regardless of the length of time you have owned shares in the Funds.
Capital gain distributions are made when a Fund realizes net capital gains on
sales of portfolio securities during the year. Dividends and capital gain
distributions paid by the Funds shortly after shares have been purchased,
although in effect a return of investment, are subject to federal income
taxation.
The sale of shares of each Fund is a taxable event and may result in a capital
gain or loss. Capital gain or loss may be realized from an ordinary redemption
of shares or an exchange of shares between two mutual funds (or two series of
the Trust).
The Trust will inform you of the source of dividends and capital gains
distributions at the time you are paid and, promptly after the close of each
calendar year, will issue an information return to advise you of the federal tax
status of such distributions and dividends. Dividends and distributions may also
be subject to state and local taxes. You should consult your tax adviser
regarding specific questions as to federal, state or local taxes.
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Federal income tax law requires you to certify that the social security number
or taxpayer identification number provided to the Funds is correct and that you
are not subject to 31% withholding for previous under-reporting to the Internal
Revenue Service (the "IRS"). You will be asked to make the appropriate
certification on your application to purchase shares. If you have not complied
with the applicable statutory and IRS requirements, the Fund is generally
required by federal law to withhold and remit to the IRS 31% of reportable
payments (which may include dividends and redemption amounts).
DIVIDENDS AND DISTRIBUTIONS
Each Fund intends to distribute substantially all of its net investment income,
if any, in the form of dividends. Each Equity Fund will generally pay income
dividends, if any, at least annually. Each Fund will generally distribute net
realized capital gains, if any, at least annually. The Fixed Income Fund
generally intends to pay income dividends, if any, monthly.
Unless you elect to receive cash, dividends and capital gains will be
automatically reinvested in additional full and fractional shares of the
respective Fund at the net asset value per share next determined. Shareholders
wishing to receive their dividends or capital gains in cash may make their
request in writing to the Funds at555 North Lane, Suite 6160, P.O. Box 844,
Conshohocken, PA 19428-0844. That request must be received by the Funds prior to
the record date to be effective as to the next dividend. You will receive a
quarterly summary of your account, including information as to any reinvested
dividends. Tax consequences to of dividends and distributions are the same if
received in cash or in additional shares of the Funds.
HOW SHARES ARE VALUED
Net asset value of each Equity Fund is determined at the close of business,
currently 4:00 p.m., New York time, Monday through Friday, except on business
holidays when the New York Stock Exchange is closed. Net asset value of the
Fixed Income Fund is determined at 3:00 p.m., New York time, Monday through
Friday, except on business holidays when the New York Stock Exchange and/or the
Federal Reserve Banking System is closed. The net asset value of the shares of
each Fund for purposes of pricing sales and redemptions is equal to the total
market value of its investments 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 each Fund. Securities that are listed on an exchange and which are not
traded on the valuation date are valued at the mean of the bid and asked prices.
Unlisted securities for which market quotations are readily available are valued
at the latest quoted sales price, if available, at the time of valuation,
otherwise, at the latest quoted bid price. Temporary cash investments with
maturities of 60 days or less will be valued at amortized cost, which
approximates market value. Securities for which no current quotations are
readily available are valued at fair value as determined in good faith using
methods approved by the Board of Trustees of the Trust. Securities may be valued
on the basis of prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities.
Fixed income securities will ordinarily be traded on the over-the-counter
market. When market quotations are not readily available, fixed income
securities may be valued based on prices provided by a pricing service. The
prices provided by the pricing service are generally determined with
consideration given to institutional bid and last sale prices and take into
account securities prices, yields, maturities, call features, ratings,
institutional trading in similar groups of securities, and developments related
to specific securities. Such fixed income securities may also be priced based
upon a matrix system of pricing similar bonds and other fixed income securities.
Such matrix system may be based upon the considerations described above used by
other pricing services and information obtained by the pricing agent from the
Advisors and other pricing sources deemed relevant by the pricing agent.
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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 Funds at the address shown below for
purchases by mail. Assistance is also available through any broker-dealer
authorized to sell shares in the Funds. Payment for shares purchased may also be
made through your account at the broker-dealer processing your application and
order to purchase. Your investment will purchase shares at each Fund's net asset
value next determined after your order is received by the Fund in proper form as
indicated herein. Since the Funds are offered only on a no-load basis, a
broker-dealer may charge a transaction fee for settlement services.
The minimum initial investment is $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. The Funds may, in the Distributor's
sole discretion, accept certain accounts with less than the stated minimum
initial investment. You may invest in the following ways:
Purchases by Mail. Shares may be purchased initially by completing the
application accompanying this Prospectus and mailing it, together with a check
payable and addressed to the Quaker Family of Funds, 555 North Lane, Suite 6160,
P.O. Box 844, Conshohocken, PA 19428-0844. Subsequent investments in an existing
account in any Fund may be made at any time in minimum amounts of $250 by
sending a check 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, each 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
a 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 Enhanced Stock Market Fund
Acct #2000000862084
For the Quaker Core Equity Fund
Acct #2000000862039
For the Quaker Aggressive Growth Fund
Acct #2000000862071
For the Quaker Small-Cap Value Fund
Acct #20000001067875
For the Quaker Sector Allocation Equity Fund
Acct #2000000862149
For the Quaker Fixed Income Fund
Acct #2000000862136
For further credit to (shareholder's name and SS# or EIN#)
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It is important that the wire contain all the information and that the Funds
receive prior telephone notification to ensure proper credit. A completed
application with signature(s) of registrant(s) must be mailed to the applicable
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. Each Fund reserves the right to reject any application or
investment. Orders become effective, and shares are purchased at, the next
determined net asset value per share after an investment has been received by a
Fund, which is as of 4:00 p.m., New York time, Monday through Friday, exclusive
of business holidays. Orders received by a Fund and effective prior to such 4:00
p.m. time will purchase shares at the net asset value determined at that time.
Otherwise, your order will purchase shares as of such 4:00 p.m. time on the next
business day. For purposes of the Fixed Income Fund, the foregoing references to
4:00 p.m. will instead be to 3:00 p.m., New York time, Monday through Friday,
exclusive of business holidays. For orders placed through a qualified
broker-dealer, such firm is responsible for promptly transmitting purchase
orders to the Funds. Investors may be charged a fee if they effect transactions
in Fund shares through a broker or agent.
If checks are returned unpaid due to nonsufficient funds, stop payment or other
reasons, the Trust will charge $20. To recover any such loss or charge, the
Trust reserves the right, without further notice, to redeem shares of any Fund
of the Trust already owned by any purchaser whose order is cancelled, and such a
purchaser may be prohibited from placing further orders unless investments are
accompanied by full payment by wire or cashier's check.
Payment must be made by check or money order drawn on a U.S. bank and payable in
U.S. dollars. Under certain circumstances the Distributor, at its sole
discretion, may allow payment in kind for Fund shares purchased by accepting
securities in lieu of cash. Any securities so accepted would be valued on the
date received and included in the calculation of the net asset value of the
Fund. See the Statement of Additional Information for additional information on
purchases in kind.
The Administrator is required by federal law to withhold and remit to the IRS
31% of the dividends, capital gains distributions and, in certain cases,
proceeds of redemptions paid to any shareholder who fails to furnish the 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 Funds, 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. Declaration Distributors, Inc., 555 North Lane, Suite 6160,
P.O. Box 844, Conshohocken, PA 19428-0844 (the "Distributor"), is the national
distributor for the Funds under a Distribution Agreement with the Trust. The
Distributor may sell Fund shares to or through qualified securities dealers or
others.
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The Trust has adopted a Distribution Plan (the "Plan") for all Funds pursuant to
Rule 12b-1 under the 1940 Act. Under the Plan the Funds may reimburse any
expenditures to finance any activity primarily intended to result in sale of the
shares of the Funds, including, but not limited to, the following: (i) payments
to the Distributor and its agents, securities dealers, and others for the sale
of shares of the Funds; (ii) payment of compensation to and expenses of
personnel who engage in or support distribution of shares of the Funds; and
(iii) formulation and implementation of marketing and promotional activities.
The categories of expenses for which reimbursement is made are approved by the
Board of Trustees of the Trust. Expenditures by the Funds pursuant to the Plan
are accrued based on the average daily net assets of each Fund and may not
exceed 0.25% of average net assets for each year elapsed subsequent to adoption
of the Plan. All expenditures under the Plan will be funded entirely from
investment advisory fees payable to the Funds' investment advisors and will not
be paid directly by the Funds. The Investment Advisory Agreements entered into
by the Funds and each of the investment advisors provides for the payment of
such distribution fees and expenses from the investment advisory fees payable
thereunder.
The Plan may not be amended to increase materially the amount to be spent under
the Plan without shareholder approval. The continuation of the Plan must be
approved by the Board of Trustees annually. At least quarterly the Board of
Trustees must review a written report of amounts expended pursuant to the Plan
and the purposes for which such expenditures were made. No amounts were expended
pursuant to the Plan for the fiscal year ended June 30, 1998.
The Distributor, at its expense, may also provide additional compensation to
dealers in connection with sales of shares of the Funds. Compensation may
include financial assistance to dealers in connection with conferences, sales or
training programs for their employees, seminars for the public, advertising
campaigns regarding the Funds, and/or other dealer-sponsored special events. In
some instances, this compensation may be made available only to certain dealers
whose representatives have sold or are expected to sell a significant amount of
such shares. Compensation may include payment for travel expenses, including
lodging, incurred in connection with trips taken by invited registered
representatives and members of their families to locations within or outside of
the United States for meetings or seminars of a business nature. Dealers may not
use sales of the Funds' shares to qualify for this compensation to the extent
such may be prohibited by the laws of any state or any self-regulatory agency,
such as the National Association of Securities Dealers, Inc. None of the
aforementioned compensation is paid for by the Funds or their shareholders.
Exchange Feature. Investors will have the privilege of exchanging shares of any
Fund for shares of any other Fund of the Trust. An exchange involves the
simultaneous redemption of shares of one series and purchase of shares of
another series at the respective closing net asset value next determined after a
request for redemption has been received, and is a taxable transaction. Shares
of each Fund may be exchanged for shares of any other series of the Trust at the
net asset value plus that series' sales charge, if any. Exchanges may only be
made by investors in states where shares of the other series are qualified for
sale. An investor may direct a 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 Funds. Such a pattern may, at the discretion of the Distributor, be limited
by that Fund's refusal to accept further purchase and/or exchange orders from an
investor, after providing the investor with 60 days prior notice. The
Distributor will consider all factors it deems relevant in determining whether a
pattern of frequent purchases, redemptions and/or exchanges by a particular
investor is abusive and not in the best interests of the Funds or its other
shareholders.
A shareholder should consider the investment objectives and policies of any
series into which the shareholder will be making an exchange, as described in
the prospectus. The Board of Trustees of the Trust reserves the right to suspend
or terminate, or amend the terms of, the exchange privilege upon 60 days written
notice to the shareholders.
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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 Funds 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 Funds.
Stock Certificates. Stock certificates will not be issued for your shares.
Evidence of ownership will be given by issuance of periodic account statements
that will show the number of shares owned.
HOW SHARES MAY BE REDEEMED
Shares of each Fund may be redeemed (the Funds will repurchase them from
shareholders) by mail or telephone. Any redemption may be more or less than the
purchase price of your shares depending on the market value of the Fund's
portfolio securities. All redemption orders received in proper form, as
indicated herein, by a Fund, whether by mail or telephone, prior to 4:00 p.m.
New York time, Monday through Friday, except for business holidays, will redeem
shares at the net asset value next determined at that time. Otherwise, your
order will redeem shares as of 4:00 p.m. on the next business day. For purposes
of the Fixed Income Fund, the foregoing references to 4:00 p.m. will instead be
to 3:00 p.m., New York time, Monday through Friday, exclusive of business
holidays. There is no charge for redemptions from the Funds, other than 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
Funds at 800-220-8888, or write to the address shown below.
Regular Mail Redemptions. Your request should be addressed to the Funds at 555
North Lane, Suite 6160, P.O. Box 844, Conshohocken, PA 19428-0844. Your request
for redemption must include:
1) Your letter of instruction specifying the account number, and the number of
shares or dollar amount to be redeemed. This request must be signed by all
registered shareholders in the exact names in which they are registered;
2) Any required signature guarantees (see "Signature Guarantees" below); and
3) Other supporting legal documents, if required in the case of estates, trusts,
guardianships, custodianships, corporations, partnerships, pension or profit
sharing plans, and other organizations.
Your redemption proceeds will be sent to you within seven days after receipt of
your redemption request. However, the Funds may delay forwarding a redemption
check for recently purchased shares while they determine whether the purchase
payment will be honored. Such delay (which may take up to 15 days from the date
of purchase) may be reduced or avoided if the purchase is made by certified
check or wire transfer. In all cases the net asset value next determined after
the receipt of the request for redemption will be used in processing the
redemption. The Funds may suspend redemption privileges or postpone the date of
payment (i) during any period that the New York Stock Exchange is closed, or
trading on the New York Stock Exchange is restricted as determined by the
Securities and Exchange Commission (the "Commission"), (ii) during any period
when an emergency exists as defined by the rules of the Commission as a result
of which it is not reasonably practicable for the Funds to dispose of securities
owned by them, or to fairly determine the value of their assets, and (iii) for
such other periods as the Commission may permit.
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Telephone and Bank Wire Redemptions. The Funds offer shareholders the option of
redeeming shares by telephone under certain limited conditions. The Funds will
redeem shares when requested by the shareholder if, and only if, the shareholder
confirms redemption instructions in writing.
The Funds may rely upon confirmation of redemption requests transmitted via
facsimile (FAX# 610-832-1067). The confirmation instructions must include:
1) Shareholder name, name of applicable 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 Funds.
The net asset value used in processing the redemption will be the net asset
value next determined after the telephone request is received. Redemption
proceeds will not be distributed until written confirmation of the redemption
request is received, per the instructions above. You can choose to have
redemption proceeds mailed to you at your address of record, your bank, or to
any other authorized person, or you can have the proceeds sent by bank wire to
your bank ($5,000 minimum). Shares of the Funds may not be redeemed by wire on
days on which your bank, and/or the Funds' Custodian, is not open for business.
You can change your redemption instructions anytime you wish by filing a letter
including your new redemption instructions with the Funds. (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 Funds in their 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 Funds, 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
Funds 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
Funds. Telephone redemption privileges authorize the applicable 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 Funds will
employ reasonable procedures, such as requiring a form of personal
identification, to confirm that instructions are genuine, and if they do not
follow such procedures, the Funds will be liable for any losses due to
fraudulent or unauthorized instructions. The Funds will not be liable for
following telephone instructions reasonably believed to be genuine.
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Transfer on Redemption to Money Market Account. Shareholders wishing to have
redemption proceeds and/or income and capital gain dividends transferred into an
account in their name in a money market fund may so indicate on their Account
Application. The Custodian and Distributor of the Funds have made available the
Evergreen Money Market Fund for use of Fund shareholders. Purchases and/or
transfers into this money market fund may only be made after the shareholder has
received the current prospectus for such Fund. For further information and a
prospectus please call the Funds at 800-220-8888.
Systematic Withdrawal Plan. A shareholder who owns shares of one of the Funds
valued at $10,000 or more at current net asset value may establish a Systematic
Withdrawal Plan to receive a monthly or quarterly check in a stated amount not
less than $100. Each month or quarter as specified, the Fund will automatically
redeem sufficient shares from your account to meet the specified withdrawal
amount. Call or write the Funds for an application form. See the Statement of
Additional Information for further details.
Signature Guarantees. To protect your account and the Funds from fraud,
signature guarantees are required to be sure that you are the person who has
authorized a change in registration, or standing instructions, for your account.
Signature guarantees are required for (1) change of registration requests, (2)
requests to establish or change exchange privileges or telephone redemption
service other than through your initial account application, and (3) requests
for redemptions in excess of $50,000. Signature guarantees are acceptable from a
member bank of the Federal Reserve System, a savings and loan institution,
credit union (if authorized under state law), registered broker-dealer,
securities exchange or association clearing agency, and must appear on the
written request for redemption, establishment or change in exchange privileges,
or change of registration.
MANAGEMENT OF THE FUNDS
Trustees and Officers. Each Fund is a series of the Quaker Investment Trust (the
"Trust"), an investment company organized as a Massachusetts business trust. The
Board of Trustees of the Trust is responsible for the management of the business
and affairs of the Trust. The Trustees and executive officers of the Trust and
their principal occupations for the last five years are set forth in the
Statement of Additional Information under "Management of the Fund - Trustees and
Officers." The Board of Trustees of the Trust is primarily responsible for
overseeing the conduct of the Trust's business. The Board of Trustees elects the
officers of the Trust who are responsible for its and the Funds' overall
operations.
Fiduciary Asset Management Co. Under the supervision of the Board of Trustees,
Fiduciary Asset Management Co. ("FAM") provides the Enhanced Stock Market Fund
and the Fixed Income Fund with a continuous program of investment management,
including the composition of each Fund's portfolio, and furnishes advice and
recommendations with respect to investments, investment policies and the
purchase and sale of securities, pursuant to an Investment Advisory Agreement
("Advisory Agreement") with the Trust.
FAM was established as a Missouri corporation in 1994, and is registered as an
investment adviser under the Investment Advisors Act of 1940, as amended. FAM
currently serves as investment advisor to over $3.7 billion in assets, rendering
investment counsel and utilizing investment strategies substantially similar to
that of the Funds, to individuals, banks and thrift institutions, pension and
profit sharing plans, trusts, estates, charitable organizations and corporations
since its inception in 1994. FAM's address is 8112 Maryland Avenue, Suite 310,
Clayton, Missouri 63105. FAM is controlled by Charles D. Walbrandt.
John L. Dorian has been responsible for day-to-day management of the Enhanced
Stock Market Fund's portfolio since its inception. Mr. Dorian has been with FAM
since April 1995. Previously Mr. Dorian was a Managing Director and Portfolio
Manager with First Quadrant Corp., Pasadena, California.
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Wiley D. Angell has been responsible for day-to-day management of the Fixed
Income Fund's portfolio since its inception. Mr. Angell has been with FAM since
its inception in June 1994. Previously Mr. Angell was Corporate Director, Fixed
Income Portfolio Manager with General Dynamics Corporation.
Under the Advisory Agreement with the Trust, FAM receives a monthly management
fee equal to an annual rate of 0.50% of the average daily net asset value of the
Enhanced Stock Market Fund. For the fiscal year ended June 30, 1998, FAM
voluntarily waived its entire fee in the amount of $6,443.
FAM receives a monthly management fee equal to an annual rate of 0.45% of the
average daily net asset value of the Fixed Income Fund. For the fiscal year
ended June 30, 1998, FAM voluntarily waived its entire fee in the amount of
$12,948.
Geewax, Terker & Co Under the supervision of the Board of Trustees, Geewax,
Terker & Co. ("GTC") provides the Core Equity Fund with a continuous program of
investment management, 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, dated October 19, 1998. GTC
became Adviser to the Fund after the previous Adviser, West Chester Capital
Advisers, Inc., resigned. GTC was chosen to become the Adviser to Core Equity by
the Board of Trustees, and was approved as Adviser by a majority of the
outstanding shares of Core Equity at a Special Meeting of Shareholders held on
October 19, 1998.
GTC was established as a Pennsylvania partnership in 1982, and is registered as
an investment adviser under the Investment Advisors Act of 1940, as amended. GTC
currently serves as investment advisor to over $3.5 billion in assets. GTC
generally operates as an investment advisory firm, and has been rendering
investment counsel, utilizing investment strategies substantially similar to
that of the Core Equity Fund, to individuals, pension and profit sharing plans,
trusts, estates, charitable organizations and corporations since 1987. GTC's
address is 99 Starr Street, Phoenixville, Pennsylvania 19460. GTC is controlled
by John J. Geewax and Bruce E. Terker.
John J. Geewax, general partner of GTC, has responsibility for the day-to-day
management of the Fund's portfolio. Prior to establishing Geewax, Terker & Co.
In 1982, Mr. Geewax served as a portfolio manager with Pennsylvania Asset
Services beginning in 1980. He was also an instructor at the Wharton School of
the University of Pennsylvania from 1980 to 1982.
Messrs. Geewax and Terker, under the Aegis Geewax, Terker & Co., have provided
investment management services and counseling to a significant number of
individual clients, large institutional clients and other registered investment
companies, including the Noah Fund and Vanguard Trustees Equity Fund since
founding the company.
Under the Advisory Agreement with the Trust, GTC receives a monthly management
fee equal to an annual rate of 0.75% of the average daily net asset value of the
Fund. For the fiscal year ended June 30, 1998, West Chester Capital Advisors,
Inc., the former Advisor to the Fund, voluntarily waived its entire fee in the
amount of $17,770.
DG Capital Management, Inc. Under the supervision of the Board of Trustees, DG
Capital Management, Inc. ("DGCM") provides the Aggressive Growth Fund with a
continuous program of investment management, 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.
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<PAGE>
DGCM was established as a Massachusetts corporation in 1996, and is registered
under the Investment Advisors Act of 1940, as amended. DGCM currently serves as
investment advisor to over $10 million in assets. DGCM has been rendering
investment counsel, utilizing investment strategies substantially similar to
that of the Aggressive Growth Fund, to individuals, banks and thrift
institutions, pension and profit sharing plans, trusts, estates, charitable
organizations and corporations since 1985. DGCM's address is 121 High Street,
Boston, Massachusetts 02110. DGCM is controlled by Manu Daftary. Mr. Daftary is
the President of DGCM and the firm's sole shareholder.
Manu Daftary is the Fund's portfolio manager and has been responsible for
day-to-day management of the Fund's portfolio since its inception. He has been
with DGCM since July 1996. Previously Mr. Daftary was a portfolio manager with
Greenville Capital Management during 1995 and early 1996; was Senior Vice
President/Portfolio Manager with Hellman, Jordan Management Company from
1993-1995; was co-manager of the institutional growth stock portfolio with
Geewax, Terker & Co. from 1988-1993. Investment advisory services are the sole
business of both DGCM and Mr. Daftary.
Under the Advisory Agreement with the Trust, DGCM receives a monthly management
fee equal to an annual rate of 0.75% of the average daily net asset value of the
Fund. For the fiscal year ended June 30, 1998, DGCM voluntarily waived its
entire fee in the amount of $10,415.
Compu-Val Investments, Inc. Under the supervision of the Board of Trustees,
Compu-Val Investments, Inc. ("CVI") provides the Mid-Cap Value Fund with a
continuous program of investment management, 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.
CVI was established as a Delaware corporation in 1974, and is registered under
the Investment Advisors Act of 1940, as amended. CVI currently serves as
investment advisor to over $170 million in assets. DGCM has been rendering
investment counsel, utilizing investment strategies substantially similar to
that of the Aggressive Growth Fund, to individuals, banks and thrift
institutions, pension and profit sharing plans, trusts, estates, charitable
organizations and corporations since 1974. CVI's address is 1702 Lovering
Avenue, Wilmington, Delaware, 19806. CVI is controlled by James Kalil, Ph.D. and
Donald J. Kalil.
Christopher O'Keefe, Director of Equity Research for the Adviser since 1995, is
the Fund's portfolio manager. Previously, Mr. O'Keefe was an investment analyst
with CoreStates investment Advisers, Philadelphia, PA , since 1989.
Under the Advisory Agreement with the Trust, CVI receives a monthly management
fee equal to an annual rate of 0.75% of the average daily net asset value of the
Fund. For the fiscal year ended June 30, 1998, CVI voluntarily waived fees in
the amount of $9,928.
Aronson + Partners. Under the supervision of the Board of Trustees, Aronson +
Partners ("Aronson") provides the Small-Cap Value Fund with a continuous program
of investment management, 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 amended
Investment Advisory Agreement ("Advisory Agreement") with the Trust, dated
October 19, 1998.
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Aronson was established as a Pennsylvania partnership in 1984, and is registered
as an investment adviser under the Investment Advisors Act of 1940, as amended.
Aronson currently serves as investment advisor to over $1.4 billion in assets.
Aronson has been rendering investment counsel, utilizing investment strategies
substantially similar to that of the Small-Cap Value Fund, to individuals, banks
and thrift institutions, pension and profit sharing plans, trusts, estates,
charitable organizations and corporations since its inception in 1984. Aronson's
address is 230 South Broad Street, 20th Floor, Philadelphia, Pennsylvania 19012.
Aronson is controlled by Theodore R. Aronson.
Mr. Aronson has been responsible for day-to-day management of the Fund's
portfolio since its inception. He has been with Aronson since August 1984.
Previously Mr. Aronson was a partner with Addison Capital Management.
Under the Advisory Agreement with the Trust prior to October 19, 1998, Aronson
received a monthly management fee equal to an annual rate of 0.75% of the
average daily net asset value of the Fund. On October 19, 1998, the shareholders
of the Fund approved a new Advisory Agreement with Aronson, instituting a new
fee schedule. Listed below is a comparison of the annual management fee rates as
a percentage of average daily net assets payable under the current management
agreement and the new management agreement for the Value Fund.
PRIOR AGREEMENT NEW AGREEMENT
--------------- -------------
Present to September 30, 1998 0.75% 0.75%
October 19, 1998- October 1, 1999 0.75% 0.90%
Thereafter 0.75% Performance Based
As Follows:
From October 1, 1999 forward, a performance fee concept will be implemented.
This will provide for an investment advisory fee (Base Fee) at an annual rate of
0.90% of the daily net assets of the Fund to be computed and paid quarterly when
the cumulative investment results for the Fund over the prior twelve (12) months
exceed the return for the Russell 2000 Index for the same period by 3.0%. this
comparison will be repeated each quarter, using the data from the immediate
prior twelve (12) months. Adjustment factors will be applied to the investment
advisory fee according to the following formula.:
Cumulative 12 months Performance Fee
Return versus the Index Adjustment
Less than + 1.0% 0.3333 X Base Fee
Between +1.0 and +1.5% 0.4664 X Base Fee
Between +1.5 and +2.0% 0.5998 X Base Fee
Between +2.0 and +2.5% 0.7332 X Base Fee
Between +2.5 and + 3.0% 0.8666 X Base Fee
At +3.0% 1.0000 X Base Fee
Between +3.0 and + 3.5% 1.1334 X Base Fee
Between +3.5 and + 4.0% 1.2668 X Base Fee
Between +4.0 and + 4.5% 1.4002 X Base Fee
Between +4.5 and + 5.0% 1.5336 X Base Fee
More than +5.0% 1.6667 X Base Fee
For the fiscal year ended June 30, 1998, Aronson voluntarily waived its entire
fee in the amount of $16,356.
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General Advisor Duties. Each Advisor supervises and implements the investment
activities of their respective Fund, including the making of specific decisions
as to the purchase and sale of portfolio investments. Among the responsibilities
of each Advisor under the Advisory Agreement is the selection of brokers and
dealers through whom transactions in the Funds' portfolio investments will be
effected. Each Advisor attempts to obtain the best execution for all such
transactions. If it is believed that more than one broker is able to provide the
best execution, each Advisor will consider the receipt of quotations and other
market services and of research, statistical and other data and the sale of
shares of the Fund in selecting a broker. Research services obtained through
Fund brokerage transactions may be used by the Advisor for its other clients
and, conversely, each Fund may benefit from research services obtained through
the brokerage transactions of the Advisor's other clients. The Advisors may also
utilize a brokerage firm affiliated with the Trust, such as the Distributor, if
it believes it can obtain the best execution of transactions from such broker,
subject to periodic review of such executions and procedures by the Board of
Trustees. For further information, see "Investment Objective and Policies
- -Investment Transactions" in the Statement of Additional Information.
Administrator. The Trust has entered into a Fund Administration Agreement with
Declaration Service Company (the "Administrator"),555 North Lane, Suite 6160,
P.O. Box 844, Conshohocken, PA 19428-0844. Subject to the authority of the Board
of Trustees, the services the Administrator provides to each Fund include
coordinating and monitoring any third parties furnishing services to the Funds;
providing the necessary office space, equipment and personnel to perform
administrative and clerical functions for the Funds; and preparing, filing and
distributing proxy materials, periodic reports to shareholders, registration
statements and other documents.
The Administrator also performs certain accounting and pricing services for each
Fund as pricing agent, including the daily calculation of each Fund's net asset
value.
Transfer Agent. The Declaration Service Company (the "Transfer Agent") serves as
the Funds' 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 Funds.
Sponsor of the Funds. Quaker Funds, Inc., will engage in shareholder servicing
activities for the Funds not otherwise provided by the Funds' Administrator or
Custodian, for which it will receive a fee at the annual rate of 0.25% of the
average daily net assets of the Funds, except the shareholder servicing fee will
be limited to 0.20% for the Enhanced Stock Market Fund and 0.15% for the Fixed
Income Fund. Pursuant to a Shareholder Servicing Agreement adopted by the Trust
for each Fund, Quaker Funds, Inc. will provide oversight with respect to each
Advisor, arrange for payment of investment advisory and administrative fees,
coordinate payments under each Fund's Distribution Plan, develop communications
with existing Fund shareholders, assist in responding to shareholder inquiries,
and provide other shareholder servicing tasks. Laurie Keyes, Jeffry H. King and
Peter F. Waitneight, each of whom is a Trustee of the Trust, control Quaker
Funds, Inc. Quaker Funds, Inc. was formed as a Pennsylvania corporation in 1996
and is located at 1288 Valley Forge Road, Suite 76, Valley Forge, Pennsylvania
19482. 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. No shareholder servicing fees were paid by the Funds
for the fiscal year ended June 30, 1998.
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<PAGE>
Custodian. First Union National Bank (the "Custodian"), serves as Custodian of
the Funds' assets. The Custodian acts as the depository for the Funds, provides
safekeeping for their portfolio securities, collects all income and other
payments with respect to portfolio securities, disburses monies at the Funds'
request and maintains records in connection with its duties.
Other Expenses. Each Fund is responsible for the payment of its expenses. These
include, for example, the fees payable to the Advisor, or expenses otherwise
incurred in connection with the management of the investment of the Funds'
assets, the fees and expenses of the Custodian, the fees and expenses of the
Administrator, the fees and expenses of Trustees, outside auditing and legal
expenses, all taxes and corporate fees payable by each Fund, Securities and
Exchange Commission fees, state securities qualification fees, costs of
preparing and printing prospectuses for regulatory purposes and for distribution
to shareholders, costs of shareholder reports and shareholder meetings, and any
extraordinary expenses. Each Fund also pays for brokerage commissions and
transfer taxes (if any) in connection with the purchase and sale of portfolio
securities. Expenses attributable to a particular series of the Trust will be
charged to that series, and expenses not readily identifiable as belonging to a
particular series will be allocated by or under procedures approved by the Board
of Trustees among one or more series in such a manner as it deems fair and
equitable.
OTHER INFORMATION
Description of Shares. The Trust was organized as a Massachusetts business trust
on October 24, 1990 under a Declaration of Trust. The Declaration of Trust
permits the Board of Trustees to issue an unlimited number of full and
fractional shares and to create an unlimited number of series of shares. The
Board of Trustees may also classify and reclassify any unissued shares into one
or more classes of shares.
When issued, the shares of each series of the Trust will be fully paid,
nonassessable and redeemable. The Trust does not intend to hold annual
shareholder meetings; it may, however, hold special shareholder meetings for
purposes such as changing fundamental policies or electing Trustees. The Board
of Trustees shall promptly call a meeting for the purpose of electing or
removing Trustees when requested in writing to do so by the record holders of a
least 10% of the outstanding shares of the Trust. The term of office of each
Trustee is of unlimited duration. The holders of at least two-thirds of the
outstanding shares of the Trust may remove a Trustee from that position either
by declaration in writing filed with the Custodian or by votes cast in person or
by proxy at a meeting called for that purpose.
Shareholders of the Trust will vote in the aggregate and not by series (Fund) or
class, except as otherwise required by the 1940 Act or when the Board of
Trustees determines that the matter to be voted on affects only the interests of
the shareholders of a particular series or class. Matters affecting an
individual series, include, but are not limited to, the investment objectives,
policies and restrictions of that series. Shares have no subscription,
preemptive or conversion rights. Share certificates will not be issued. Each
share is entitled to one vote (and fractional shares are entitled to
proportionate fractional votes) on all matters submitted for a vote, and shares
have equal voting rights except that only shares of a particular series are
entitled to vote on matters affecting only that series. Shares do not have
cumulative voting rights. Therefore, the holders of more than 50% of the
aggregate number of shares of all series of the Trust may elect all the
Trustees.
Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable as partners for the obligations of the
trust. The Declaration of Trust, therefore, contains provisions which are
intended to mitigate such liability. See "Description of the Trust" in the
Statement of Additional Information for further information about the Trust and
its shares.
26
<PAGE>
As of June 30, 1998, the following persons owned of record or beneficially more
than 25% of the shares of the Funds: Manu Daftary IRA, record owner with respect
to 28.24% of the Aggressive Growth Fund; Accordingly, these persons may be
deemed to be a "controlling person" of the indicated Fund within the meaning of
the Investment Company Act.
Reporting to Shareholders. Each Fund will send to its shareholders annual and
semi-annual reports; the financial statements appearing in annual reports for
each Fund will be audited by independent accountants. In addition, the Funds
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 any
Fund may be directed in writing to 555 North Lane, Suite 6160, Conshohocken, PA
19428 or by calling 800-220-8888.
Calculation of Performance Data. From time to time the Funds may advertise their
average annual total return. The "average annual total return" of each Fund
refers to the average annual compounded rates of return over 1, 5 and 10 year
periods that would equate an initial amount invested at the beginning of a
stated period to the ending redeemable value of the investment. The calculation
assumes the reinvestment of all dividends and distributions, includes all
recurring fees that are charged to all shareholder accounts and deducts all
nonrecurring charges at the end of each period. If the Fund has been operating
less than 1, 5 or 10 years, the time period during which the Fund has been
operating is substituted.
In addition, each Fund may advertise other total return performance data. This
data shows as a percentage rate of return encompassing all elements of return
(i.e. income and capital appreciation or depreciation); it assumes reinvestment
of all dividends and capital gain distributions. Such other total return data
may be quoted for the same or different periods as those for which average
annual total return is quoted. This data may consist of a cumulative percentage
rate of return, actual year-by-year rates or any combination thereof. Cumulative
total return represents the cumulative change in value of an investment in each
Fund for various periods.
From time to time the Fixed Income Fund may also advertise its yield. The
"yield" of a Fund is computed by dividing the net investment income per share
earned during the most recent practicable period stated in the advertisement by
the maximum offering price per share on the last day of the period (using the
average number of shares entitled to receive dividends). For the purpose of
determining net investment income, the calculation includes among expenses of
the Fund all recurring fees that are charged to all shareholder accounts and any
nonrecurring charges for the period stated.
The total return and yield of each Fund could be increased to the extent the
Advisor, the Administrator or the Fund Sponsor may waive all or a portion of
their fees. Total return and yield figures are based on the historical
performance of each Fund, show the performance of a hypothetical investment, and
are not intended to indicate future performance. The Funds' quotations may from
time to time be used in advertisements, sales literature, shareholder reports,
or other communications. For further information, see "Additional Information on
Performance" in the Statement of Additional Information.
27
<PAGE>
THE QUAKER FAMILY OF FUNDS
PROSPECTUS
November 1, 1998
DISTRIBUTOR
Declaration Distributors, Inc.
555 North Lane, Suite 6160
Conshohocken, PA 19428
CUSTODIAN
First Union National Bank of North Carolina
ADMINISTRATOR
Declaration Service Company
P.O. Box 844
Conshohocken, PA 19428-0844
TRANSFER AGENT
Declaration Service Company
P.O. Box 844
Conshohocken, PA 19428-0844
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 ADVISORS
Aronson + Partners
Philadelphia, Pennsylvania
Compu-Val Investments, Inc.
Wilmington, Delaware
DG Capital Management
Wayland, Massachusetts
Fiduciary Asset Management
St. Louis, Missouri
Bellevue, Washington
Geewax, Terker & Co.
Phoenixville, Pennsylvania
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
THE QUAKER FAMILY OF FUNDS
Series of
QUAKER INVESTMENT TRUST
555 North Lane, Post Office Box 0844
Suite 6160
Conshohocken, PA 19428-0844
Telephone 800-220-8888
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...................................... 11
MANAGEMENT OF THE FUNDS...................................................... 13
SPECIAL SHAREHOLDER SERVICES................................................. 20
ADDITIONAL INFORMATION ON PERFORMANCE........................................ 21
APPENDIX A - DESCRIPTION OF RATINGS.......................................... 24
ANNUAL REPORTS OF THE FUNDS FOR THE FISCAL YEAR ENDED JUNE 30, 1998.....ATTACHED
This Statement of Additional Information (the "Additional Statement") is meant
to be read in conjunction with the Prospectus, dated, November 2, 1998, for the
Quaker Enhanced Stock Market Fund, the Quaker Core Equity Fund, the Quaker
Aggressive Growth Fund, the Quaker Mid-Cap Value Fund, the Quaker Small-Cap
Value Fund, and the Quaker Fixed Income Fund (individually a "Fund" and
collectively the "Funds"), as the Prospectus may be amended or supplemented from
time to time, and is incorporated by reference in its entirety into the
Prospectus. Because this Additional Statement is not itself a prospectus, no
investment in shares of the Funds should be made solely upon the information
contained herein. Copies of the Funds' Prospectus may be obtained at no charge
by writing or calling the Funds at the address and phone number shown above.
Capitalized terms used but not defined herein have the same meanings as in the
Prospectus.
1
<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.
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. 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.
2
<PAGE>
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. The Distributor is a registered securities
broker-dealer, but it is unlikely that the Distributor will execute transactions
on behalf of the Funds.
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.
3
<PAGE>
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, 1998, the total dollar amount of brokerage
commissions paid by the Enhanced Stock Market Fund was $3,000, all of which was
paid during such period to the former Distributor, Quaker Securities , Inc. .
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, 1998.
For the fiscal year ended June 30, 1998, the total dollar amount of brokerage
commissions paid by the Core Equity Fund was $6,199, all of which was paid
during such period to the former 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, 1998.
For the fiscal year ended June 30, 1998, the total dollar amount of brokerage
commissions paid by the Aggressive Growth Fund was $45,320, of which $45,094 was
paid during such period to the former Distributor. Transactions in which the
Aggressive Growth Fund used the Distributor as broker involved 98.41% of the
aggregate dollar amount of transactions involving the payment of commissions and
99.50% of the aggregate brokerage commissions paid by the Aggressive Growth Fund
for the fiscal year ended June 30, 1998.
For the fiscal year ended June 30, 1998, the total dollar amount of brokerage
commissions paid by the Small-Cap Value Fund was $11,095, none of which was paid
during such period to the former 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, 1998.
For the fiscal year ended June 30, 1998, the total dollar amount of brokerage
commissions paid by the Mid-Cap Value Fund was $19,086, all of which was paid
during such period to the former Distributor. Transactions in which the Mid-Cap
Value Fund used the Distributor as broker involved 100% of the aggregate
brokerage commissions paid by the commissions paid by the Mid-Cap Value Fund for
the fiscal year ended June 30, 1998.
4
<PAGE>
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.
5
<PAGE>
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.
6
<PAGE>
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.
7
<PAGE>
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.
8
<PAGE>
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.
9
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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.
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<PAGE>
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;
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<PAGE>
(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;
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(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 closing time of
the New York Stock Exchange for the Equity Funds (4 p.m. except on holidays and
days in which New York Stock Exchange trading limits may be implemented), and
the closing time of the fixed income futures markets (3:00 p.m. 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.'s Birthday, 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.
13
<PAGE>
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, 1998, the net expenses after fee waivers and
expense reimbursements were $12,856 for the Enhanced Stock Market Fund, $32,357
for the Core Equity Fund, $18,863 for the Aggressive Growth Fund, $47,305 for
the Mid-Cap Value Fund, $29,585 for the Small-Cap Value Fund, and $25,781 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. Declaration Distributors, 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, 1998.
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.
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<PAGE>
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.
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<PAGE>
DESCRIPTION OF THE TRUST
The Trust is an unincorporated business trust organized under Massachusetts law
on October 24, 1990. The Trust's Declaration of Trust authorizes the Board of
Trustees to divide shares into series, each series relating to a separate
portfolio of investments, and to classify and reclassify any unissued shares
into one or more classes of shares of each such series. The Declaration of Trust
currently provides for the shares of six series, as follows: the Quaker Enhanced
Stock Market Fund and the Quaker Fixed Income Fund, both managed by Fiduciary
Asset Management, Inc. of St. Louis, Missouri; the Quaker Core Equity Fund
managed by Geewax, Terker & Co., of Phoenixville, Pennsylvania; the Quaker
Aggressive Growth Fund managed by DG Capital Management, Inc. of Wayland,
Massachusetts; the Quaker Mid-Cap Value Fund managed by Compu-Val Investments,
Inc. of Wilmington, Delaware; and the Quaker Small-Cap Value Fund managed by
Aronson + Partners of Philadelphia, Pennsylvania. ; and 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.
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<PAGE>
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.
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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.
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<PAGE>
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:
Name, Age, Position(s) Principal Occupation(s)
and Address During Past 5 Years
Howard L. Gleit, 58 Of Counsel Connolly Epstein Chicco
Trustee Foxman Engelmyer & Ewing Philadelphia,
1515 Market Street Pennsylvania since 1997; previously, Of
Philadelphia, Pennsylvania Counsel Zapruder & Odell Bala Cynwyd,
Pennsylvania since 1994; previously,
Partner Pepper, Hamilton & Scheetz
Philadelphia, Pennsylvania
Everett T. Keech, 58 Chairman and CEO Pico Products, Inc.
Trustee Lakeview Terrace, California
One Tower Bridge, Suite 501
West Conshohocken, Pennsylvania
Laurie Keyes, 48* Chief Operating Officer Quaker
Trustee Securities, Inc. Valley Forge,
Suite 75 Pennsylvania (Distributor to the Quaker
1288 Valley Forge Road Family of Funds)
Valley Forge, Pennsylvania
Jeffry H. King, 55* Chairman and CEO Quaker Securities, Inc.
Trustee and Chairman Valley Forge, Pennsylvania (Distributor
Suite 75 to the Quaker Family of Funds)
1288 Valley Forge Road
Valley Forge, Pennsylvania
Louis P. Pektor III, 47 President Ashley Development Company
Trustee Allentown, Pennsylvania since 1993;
961 Marcon Boulevard, Suite 300 President Greystone Capital Allentown,
Allentown, Pennsylvania Pennsylvania since 1993; previously,
Executive Vice President Wall Street
Mergers & Acquisitions Allentown,
Pennsylvania
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<PAGE>
Peter F. Waitneight, 56* President Quaker Funds, Inc. Valley
Trustee and President Forge, Pennsylvania since 1996 (Sponsor
Suite 76 to the Quaker Family of Funds);
1288 Valley Forge Road previously, President, Paragon Financial
Valley Forge, Pennsylvania Consulting Malvern, Pennsylvania
1995-96; previously, Marketing Director
Turner Investment Partners Berwyn,
Pennsylvania 1993-95;
- ----------------------------
* 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, 1998.
All Trustees are reimbursed for any out-of-pocket expenses incurred in
connection with attendance at meetings.
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
Figures are for the fiscal year ended June 30, 1998.
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<PAGE>
Principal Holders of Voting Securities. As of June 30, 1998, the Trustees and
Officers of the Trust as a group owned beneficially (i.e., had voting and/or
investment power) 39.814% of the then outstanding shares of the Enhanced Market
Fund, 6.423% of the then outstanding shares of the Core Equity Fund, 20.252% of
the then outstanding shares of the Aggressive Growth Fund, 12.012% of the then
outstanding shares of the Small-Cap Value Fund, and 7.276% 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 June 30, 1998.
QUAKER ENHANCED STOCK MARKET FUND
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership* Percent
Peter Waitneight IRA 17,046.242 shares 14.887%**
One Hunt Club Lane
Malvern, PA 19355
Laurie Keyes 9256.867 shares 8.084%
402 Chester Rd
Devon, PA 19333
Charles Cook IRA 8966.336 shares 7.861%
26 Broadway
New York, NY 10004
Anthony Cirillo, IRA 2334.554 shares 10.772%**
726 Floyd Street
Englewood Cliffs, NJ 76320
SEC Corp IRA FBO Alexandre 6289.149 shares 5.492%
PO Box 2052
Jersey City, NJ 73030
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QUAKER CORE EQUITY FUND
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership* Percent
St Mary's County Sheriff's Pension Fund 257441.673 shares 77.716%**
PO Box 30758
Cayman Islands, CJ
QUAKER MID-CAP VALUE FUND
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership* Percent
National Investor Services FBO 268626.568 32.502%**
55 Water Street, 32nd Floor
New York, NY 10041
Trust Company of Illinois FBO 519497.432 62.857%**
QUAKER SMALL-CAP VALUE FUND
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership* Percent
Altru Company 45687.353 shares 15.432%**
c/o Keystone Financial Trust Operations
P.O. Box 2450
Altoona, PA 16603-2450
Theodore Aronson IRA 44428.809 shares 15.007%**
1234 Country Club Lane
Gladwyn, PA 19035
Charles Schwab & Co. FBO 21866.262 shares 7.385%
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QUAKER AGGRESSIVE GROWTH FUND
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership* Percent
Manu Daftary IRA 33539.108 shares 23.497%**
8 Waybridge Lane
Wayland, MA 0177-4550
Peter Scholfield 10784.547 shares 7.555%
111 Cratin Lane
West Chester, PA 19380
Laurie Keyes 10452.446 shares 7.322%
402 Chester Rd
Devon, PA 19333
Peter Waitneight IRA 7428.548 shares 5.204%
One Hunt Club Lane
Malvern, PA 19355
Mary L. Grover 8305.648 shares 5.818%
3 Regal Point
Barrington, RI 28060
QUAKER FIXED INCOME FUND
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership* Percent
Peter Waitneight IRA 30331.923 shares 5.555%
One Hunt Club Lane
Malvern, PA 19355
St Mary's County Sheriff's Pension 429839.737 78.721%**
Rt 245, PO Box 653
Leonardtown, MD 20650
* 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.
The fee paid to Aronson + Partners, Advisor to the Quaker Small-Cap Value Fund,
after September 1999 may be increased or decreased by applying an adjustment
each quarter to the base fee at the annual rate of 0.90%. These adjustments will
be made quarterly depending on the Fund's investment performance for the 12
months immediately preceding the determination relative to the return of the
Russell 2000 Index for the same time period.
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<PAGE>
The following table sets forth the adjustment factors to the base fee payable to
Aronson + Partners under the investment advisory agreement now in effect.
12 months performance Performance Fee
versus the Index Adjustment
---------------- ----------
Less than +1.0% 0.3333 x Base Fee
Between +1.0 and +1.5% 0.4664 x Base Fee
Between +1.5 and +2.0% 0.5998 x Base Fee
Between +2.0 and +2.5% 0.7332 x Base Fee
Between +2.5 and +3.0 0.8666 x Base Fee
At +3.0% 1.0000 x Base Fee
Between +3.0 and +3.5% 1.1334 x Base Fee
Between +3.5 and + 4.0% 1.2668 x Base Fee
Between +4.0 and +4.5% 1.4002 x Base Fee
Between +4.5 and +5.0 1.5336 x Base Fee
More than +5.0% 1.6667 x Base Fee
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 an Investment
Company Services Agreement with Declaration Services Company (the
"Administrator"), 555 North Lane, Suite 6160, Conshohocken, Pennsylvania, 19428,
pursuant to which the Administrator receives a fee at the annual rate of 0.175%
of the average daily net assets of each Fund on the first $50 million; 0.150% of
the next $50 million; and 0.125% of its average daily net assets in excess of
$100 million. In addition, the Administrator currently receives a base monthly
fee of $2,000 for accounting and recordkeeping services for each Fund. The
Administrator also charges each Fund for certain costs involved with the daily
valuation of investment securities and is reimbursed for out-of-pocket expenses.
The Administrator charges a minimum fee of $3,000 per month per Fund for all of
its fees taken in the aggregate, analyzed monthly.
The Administrator will perform the following services for each Fund: (1)
coordinate with the Custodian and monitor the services it provides to the Fund;
(2) coordinate with and monitor any other third parties furnishing services to
the Fund; (3) provide the Fund with necessary office space, telephones and other
communications facilities and personnel competent to perform administrative and
clerical functions for the Fund; (4) supervise the maintenance by third parties
of such books and records of the Fund as may be required by applicable federal
or state law; (5) prepare or supervise the preparation by third parties of all
federal, state and local tax returns and reports of the Fund required by
applicable law; (6) prepare and, after approval by the Trust, file and arrange
for the distribution of proxy materials and periodic reports to shareholders of
the Fund as required by applicable law; (7) prepare and, after approval by the
Trust, arrange for the filing of such registration statements and other
documents with the Securities and Exchange Commission and other federal and
state regulatory authorities as may be required by applicable law; (8) review
and submit to the officers of the Trust for their approval invoices or other
requests for payment of Fund expenses and instruct the Custodian to issue checks
in payment thereof; and (9) take such other action with respect to the Fund as
may be necessary in the opinion of the Administrator to perform its duties under
the agreement. The Administrator also will provide certain accounting and
pricing services for each Fund.
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<PAGE>
Distributor. Declaration Distributors, Inc. (the "Distributor"), 555 North Lane,
Suite 6160, Conshohocken, Pennsylvania, 19428, acts as an underwriter and
distributor of each Fund's shares for the purpose of facilitating the
registration of shares of the Fund under state securities laws and to assist in
sales of Fund shares pursuant to a Distribution Agreement (the "Distribution
Agreement") approved by the Board of Trustees of the Trust.
In this regard, the Distributor has agreed at its own expense to qualify as a
broker-dealer under all applicable federal or state laws in those states which
each Fund shall from time to time identify to the Distributor as states in which
it wishes to offer its shares for sale, in order that state registrations may be
maintained for the Fund.
The Distributor is a broker-dealer registered with the Securities and Exchange
Commission and a member in good standing of the National Association of
Securities Dealers, Inc.
The Distribution Agreement may be terminated by either party upon 60 days prior
written notice to the other party.
Sponsor. Quaker Funds, Inc. (the "Sponsor"), 1288 Valley Forge Road, Post Office
Box 987, Valley Forge, Pennsylvania 19482, acts as sponsor for each Fund and
provides certain shareholder services (more thoroughly described in the
Prospectus) pursuant to a Shareholder Servicing Agreement between the Trust and
the Sponsor for each Fund approved by the Board of Trustees of the Trust. The
Shareholder Servicing Agreement may be terminated by each party upon 60 days
prior written notice to the other party.
Custodian. First Union National Bank (the "Custodian"), , 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.
25
<PAGE>
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:
26
<PAGE>
The Quaker Family of Funds
555 North Lane, Suite 6160
Post Office Box 0844
Conshohocken, PA 19428
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:
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<PAGE>
n
P(1+T) = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
N = number of years (exponential number)
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5 or 10 year
periods at the end of the year or period;
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, 1998, was 44.70% for the Core Equity Fund,
42.73% for the Aggressive Growth Fund, 52.89% for the Small-Cap Value Fund,
9.20% for the Mid-Cap Value Fund, 52.76% for the Enhanced Stock Market Fund, and
11.69% 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:
6
Yield =2[(A - B + 1) - 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.
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<PAGE>
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 or the S&P 400
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.
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<PAGE>
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.
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APPENDIX A
DESCRIPTION OF RATINGS
The Funds may generally acquire from time to time fixed income securities that
meet the following minimum rating criteria ("Investment Grade Debt Securities")
or, if unrated, are in the Advisor's opinion comparable in quality to Investment
Grade Debt Securities. The Fixed Income Fund, however, intends to limit its
portfolio to a more restrictive quality criteria, limiting portfolio investment
to those securities in the three highest ratings, as described below, or if not
rated, of equivalent quality as determined by the Advisor to the Fixed Income
Fund. The various ratings used by the nationally recognized securities rating
services are described below.
A rating by a rating service represents the service's opinion as to the credit
quality of the security being rated. However, the ratings are general and are
not absolute standards of quality or guarantees as to the creditworthiness of an
issuer. Consequently, the Advisor believes that the quality of fixed income
securities in which the Funds may invest should be continuously reviewed and
that individual analysts give different weightings to the various factors
involved in credit analysis. A rating is not a recommendation to purchase, sell
or hold a security, because it does not take into account market value or
suitability for a particular investor. When a security has received a rating
from more than one service, each rating is evaluated independently. Ratings are
based on current information furnished by the issuer or obtained by the rating
services from other sources that they consider reliable. Ratings may be changed,
suspended or withdrawn as a result of changes in or unavailability of such
information, or for other reasons.
Standard & Poor's Ratings Group. The following summarizes the highest four
ratings used by Standard & Poor's Ratings Group ("S&P") for bonds which are
deemed to be "Investment-Grade Debt Securities" by the Advisor:
AAA - This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay principal.
AA - Debt rated AA is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in a small
degree.
A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than for debt in
higher rated categories.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
Bonds rated BB, B, CCC, CC and C are not considered by the Advisor to be
"Investment-Grade Debt Securities" and are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
bonds may have some quality and protective characteristics, these are outweighed
by large uncertainties or major risk exposures to adverse conditions.
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Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1.
The rating SP-1 is the highest rating assigned by S&P to municipal notes and
indicates very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics are given a
plus (+) designation.
Moody's Investors Service, Inc. The following summarizes the highest four
ratings used by Moody's Investors Service, Inc. ("Moody's") for bonds which are
deemed to be "Investment-Grade Debt Securities" by the Advisor:
Aaa - Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A - Debt which is rated A possesses many favorable investment attributes
and is to be considered as an upper medium grade obligation. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa - Debt which is rated Baa is considered as a medium grade obligation,
i.e., it is neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such debt lacks outstanding investment
characteristics and in fact has speculative characteristics as well.
Moody's applies numerical modifiers (l, 2 and 3) with respect to bonds rated Aa,
A and Baa. The modifier 1 indicates that the bond being rated ranks in the
higher end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the bond ranks in the lower end of
its generic rating category.
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<PAGE>
Bonds which are rated Ba, B, Caa, Ca or C by Moody's are not considered
"Investment-Grade Debt Securities" by the Advisor. Bonds rated Ba are judged to
have speculative elements because their future cannot be considered as well
assured. Uncertainty of position characterizes bonds in this class, because the
protection of interest and principal payments often may be very moderate and not
well safeguarded.
Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the security over any long period for time may be small. Bonds
which are rated Caa are of poor standing. Such securities may be in default or
there may be present elements of danger with respect to principal or interest.
Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
Bonds which are rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered to
have a superior capacity for repayment of short-term promissory obligations.
Issuers rated Prime-2 (or related supporting institutions) are considered to
have a strong capacity for repayment of short-term promissory obligations. This
will normally be evidenced by many of the characteristics of issuers rated
Prime-1 but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics, while
still appropriated may be more affected by external conditions. Ample alternate
liquidity is maintained.
The following summarizes the highest rating used by Moody's for short-term notes
and variable rate demand obligations:
MIG-l; VMIG-l - Obligations bearing these designations are of the best
quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
Duff & Phelps Credit Rating Co. The following summarizes the highest four
ratings used by Duff & Phelps Credit Rating Co. ("D&P") for bonds which are
deemed to be "Investment-Grade Debt Securities" by the Advisor:
AAA - Bonds that are rated AAA are of the highest credit quality. The risk
factors are considered to be negligible, being only slightly more than for
risk-free U.S. Treasury debt.
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<PAGE>
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.
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<PAGE>
BBB - Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and
repay principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have adverse
impact on these bonds, and therefore impair timely payment. The likelihood
that the ratings of these bonds will fall below investment grade is higher
than for bonds with higher ratings.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within a rating category.
Bonds rated BB, B and CCC by Fitch are not considered "Investment-Grade Debt
Securities" and are regarded, on balance, as predominantly speculative with
respect to the issuer's ability to pay interest and make principal payments in
accordance with the terms of the obligations. BB indicates the lowest degree of
speculation and CCC the highest degree of speculation.
The following summarizes the three highest ratings used by Fitch for short-term
notes, municipal notes, variable rate demand instruments and commercial paper:
F-1+ - Instruments assigned this rating are regarded as having the
strongest degree of assurance for timely payment.
F-1 - Instruments assigned this rating reflect an assurance of timely
payment only slightly less in degree than issues rated F-1+
F-2 - Instruments assigned this rating have satisfactory degree of
assurance for timely payment, but the margin of safety is not as great as
for issues assigned F-1+ and F-1 ratings.
35
<PAGE>
THE QUAKER FAMILY
OF MUTUAL FUNDS
August 1998
Dear Shareholder:
As of the close of June, 1998, we have completed the first full year of
investment activity within the Quaker Family of Funds. And what a year it
has been! The assets in the Quaker Funds have increased by more than five
times during the year to close the period at $26 million. Equity markets
rose dramatically over this 12 month period to reward investors with
substantial gains. Fixed income markets showed steady growth during this
period to reward investors with an attractive return with low risk.
QUAKER ENHANCED STOCK MARKET FUND
An investment in this Fund returned 28.3% over the 12 months ending in
June 1998. This is a broadly diversified portfolio of more than 150 stocks
identified by an eighty factor quantitative model from all industry
sectors. The S&P 500, which serves as the Fund's benchmark, rose 30.2%
over the same period. While the Fund performed well, it was unable to keep
pace with the index because of conservative underweighting in a number of
stocks that were bid up to very high P/E levels during the past 6 months.
QUAKER CORE EQUITY FUND
This Fund continued its emphasis on industry leading, investment grade
stocks during the year. Industry sectors that were favored included
consumer staples, health care, financial services and technology. The Fund
held positions in 67 companies at the end of June. Quaker Core Equity
gained 24.2% during the twelve months, falling somewhat short of the S&P
500 index. This result was influenced by very significant new investments
arriving in January, one of the most ebullient periods for the stock
market. Since it took several weeks to bring the assets to a fully
invested position, performance was negatively affected.
QUAKER AGGRESSIVE GROWTH FUND
The Quaker Aggressive Growth Fund has been pursuing returns with a
two-pronged portfolio strategy. At the end of June, the Fund was invested
in a combination of "special situation" stocks and larger capitalization
issues. The special situations in the Fund are spin-offs, corporate
restructurings and "tracking stocks" (entities holding a potential spin-off
operation). Larger cap stocks held by the Fund have strong earnings
momentum and reasonable valuations given their projected growth rates.
This Fund returned 26.7% over the past 12 months, in contrast with the S&P
500's return of 30.2%.
QUAKER MID-CAP VALUE FUND
The Quaker Mid-Cap Value Fund began investment activities in January
1998. This Fund focuses on companies with market capitalizations up to $6
billion. Stocks are selected by using value parameters, emphasizing strong
cash flow and improving fundamentals. There were some early successes,
with Money Store being acquired in short order by First Union, realizing a
100% return for the Fund. The best performing stock held by the
<PAGE>
Fund, Telespectrum Worldwide, is a restructuring/turnaround situation
which has already doubled in the Fund. Near term disappointments include
Ballard Medical and Cooper Tire. During its first 6 months of operations
ending in June, Quaker Mid-Cap Value has returned 9.2%. The relevant
index, the S&P 400 Mid-Cap, generated 8.0% during the same period.
QUAKER SMALL-CAP VALUE FUND
This Fund has been a particularly strong relative performer. This has
been achieved using a conservative value investment approach, while the
market has been responding very favorably to growth attributes. This Fund
is broadly diversified, with more than 180 stocks which are held in the
portfolio according to the industry weights of the Russell 2000 index. A
major contributor to the excess return of this Fund was the momentum of its
holdings. While value is the primary discipline, there is a search for
improving sentiment among security analysts and favorable price action.
The Fund's slightly larger capitalization size in relation to its benchmark
was favorable as well. Quaker Small-Cap Value returned 27.1% for the year
ending in June, while the Russell 2000 returned 16.6%. Since inception
(November 25, 1996) this Fund has generated a total return of 52.9% while
the Russell 2000 rose by 33.4%.
QUAKER FIXED INCOME FUND
In the 12 months ended June 1998, the Quaker Fixed Income Fund
generated a return of 10% for its investors. This Fund holds a high
quality portfolio of fixed income securities, including governments,
agencies, corporates and asset backed bonds. The return benefited from a
decline in bond yields during the period which caused the market value of
portfolio holdings to rise. The Salomon Broad Investment Grade Index
returned 10.6% during the same 12 month period.
WHAT LIES AHEAD?
Domestic equity markets have moved downward rather abruptly during late
July and early August. There is much speculation among analysts about the
depth and duration of this adjustment. To what extent will the financial
turmoil in the rest of the world witnessed during the past year become a
problem for United States markets? This immediate concern for the
direction of the market must be tempered by the proposition that serious
long term investors have goals measured in years and decades and to
appreciate that we have been generously rewarded in the recent past.
This is a good time to review financial strategies to focus on asset
allocation among investment styles and capitalization sizes and to make
necessary adjustments. Also consider utilizing fixed income exposure and
cash positions to dampen volatility as events unfold.
Sincerely,
/S/PETER F. WAITNEIGHT
Peter F. Waitneight
Chairman
ii
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
PERFORMANCE UPDATE -- $1,000 INVESTMENT
FOR THE PERIOD FROM NOVEMBER 25, 1996
(COMMENCEMENT OF OPERATIONS) TO JUNE 30, 1998
[ID -- PLOT POINTS FOR GRAPH]
Quaker Enhanced
---------------
11/25/96 $1,000 $1,000
12/31/96 1,016 981
3/31/97 1,021 1,007
6/30/97 1,190 1,183
9/30/97 1,292 1,271
12/31/97 1,323 1,308
3/31/98 1,484 1,490
6/30/98 1,528 1,539
|----------------------------|
| TOTAL RETURN |
|----------------------------|
| Commencement of operations |
| through 6/30/98 |
|----------------------------|
| 52.76% |
|----------------------------|
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.
o The graph assumes an initial $1,000 investment at November 25, 1996.
All dividends and distributions are reinvested.
o At June 30, 1998, the Fund would have grown to $1,528 -- total
investment return of 52.76% since November 25, 1996.
o At June 30, 1998, a similar investment in the S&P 500 Total Return
Index would have grown to $1,539 -- total investment return of 53.94% since
November 25, 1996.
o 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.
1
<PAGE>
QUAKER CORE EQUITY FUND
PERFORMANCE UPDATE -- $1,000 INVESTMENT
FOR THE PERIOD FROM NOVEMBER 25, 1996
(COMMENCEMENT OF OPERATIONS) TO JUNE 30, 1998
[ID -- PLOT POINTS FOR GRAPH]
Quaker Core Equity S&P 500 Index
------------------ -------------
11/25/96 $1,000 $1,000
12/31/96 980 981
3/31/97 983 1,007
6/30/97 1,165 1,183
9/30/97 1,262 1,271
12/31/97 1,270 1,308
3/31/98 1,412 1,490
6/30/98 1,447 1,539
|----------------------------|
| TOTAL RETURN |
|----------------------------|
| Commencement of operations |
| through 6/30/98 |
|----------------------------|
| 44.70% |
|----------------------------|
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.
o The graph assumes an initial $1,000 investment at November 25, 1996.
All dividends and distributions are reinvested.
o At June 30, 1998, the Fund would have grown to $1,447 -- total
investment return of 44.70% since November 25, 1996.
o At June 30, 1998, a similar investment in the S&P 500 Total Return
Index would have grown to $1,539 -- total investment return of 53.94% since
November 25, 1996.
o 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.
2
<PAGE>
QUAKER AGGRESSIVE GROWTH FUND
PERFORMANCE UPDATE -- $1,000 INVESTMENT
FOR THE PERIOD FROM NOVEMBER 25, 1996
(COMMENCEMENT OF OPERATIONS) TO JUNE 30, 1998
[ID -- PLOT POINTS FOR GRAPH]
Quaker Aggressive S&P 500 Index
----------------- -------------
11/25/96 $1,000 $1,000
12/31/96 1,034 981
3/31/97 1,045 1,007
6/30/97 1,127 1,183
9/30/97 1,307 1,271
12/31/97 1,244 1,308
3/31/98 1,408 1,490
6/30/98 1,427 1,539
|----------------------------|
| TOTAL RETURN |
|----------------------------|
| Commencement of operations |
| through 6/30/98 |
|----------------------------|
| 42.73% |
|----------------------------|
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 Aggressive 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.
o The graph assumes an initial $1,000 investment at November 25, 1996.
All dividends and distributions are reinvested.
o At June 30, 1998, the Fund would have grown to $1,427 -- total
investment return of 42.73% since November 25, 1996.
o At June 30, 1998, a similar investment in the S&P 500 Total Return
Index would have grown to $1,539 -- total investment return of 53.94% since
November 25, 1996.
o 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.
3
<PAGE>
QUAKER MID-CAP VALUE FUND
PERFORMANCE UPDATE -- $1,000 INVESTMENT
FOR THE PERIOD FROM JANUARY 6, 1998
(COMMENCEMENT OF OPERATIONS) TO JUNE 30, 1998
[ID -- PLOT POINTS FOR GRAPH]
Quaker Mid-Cap S&P 400 Mid-Cap Index
----------------- ----------------------
1/ 6/98 $1,000 $1,000
1/31/98 1,002 980
2/28/98 1,062 1,060
3/31/98 1,117 1,107
4/30/98 1,141 1,126
5/31/98 1,097 1,074
6/30/98 1,092 1,080
|----------------------------|
| TOTAL RETURN |
|----------------------------|
| Commencement of operations |
| through 6/30/98 |
|----------------------------|
| 9.20% |
|----------------------------|
This graph depicts the performance of the Quaker Mid-Cap Value Fund
versus the S&P 400 Mid-Cap Index. It is important to note that the Quaker
Mid-Cap Value 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.
o The graph assumes an initial $1,000 investment at January 6, 1998.
All dividends and distributions are reinvested.
o At June 30, 1998, the Fund would have grown to $1,092 -- total
investment return of 9.20% since January 6, 1998.
o At June 30, 1998, a similar investment in the S&P 400 Mid-Cap Index
would have grown to $1,080 -- total investment return of 8.01% since
January 6, 1998.
o 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.
4
<PAGE>
QUAKER SMALL-CAP VALUE FUND
PERFORMANCE UPDATE -- $1,000 INVESTMENT
FOR THE PERIOD FROM NOVEMBER 25, 1996
(COMMENCEMENT OF OPERATIONS) TO JUNE 30, 1998
[ID -- PLOT POINTS FOR GRAPH]
Quaker Small Cap Russell 2000 Index
----------------- ------------------
11/25/96 $1,000 $1,000
12/31/96 996 1,038
3/31/97 1,002 985
6/30/97 1,203 1,144
9/30/97 1,422 1,314
12/31/97 1,409 1,269
3/31/98 1,569 1,400
6/30/98 1,529 1,333
|----------------------------|
| TOTAL RETURN |
|----------------------------|
| Commencement of operations |
| through 6/30/98 |
|----------------------------|
| 52.89% |
|----------------------------|
This graph depicts the performance of the Quaker Small-Cap Value Fund
versus the Russell 2000 Index. It is important to note that the Quaker
Small-Cap Value 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.
o The graph assumes an initial $1,000 investment at November 25, 1996.
All dividends and distributions are reinvested.
o At June 30, 1998, the Fund would have grown to $1,529 -- total
investment return of 52.89% since November 25, 1996.
o At June 30, 1998, a similar investment in the Russell 2000 Index
would have grown to $1,333 -- total investment return of 33.34% since
November 25, 1996.
o 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.
5
<PAGE>
QUAKER FIXED INCOME FUND
PERFORMANCE UPDATE -- $1,000 INVESTMENT
FOR THE PERIOD FROM NOVEMBER 25, 1996
(COMMENCEMENT OF OPERATIONS) TO JUNE 30, 1998
[ID -- PLOT POINTS FOR GRAPH]
Quaker Fixed Salomon BIG Index
----------------- ------------------
11/25/96 $1,000 $1,000
12/31/96 996 995
3/31/97 985 990
6/30/97 1,016 1,026
9/30/97 1,049 1,061
12/31/97 1,077 1,091
3/31/98 1,091 1,109
6/30/98 1,117 1,135
|----------------------------|
| TOTAL RETURN |
|----------------------------|
| Commencement of operations |
| through 6/30/98 |
|----------------------------|
| 11.69% |
|----------------------------|
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.
o The graph assumes an initial $1,000 investment at November 25, 1996.
All dividends and distributions are reinvested.
o At June 30, 1998, the Fund would have grown to $1,117 -- total
investment return of 11.69% since November 25, 1996.
o At June 30, 1998, a similar investment in the Salomon Brothers Broad
Investment-Grade Index would have grown to $1,135 -- total investment
return of 13.46% since November 25, 1996.
o 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.
6
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
NUMBER MARKET
OF SHARES VALUE
--------- -----------
COMMON STOCK -- 95.99%
ADVERTISING -- 1.32%
Gannett Inc. Company 200 $ 14,213
Tribune Company 100 6,881
-----------
21,094
-----------
AEROSPACE & DEFENSE -- 2.22%
Allied Signal Inc. 400 17,750
General Dynamics Corp. 100 4,650
Parker Hannifin Corp. 100 3,813
United Technologies Corp. 100 9,250
-----------
35,463
-----------
AGRICULTURE -- 1.32%
Deere & Company 400 21,150
-----------
AIRCRAFT PARTS & AUXILIARY EQUIPMENT -- 0.24%
Teleflex Inc. 100 3,800
-----------
AIR TRANSPORTATION, SCHEDULED -- 1.23%
(a) America West Holdings Corp. CL B 100 2,856
Comair Holdings Inc. 100 3,088
SouthWest Airlines Company 200 5,925
UAL Corp. 100 7,800
-----------
19,669
-----------
APPAREL & FABRICS -- 0.35%
Burlington Industries Inc. New 400 5,625
-----------
AUTO CONTROLS -- 0.52%
Honeywell Inc. 100 8,356
-----------
AUTO & TRUCKS -- 1.20%
Ford Motor Company 100 5,900
General Motors Corp. 200 13,363
-----------
19,263
-----------
BAKERY PRODUCTS -- 0.41%
Interstate Bakeries Corp. New 200 6,638
-----------
BEVERAGES -- 2.39%
Coca-Cola Company 400 34,200
Coca-Cola Enterprises Inc. 100 3,925
-----------
38,125
-----------
7
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
NUMBER MARKET
OF SHARES VALUE
--------- -----------
COMMON STOCK -- (continued)
BIOLOGICAL PRODUCTS -- 0.82%
(a) Amgen Inc. 200 $ 13,075
-----------
BUILDING MATERIALS -- 0.67%
Vulcan Materials Company 100 10,669
-----------
CABLE & OTHER PAY TELEVISION SERVICES -- 0.24%
(a) Tele-Communications, Inc. Ser A TCI Group 100 3,844
-----------
COMMERCIAL SERVICES -- 0.17%
Ogden Corp. 100 2,769
-----------
COMPUTERS -- 2.56%
(a) Dell Computer Corp. 100 9,281
International Business Machines Inc. 200 22,963
(a) Storage Technology Corp. Par $.10 200 8,675
-----------
40,919
-----------
COMPUTER PERIPHERAL EQUIPMENT -- 0.24%
Symbol Technologies, Inc. 100 3,775
-----------
COMPUTER SOFTWARE & SERVICES -- 2.03%
(a) Microsoft Corp. 300 32,513
-----------
CONSTRUCTION MACHINERY & EQUIPMENT -- 0.72%
Sunstrand Corp. 200 11,450
-----------
CONVERTED PAPER & PAPERBOARD PRODUCTS -- 0.85%
Avery Dennison Corp. 100 5,375
Minnesota Mining and Manufacturing Company 100 8,219
-----------
13,594
-----------
ELECTRIC & OTHER SERVICES COMBINED -- 0.18%
Nipsco Industries Inc. 100 2,800
-----------
ELECTRIC SERVICES -- 0.81%
DTE Energy Company 100 4,038
Ipalco Enterprises Inc. 200 8,888
-----------
12,925
-----------
ELECTRONICS -- 2.28%
General Electric Company 400 36,400
-----------
ELECTRONIC COMPUTERS -- 0.33%
Tandy Corp. 100 5,306
-----------
8
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
NUMBER MARKET
OF SHARES VALUE
--------- -----------
COMMON STOCK -- (continued)
ELECTRONICS - SEMICONDUCTOR -- 0.46%
Intel Corp. 100 $ 7,413
-----------
ENTERTAINMENT -- 0.48%
(a) King World Productions, TNS Inc. 300 7,650
-----------
FABRICATED RUBBER PRODUCTS -- 0.27%
Carlisle Companies 100 4,306
-----------
FINANCIAL - BANKS, MONEY CENTER -- 3.35%
Chase Manhattan Corp. New 200 15,100
Comerica, Inc. 200 13,250
First Chicago NBD Corp. 200 17,725
Norwest Corp. 200 7,475
-----------
53,550
-----------
FINANCIAL - SAVINGS/LOANS/THRIFT -- 1.66%
First Federal Financial Corp. 100 5,200
Golden West Financial Corp. 200 21,263
-----------
26,463
-----------
FINANCIAL - SECURITIES BROKERS -- 4.01%
Bear Stearns Companies Inc. 300 17,063
Donaldson, Lufkin & Jenrette, Inc. New 300 15,244
Merrill Lynch & Co. Inc. 100 9,225
Morgan Stanley, Dean Witter, Discover and Co. New 200 18,275
Paine Webber Group Inc. 100 4,288
-----------
64,094
-----------
FINANCIAL SERVICES -- 2.71%
American Express Company 100 11,400
Comdisco, Inc. 400 7,600
Federal National Mortgage Assoc. 400 24,300
-----------
43,300
-----------
FIRE, MARINE & CASUALTY INSURANCE -- 0.40%
Mercury General Corp. New 100 6,444
-----------
FOOD AND KINDRED PRODUCTS -- 0.28%
Universal Foods Corp. 200 4,438
-----------
FOOD - WHOLESALE -- 0.83%
Supervalu Inc. 300 13,313
-----------
9
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
NUMBER MARKET
OF SHARES VALUE
--------- -----------
COMMON STOCK -- (continued)
GAS - DISTRIBUTION -- 0.25%
Nicor Inc. 100 $ 4,013
-----------
GENERAL BUILDING CONTRACTORS -- 0.84%
Armstrong World Industries Inc. 200 13,475
-----------
GRAIN MILLS PRODUCTS -- 0.47%
Kellogg Co. 200 7,513
-----------
GREETING CARDS -- 0.34%
Knight-Ridder, Inc. 100 5,506
-----------
HOMEBUILDERS -- 0.71%
Centex Corp. 300 11,325
-----------
HOUSEHOLD FURNITURE -- 0.18%
(a) Furniture Brands Int'l Inc. 100 2,806
-----------
HOUSEHOLD PRODUCTS & HOUSEWARES -- 0.62%
Maytag Corp. 200 9,875
-----------
INDUSTRIAL INORGANIC CHEMICALS -- 0.79%
Air Products & Chem Inc. 200 8,000
Georgia Gulf Corp. New 200 4,563
-----------
12,563
-----------
INSURANCE AGENTS, BROKERS & SERVICES -- 0.37%
Ambac Financial Group, Inc. 100 5,850
-----------
INSURANCE CARRIERS -- 0.22%
Horace Mann Educators Corp. New 100 3,450
-----------
INSURANCE - LIFE & HEALTH -- 1.08%
Jefferson-Pilot 200 11,588
SunAmerica, Inc. 100 5,744
-----------
17,331
-----------
INSURANCE - MULTILINE -- 3.47%
Allstate Corp. 300 27,469
American International Group, Inc. 100 14,600
Old Republic International Corp. 300 8,794
Torchmark Corp. 100 4,575
-----------
55,438
-----------
10
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
NUMBER MARKET
OF SHARES VALUE
--------- -----------
COMMON STOCK -- (continued)
LIFE INSURANCE -- 1.13%
Equitable Cos. Inc. 100 $ 7,494
Protective Life Corp. 100 3,669
Provident Cos. Inc. 200 6,900
-----------
18,063
-----------
MACHINE - CONSTRUCTION & MINING -- 0.99%
Caterpillar Inc. 300 15,863
-----------
MACHINE - DIVERSIFIED -- 1.85%
Aeroquip-Vickers Inc. 200 11,675
Cooper Industries, Inc. 200 10,988
Dover Corp. 200 6,850
-----------
29,513
-----------
MALT BEVERAGES -- 1.18%
Anheuser-Busch Co. Inc. 400 18,875
-----------
MISCELLANEOUS - DISTRIBUTION & WHOLESALE -- 0.49%
Unilever NV New York SHS ADR 100 7,894
-----------
MISCELLANEOUS - MANUFACTURING -- 0.32%
National Service Industries, Inc. 100 5,088
-----------
MORTGAGE BANKERS & CORRESPONDENTS -- 0.29%
Federal Home Loan Mtg. Corp. 100 4,706
-----------
MOTORCYCLES, BICYCLES, & PARTS -- 0.24%
Harley Davidson Inc. 100 3,875
-----------
MOTOR HOMES -- 0.25%
Fleetwood Enterprises Inc. 100 4,000
-----------
MOTOR VEHICLES & CARS BODIES -- 0.33%
Paccar Inc. 100 5,225
-----------
NATIONAL COMMERCIAL BANKS -- 3.35%
Bank America Corp. 100 8,644
First Tennessee Natl. Corp. 100 3,156
Mellon Bank Corp. 100 6,963
PNC Bank Corp. 100 5,381
Regions Financial Corp. 100 4,106
Republic New York Corp. 200 12,588
Star Banc Corp. 200 12,775
-----------
53,613
-----------
11
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
NUMBER MARKET
OF SHARES VALUE
--------- -----------
COMMON STOCK -- (continued)
NATURAL GAS TRANSMISSION -- 0.68%
Costal Corp. 100 $ 6,981
El Paso Natural Gas Company New 100 3,825
-----------
10,806
-----------
NEWSPAPER: PUBLISHING OR PRINTING -- 3.62%
Washington Post Co. Cl B 100 57,900
-----------
OFFICE & BUSINESS EQUIPMENT -- 0.90%
Pitney-Bowes, Inc. 300 14,438
-----------
OIL & GAS - EXPLORATION -- 0.96%
Mobil Corp. 200 15,325
-----------
OIL & GAS - INTERNATIONAL -- 0.89%
Exxon Corp. 200 14,263
-----------
OPERATIVE BUILDERS -- 0.37%
Pulte Corp. 200 5,975
-----------
PAINTS, VARNISHES, LACQUERS, ENAMELS -- 0.87%
PPG Industries, Inc. 200 13,913
-----------
PAPER MILLS -- 0.24%
Chesapeake Corp. of Virginia 100 3,894
-----------
PHARMACEUTICALS -- 4.36%
Bristol-Myers Squibb Company 200 22,988
Merck & Co., Inc. 200 26,750
Pfizer Inc. 100 10,869
Schering-Plough Corp. 100 9,163
-----------
69,769
-----------
PHARMACEUTICAL PREPARATION -- 0.95%
Abbott Labs 200 8,175
Warner Lambert Company 100 6,938
-----------
15,113
-----------
PLASTICS, MATERIALS, SYNTHETIC RESINS -- 1.30%
Rohm & Haas Company 200 20,788
-----------
PLASTICS PRODUCTS -- 0.42%
Illinois Tool Works Inc. 100 6,669
-----------
12
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
NUMBER MARKET
OF SHARES VALUE
--------- -----------
COMMON STOCK -- (continued)
PUMPS & PUMPING EQUIPMENT -- 0.23%
General Signal Corp. 100 $ 3,600
-----------
RADIO & TV BROADCASTING EQUIPMENT -- 0.84%
Harris Corp. 300 13,406
-----------
RAILROADS, LINE - HAUL OPERATING -- 1.02%
Canadian Pacific Ltd. New 400 11,350
Kansas City Southern Industries Company 100 4,963
-----------
16,313
-----------
REFUSE SYSTEMS -- 0.31%
USA Waste Services Inc. 100 4,938
-----------
RETAIL - APPAREL -- 0.95%
TJX Companies, Inc. New 200 4,825
VF Corp. 200 10,300
-----------
15,125
-----------
RETAIL - DEPARTMENT STORES -- 2.46%
Dayton Hudson Corp. 200 9,700
Wal-Mart Stores, Inc. 400 24,300
Federated Department Stores, Inc. 100 5,381
-----------
39,381
-----------
RETAIL - DRUG STORES & PROPRIETARY -- 0.26%
Walgreen Company 100 4,131
-----------
RETAIL - FAMILY CLOTHING STORES -- 0.77%
Gap Inc. 200 12,325
-----------
RETAIL - LUMBER & BUILDING MATERIALS DEALERS -- 0.51%
Lowe's Companies Inc. 200 8,113
-----------
RETAIL - WOMEN'S CLOTHING STORES -- 0.41%
Limited, Inc. 200 6,625
-----------
SAVINGS INSTITUTION, FEDERALLY CHARTERED -- 0.47%
Greenpoint Financial Corp. 200 7,525
-----------
SECURITY BROKERS, DEALERS & FLOTATION COS. -- 0.27%
Edwards (A.G.) Inc. 100 4,269
-----------
13
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
NUMBER MARKET
OF SHARES VALUE
--------- -----------
COMMON STOCK -- (continued)
SEMICONDUCTORS & RELATED DEVICES -- 0.60%
Rockwell Int'l Corp. New 200 $ 9,613
-----------
SERVICES - HEALTH SERVICES -- 0.59%
Cardinal Health Inc. 100 9,375
-----------
SERVICES - MISCELLANEOUS BUSINESS SERVICES -- 0.48%
Servicemaster Company 200 7,613
-----------
SOAP DETERGENT, CLEANING
PREPARATIONS, PERFUMES -- 2.08%
Colgate Palmolive Co. 100 8,800
Ecolab Inc. 200 6,200
Procter & Gamble Co. 200 18,213
-----------
33,213
-----------
STATE COMMERCIAL BANKS -- 2.92%
Amsouth Bancorp 200 7,863
Bank of New York Co. Inc. 300 18,206
Southtrust Corp. 100 4,350
Suntrust Banks, Inc. 200 16,263
-----------
46,681
-----------
STEEL WORKS, BLAST FURNACES & ROLLING MILLS -- 0.33%
Texas Industries, Inc. New 100 5,300
-----------
SUGAR & CONFECTIONERY PRODUCTS -- 0.86%
Hershey Foods Corp. 200 13,800
-----------
SURETY INSURANCE -- 0.36%
MGIC Investment Corp. Wis 100 5,706
-----------
TELECOMMUNICATIONS -- 0.29%
Alltel Corporation 100 4,650
-----------
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE) -- 0.54%
Century Telephone Enterprises Inc. 100 4,588
SBC Communications Inc. 100 4,000
-----------
8,588
-----------
TELEPHONE - LONG DISTANCE -- 0.36%
AT&T Corporation 100 5,713
-----------
TRANSPORTATION - RAIL -- 0.61%
Burlington Northern Santa Fe Corporation 100 9,819
-----------
14
<PAGE>
QUAKER ENHANCED STOCK MARKET FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
NUMBER MARKET
OF SHARES VALUE
--------- -----------
COMMON STOCK -- (continued)
UTILITIES - TELECOMMUNICATIONS -- 3.78%
Ameritech Corporation 400 $ 17,950
BellSouth Corporation 300 20,138
GTE Corporation 400 22,250
-----------
60,338
-----------
WATER SUPPLY -- 0.19%
American Water Works Co. Inc. 100 3,100
-----------
WHOLESALE - DURABLE GOODS - 0.31%
Grainger, W.W. Inc. 100 4,981
-----------
WHOLESALE - GROCERIES & RELATED PRODUCTS -- 0.32%
Sysco Corporation 200 5,125
-----------
TOTAL COMMON STOCKS (COST $1,413,526) 1,534,256
-----------
INVESTMENT COMPANIES -- 2.42%
Evergreen Money Market Treasury
Institutional Money 38,666
-----------
TOTAL INVESTMENT COMPANIES (COST $38,666) 38,666
-----------
TOTAL VALUE OF INVESTMENTS (COST $1,452,192 (b)) 98.41% $ 1,572,922
Other Assets Less Liabilities 1.59% 25,612
------- -----------
NET ASSETS 100.00% $ 1,598,534
======= ===========
(a) Non-income producing investment.
(b) Aggregate cost for financial reporting and federal income tax purposes is
the same. Unrealized appreciation of investments for financial reporting
and federal income tax purposes is as follows:
Unrealized appreciation $ 141,847
Unrealized depreciation (21,117)
-----------
NET UNREALIZED APPRECIATION $ 120,730
===========
See notes to financial statements.
15
<PAGE>
QUAKER CORE EQUITY FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
NUMBER MARKET
OF SHARES VALUE
--------- -----------
COMMON STOCK -- 98.71%
AEROSPACE & DEFENSE -- 4.25%
Allied Signal, Inc. 1,500 $ 66,563
The Boeing Company 1,400 62,388
Lockheed Martin Corporation 700 74,113
-----------
203,064
-----------
BEVERAGES -- 1.29%
PepsiCo, Inc. 1,500 61,781
-----------
BUSINESS SERVICES -- 2.56%
Electronic Data Systems Corporation 1,000 40,000
Reuters Group PLC 1,200 82,200
-----------
122,200
-----------
COMPUTERS -- 5.62%
Compaq Computer Corporation 2,000 56,750
Hewlett-Packard Company 2,000 119,750
International Business Machines, Inc. 800 91,850
-----------
268,350
-----------
COMPUTER SOFTWARE & HARDWARE -- 8.10%
Automatic Data Processing, Inc. 1,000 72,875
Ceridian Corporation 900 52,875
(a) Cisco Systems, Inc. 800 73,650
Computer Associates International, Inc. 1,500 83,344
(a) Safeguard Scientifics, Inc. 2,500 104,219
-----------
386,963
-----------
CONSUMER STAPLES -- 0.42%
(a) Vlasic Foods International, Inc. 1,000 20,125
-----------
CONTROLLED ENVIRONMENTS -- 0.35%
Honeywell Inc. 200 16,713
-----------
COSMETICS & PERSONAL CARE -- 6.72%
Colgate-Palmolive Company 1,300 114,400
Gillette Corporation 2,200 124,713
Procter & Gamble Company 900 81,956
-----------
321,069
-----------
ELECTRONICS -- 1.33%
General Electric Company 700 63,700
-----------
16
<PAGE>
QUAKER CORE EQUITY FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
NUMBER MARKET
OF SHARES VALUE
--------- -----------
COMMON STOCK -- (continued)
ELECTRONICS - SEMICONDUCTORS -- 1.79%
Intel Corporation 800 $ 59,300
Motorola, Inc. 500 26,281
-----------
85,581
-----------
ENERGY -- 1.15%
Royal Dutch Petroleum Company 1,000 54,813
-----------
ENTERTAINMENT -- 3.07%
Time Warner Inc. 1,100 93,981
The Walt Disney Company 500 52,530
-----------
146,511
-----------
FINANCIAL SERVICES -- 5.37%
Franklin Resources, Inc. 1,200 64,800
Federal National Mortgage Association 1,200 72,900
Morgan Stanley, Dean Witter, Discover & Company 1,300 118,788
-----------
256,488
-----------
FINANCIAL - BANKS, MONEY CENTER -- 7.60%
J.P. Morgan & Company Inc. 500 58,563
Mellon Bank Corporation 2,500 174,063
Nations Bank Corporation 1,000 76,500
PNC Bank Corporation 1,000 53,813
-----------
362,939
-----------
FINANCIAL - SECURITY BROKERS -- 2.05%
SLM Holdings Corporation 2,000 98,000
-----------
FOOD - PROCESSING -- 4.88%
Campbell Soup Company 500 26,563
Heinz (H.J.) Company 1,500 84,188
Hershey Foods Corporation 1,200 82,800
Phillip Morris Companies Inc. 1,000 39,375
-----------
232,926
-----------
INSURANCE - LIFE & HEALTH -- 1.27%
AFLAC, Inc. 2,000 60,625
-----------
INSURANCE - MULTILINE -- 3.70%
American International Group, Inc. 500 73,000
Cigna Corporation 1,500 103,500
-----------
176,500
-----------
17
<PAGE>
QUAKER CORE EQUITY FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
NUMBER MARKET
OF SHARES VALUE
--------- -----------
COMMON STOCK -- (continued)
MEDICAL SUPPLIES -- 2.32%
Johnson & Johnson 1,500 $ 110,625
-----------
MEDICAL - BIOTECHNOLOGY -- 6.26%
Merck & Company, Inc. 900 120,375
Pfizer Inc. 800 86,950
Schering-Plough Corporation 1,000 91,625
-----------
298,950
-----------
METALWORKING - MACHINERY & EQUIPMENT -- 0.79%
Kennametal Inc. 900 37,575
-----------
MINING -- 3.65%
Potash Corporation of Saskatachewan Inc. 1,600 120,900
Vulcan Materials Company 500 53,344
-----------
174,244
-----------
OFFICE & BUSINESS EQUIPMENT -- 2.10%
Xerox Corporation 700 71,138
(a) Staples, Inc. 1,000 28,938
-----------
100,076
-----------
OIL & GAS - EQUIPMENT & SERVICES -- 1.43%
Schlumberger Limited 1,000 68,312
-----------
OIL & GAS - EXPLORATION -- 1.12%
El Paso Natural Gas Company 1,400 53,550
-----------
OIL & GAS - INTERNATIONAL -- 1.19%
Exxon Corporation 800 57,050
-----------
PAPERBOARD PRODUCTS -- 1.20%
Minnesota Mining & Manufacturing 700 57,530
-----------
PAINTS, VARNISHES, LACQUERS,
ENAMELS & PRODUCTS -- 0.55%
Sherwin Williams Company 800 26,500
-----------
PLASTICS - SYNTHETICS -- 1.56%
DuPont De Nemours & Company 1,000 74,625
-----------
PHARMACEUTICAL PREPARATIONS -- 3.75%
Bristol-Myers Squibb Company 1,000 114,938
(a) Elan Corporation PLC 1,000 64,312
-----------
179,250
-----------
18
<PAGE>
QUAKER CORE EQUITY FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
NUMBER MARKET
OF SHARES VALUE
--------- -----------
COMMON STOCK -- (continued)
PUBLISHING -- 0.57%
E.W. Scripps Company Class (A) 500 $ 27,405
-----------
RAILROADS - LINE HAULING -- 0.52%
Kansas City Southern Industries Company 500 24,812
-----------
RESTAURANTS FOOD & SERVICE -- 3.16%
McDonald's Corporation 1,500 103,500
(a) Tricon Global Restaurants, Inc. 1,500 47,530
-----------
151,030
-----------
SUGAR & CONFECTIONERY PRODUCTS -- 2.05%
W.M. Wrigley Jr. Company 1,000 98,000
-----------
TECHNOLOGY -- 0.07%
Docucorp International, Inc. 500 3,281
-----------
TELECOMMUNICATIONS EQUIPMENT -- 4.58%
Bell Atlantic Corporation 1,000 45,625
Lucent Technologies, Inc. 1,400 116,462
Northern Telecom Limited 1,000 56,750
-----------
218,837
-----------
WATER SUPPLY -- 0.33%
American Water Works Company, Inc. 500 15,500
-----------
TOTAL COMMON STOCKS (Cost $3,984,653) 4,715,500
-----------
TOTAL VALUE OF INVESTMENTS (COST $3,984,653 (b)) 98.71% $ 4,715,500
Other Assets Less Liabilities 1.29% 61,600
------- -----------
NET ASSETS 100.00% $ 4,777,100
======= ===========
(a) Non-income producing investment.
(b) Aggregate cost for financial reporting and
federal income tax purposes is the same.
Unrealized appreciation of investments for
financial reporting and federal income
tax purposes is as follows:
Unrealized appreciation $ 785,737
Unrealized depreciation (54,890)
-----------
NET UNREALIZED APPRECIATION $ 730,847
===========
See notes to the financial statements.
19
<PAGE>
QUAKER AGGRESSIVE GROWTH FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
NUMBER MARKET
OF SHARES VALUE
--------- -----------
COMMON STOCK -- 71.65%
BANKING -- 2.23%
Nations Bank Corp 500 $ 38,250
-----------
BEVERAGES -- 2.64%
The Coca-Cola Company 300 25,650
Coca-Cola Enterprises 500 19,625
-----------
45,275
-----------
BOTTLED & CANNED SOFTDRINKS -- 0.67%
Whitman Corporation 500 11,469
-----------
BUSINESS SERVICES -- 1.69%
Sodexho Marriot Services Inc. 1,000 29,000
-----------
CHEMICAL & ALLIED PRODUCTS -- 0.23%
Great Lakes Chemical Corporation 100 3,944
-----------
CIGARETTES -- 1.15%
Phillip Morris Company 500 19,688
-----------
CONSTRUCTION & MACHINERY EQUIPMENT -- 0.93%
Caterpillar, Inc. 300 15,862
-----------
CONTROLLED ENVIRONMENTS -- 1.03%
Oak Industries 500 17,688
-----------
CONSUMER SERVICES -- 1.33%
ServiceMaster Co. 600 22,838
-----------
DEPARTMENT STORES -- 1.15%
May Department Store 300 19,650
-----------
FAMILY CLOTHING STORES -- 0.02%
(a) Abercrombie & Fitch 8 352
-----------
FINANCIAL SERVICES -- 4.82%
Federal Home Loan Management Corp. 400 18,825
Providian Financial Corp. 300 23,569
(a) Tele-Communications TCI Ventures Group 2,000 40,125
-----------
82,519
-----------
FINANCIAL - BANKS, MONEY CENTER -- 1.63%
Banc One Corporation 500 27,906
-----------
20
<PAGE>
QUAKER AGGRESSIVE GROWTH FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
NUMBER MARKET
OF SHARES VALUE
--------- -----------
COMMON STOCK -- (continued)
FOOD - PROCESSING -- 5.49%
Agibrands International, Inc. 650 $ 19,662
Campbell Soup Company 300 15,938
Ralstin-Ralston Purina Group 500 58,406
-----------
94,006
-----------
FOOD - WHOLESALE -- 1.10%
Ralcorp Holdings, Inc. 1,000 18,875
-----------
GROCERY STORES -- 0.71%
American Stores 500 12,094
-----------
HEALTHCARE -- 6.41%
Cardinal Health Inc. 200 18,750
(a) Neurex Corporation 3,000 91,125
-----------
109,875
-----------
INDUSTRIAL -- 2.71%
Hussman International, Inc. 2,500 46,406
-----------
INSURANCE AGENTS, BROKERS & SERVICES -- 2.60%
Hartford Financial Services Group Inc. 200 22,875
Mutual Risk Management Ltd. 600 21,750
-----------
44,625
-----------
INSURANCE - LIFE & HEALTH -- 0.85%
Old Republic International Corporation 500 14,656
-----------
INSURANCE - MULTILINE -- 2.42%
CIGNA Corporation 600 41,400
-----------
INSURANCE - PROPERTY & CASUALTY -- 3.01%
Mercury General Corporation 800 51,550
-----------
MEDICAL - BIOTECHNOLOGY -- 1.98%
Millennium Chemicals, Inc. 1,000 33,875
-----------
MEDICINAL - CHEMICALS & BOTANICAL PRODUCTS -- 0.85%
Martek Biosciences Corporation 1,000 14,563
-----------
MOTOR VEHICLES & CAR BODIES -- 1.72%
Ford Motor Company 500 29,500
-----------
PERSONAL CREDIT INSTITUTION -- 1.77%
Travelers Group, Inc. 500 30,312
-----------
21
<PAGE>
QUAKER AGGRESSIVE GROWTH FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
NUMBER MARKET
OF SHARES VALUE
--------- -----------
COMMON STOCK -- (continued)
PHARAMACEUTICALS -- 1.32%
(a) Vion Pharamaceuticals Inc. 2,000 $ 9,500
Zeneca Group PLC 300 13,162
-----------
22,662
-----------
PLASTIC PRODUCTS -- 1.17%
Illinois Tool Works, Inc. 300 20,006
-----------
RETAIL - APPAREL -- 0.56%
The TJX Corporation 400 9,650
-----------
RETAIL - GENERAL MERCHANDISE -- 1.18%
BJ's Wholesale Club, Inc. 500 20,312
-----------
SECURITY BROKERS, DEALERS, FLOTATION COS. -- 4.33%
Donaldson, Lufkin, & Jenrette, Inc. 500 25,406
Morgan Stanley Dean Witter Discover & Company 300 27,412
Paine Webber Group Inc. 500 21,438
-----------
74,256
-----------
STATE COMMERCIAL BANKS -- 3.45%
Allegiance Corporation 800 41,000
Bank of New York, Inc. 300 18,206
-----------
59,206
-----------
TECHNOLOGY -- 0.71%
(a) New Era of Networks 400 12,200
-----------
TELEPHONE APPARATUS -- 1.66%
Northern Telecom Ltd. 500 28,375
-----------
UTILITIES - TELECOMMUNICATIONS -- 4.36%
AT&T Corporation 300 17,138
GTE Corporation 400 22,250
Sprint Corporation 500 35,250
-----------
74,638
-----------
VARIETY STORES -- 1.77%
Wal-Mart Stores Inc. 500 30,375
-----------
TOTAL COMMON STOCKS (COST $1,154,829) 31,158 $ 1,227,858
-----------
22
<PAGE>
QUAKER AGGRESSIVE GROWTH FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
NUMBER MARKET
OF SHARES VALUE
--------- -----------
INVESTMENT COMPANIES -- 13.50%
Evergreen Money Market Treasury Institutional $ 231,255
-----------
Treasury Money Market Fund Institutional
Service Shares
TOTAL INVESTMENT COMPANIES (COST $231,255) $ 231,255
-----------
TOTAL VALUE OF INVESTMENTS (COST $1,386,084) $ 1,459,113
===========
OPEN SHORT POSITIONS -- (5.74%)
(a) Elan Corporation PLC 1,530 (98,398)
-----------
TOTAL OPEN SHORT POSITIONS (PROCEEDS $94,302) (98,398)
===========
TOTAL VALUE OF INVESTMENTS AND
OPEN SHORT POSITIONS (b) 79.41% $ 1,360,715
Other Assets Less Liabilities 20.59% 352,870
------- -----------
NET ASSETS 100.00% $ 1,713,585
======= ===========
(a) Non-income producing investment.
(b) Aggregate cost for financial reporting and
federal income tax purposes is the same.
Unrealized appreciation of investments for
financial reporting and federal income
tax purposes is as follows:
Unrealized appreciation $ 92,308
Unrealized depreciation (23,375)
-----------
NET UNREALIZED APPRECIATION $ 68,933
===========
See notes to financial statements.
23
<PAGE>
QUAKER MID CAP VALUE FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
NUMBER MARKET
OF SHARES VALUE
--------- -----------
COMMON STOCK -- 88.49%
CHEMICALS -- 4.54%
International Specialty Products 22,000 $ 409,750
-----------
COMMERCIAL SERVICES -- 5.58%
(a) Telespectrum Worldwide Inc. 25,400 222,250
The Reynolds & Reynolds Company 15,500 281,906
-----------
504,156
-----------
COMPUTER SOFTWARE & SERVICES -- 9.89%
Ceridian Corporation 7,100 417,125
(a) Daisytek International Corporation 10,500 267,094
(a) Symantec Corporation 8,000 209,000
-----------
893,219
-----------
CONSTRUCTION - HEAVY -- 1.93%
Granite Construction, Inc. 5,700 174,563
-----------
ELECTRONICS -- 2.78%
Tektronix, Inc 7,100 251,163
-----------
ENGINEERING & CONSTRUCTION -- 3.87%
Crane Company 7,200 349,650
-----------
ENERGY -- 3.19%
Ocean Energy, Inc. 14,744 288,430
-----------
FINANCIAL - THRIFT, SAVINGS & LOAN -- 14.29%
Roslyn Bancorp, Inc. 12,000 267,750
S&P Mid-Cap 400 Depository Receipts 14,700 1,023,487
-----------
1,291,237
-----------
HOLDING COMPANIES DIVERSIFIED -- 9.26%
The Coastal Corporation 5,300 370,006
Questar Corporation 14,800 290,450
Bergen Brunswig Corporation 3,800 176,225
-----------
836,681
-----------
MEDICAL SUPPLIES -- 5.49%
Ballard Medical Products 12,900 232,200
Becton, Dickinson & Company 3,400 263,925
-----------
496,125
-----------
MISCELLANEOUS - MANUFACTURING -- 6.55%
(a) Griffon Corporation 18,000 230,625
Kellwood Company 10,100 361,075
-----------
591,700
-----------
24
<PAGE>
QUAKER MID CAP VALUE FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
NUMBER MARKET
OF SHARES VALUE
--------- -----------
COMMON STOCK -- (continued)
OFFICE & BUSINESS EQUIPMENT -- 2.38%
Harris Corporation 4,800 $ 214,500
-----------
OIL & GAS - EXPLORATION -- 4.08%
(a) Newfield Exploration 14,800 368,150
-----------
OIL & GAS - DOMESTIC -- 1.99%
Amerada Hess Corporation 3,300 179,231
-----------
PERSONAL CREDIT INSTITUTIONS -- 2.88%
(a) Americredit Corporation 7,300 260,518
-----------
RETAIL - DEPARTMENT STORES -- 4.20%
(a) Profitt's, Inc 9,400 379,525
-----------
RETAIL - GROCERY -- 2.58%
Hannaford Brothers 5,300 233,200
-----------
TIRE & RUBBER -- 3.01%
Cooper Tire & Rubber Company 13,200 272,251
-----------
TOTAL COMMON STOCKS (COST $7,492,825) 7,994,049
-----------
INVESTMENT COMPANIES -- 2.81%
Evergreen Money Market Treasury Institutional
Treasury Money Market Fund Institutional
Service Shares
(COST $253,534) 253,534 253,534
-----------
TOTAL VALUE OF INVESTMENTS (COST $7,746,359) 91.30% $ 8,247,583
Other Assets Less Liabilities 8.70% 785,597
------- -----------
NET ASSETS 100.00% $ 9,033,180
======= ===========
(a) Non-income producing investment.
(b) Aggregate cost for financial reporting and
federal income tax purposes is the same.
Unrealized appreciation of investments for
financial reporting and federal income
tax purposes is as follows:
Unrealized appreciation $ 804,039
Unrealized depreciation (302,816)
-----------
NET UNREALIZED APPRECIATION $ 501,223
===========
See notes to financial statements.
25
<PAGE>
QUAKER SMALL-CAP VALUE FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
NUMBER MARKET
OF SHARES VALUE
--------- -----------
COMMON STOCK -- 80.80%
AEROSPACE & DEFENSE -- 1.16%
Litton Industries, Inc. 300 $ 17,700
Sunstrand Corporation 500 28,625
-----------
46,325
-----------
ADVERTISING AGENCIES -- 0.39%
(a) Catalina Marketing Corporation 300 15,580
-----------
AIR COURIER SERVICES -- 0.53%
Airborne Freight Corporation 600 20,963
-----------
AIR TRANSPORTATION -- 0.58%
(a) Midwest Express Holdings, Inc. 300 10,856
(a) Continental Airlines, Inc. 200 12,175
-----------
23,031
-----------
AUTO PARTS - ORIGINAL EQUIPMENT -- 0.45%
Arvin Industries, Inc. 500 18,156
-----------
AUTOS & TRUCKS -- 0.72%
Navistar International Corporation 1,000 28,875
-----------
BUILDING MATERIALS -- 1.71%
Lone Star Industries 400 30,825
Texas Industries, Inc. 300 15,900
Vulcan Materials Company 200 21,337
-----------
68,062
-----------
BUSINESS MACHINES -- 0.30%
Splash Technology Holdings, Inc. 700 12,030
-----------
BUSINESS SERVICES -- 2.60%
Complete Business Solutions, Inc. 900 32,344
(a) Integrated Circuit Systems, Inc. 1,000 16,625
(a) Mastech Corporation 1,000 28,125
(a) Personnel Group America, Inc. 600 12,000
Trigon Healthcare, Inc. 400 14,475
-----------
103,569
-----------
CATALOG & MAIL ORDER HOUSES -- 0.63%
(a) CDW Computer Center, Inc. 500 25,000
-----------
26
<PAGE>
QUAKER SMALL-CAP VALUE FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
NUMBER MARKET
OF SHARES VALUE
--------- -----------
COMMON STOCK -- (continued)
CHEMICALS -- 1.68%
The Geon Company 500 $ 11,469
Georgia Gulf Corporation 500 11,406
Millenium Chemicals, Inc. 700 23,713
Wellman, Inc. 900 20,419
-----------
67,007
-----------
CHEMICAL SERVICES -- 0.68%
Leasing Solutions, Inc. 600 17,250
(a) Veritas DGC Inc. 200 9,988
-----------
27,238
-----------
COMMERCIAL PRINTING -- 0.53%
World Color Press, Inc. 600 21,000
-----------
COMPUTERS -- 0.15%
(a) SMART Modular Technologies, Inc. 400 5,850
-----------
COMPUTER SOFTWARE & SERVICES -- 3.31%
(a) Cambridge Technology Partners, Inc. 200 10,925
Comdisco, Inc. 600 11,400
(a) Computer Horizon Corporation 600 22,238
(a) InterVoice, Inc. 1,200 21,300
Keane Inc. 500 28,000
Madge Networks NV 4,700 22,325
(a) Pomeroy Computer Resources, Inc. 600 15,638
-----------
131,826
-----------
CONSUMER DURABLES -- 0.58%
C & D Technologies, Inc. 400 23,200
-----------
CONSTRUCTION -- 1.41%
Centex Construction Products 600 23,100
D.R. Horton, Inc. 675 14,090
(a) Walter Industries, Inc. 1,000 18,938
-----------
56,128
-----------
DRUGS & MEDICINE -- 2.46%
(a) Arterial Vascular Engineering, Inc. 1,000 35,750
(a) ESC Medical Systems Ltd. 700 23,625
(a) NBTY, Inc. 1,100 20,213
Bergen Brunswig Corporation Class (A) 400 18,550
-----------
98,138
-----------
27
<PAGE>
QUAKER SMALL-CAP VALUE FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
NUMBER MARKET
OF SHARES VALUE
--------- -----------
COMMON STOCK -- (continued)
ELECTRICAL - MACHINERY, EQUIPMENT & SUPPLIES -- 0.51%
Exide Corporation 1,200 $ 20,175
-----------
ELECTRIC SERVICES -- 0.37%
El Paso Electric Company 1,600 14,700
-----------
ELECTRONICS -- 2.79%
Arrow Electronics, Inc. 500 10,875
(a) Berg Electronics Corporation 1,100 21,519
(a) CHS Electronics, Inc. 1,500 26,813
General Cable Corporation 1,000 28,875
(a) SCI Systems, Inc. 400 15,050
Technitrol, Inc. 200 7,988
-----------
111,120
-----------
ENERGY - RAW MATERIALS -- 0.30%
Cleco Corporation 400 11,900
-----------
ENTERTAINMENT -- 0.92%
Anchor Gaming 300 23,288
GTECH Holdings Corporation 400 13,475
-----------
36,763
-----------
FABRICATED RUBBER PRODUCTS -- 0.43%
Carlisle Companies, Inc. 400 17,225
-----------
FINANCIAL - BANKS, COMMERCIAL -- 1.87%
Commerce Bancshares, Inc. 157 7,664
Greenpoint Financial Corporation 400 15,050
Popular, Inc. 400 26,600
TR Financial Corporation 600 25,125
-----------
74,439
-----------
FINANCIAL - MISCELLANEOUS -- 3.01%
CMAC Investments Corporation 400 24,600
(a) Consumer Portfolio Services, Inc. 1,400 14,700
Dain Rauscher Corporation 300 16,425
Financial Security Assurance Holdings 300 17,625
SEI Corporation 400 24,800
(a) Southern Pacific Fund Corporation 1,400 21,963
-----------
120,113
-----------
28
<PAGE>
QUAKER SMALL-CAP VALUE FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
NUMBER MARKET
OF SHARES VALUE
--------- -----------
COMMON STOCK -- (continued)
FINANCIAL - SAVINGS/LOAN/THRIFT -- 1.32%
AMRESCO, Inc. 400 $ 11,650
(a) ContiFinancial Corporation 300 6,938
Dime Bancorp, Inc. 411 12,304
(a) FIRSTPLUS Financial Group, Inc. 600 21,600
-----------
52,492
-----------
FINANCIAL - SECURITIES BROKERS -- 2.04%
Edwards (A.G.), Inc. 450 19,209
Donaldson, Lufkin & Jenrette, Inc. 400 20,325
Paine Webber Group Inc. 450 19,294
Raymond James Financial, Inc. 750 22,452
-----------
81,280
-----------
FINANCIAL SERVICES -- 1.84%
Acceptance Insurance Companies 600 14,738
(a) AmeriCredit Corporation 600 21,413
Capital One Financial Corporation 300 37,256
-----------
73,407
-----------
FOOD - PROCESSING -- 0.74%
Interstate Bakeries Corporation 700 23,231
(a) Smithfield Foods, Inc. 200 6,100
-----------
29,331
-----------
FOOD - WHOLESALE -- 0.60%
Fleming Companies, Inc. 600 10,538
Supervalu Inc. 300 13,313
-----------
23,851
-----------
GENERAL INDUSTRIAL MACHINERY & EQUIPMENT -- 0.21%
Regal-Beloit Corporation 300 8,550
-----------
HELP SUPPLY SERVICES -- 1.18%
(a) CDI Corporation 200 5,350
(a) Interim Services, Inc. 700 22,488
(a) Volt Info Services, Inc 700 18,988
-----------
46,826
-----------
HOLDING COMPANIES - DIVERSIFIED -- 0.53%
(a) Anixter International Inc. 1,100 20,968
-----------
29
<PAGE>
QUAKER SMALL-CAP VALUE FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
NUMBER MARKET
OF SHARES VALUE
--------- -----------
COMMON STOCK -- (continued)
HOMEBUILDERS -- 0.75%
Centex Corporation 400 $ 15,100
(a) Champion Enterprises, Inc. 500 14,625
-----------
29,725
-----------
HOUSEHOLD PRODUCTS & HOUSEWARES -- 0.74%
(a) Furniture Brands International, Inc. 900 25,256
Harvety Furniture Company, Inc. 200 4,425
-----------
29,681
-----------
INSURANCE - LIFE & HEALTH -- 0.95%
Partnerre, Ltd. 300 15,300
PennCorp Financial Group, Inc. 900 18,450
Vesta Insurance Group, Inc. 200 4,262
-----------
38,012
-----------
INSURANCE - MULTILINE -- 0.80%
Americian National Insurance Company 100 10,525
Capital Re Corp 300 21,488
-----------
32,013
-----------
INSURANCE - PROPERTY & CASUALTY -- 3.52%
Everest Reinsurance Holdings, Inc. 500 19,219
Fremont General Corporation 200 10,838
LaSalle Re Holdings Ltd. 400 15,150
NAC Re Corp. 200 10,675
Orion Capital Corporation 300 16,762
PXRE Corporation 100 3,000
Reliance Group Holdings, Inc. 800 14,000
The First American Financial Corporation 300 27,000
The PMI Group, Inc. 200 14,675
TIG Holdings, Inc. 400 9,200
-----------
140,519
-----------
INSURANCE - TITLE -- 0.70%
Fidelity National Financial, Inc. 700 27,868
-----------
IRON & STEEL -- 1.30%
Bethlehem Steel Corporation 1,700 21,144
National Steel Corporation Class (B) 1,200 14,250
USX-U.S. Steel Group, Inc. 500 16,500
-----------
51,894
-----------
30
<PAGE>
QUAKER SMALL-CAP VALUE FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
NUMBER MARKET
OF SHARES VALUE
--------- -----------
COMMON STOCK -- (continued)
LIQUOR -- 0.62%
(a) Canadaigua Brands Class (A) 500 $ 24,594
-----------
MEASURING & CONTROLLING DEVICES -- 0.36%
(a) Input/Output, Inc. 800 14,250
-----------
MEDIA -- 0.64%
Hollinger International, Inc. Class (A) 1,500 25,500
-----------
MEDICAL - HOSPITAL MANAGEMENT & SERVICES -- 1.74%
(a) American Home Patient, Inc. 500 9,562
Integrated Health Services, Inc. 406 15,225
Mariner Health Group, Inc. 1,000 16,625
(a) NovaCare, Inc. 1,500 17,625
Sun Healthcare Group, Inc. 700 10,238
-----------
69,275
-----------
MEDICAL SUPPLIES -- 0.30%
Owens & Minor, Inc. 1,200 12,000
-----------
METAL FABRICATION & HARDWARE -- 0.62%
The Timken Company 800 24,650
-----------
MISCELLANEOUS - MANUFACTURING -- 2.08%
(a) Lexmark International Group, Inc. Class (A) 400 24,400
NACCO Industries, Inc. Class (A) 200 25,850
Trinity Industries, Inc. 600 24,900
Vitro Sociedad Anonima ADR 1,200 7,650
-----------
82,800
-----------
NON-DURABLE & ENTERTAINMENT -- 1.21%
Department 56, Inc. 600 21,300
(a) Sonic Corporation 1,200 26,850
-----------
48,150
-----------
NON-FERROUS METALS -- 0.36%
(a) Encore Wire Corporation 900 14,513
-----------
OFFICE & CLININCS OF DOCTORS OF MEDICINE -- 0.22%
(a) Coventry Healthcare, Inc. 600 8,925
-----------
31
<PAGE>
QUAKER SMALL-CAP VALUE FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
NUMBER MARKET
OF SHARES VALUE
--------- -----------
COMMON STOCK -- (continued)
OIL & GAS - DOMESTIC -- 1.84%
McDermott (J Ray) SA 300 $ 12,450
Sun Company, Inc. 500 19,406
Teekay Shipping, Corporation 900 22,556
Tesoro Petroleum Corporation 1,200 19,050
-----------
73,462
-----------
OIL & GAS - DRILLING -- 0.83%
(a) Cliffs Drilling Company 300 9,844
Helmerich & Payne, Inc. 400 8,900
(a) Key Energy Group, Inc. 1,100 14,439
-----------
33,183
-----------
OIL & GAS - FIELD SERVICES -- 0.33%
Pool Energy Services Company 900 13,275
-----------
OIL & GAS - OTHER SERVICES -- 1.06%
Rochester Gas & Electric Corporation 700 22,356
UGI Corporation 800 19,900
-----------
42,256
-----------
OPERATIVE BUILDERS -- 0.70%
(a) Fairfield Communities, Inc. 800 15,350
Kaufman & Broad Home Corporation 400 12,700
-----------
28,050
-----------
PACKAGING & CONTAINERS -- 0.30%
Ball Corporation 300 12,056
-----------
PAPER & FOREST PRODUCTS -- 0.44%
(a) Mail-Weil, Inc. 800 17,350
-----------
PHARMACEUTICALS -- 1.47%
Herbalife International, Inc. Class (A) 1,133 27,900
ICN Pharmaceuticals, Inc. 600 27,413
(a) PharMercia, Inc. 273 3,293
-----------
58,606
-----------
PREPACKAGED SOFTWARE -- 0.93%
(a) Intersolv, Inc. 1,000 16,062
(a) Symantec Corporation 800 20,900
-----------
36,962
-----------
32
<PAGE>
QUAKER SMALL-CAP VALUE FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
NUMBER MARKET
OF SHARES VALUE
--------- -----------
COMMON STOCK -- (continued)
PRODUCER GOODS -- 1.16%
Aeroquip-Vickers, Inc. 200 $ 11,675
Chart Industries 600 14,325
The Maitowoc Company, Inc. 500 20,156
-----------
46,156
-----------
PUMPS & PUMPING EQUIPMENT -- 0.35%
Graco, Inc. 400 13,950
-----------
PUBLISHING - PRINTING -- 0.45%
Bowne & Company, Inc. 400 18,000
-----------
REAL PROPERTY -- 0.42%
CB Commercial Real Estate Service Group 500 16,718
-----------
RESTAURANTS & FOOD SERVICE -- 2.79%
(a) Brinker International, Inc. 1,000 19,250
CKE Restaurants, Inc. 700 28,875
Daren Restaurants, Inc. 1,200 19,050
Foodmaker, Inc. 600 10,125
(a) Ryan's Family Steak Houses, Inc. 900 9,225
Ruby Tuesday, Inc. 1,600 24,800
-----------
111,325
-----------
RETAIL - APPAREL -- 1.60%
Ross Stores, Inc. 400 17,200
(a) The Dress Barn, Inc. 300 7,462
Paul Harris Stores, Inc. 1,300 17,225
(a) Payless Shoesource, Inc. 300 22,106
-----------
63,993
-----------
RETAIL - GENERAL MERCHANDISE -- 1.06%
(a) Best Buy Co., Inc. 800 28,900
Fingerhut Companies, Inc. 400 13,200
-----------
42,100
-----------
RETAIL - SPECIALTY LINE -- 0.54%
(a) Micro Warehouse, Inc. 1,400 21,700
-----------
STATE COMMERCIAL BANKS -- 1.37%
Allegiance Corporation 500 25,625
(a) First Republic Bank 800 28,900
-----------
54,525
-----------
33
<PAGE>
QUAKER SMALL-CAP VALUE FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
NUMBER MARKET
OF SHARES VALUE
--------- -----------
COMMON STOCK -- (continued)
TELECOMMUNICATIONS -- 1.08%
360 Communications Company 800 $ 25,600
(a) Brightpoint, Inc. 900 13,050
Cidco, Inc. 1,000 4,625
-----------
43,275
-----------
TELECOMMUNICATIONS EQUIPMENT -- 0.38%
(a) Paging Network, Inc. 600 8,400
Tadiran Ltd. 200 6,625
-----------
15,025
-----------
TEXTILES -- 0.60%
Burlington Industries, Inc. 1,700 23,906
-----------
TOBACCO -- 0.47%
Universal Corporation 500 18,688
-----------
TRANSPORTATION - AIR -- 1.12%
Alaska Air Group, Inc. 400 21,825
(a) America West Holdings, Company Class (B) 800 22,850
-----------
44,675
-----------
TRANSPORTATION - MISCELLANEOUS -- 0.48%
Sea Containers, Ltd. 500 19,125
-----------
UTILITIES - ELECTRIC -- 2.10%
Commonwealth Energy System 200 7,550
Marketspan Corporation 176 5,268
New York State Electric & Gas Corporation 500 20,812
Public Service Company of New Mexico 1,100 24,956
The United Illuminating Company 500 25,312
-----------
83,898
-----------
UTILITIES - GAS -- 0.17%
Westcoast Energy Inc. 300 6,694
-----------
VARIETY STORES -- 1.00%
AMES Department Stores, Inc. 1,000 26,312
Shopko Stores, Inc. 400 13,600
-----------
39,912
-----------
34
<PAGE>
QUAKER SMALL-CAP VALUE FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
NUMBER MARKET
OF SHARES VALUE
--------- -----------
COMMON STOCK -- (continued)
WHOLESALE - SPECIAL LINE -- 0.32%
(a) CellStar Corporation 1,000 $ 12,938
-----------
TOTAL COMMON STOCKS (COST $2,914,935) 3,221,290
-----------
INVESTMENT COMPANIES -- 0.86%
Evergreen Money Market Treasury Institutional
Treasury Money Market Fund Institutional
Service Shares
(COST $34,101) 34,101 34,101
-----------
TOTAL VALUE OF INVESTMENTS (COST $2,949,036 (b)) 81.66% $ 3,255,391
Other Assets Less Liabilities 18.34% 731,335
------- -----------
NET ASSETS 100.00% $ 3,986,726
======= ===========
(a) Non-income producing investment.
(b) Aggregate cost for financial reporting and
federal income tax purposes is the same.
Unrealized appreciation of investments for
financial reporting and federal income
tax purposes is as follows:
Unrealized appreciation $ 464,679
Unrealized depreciation (158,324)
-----------
NET UNREALIZED APPRECIATION $ 306,355
===========
See notes to financial statements.
35
<PAGE>
QUAKER FIXED INCOME FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1998
INTEREST MATURITY
PRINCIPAL RATE DATE VALUE
--------- -------- -------- ---------
MORTGAGE BACKED SECURITIES -- 34.26%
FHLMC 450,000 5.75% 15-Apr-08 $ 449,260
FNMA 500,000 5.75% 15-Jun-05 501,761
FNMA 1,000,000 6.50% 01-May-28 995,700
TOTAL MORTGAGE BACKED SECURITIES ---------
(COST $1,933,721) 1,946,721
---------
U.S. GOVERNMENT OBLIGATIONS -- 56.29%
U.S. Treasury Bond 530,000 0.00% 15-Nov-21 139,607
U.S. Treasury Bond 270,000 10.375% 15-Nov-12 361,631
U.S. Treasury Bond 100,000 8.00% 15-Nov-21 128,906
U.S. Treasury Note 420,000 11.125% 15-Aug-03 522,900
U.S. Treasury Note 935,000 7.00% 15-Jul-06 1,021,487
U.S. Treasury Note 101,000 5.375% 15-Feb-01 100,653
U.S. Treasury Note 900,000 6.25% 31-Aug-02 923,344
TOTAL U.S. GOVERNMENT OBLIGATIONS ---------
(COST $3,156,921) 3,198,529
---------
SHARES
--------
INVESTMENT COMPANIES -- 6.02%
Evergreen Money Market Treasury
Institutional Money 341,823 341,823
---------
TOTAL INVESTMENT COMPANIES
(COST $341,823) 341,823
---------
TOTAL VALUE OF INVESTMENTS
(COST $5,432,465 (a)) 96.57% $5,487,073
Other Assets Less Liabilities 3.43% 195,079
------- ----------
NET ASSETS 100.00% $5,682,152
======= ==========
(a) Aggregate cost for financial reporting
and federal income tax purposes is the same.
Unrealized appreciation of investments for
financial reporting and federal income
tax purposes is as follows:
Unrealized appreciation $ 58,450
Unrealized depreciation (3,842)
----------
NET UNREALIZED APPRECIATION $ 54,608
==========
36
<PAGE>
QUAKER INVESTMENT TRUST
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1998
<TABLE>
<CAPTION>
Enhanced Stock Core Equity Aggressive Mid-Cap Small Cap Fixed Income
Market Fund Fund Growth Fund Value Fund Value Fund Fund
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at value (cost $1,452,192,
$3,984,653, $1,386,084, $7,746,359,
$2,949,036 and $5,432,465) (note 2) $1,572,922 $4,715,500 $1,459,113 $8,247,583 $3,255,391 $5,487,073
Cash 14,118 5,450 25,363 667,291 117,439 71,450
Deposits with brokers for
securities sold short 0 0 47,468 0 0 0
Receivables:
Dividends and interest 1,707 4,613 2,799 8,013 2,563 86,978
Fund shares sold 0 55,870 102,837 144,751 606,440 35,182
Investment securities sold 0 0 169,514 125,033 0 0
Deferred organization expenses, net
(notes 2 and 4) 22,533 22,533 22,515 9,002 22,533 22,533
---------- ---------- ---------- ---------- ---------- ----------
TOTAL ASSETS 1,611,280 4,803,966 1,829,609 9,201,673 4,004,366 5,703,216
---------- ---------- ---------- ---------- ---------- ----------
LIABILITIES
Securities sold short, at value
(proceeds $94,302) 0 0 98,398 0 0 0
Payables:
Fund shares purchased 135 0 0 35,455 0 0
Investment securities purchased 0 0 1,269 112,145 0 0
Accrued expenses 10,878 11,147 12,020 8,923 11,311 8,411
Due to fund sponsor (notes 2 and 3) 1,733 15,719 4,337 11,970 6,329 12,653
---------- ---------- ---------- ---------- ---------- ----------
TOTAL LIABILITIES 12,746 26,866 116,024 168,493 17,640 21,064
---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS
(Applicable to 114,051, 331,256,
142,735, 826,469, 296,051 and 546,029
shares outstanding, respectively;
unlimited shares of $0.01 par value,
beneficial interest authorized) $1,598,534 $4,777,100 $1,713,585 $9,033,180 $3,986,726 $5,682,152
========== ========== ========== ========== ========== ==========
NET ASSET VALUE, REDEMPTION AND
OFFERING PRICE PER SHARE $14.02(1) $14.42(2) $12.01(3) $10.93(4) $13.47(5) $10.41(6)
========== ========== ========== ========== ========== ==========
NET ASSETS CONSIST OF
Paid-in capital $1,278,620 $4,032,994 $1,553,060 $8,412,859 $3,563,093 $5,640,544
Undistributed net investment
income (loss) 3,528 677 (540) (10,859) (4,147) 784
Accumulated net realized gain (loss)
on investments 195,656 12,582 92,132 129,957 121,425 (13,784)
Net unrealized appreciation
on investments 120,730 730,847 68,933 501,223 306,355 54,608
---------- ---------- ---------- ---------- ---------- ----------
$1,598,534 $4,777,100 $1,713,585 $9,033,180 $3,986,726 $5,682,152
========== ========== ========== ========== ========== ==========
</TABLE>
(1) $1,598,534 / 114,051 shares (4) $9,033,180 / 826,469 shares
(2) $4,777,100 / 331,256 shares (5) $3,986,726 / 296,051 shares
(3) $1,713,585 / 142,735 shares (6) $5,682,152 / 546,029 shares
See notes to the financial statements.
37
<PAGE>
QUAKER INVESTMENT TRUST
STATEMENTS OF OPERATIONS
YEAR ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Enhanced Stock Core Equity Aggressive Mid-Cap(1) Small Cap Fixed Income
Market Fund Fund Growth Fund Value Fund Value Fund Fund
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
INCOME:
Dividends $ 17,908 $ 29,985 $ 7,924 $ 23,712 $ 21,252 $ 0
Interest 2,476 3,049 10,399 12,734 4,501 157,991
-------- -------- -------- -------- -------- --------
TOTAL INCOME 20,384 33,034 18,323 36,446 25,753 157,991
-------- -------- -------- -------- -------- --------
EXPENSES:
Investment advisory fees (note 2) 6,433 17,770 10,415 26,346 16,356 12,948
Fund administration fees (note 2) 2,353 3,377 2,525 4,186 3,406 3,981
Fund accounting fees (note 2) 22,829 22,829 22,876 10,731 22,829 22,829
Security pricing fees 7,920 2,245 3,142 4,098 10,242 119
Custody fees 617 578 2,149 319 683 595
Shareholder servicing fees 3,938 3,941 4,277 3,165 4,175 3,598
Shareholder recordkeeping fees 5,009 4,998 4,998 1,973 4,998 4,998
Shareholder servicing distribution
fees (note 3) 2,573 5,982 3,462 8,785 5,451 4,317
Registration and filing
administration fees 1,626 1,718 2,081 1,341 2,165 1,711
Trustee fees and meeting expenses 156 156 157 78 156 153
Audit fees 4,001 4,001 4,012 1,984 4,001 4,001
Legal fees 2,785 2,785 2,793 1,381 2,785 2,785
Registration and filing expenses 634 1,366 4,187 1,647 3,321 598
Printing expenses 1,482 1,579 1,702 820 1,653 1,307
Amortization of deferred organizational
expenses (note 4) 6,756 6,756 6,775 997 6,756 6,756
Other operating expenses 2,630 3,154 2,634 1,373 2,833 1,968
-------- -------- -------- -------- -------- --------
TOTAL EXPENSES 71,742 83,235 78,185 69,224 91,810 72,664
Less:
Expense reimbursements (note 3) (49,880) (27,126) (45,445) (3,206) (40,418) (29,618)
Investment advisory fees
waived (note 2) (6,433) (17,770) (10,415) (9,928) (16,356) (12,948)
Shareholder service fees
waived (note 3) (2,573) (5,982) (3,462) (8,785) (5,451) (4,317)
-------- -------- -------- -------- -------- --------
NET EXPENSES 12,856 32,357 18,863 47,305 29,585 25,781
-------- -------- -------- -------- -------- --------
NET INVESTMENT INCOME (LOSS) 7,528 677 (540) (10,859) (3,832) 132,210
-------- -------- -------- -------- -------- --------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain (loss) from
investment transactions
before income taxes 290,761 16,584 297,196 129,957 259,589 (13,784)
Income taxes (note 1) 0 0 39,743 0 0 0
Less reimbursement (notes 1 and 3) 0 0 (39,743) 0 0 0
-------- -------- -------- -------- -------- --------
NET INCOME TAXES 0 0 0 0 0 0
-------- -------- -------- -------- -------- --------
NET REALIZED GAIN (LOSS) FROM
INVESTMENT TRANSACTIONS 290,761 16,584 297,196 129,957 259,589 (13,784)
-------- -------- -------- -------- -------- --------
INCREASE IN UNREALIZED APPRECIATION
ON INVESTMENTS 24,466 662,487 15,896 501,223 141,382 56,616
-------- -------- -------- -------- -------- --------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS 315,227 679,071 313,092 631,180 400,971 42,832
-------- -------- -------- -------- -------- --------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $322,755 $679,748 $312,552 $620,321 $397,139 $175,042
======== ======== ======== ======== ======== ========
</TABLE>
(1) The Quaker Mid-Cap Value Fund commenced operations on January 6, 1998.
See notes to the financial statements.
38
<PAGE>
QUAKER INVESTMENT TRUST
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Enhanced Stock Core Equity Aggressive Mid-Cap Small Cap Fixed Income
FOR THE YEAR ENDED JUNE 30, 1998 Market Fund Fund Growth Fund Value Fund(1) Value Fund Fund
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE IN NET ASSETS
OPERATIONS
Net investment income (loss) $ 7,528 $ 677 $ (540) $ (10,859) $ (3,832) $ 132,210
Net realized gain (loss) from
investment transactions 290,761 16,584 297,196 129,957 259,589 (13,784)
Increase in unrealized appreciation
on investments 24,466 662,487 15,896 501,223 141,382 56,616
---------- ---------- ---------- ---------- ---------- ----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 322,755 679,748 312,552 620,321 397,139 175,042
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (4,067) 0 (12) 0 (464) (131,435)
Net realized gain from investment
transactions (91,954) 0 (153,326) 0 0 0
Distribution in excess of net
realized gain 0 0 (51,738) 0 (138,164) 0
---------- ---------- ---------- ---------- ---------- ----------
TOTAL DISTRIBUTIONS (96,021) 0 (205,076) 0 (138,628) (131,435)
---------- ---------- ---------- ---------- ---------- ----------
CAPITAL SHARE TRANSACTIONS
Increase in net assets from Fund
share transactions (note 7) 589,226 3,578,827 485,153 8,412,859 2,394,742 5,062,615
---------- ---------- ---------- ---------- ---------- ----------
TOTAL INCREASE IN NET ASSETS 815,960 4,258,575 592,629 9,033,180 2,653,253 5,106,222
NET ASSETS
Beginning of period 782,574 518,525 1,120,956 0 1,333,473 575,930
---------- ---------- ---------- ---------- ---------- ----------
End of period $1,598,534 $4,777,100 $1,713,585 $9,033,180 $3,986,726 $5,682,152
========== ========== ========== ========== ========== ==========
FOR THE PERIOD FROM NOVEMBER 25, 1996
(COMMENCEMENT OF OPERATIONS) TO JUNE 30, 1997
INCREASE IN NET ASSETS
OPERATIONS
Net investment income $ 3,607 $ 1,024 $ 2,939 $ 0 $ 1,230 $ 12,277
Net realized gain (loss) from
investment transactions (3,149) (4,002) 6,734 0 54,417 0
Increase (decrease) in unrealized
appreciation on investments 96,264 68,360 53,037 0 164,973 (2,008)
---------- ---------- ---------- ---------- ---------- ----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS 96,722 65,382 62,710 0 220,620 10,269
---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (3,542) (1,024) (2,927) 0 (1,081) (12,268)
Net realized gain from
investment transactions 0 0 (6,734) 0 0 0
Distribution in excess of net
realized gain 0 0 0 0 (54,417) 0
---------- ---------- ---------- ---------- ---------- ----------
TOTAL DISTRIBUTIONS (3,542) (1,024) (9,661) 0 (55,498) (12,268)
---------- ---------- ---------- ---------- ---------- ----------
CAPITAL SHARE TRANSACTIONS
Increase in net assets from
Fund share transactions
(note 7) 689,394 454,167 1,067,907 0 1,168,351 577,929
---------- ---------- ---------- ---------- ---------- ----------
TOTAL INCREASE IN NET ASSETS 782,574 518,525 1,120,956 0 1,333,473 575,930
NET ASSETS
Beginning of period 0 0 0 0 0 0
---------- ---------- ---------- ---------- ---------- ----------
End of period $ 782,574 $ 518,525 $1,120,956 $ 0 $1,333,473 $ 575,930
========== ========== ========== ========== ========== ==========
</TABLE>
(1) The Quaker Mid-Cap Value Fund commenced operations on January 6, 1998.
See notes to the financial statements.
39
<PAGE>
QUAKER INVESTMENT TRUST
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
ENHANCED STOCK CORE EQUITY AGGRESSIVE GROWTH
MARKET FUND FUND FUND
--------------------------- ---------------------------- --------------------------
FOR THE FOR THE FOR THE
PERIOD FROM PERIOD FROM PERIOD FROM
YEAR NOVEMBER 25, 1996 YEAR NOVEMBER 25, 1996 YEAR NOVEMBER 25, 1996
ENDED (COMMENCEMENT OF ENDED (COMMENCEMENT OF ENDED (COMMENCEMENT OF
JUNE 30, OPERATIONS) TO JUNE 30, OPERATIONS) TO JUNE 30, OPERATIONS) TO
1998 JUNE 30, 1997 1998 JUNE 30, 1997 1998 JUNE 30, 1997
--------------------------- ---------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.83 $ 10.00 $ 11.61 $ 10.00 $ 11.16 $ 10.00
---------- -------- ---------- -------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) 0.07 0.07 0.00 0.04 0.00 0.04
Net realized and unrealized gain
(loss) on investments 3.10 1.83 2.81 1.61 2.69 1.23
---------- -------- ---------- -------- ---------- ----------
TOTAL FROM INVESTMENT OPERATIONS 3.17 1.90 2.81 1.65 2.69 1.27
---------- -------- ---------- -------- ---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (0.04) (0.07) 0.00 (0.04) 0.00 (0.04)
Net realized gain from investment
transactions (0.94) 0.00 0.00 0.00 (1.38) (0.07)
Distribution in excess of net
realized gain 0.00 0.00 0.00 0.00 (0.46) 0.00
---------- -------- ---------- -------- ---------- ----------
TOTAL DISTRIBUTIONS (0.98) (0.07) 0.00 (0.04) (1.84) (0.11)
---------- -------- ---------- -------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $14.02 $11.83 $14.42 $11.61 $12.01 $11.16
========== ======== ========== ======== ========== ==========
TOTAL RETURN 28.32% 19.04%(b) 24.20% 16.50%(b) 26.57% 12.68%(b)
RATIOS/SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $1,598,534 $782,574 $4,777,100 $518,525 $1,713,585 $1,120,956
RATIO OF EXPENSES TO AVERAGE
NET ASSETS
Before expense reimbursements and
waived fees 5.58% 16.44%(a) 3.48% 21.30%(a) 8.09% 13.44%(a)
After expense reimbursements and
waived fees 1.00% 1.00%(a) 1.35% 1.35%(a) 1.35% 1.34%(a)
RATIO OF NET INVESTMENT INCOME (LOSS) TO
AVERAGE NET ASSETS
Before expense reimbursements and
waived fees (3.99%) (14.32%)(a) (2.10%) (19.47%)(a) (6.72%) (9.18%)(a)
After expense reimbursements and
waived fees 0.59% 1.14%(a) 0.03% 0.49%(a) (0.04%) 0.64%(a)
PORTFOLIO TURNOVER RATE 274.63% 34.26% 64.36% 11.49% 876.64% 778.01%
</TABLE>
(a) Annualized.
(b) Aggregate total return, not annualized.
See notes to the financial statements.
40
<PAGE>
QUAKER INVESTMENT TRUST
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
MID-CAP SMALL CAP FIXED INCOME
VALUE FUND VALUE FUND FUND
---------------- -------------------------- ----------------------------
FOR THE FOR THE FOR THE
PERIOD FROM PERIOD FROM PERIOD FROM
JANUARY 6, 1998 YEAR NOVEMBER 25, 1996 YEAR NOVEMBER 25, 1996
(COMMENCEMENT OF ENDED (COMMENCEMENT OF ENDED (COMMENCEMENT OF
OPERATIONS) TO JUNE 30, OPERATIONS) TO JUNE 30, OPERATIONS) TO
JUNE 30, 1998 1998 JUNE 30, 1997 1998 JUNE 30, 1997
---------------- -------------------------- ----------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 11.53 $ 10.00 $ 9.89 $ 10.00
---------- ---------- ---------- ---------- --------
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss) (0.02) (0.01) 0.01 0.47 0.26
Net realized and unrealized gain
(loss) on investments 0.95 2.99 2.02 0.50 (0.11)
---------- ---------- ---------- ---------- --------
TOTAL FROM INVESTMENT OPERATIONS 0.93 2.98 2.03 0.97 0.15
---------- ---------- ---------- ---------- --------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income 0.00 0.00 (0.01) (0.45) (0.26)
Net realized capital gain 0.00 (1.04) (0.49) 0.00 0.00
Distribution in excess of net
realized gain 0.00 0.00 0.00 0.00 0.00
---------- ---------- ---------- ---------- --------
TOTAL DISTRIBUTIONS 0.00 (1.04) (0.50) (0.45) (0.26)
---------- ---------- ---------- ---------- --------
NET ASSET VALUE, END OF PERIOD $10.93 $13.47 $11.53 $10.41 $9.89
========== ========== ========== ========== ========
TOTAL RETURN 9.30%(b) 27.04% 20.35%(b) 9.97% 1.57%(b)
RATIOS/SUPPLEMENTAL DATA
NET ASSETS, END OF PERIOD $9,033,180 $3,792,089 $1,333,473 $5,682,152 $575,930
RATIO OF EXPENSES TO AVERAGE
NET ASSETS
Before expense reimbursements and
waived fees 1.97%(a) 4.20% 10.50%(a) 2.53% 16.56%(a)
After expense reimbursements and
waived fees 1.35%(a) 1.35% 1.31%(a) 0.90% 0.90%(a)
RATIO OF NET INVESTMENT INCOME (LOSS)
TO AVERAGE NET ASSETS
Before expense reimbursements and
waived fees (0.93%)(a) (3.03%) (8.96%)(a) 2.96% (10.87%)(a)
After expense reimbursements and
waived fees (0.31%)(a) (0.18%) 0.22%(a) 4.59% 4.79%(a)
PORTFOLIO TURNOVER RATE 13.86% 129.58% 90.63% 81.55% 0.00%
</TABLE>
(a) Annualized.
(b) Aggregate total return, not annualized.
See notes to the financial statements.
41
<PAGE>
QUAKER INVESTMENT TRUST
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1998
- - ------------------------------------------------------------------------------
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The Quaker Investment Trust (the "TRUST"), a diversified, open-end
management investment company, was organized as a Massachusetts Business Trust
on October 24, 1990, and is registered under the Investment Company Act of
1940, as amended. The Trust's Agreement and Declaration of Trust permits the
Trustees to issue an unlimited number of shares of beneficial interest. The
Trust has established six series: the Quaker Core Equity Fund, the Quaker
Aggressive Growth Fund, the Quaker Enhanced Stock Market Fund, the Quaker
Small Cap Value Fund, the Quaker Mid-Cap Value Fund and the Quaker Fixed
Income Fund (each a "FUND" and collectively, the "FUNDS"). The investment
objectives of each Fund are set forth below.
The Quaker Enhanced Stock Market Fund (the "ENHANCED STOCK MARKET FUND"),
The Quaker Core Equity Fund (the "CORE EQUITY FUND"), The Quaker Aggressive
Growth Fund (the "AGGRESSIVE GROWTH FUND"), and The Quaker Small Cap Value
Fund (the "SMALL CAP VALUE FUND") all commenced operations on November 25,
1996. The Quaker Mid-Cap Value Fund (the "MID-CAP VALUE FUND") commenced
operations on January 6, 1998. The investment objective of these Funds is to
provide shareholders with long-term capital growth by investing primarily in
equity securities of domestic U.S. companies.
The Quaker Fixed Income Fund (the "FIXED INCOME FUND") commenced
operations on November 25, 1996. The investment objective of this Fund is to
generate current income, preserve capital and maximize total returns through
active management of investment grade income securities.
A. SECURITY VALUATION. Each 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. (3:00 p.m. for securities of the Fixed Income
Fund), 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 Aggressive Growth Fund did not comply with
the provisions of the Internal Revenue Code applicable to regulated investment
companies for the tax year ended August 31, 1997. Consequently, a provision
for federal and state income taxes on net built-in realized gains as of August
31, 1997, has been included in the financial statements. For the tax year
beginning September 1, 1997, the Fund has complied with the provisions of the
Internal Revenue Service Code applicable to regulated investment companies.
Quaker Funds, Inc. (the "SPONSOR") has agreed to pay all taxes associated
with the Aggressive Growth Fund's tax status.
For the other Funds, no provision has been made for federal income taxes
or personal holding company taxes since it is the policy of each 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.
42
<PAGE>
QUAKER INVESTMENT TRUST
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1998
- - ------------------------------------------------------------------------------
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER
INFORMATION -- (CONTINUED)
Due to a concentration of shareholders at June 30, 1998, each 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 due to investments
which have a different basis for financial statement and 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 each 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.
The Aggressive Growth Fund makes short sales of investments, which are
transactions in which the Fund sells a security it does not own. To complete
such a transaction, the Fund must borrow the security to make delivery to the
buyer. The Fund is then obligated to replace the security borrowed by
purchasing it at the market price at the time of replacement. The proceeds of
short sales are retained by the broker to the extent necessary to meet margin
requirements, until the short position is closed out.
D. DISTRIBUTIONS TO SHAREHOLDERS. Except for the Fixed Income Fund which
declares dividends monthly, each 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. Each 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 may affect the reported amounts of
assets and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
NOTE 2 -- INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to separate investment advisory agreements, the Advisors,
Fiduciary Asset Management Company for the Enhanced Stock Market Fund and the
Fixed Income Fund, West Chester Capital Advisors, Inc. for the Core Equity
Fund, DG Capital Management, Inc. for the Aggressive Growth Fund, Compu-Val
Investments, Inc. for the Mid-Cap Value Fund and Aronson + Partners for the
Small Cap Value Fund (the "ADVISORS") provide each Fund with a continuous
program of supervision of the Fund's assets, including the composition of its
portfolio, and furnish advice and recommendations with respect to investments,
investment policies and the purchase and sale of securities. As compensation
for their services, the Advisors receive a fee at an annual rate of the Fund's
average daily net assets. The Advisors intend to voluntarily waive
43
<PAGE>
QUAKER INVESTMENT TRUST
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1998
- - ------------------------------------------------------------------------------
NOTE 2 -- INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY
TRANSACTIONS -- (CONTINUED)
all or a portion of their fees. There can be no assurance that the
foregoing voluntary fee waivers will continue. For the period ended June 30,
1998, each Advisor has voluntarily waived its fee as follows:
ADVISORY FEE ADVISORY FEE
RATE WAIVER
------------ ------------
Enhanced Stock Market Fund... 0.50% $ 6,433
Core Equity Fund ............ 0.75 17,770
Aggressive Growth Fund....... 0.75 10,415
Mid-Cap Value Fund........... 0.75 9,928
Small Cap Value Fund......... 0.75 16,356
Fixed Income Fund............ 0.45 12,948
As of May 1, 1998, The Declaration Service Company (the "ADMINISTRATOR")
replaced The Nottingham Company as the Administrator for each Fund. The
Administrator provides administrative services to and is generally responsible
for the overall management and day-to-day operations of each 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 0.05%
of each Fund's first $25 million of average daily net assets, 0.09% of the
next $25 million of average daily net assets, 0.07% of the next $50 million of
average daily net assets, and 0.06% of its average daily net assets in excess
of $100 million. The Administrator also receives an annual fee of $17,000 for
accounting and record keeping services. Additionally, the Administrator
charges each Fund for servicing of shareholder accounts and registration of
each Fund's shares. The Administrator also charges each Fund for certain
expenses involved with the daily valuation of portfolio securities.
As of May 1, 1998, The Declaration Service Company (the "TRANSFER AGENT")
replaced NC Shareholder Services, LLC as the Transfer Agent for each Fund.
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. As compensation
for its services, the Transfer Agent receives an annual fee of $15,000.
Certain Trustees and officers of the Trust are also officers of the
Advisor, the Distributor or the Administrator.
Certain organizational expenses totaling $10,000 were paid by Quaker
Funds, Inc. on behalf of the Mid-Cap Value Fund to a company controlled by the
Fund's former Administrator, The Nottingham Company.
Amounts due to the Fund Sponsor represent organizational costs paid by the
Sponsor on behalf of the Funds, net of expense reimbursements due from the
Sponsor for expenses incurred in excess of operating expense limitations.
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 each Fund's
44
QUAKER INVESTMENT TRUST
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1998
- - ------------------------------------------------------------------------------
NOTE 3 -- SERVICE FEES -- (CONTINUED)
investment advisor, arrange for payment of investment advisory and
administrative fees, coordinate payments under each Fund's Distribution Plan,
develop communications with existing Fund shareholders, assist in responding
to shareholder inquiries, and will provide other shareholder services. As
compensation for these services, Quaker Funds, Inc. receives a fee according
to the table below of each Fund's average daily net assets. The Sponsor
intends to voluntarily waive all or a portion of its fee and reimburse
expenses of each Fund to limit total Fund operating expenses. There can be no
assurance that the voluntary fee waivers or reimbursements will continue. For
the year ended June 30, 1998, the amounts are as follows:
SPONSOR OPERATING FEE REIMBURSED
FEE(1) EXPENSES(1) WAIVERS EXPENSES
------- ----------- ------- ----------
Enhanced Stock Market Fund. 0.20% 1.00% $2,573 $49,880
Core Equity Fund........... 0.25 1.35 5,982 27,126
Aggressive Growth Fund..... 0.25 1.35 3,462 85,188*
Mid-Cap Value Fund......... 0.25 1.35 8,785 3,206
Small Cap Value Fund....... 0.25 1.35 5,451 40,418
Fixed Income Fund.......... 0.45 0.90 4,317 29,618
(1) Percentage of average daily net assets.
* Reimbursed expenses for the Aggressive Growth Fund include
$39,743 in reimbursed taxes.
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 each Fund except the Mid-Cap Value Fund. The
Mid-Cap Value Fund incurred $10,000 in connection with its organization and
registration of shares and has assumed that amount.
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
For the year ended June 30, 1998, purchases and sales of investment
securities (excluding short-term investments) aggregated as follows:
PURCHASES SALES
----------- -----------
Enhanced Stock Market Fund...... $ 3,941,252 $ 3,480,305
Core Equity Fund................ 5,050,407 1,525,742
Aggressive Growth Fund.......... 10,168,331 10,289,905
Mid-Cap Value Fund.............. 8,184,328 821,460
Small Cap Value Fund............ 4,315,317 2,796,629
Fixed Income Fund............... 6,912,136 2,314,524
45
<PAGE>
QUAKER INVESTMENT TRUST
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1998
- - ------------------------------------------------------------------------------
NOTE 6 -- DEFERRED INCOME TAXES
As discussed in Note 1, the Aggressive Growth Fund did not comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies for the tax year ended August 31, 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, 1998 and June 30, 1997 are as follows:
1998 1997
-------- --------
Deferred tax asset arising from unrealized
depreciation on investments $ 0 $ 3,300
Less valuation allowance 0 0
-------- --------
0 3,300
Deferred tax liability arising from
unrealized appreciation on investments 0 (12,600)
-------- --------
Net deferred tax liability $ 0 $ (9,300)
======== ========
The valuation allowance did not change for the year ended June 30, 1998.
The Fund Sponsor has agreed to pay all taxes associated with the Fund's
current year tax status.
For the tax year beginning September 1, 1997, all of the Funds complied
with the provisions of the Internal Revenue Code applicable to regulated
investment companies.
NOTE 7 -- FUND SHARE TRANSACTIONS
At June 30, 1998, there were an unlimited number of shares of beneficial
interest with a $0.01 par value, authorized. The following table summarizes
the activity in shares of each Fund:
ENHANCED STOCK MARKET FUND
FOR THE PERIOD FROM
FOR THE YEAR NOVEMBER 25, 1996
ENDED (COMMENCEMENT OF OPERATIONS)
JUNE 30, 1998 TO JUNE 30, 1997
------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
------- --------- ------- ---------
Shares sold.................... 49,185 $ 612,241 67,743 $ 707,083
Shares issued to shareholders
in reinvestment
of distributions............. 7,682 92,775 301 3,442
Shares redeemed................ (8,976) (115,790) (1,884) (21,131)
------- --------- ------- ---------
Net increase................... 47,891 $ 589,226 66,160 $ 689,394
========= =========
Shares outstanding:
Beginning of period.......... 66,160 0
------- -------
End of period................114,051 66,160
======= =======
46
<PAGE>
QUAKER INVESTMENT TRUST
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1998
- - ------------------------------------------------------------------------------
NOTE 7 -- FUND SHARE TRANSACTIONS -- (CONTINUED)
CORE EQUITY FUND
FOR THE PERIOD FROM
FOR THE YEAR NOVEMBER 25, 1996
ENDED (COMMENCEMENT OF OPERATIONS)
JUNE 30, 1998 TO JUNE 30, 1997
------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
------- ---------- ------- ---------
Shares sold................... 295,920 $3,698,776 45,060 $458,899
Shares issued to shareholders
in reinvestment
of distributions............ 404 5,088 93 1,024
Shares redeemed............... (9,731) (125,037) (490) (5,756)
------- ---------- ------ --------
Net increase.................. 286,593 $3,578,827 44,663 $454,167
========== ========
Shares outstanding:
Beginning of period......... 44,663 0
------- ------
End of period............... 331,256 44,663
======= ======
AGGRESSIVE GROWTH FUND
FOR THE PERIOD FROM
FOR THE YEAR NOVEMBER 25, 1996
ENDED (COMMENCEMENT OF OPERATIONS)
JUNE 30, 1998 TO JUNE 30, 1997
------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
------- --------- ------- ---------
Shares sold................... 37,598 $ 437,842 101,462 $1,078,209
Shares issued to shareholders
in reinvestment
of distributions............ 18,893 205,076 868 9,661
Shares redeemed............... (14,243) (157,765) (1,843) (19,963)
------- -------- ------- ----------
Net increase.................. 42,248 $485,153 100,487 $1,067,907
======== ==========
Shares outstanding:
Beginning of period......... 100,487 0
------- -------
End of period............... 142,735 100,487
======= =======
47
<PAGE>
QUAKER INVESTMENT TRUST
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1998
- - ------------------------------------------------------------------------------
NOTE 7 -- FUND SHARE TRANSACTIONS -- (CONTINUED)
MID-CAP VALUE FUND
FOR THE PERIOD FROM
JANUARY 6, 1998
(COMMENCEMENT OF OPERATIONS)
TO JUNE 30, 1998
----------------------------
SHARES AMOUNT
------- ---------
Shares sold........................ 881,764 9,018,099
Shares issued to shareholders
in reinvestment
of distributions................. 0 0
Shares redeemed.................... (55,295) (605,240)
------- ----------
Net increase....................... 826,469 $8,412,859
==========
Shares outstanding:
Beginning of period.............. 0
-------
End of period.................... 826,469
=======
SMALL CAP VALUE FUND
FOR THE PERIOD FROM
FOR THE YEAR NOVEMBER 25, 1996
ENDED (COMMENCEMENT OF OPERATIONS)
JUNE 30, 1998 TO JUNE 30, 1997
------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
------- ---------- ------- ----------
Shares sold................... 177,952 $2,372,489 110,840 $1,112,853
Shares issued to shareholders
in reinvestment
of distributions............ 11,315 138,626 4,820 55,498
Shares redeemed............... (8,876) (116,373) 0 0
------- ---------- ------- ----------
Net increase.................. 180,391 $2,394,742 115,660 $1,168,351
========== ==========
Shares outstanding:
Beginning of period......... 115,660 0
------- -------
End of period............... 296,051 115,660
======= =======
48
<PAGE>
QUAKER INVESTMENT TRUST
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1998
- - ------------------------------------------------------------------------------
NOTE 7 -- FUND SHARE TRANSACTIONS -- (CONTINUED)
FIXED INCOME FUND
FOR THE PERIOD FROM
FOR THE YEAR NOVEMBER 25, 1996
ENDED (COMMENCEMENT OF OPERATIONS)
JUNE 30, 1998 TO JUNE 30, 1997
------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
------- ---------- ------- ----------
Shares sold................... 504,805 $5,237,479 56,957 $565,661
Shares issued to shareholders
in reinvestment
of distributions 12,743 131,435 1,248 12,268
Shares redeemed............... (29,724) (306,299) 0 0
------- ---------- ------ --------
Net increase.................. 487,824 $5,062,615 58,205 $577,929
========== ========
Shares outstanding:
Beginning of period......... 58,205 0
------- ------
End of period............... 546,029 58,205
======= ======
49
<PAGE>
INDEPENDENT AUDITOR'S REPORT
August 20, 1998
To the Shareholders and Board of Trustees
Quaker Investment Trust
Valley Forge, Pennsylvania
We have audited the statements of assets and liabilities, including the
schedules of investments, of the QUAKER INVESTMENT TRUST (comprising,
respectively, the Quaker Enhanced Stock Market Fund, the Quaker Core Equity
Fund, the Quaker Aggressive Growth Fund, the Quaker Mid Cap Value Fund, the
Quaker Small-Cap Value Fund, and the Quaker Fixed Income Fund) as of June 30,
1998, and the related statements of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period
then ended and the selected per share data and ratios for each of the two
years in the period then ended (except for the Quaker Mid Cap Value Fund which
is for the period from January 6, 1998, commencement of operations, to June
30, 1998.) The Quaker Enhanced Stock Market Fund, the Quaker Core Equity
Fund, the Quaker Aggressive Growth Fund, the Quaker Small-Cap Value Fund, and
the Quaker Fixed Income Fund commenced operations on November 25, 1996. 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, 1998, 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 INVESTMENT TRUST as of June 30, 1998, and the
results of its operations for the year then ended, the changes in net assets
for each of the two years in the period then ended, and the selected per share
data and ratios for each of the two years in the period then ended (except for
the Quaker Mid Cap Value Fund which is for the period from January 6, 1998,
commencement of operations, to June 30, 1998) in conformity with generally
accepted accounting principles.
Goldenberg Rosenthal Friedlander, LLP /S/
Jenkintown, Pennsylvania
50
<PAGE>
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<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
THE QUAKER FAMILY
OF MUTUAL FUNDS
800-220-8888
http://www.quakerfunds.com
THE QUAKER FAMILY
OF MUTUAL FUNDS
ANNUAL REPORT
---------------------
JUNE 30, 1998
<PAGE>
PART C
QUAKER INVESTMENT TRUST
FORM N-1A
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
- ------------------------------------------
(a) Financial Statements: Annual Reports for the fiscal year ended June
30, 1998 for all Series of the Quaker Investment Trust are
incorporated under Part B. Annual Report for The Quaker Family of
Mutual Funds
(b) Exhibits
(1) Declaration of Trust - Amended and Restated Declaration of
Trust-Incorporated by reference; filed 8/29/96
(2) By-Laws - Amended and Restated By-Laws- Incorporated by
reference; filed 8/29/96
(3) Not Applicable
(4) Not Applicable - the series of the Registrant do not issue
certificates
(5)(a) Investment Advisory Agreement for Quaker Enhanced Equity
Index Fund- Incorporated by reference; filed 8/29/96
(b) Investment Advisory Agreement for Quaker Core Equity Fund-
Enclosed
(c) Investment Advisory Agreement for Quaker Aggressive Growth
Fund- INCORPORATED BY REFERENCE; FILED 8/29/96
(d) Investment Advisory Agreement for Quaker Small Cap Value
Fund-ENCLOSED
(e) Investment Advisory Agreement for Quaker Mid-Cap Value
Fund-Incorporated by reference; filed 10/27/97
(f) Investment Advisory Agreement for Quaker Fixed Income
Fund-Incorporated by reference; filed 8/29/96
(6) Distribution Agreement between the Registrant and
Declaration Distributors, Inc.- Enclosed
(7) Not Applicable
(8) Custodian Agreement - Incorporated by reference; filed
9/5/97
(9) Investment Services Agreement between the Registrant and
Declaration Services Company- Enclosed
(10) Opinion and Consent of Counsel-Incorporated by reference;
filed 8/28/97
(11) Consent of Auditors- Incorporated by reference; filed
8/28/97.
(12) Not Applicable
(13) Not Applicable
(14) Not Applicable
(15)(a) Plan of Distribution under Rule 12b-1 for Quaker Enhanced
Equity Index Fund- Incorporated by reference; filed 11/12/96
(b) Plan of Distribution under Rule 12b-1 for Quaker Core Equity
Trust- Enclosed
(c) Plan of Distribution under Rule 12b-1 for Quaker Aggressive
Growth Fund- Incorporated by reference; filed 11/12/96
(d) Plan of Distribution under Rule 12b-1 for Quaker Small Cap
Value Fund- Incorporated by reference; filed 11/12/96
(e) Plan of Distribution under Rule 12b-1 for Quaker Fixed
Income Fund- Incorporated by reference; filed 11/12/96
(f) Plan of Distribution under Rule 12b-1 for Quaker Mid-Cap
Value Fund- Incorporated by reference, filed 10/27/97
(16) Computation of Performance Data - Incorporated by reference;
filed 9/05/97
(17)(a) Copies of Powers of Attorney- Incorporated by reference;
filed 9/05/97
(b) Financial Data Schedules- Incorporated by reference; filed
9/05/97
(18) Not applicable
ITEM 25. Persons Controlled by or Under Common Control with Registrant
- ----------------------------------------------------------------------
No person is controlled by or under common control with Registrant.
ITEM 26. Number of Record Holders of Securities
- -----------------------------------------------
As of June 30, 1998, the number of record holders of each class of
securities of Registrant was as follows:
Number of
Title of Class Record Holders
-------------- --------------
Quaker Enhanced Equity Index Fund ............... 58
Quaker Core Equity Fund ......................... 65
Quaker Aggressive Growth Fund ................... 62
Quaker Small Cap Value Fund .................... 110
Quaker Mid-Cap Value Fund ....................... 31
Quaker Fixed Income Fund ........................ 32
ITEM 27. Indemnification
- ------------------------
Reference is hereby made to the following sections of the following
documents filed or included by reference as exhibits hereto: Article VII,
Sections 5.4 of the Registrant's Declaration of Trust, Article XIV Section
8(b) of the Registrant's Investment Advisory Agreements, Section 8(b) of
the Registrant's Administration Agreement, and Section (6) of the
Registrant's Distribution Agreements. The Trustees and officers of the
Registrant and the personnel of the Registrant's administrator are insured
under an errors and omissions liability insurance policy. The Registrant
and its officers are also insured under the fidelity bond required by Rule
17g-1 under the Investment Company Act of 1940.
ITEM 28. Business and other Connections of Investment Advisor
- -------------------------------------------------------------
See the Statement of Additional Information section entitled "Trustees and
Officers" for the activities and affiliations of the officers and directors
of the Investment Advisors of the Registrant. Except as so provided, to the
knowledge of Registrant, none of the directors or executive officers of the
Investment Advisors is or has been at any time during the past two fiscal
years engaged in any other business, profession, vocation or employment of
a substantial nature. The Investment Advisors currently serve as investment
advisors to numerous institutional and individual clients.
ITEM 29. Principal Underwriter
- ------------------------------
(a) Declaration Distributors, Inc. ("DDI")is underwriter and distributor
for The Quaker Family of Funds. DDI serves as underwriter or
distributor for other investment companies.
(b) Name and Principal Position(s) and Offices Position(s) and Offices
Business Address with Underwriter with Registrant Jeffry H. King
Chairman & CEO Trustee and Chairman 1288 Valley Forge Rd Valley Forge,
PA Laurie Keyes Chief Operating Officer Trustee 1288 Valley Forge Rd
Valley Forge, PA (c) Not applicable
ITEM 30. Location of Accounts and Records
- -----------------------------------------
All account books and records not normally held by First Union National
Bank of North Carolina, the Custodian to the Registrant, are held by the
Registrant, in the offices of Declaration Service Company, Fund Accountant,
Administrator, and Transfer Agent to the Registrant, or by the Advisors to
the Registrant (Fiduciary Asset Management, Inc., West Chester Capital
Advisors, Inc., DG Capital Management, Inc., Aronson + Partners, Logan
Capital Management, Inc., and Compu-Val Investments, Inc.).The address of
Declaration Service Company is 555 North Lane, Suite 6160, Conshohocken, PA
19428. The address of First Union National Bank of North Carolina is Two
First Union Center, Charlotte, North Carolina 28288-1151.The address of
Fiduciary Asset Management Co. is 8112 Maryland Avenue, Suite310, Clayton,
Missouri 63105. The address of West Chester Capital Advisors, Inc. is 106
South Church Street, West Chester, Pennsylvania 19382. The address of DG
Capital Management, Inc. is 8 Waybridge Lane, Wayland, Massachusetts 01778.
The address of Aronson + Partners is 230 South Broad Street, 20th Floor,
Philadelphia, Pennsylvania 19012. The address of Logan Capital Management,
Inc. is One Liberty Place, Suite 2700, Philadelphia, Pennsylvania 19103.
The address of Compu-Val Investments, Inc. is 1702 Lovering Avenue,
Wilmington, Delaware, 19806.
ITEM 31. Management Services.
- -----------------------------
The substantive provisions of the Fund Accounting, Dividend Disbursing
& Transfer Agent and Administration Agreement, as amended, between the
Registrant and The Declaration Service Company are discussed in Part B
hereof.
ITEM 32. Undertakings.
- ----------------------
The Registrant hereby undertakes to comply with Section 16(c) of the
Investment Company Act of 1940. Registrant undertakes to furnish each
person to whom a Prospectus is delivered with a copy of the latest annual
report of each series of Registrant to shareholders upon request and
without charge.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Valley Forge, State of Pennsylvania on
the 28th day of October, 1998.
QUAKER INVESTMENT TRUST
By: /s/ Peter F. Waitneight
Peter F. Waitneight, Trustee and President*
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
*
- -----------------------------------
Howard L. Gleit, Trustee
*
- -----------------------------------
Everett T. Keech, Trustee
*
- -----------------------------------
Laurie Keyes, Trustee
*
- -----------------------------------
Jeff King, Trustee and Chairman
*
- -----------------------------------
Louis P. Pektor III, Trustee
*
- -----------------------------------
Paul Giorgio Chief Principal Financial Officer
*
- -----------------------------------
Peter F. Waitneight, Trustee and President*
* Peter F. Waitneight Attorney-in-Fact, Dated: September 30, 1998
<PAGE>
QUAKER INVESTMENT TRUST
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
EXHIBIT 5(b) INVESTMENT ADVISORY AGREEMENT FOR CORE EQUITY
EXHIBIT 5(c) INVESTMENT ADVISORY AGREEMENT FOR SMALL-CAP VALUE FUND
EXHIBIT 6 DISTRIBUTION AGREEMENT
EXHIBIT 9 INVESTMENT SERVICES AGREEMENT
EXHIBIT 15 12B-1 PLAN OF DISTRIBUTION FOR CORE EQUITY
EXHIBIT 5(b) INVESTMENT ADVISORY AGREEMENT FOR CORE EQUITY
INVESTMENT ADVISOR AGREEMENT
AGREEMENT, made this 19th day of October, 1998, between Quaker Investment
Trust (the "Trust") and Geewax, Terker & Co., a Pennsylvania partnership (the
"Adviser"), registered as an investment adviser under the Investment Advisers
Act of 1940, as amended (the "Act").
BACKGROUND
WHEREAS, the Trust is registered as a diversified, open-end management
investment company of the series type under the investment Company Act of 1940,
as amended (the "1940 Act"); and
WHEREAS, the Trust desires to retain the Adviser to furnish investment
advisory services to the Quake Core Equity Fund (the "Fund") series of the Trust
pursuant to the terms and conditions of this Agreement, and the Adviser is
willing to so furnish such services;
NOW THEREFORE, in consideration of the foregoing and the agreements and
covenants herein contained, the parties hereto, intending to be legally bound,
agree as follows:
1. Appointment
The Trust hereby appoints the Adviser to act as Investment Adviser to the
Quaker Core Equity Fund (the "Fund") for the periods and on the terms set forth
in this Agreement. The Adviser accepts the appointment and agrees to furnish the
services herein set forth for the compensation herein provided.
2. Delivery of Documents
The Trust has furnished the Investment Adviser with copies properly
certified or authenticated copies of each of the following:
a. The Trust's Declaration of Trust, as filed with the Commonwealth of
Massachusetts (such Declaration, as presently in effect and as it
shall from time to time be amended, is herein called the
"Declaration");
b. The Trust's By-Laws (such By-Laws, as presently in effect and as they
may be from time to time amended, are herein called the "By-Laws")
c. Resolutions of the Trust's Board of Trustees authorizing the
appointment of the Adviser and approving this Agreement;
d. The Trust's Registration Statement on form N-1A promulgated under the
1940 Act and under the Securities Act of 1933, as amended (the "1933
Act"), relating to shares of beneficial interest of the fund (herein
called the "Shares") as filed with the Securities and Exchange
Commission ("SEC") and all amendments thereto;
e. The Fund's Prospectus, Statement of Additional Information (such
Prospectus, together with the statement of Additional Information, as
presently in effect and all amendments and supplements thereto are
herein called the "Prospectus")
The Trust will furnish the Adviser from time to time with copies,
properly certified or authenticated, of all amendments of or
supplements to the foregoing at the same time as such documents are
required to be filed with the SEC.
3. Management
Subject to the supervision of the Trust's Board of Trustees, the Adviser will
provide a continuous investment program for the Fund, including investment
research and management with respect to all securities, investments, cash and
cash equivalents in the Fund. The Advisor will determine from time to time what
securities and other investments will be purchased, retained or sold by the
Fund. The Advisor will provide the services under this Agreement in accordance
with the Funds investment objectives, policies and restrictions as such are set
forth in the prospectus from time to time. The Advisor further agrees that it:
(a) Will conform its activities to all applicable rules and Regulations of
the SEC and will, in addition, conduct its activities under this
agreement in accordance with the regulations of any other Federal and
State agencies which may now or in the future have jurisdiction over
its activities under this Agreement.
(b) Will place orders pursuant to its investment determinations for the
Fund either directly with the respective issuers or with any broker or
dealer. In placing orders with brokers or dealers, the Advisor will
attempt to obtain the best net price and the most favorable execution
of its orders. Consistent with this obligation, when the Advisor
believes two or more brokers or dealers are comparable in price and
execution, the Advisor may prefer: (I) brokers and dealers who provide
the Fund with research advice and other services, or who recommend or
sell Trust shares, and (II) brokers who are affiliated with the Fund
or the Advisor; provided, however, that in no instance will portfolio
securities be purchased from or sold to the Advisor in principal
transactions;
(c) Will provide, at its own cost, all office space, facilities and
equipment necessary for the conduct of its advisory activities on
behalf of the fund.
4. Services not Exclusive
The advisory services to be furnished by the Advisor hereunder are not to be
considered exclusive, and the Advisor shall be free to furnish similar services
to others so long as its services under this Agreement are not impaired thereby;
provided, however, that without the written consent of the Trustees of the
Trust, the Advisor will not serve as an investment advisor to any other
investment company having a similar investment objective to that of the fund.
5. Books and Records
In compliance with Rule 31a-3 promulgated under the 1940 Act, that Advisor
hereby agrees that all records which it maintains for the benefit of the Fund
are the property of the Fund and further agrees to surrender promptly to the
Fund any of such records upon the Fund's request. The Advisor further agrees to
preserve for the periods prescribed by Rule 31a-2 promulgated under the 1940
Act. The records required to be maintained by it pursuant to Rule 31a-1
promulgated under the 1940 Act that are not maintained by others on behalf of
the Fund.
6. Expenses
During the term of this Agreement, the Advisor will pay all expenses incurred by
it in connection with its investment advisory services furnished to the Fund
other than the costs of securities and other investments (including brokerage
commissions and other transaction charges) purchased or sold for the Fund. In
addition, in accordance with the plan of Distribution adopted by the Fund under
the provisions of Rule 12b-1 promulgated under the 1940 Act, the Advisor agrees
to pay, from the Advisory fees paid to it hereunder, the amounts set forth in
Exhibit A attached hereto to qualified brokers and dealers who are authorized to
sell Fund shares and receive compensation therefore.
7. Compensation
The trust will pay the Advisor, and the Advisor will accept as full compensation
for its services rendered hereunder, an investment advisory fee, computed at the
end of each month and payable within five (5) business days thereafter, equal to
the annual rate of 0.75% of the average daily net assets of the Fund. The
Advisor hereby acknowledges that the expense ratio for the Fund will be capped
at 1.35% of the average daily net assets of the Fund and hereby agrees to waive
its fees to the extent necessary to achieve such expense ratio, on a basis that
is pro rata to the fees charged by other providers of services to the Fund. All
parties to this Agreement do hereby authorize and instruct the Declaration
Group, the Fund's Administrator, to provide a calculation each month of the
gross amount due the Advisor and to deduct from such amount all applicable
amounts of fee waivers as well as the amounts set forth in Exhibit A, if
applicable, prior to remitting fee payments hereunder.
8. Limitation of Liability
The Advisor shall not be liable for any error of judgement, mistake of law or
for any other loss suffered by the Fund in connection with the performance of
this 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 malfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its obligations or
duties under this Agreement.
9. Duration and Termination
This Agreement shall become effective upon the resignation of the existing
investment advisor to the Fund and, unless sooner terminated as provided herein,
shall continue in effect for two years. Thereafter, this Agreement shall be
renewable for successive periods of one year each, provided such continuance is
specifically approved annually:
(a) By the vote of a majority of those members of the Board of Trustees
who are not parties to the Agreement or interested persons of any such
party 9as that term is defined in the 1940 Act), cast in person at a
meeting called for the purpose of voting on such approval; and
(b) By vote of either the Board of Trustees or a majority (as that term is
defined in the 1940 Act) of the outstanding voting securities of the
Fund.
Notwithstanding the foregoing, this Agreement may be terminated by the Fund or
by the Advisor at any time upon sixty (60) days written notice, without payment
of any penalty. Provided that termination by the Fund must be authorized by vote
of the Board of Trustees or by vote of a majority of the outstanding voting
securities of the Fund. This Agreement will automatically terminate in the event
of its assignment (as that term is defined in the 1940 Act).
10. Amendment of this Agreement
No provision of this Agreement may be changed, waived, discharged, or terminated
orally, but only by a written instrument signed by the party against which
enforcement of the change, waiver, discharge or termination is sought. No
material amendment of this Agreement shall be effective until approved by vote
of the holders of a majority of the Fund's outstanding voting securities (as
defined in the 1940 Act).
11. Miscellaneous
The captions in this Agreement are included for convenience of reference only
and in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the remainder
of the Agreement shall not be affected thereby. This Agreement shall be binding
on, and shall inure to the benefit of, the parties hereto and their respective
successors.
12. Counterparts
This Agreement may be executed in counterparts by the parties hereto, each of
which shall constitute and original, and all of which, together, shall
constitute one Agreement.
13. Governing Law
This Agreement shall be construed in accordance with, and governed by, the laws
of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first written
above.
Attest: QUAKER INVESTMENT TRUST
By: _______________________ By: /s/ Peter F. Waitneight
Title: Title: President
Attest: GEEWAX, TERKER & CO.
By: ________________________ By: ____________________________
Title: Title:
<PAGE>
Exhibit A
12b-1 Fees
For shares sold through the Charles Schwab Mutual Fund Marketplace,
Fidelity Brokerage Services, Inc., Waterhouse Securities, Inc., or Jack White &
Company, the 12b-1 fees to be paid shall be equal to 0.20% of the purchase price
of such shares.
For shares sold through an authorized wholesaler, the 12b-1 fees to be paid
shall be equal to:
25% of management fee on amount of Fund shares sold for first 12 months
10% of management fee on such amount for succeeding 12 months
5% of management fee on such amount thereafter.
The foregoing shall be in effect with respect to Fund shares until such
shares are redeemed.
- --------------------------------------------------------------------------------
EXHIBIT 5(c) INVESTMENT ADVISORY AGREEMENT FOR SMALL-CAP VALUE FUND
INVESTMENT ADVISOR AGREEMENT
AGREEMENT, made this 19th day of October, 1998, between Quaker Investment
Trust (the "Trust") and Aronson + Partners., a Pennsylvania partnership (the
"Adviser"), registered as an investment adviser under the Investment Advisers
Act of 1940, as amended (the "Act").
BACKGROUND
WHEREAS, the Trust is registered as a diversified, open-end management
investment company of the series type under the investment Company Act of 1940,
as amended (the "1940 Act"); and
WHEREAS, the Trust desires to retain the Adviser to furnish investment
advisory services to the Quaker Small-Cap Value Fund (the "Fund") series of the
Trust pursuant to the terms and conditions of this Agreement, and the Adviser is
willing to so furnish such services;
NOW THEREFORE, in consideration of the foregoing and the agreements and
covenants herein contained, the parties hereto, intending to be legally bound,
agree as follows:
1. Appointment
The Trust hereby appoints the Adviser to act as Investment Adviser to the
Quaker Core Equity Fund (the "Fund") for the periods and on the terms set forth
in this Agreement. The Adviser accepts the appointment and agrees to furnish the
services herein set forth for the compensation herein provided.
2. Delivery of Documents
The Trust has furnished the Investment Adviser with copies properly
certified or authenticated copies of each of the following:
f. The Trust's Declaration of Trust, as filed with the Commonwealth of
Massachusetts (such Declaration, as presently in effect and as it
shall from time to time be amended, is herein called the
"Declaration");
g. The Trust's By-Laws (such By-Laws, as presently in effect and as they
may be from time to time amended, are herein called the "By-Laws")
h. Resolutions of the Trust's Board of Trustees authorizing the
appointment of the Adviser and approving this Agreement;
i. The Trust's Registration Statement on form N-1A promulgated under the
1940 Act and under the Securities Act of 1933, as amended (the "1933
Act"), relating to shares of beneficial interest of the fund (herein
called the "Shares") as filed with the Securities and Exchange
Commission ("SEC") and all amendments thereto;
j. The Fund's Prospectus, Statement of Additional Information (such
Prospectus, together with the statement of Additional Information, as
presently in effect and all amendments and supplements thereto are
herein called the "Prospectus")
The Trust will furnish the Adviser from time to time with copies, properly
certified or authenticated, of all amendments of or supplements to the foregoing
at the same time as such documents are required to be filed with the SEC.
3. Management
Subject to the supervision of the Trust's Board of Trustees, the Adviser will
provide a continuous investment program for the Fund, including investment
research and management with respect to all securities, investments, cash and
cash equivalents in the Fund. The Advisor will determine from time to time what
securities and other investments will be purchased, retained or sold by the
Fund. The Advisor will provide the services under this Agreement in accordance
with the Funds investment objectives, policies and restrictions as such are set
forth in the prospectus from time to time. The Advisor further agrees that it:
(d) Will conform its activities to all applicable rules and Regulations of
the SEC and will, in addition, conduct its activities under this
agreement in accordance with the regulations of any other Federal and
State agencies which may now or in the future have jurisdiction over
its activities under this Agreement.
(e) Will place orders pursuant to its investment determinations for the
Fund either directly with the respective issuers or with any broker or
dealer. In placing orders with brokers or dealers, the Advisor will
attempt to obtain the best net price and the most favorable execution
of its orders. Consistent with this obligation, when the Advisor
believes two or more brokers or dealers are comparable in price and
execution, the Advisor may prefer: (I) brokers and dealers who provide
the Fund with research advice and other services, or who recommend or
sell Trust shares, and (II) brokers who are affiliated with the Fund
or the Advisor; provided, however, that in no instance will portfolio
securities be purchased from or sold to the Advisor in principal
transactions;
(f) Will provide, at its own cost, all office space, facilities and
equipment necessary for the conduct of its advisory activities on
behalf of the fund.
4. Services not Exclusive
The advisory services to be furnished by the Advisor hereunder are not to be
considered exclusive, and the Advisor shall be free to furnish similar services
to others so long as its services under this Agreement are not impaired thereby;
provided, however, that without the written consent of the Trustees of the
Trust, the Advisor will not serve as an investment advisor to any other
investment company having a similar investment objective to that of the fund.
5. Books and Records
In compliance with Rule 31a-3 promulgated under the 1940 Act, that Advisor
hereby agrees that all records which it maintains for the benefit of the Fund
are the property of the Fund and further agrees to surrender promptly to the
Fund any of such records upon the Fund's request. The Advisor further agrees to
preserve for the periods prescribed by Rule 31a-2 promulgated under the 1940
Act. The records required to be maintained by it pursuant to Rule 31a-1
promulgated under the 1940 Act that are not maintained by others on behalf of
the Fund.
6. Expenses
During the term of this Agreement, the Advisor will pay all expenses incurred by
it in connection with its investment advisory services furnished to the Fund
other than the costs of securities and other investments (including brokerage
commissions and other transaction charges) purchased or sold for the Fund. In
addition, in accordance with the plan of Distribution adopted by the Fund under
the provisions of Rule 12b-1 promulgated under the 1940 Act, the Advisor agrees
to pay, from the Advisory fees paid to it hereunder, the amounts set forth in
Exhibit A attached hereto to qualified brokers and dealers who are authorized to
sell Fund shares and receive compensation therefore.
7. Compensation
The trust will pay the Advisor, and the Advisor will accept as full compensation
for its services rendered hereunder, an investment advisory fee, computed at the
end of each month and payable within five (5) business days thereafter, as
follows. Through the end of the period ending September 30, 1998 the fee will
continue to be equal to the annual rate of 0.75% of the average daily net assets
of the Fund. Beginning October 1, 1998 and continuing for one year thereafter,
the fee will rise to the annual rate of 0.90% of the average daily net assets of
the Fund. The Advisor hereby acknowledges that the expense ratio for the Fund
will be capped at 1.50% of the average daily net assets of the Fund for the year
following October 1, 1998 and hereby agrees to waive its fees to the extent
necessary to achieve such expense ratio, on a basis that is pro rata to the fees
charged by other providers of services to the Fund.
From October 1, 1999 forward, a performance fee concept will be implemented.
This will provide for an investment advisory fee (Base Fee) at an annual rate of
0.90% of the daily net assets of the Fund to be computed and paid quarterly when
the cumulative investment results for the Fund over the prior twelve (12) months
exceed the return for the Russell 2000 Index for the same period by 3.0%. this
comparison will be repeated each quarter, using the data from the immediate
prior twelve (12) months. Adjustment factors will be applied to the investment
advisory fee according to the following formula.:
Cumulative 12 months Performance Fee
Return versus the Index Adjustment
Less than + 1.0% 0.3333 X Base Fee
Between +1.0 and +1.5% 0.4664 X Base Fee
Between +1.5 and +2.0% 0.5998 X Base Fee
Between +2.0 and +2.5% 0.7332 X Base Fee
Between +2.5 and + 3.0% 0.8666 X Base Fee
At +3.0% 1.0000 X Base Fee
Between +3.0 and + 3.5% 1.1334 X Base Fee
Between +3.5 and + 4.0% 1.2668 X Base Fee
Between +4.0 and + 4.5% 1.4002 X Base Fee
Between +4.5 and + 5.0% 1.5336 X Base Fee
More than +5.0% 1.667 X Base Fee
All parties to this Agreement do hereby authorize and instruct the Declaration
Group, the Fund's Administrator, to provide a calculation each month of the
gross amount due the Advisor and to deduct from such amount all applicable
amounts of fee waivers as well as the amounts set forth in Exhibit A, if
applicable, prior to remitting fee payments hereunder.
14. Limitation of Liability
The Advisor shall not be liable for any error of judgement, mistake of law or
for any other loss suffered by the Fund in connection with the performance of
this 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 malfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its obligations or
duties under this Agreement.
15. Duration and Termination
This Agreement shall become effective upon the resignation of the existing
investment advisor to the Fund and, unless sooner terminated as provided herein,
shall continue in effect for two years. Thereafter, this Agreement shall be
renewable for successive periods of one year each, provided such continuance is
specifically approved annually:
(c) By the vote of a majority of those members of the Board of Trustees
who are not parties to the Agreement or interested persons of any such
party 9as that term is defined in the 1940 Act), cast in person at a
meeting called for the purpose of voting on such approval; and
(d) By vote of either the Board of Trustees or a majority (as that term is
defined in the 1940 Act) of the outstanding voting securities of the
Fund.
Notwithstanding the foregoing, this Agreement may be terminated by the Fund or
by the Advisor at any time upon sixty (60) days written notice, without payment
of any penalty. Provided that termination by the Fund must be authorized by vote
of the Board of Trustees or by vote of a majority of the outstanding voting
securities of the Fund. This Agreement will automatically terminate in the event
of its assignment (as that term is defined in the 1940 Act).
16. Amendment of this Agreement
No provision of this Agreement may be changed, waived, discharged, or terminated
orally, but only by a written instrument signed by the party against which
enforcement of the change, waiver, discharge or termination is sought. No
material amendment of this Agreement shall be effective until approved by vote
of the holders of a majority of the Fund's outstanding voting securities (as
defined in the 1940 Act).
17. Miscellaneous
The captions in this Agreement are included for convenience of reference only
and in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the remainder
of the Agreement shall not be affected thereby. This Agreement shall be binding
on, and shall inure to the benefit of, the parties hereto and their respective
successors.
18. Counterparts
This Agreement may be executed in counterparts by the parties hereto, each of
which shall constitute and original, and all of which, together, shall
constitute one Agreement.
19. Governing Law
This Agreement shall be construed in accordance with, and governed by, the laws
of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first written
above.
Attest: QUAKER INVESTMENT TRUST
By: _______________________ By: Peter F. Waitneight
Title: Title: President
Attest: ARONSON + PARTNERS
By: ________________________ By: ____________________________
Title: Title: General Partner
<PAGE>
Exhibit A
12b-1 Fees
For shares sold through the Charles Schwab Mutual Fund Marketplace,
Fidelity Brokerage Services, Inc., Waterhouse Securities, Inc., or Jack White &
Company, the 12b-1 fees to be paid shall be equal to 0.20% of the purchase price
of such shares.
For shares sold through an authorized wholesaler, the 12b-1 fees to be paid
shall be equal to:
25% of management fee on amount of Fund shares sold for first 12 months
10% of management fee on such amount for succeeding 12 months
5% of management fee on such amount thereafter.
The foregoing shall be in effect with respect to Fund shares until such
shares are redeemed.
- --------------------------------------------------------------------------------
EXHIBIT 6 DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT
QUAKER INVESTMENT TRUST
THIS DISTRIBUTION AGREEMENT (the "Agreement") is made as of the 19th day of
October, 1998 by and among The Quaker Investment Trust (the "Fund"), a
Massachusetts business trust and Declaration Distributors, Inc. (the
"Distributor"), a Pennsylvania corporation.
WITNESSETH THAT:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act")
and has registered its shares of common stock (the "Shares") under the
Securities Act of 1933, as amended (the "1933 Act") in one or more distinct
series of Shares (the "Portfolio" or "Portfolios");
WHEREAS, the Distributor is a broker-dealer registered with the U.S.
Securities and Exchange Commission (the "SEC") and a member in good standing of
the National Association of Securities Dealers, Inc. (the "NASD"); and
WHEREAS, the Fund and the Distributor desire to enter into this Agreement
pursuant to which the Distributor will provide distribution services to the
Portfolios of the Fund identified on Schedule A, as may be amended from time to
time, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, the Fund, the Adviser and the Distributor,
intending to be legally bound hereby, agree as follows:
1. Appointment of Distributor. The Fund hereby appoints the Distributor as
its exclusive agent for the distribution of the Shares, and the Distributor
hereby accepts such appointment under the terms of this Agreement. The Fund
shall not sell any Shares to any person except to fill orders for the Shares
received through the Distributor; provided, however, that the foregoing
exclusive right shall not apply: (i) to Shares issued or sold in connection with
the merger or consolidation of any other investment company with the Fund or the
acquisition by purchase or otherwise of all or substantially all of the assets
of any investment company or substantially all of the outstanding shares of any
such company by the Fund; (ii) to Shares which may be offered by the Fund to its
shareholders for reinvestment of cash distributed from capital gains or net
investment income of the Fund; or (iii) to Shares which may be issued to
shareholders of other funds who exercise any exchange privilege set forth in the
Fund's Prospectus. Notwithstanding any other provision hereof, the Fund may
terminate, suspend, or withdraw the offering of the Shares whenever, in its sole
discretion, it deems such action to be desirable, and the Distributor shall
process no further orders for Shares after it receives notice of such
termination, suspension or withdrawal.
2. Fund Documents. The Fund has provided the Administrator with properly
certified or authenticated copies of the following Fund related documents in
effect on the date hereof: the Fund's organizational documents, including
Articles of Incorporation and by-laws; the Fund's Registration Statement on Form
N-1A, including all exhibits thereto; the Fund's most current Prospectus and
Statement of Additional Information; and resolutions of the Fund's Board of
Directors authorizing the appointment of the Distributor and approving this
Agreement. The Fund shall promptly provide to the Distributor copies, properly
certified or authenticated, of all amendments or supplements to the foregoing.
The Fund shall provide to the Distributor copies of all other information which
the Distributor may reasonably request for use in connection with the
distribution of Shares, including, but not limited to, a certified copy of all
financial statements prepared for the Fund by its independent public
accountants. The Fund shall also supply the Distributor with such number of
copies of the current Prospectus, Statement of Additional Information and
shareholder reports as the Distributor shall reasonably request.
3. Distribution Services. The Distributor shall sell and repurchase Shares
as set forth below, subject to the registration requirements of the 1933 Act and
the rules and regulations thereunder, and the laws governing the sale of
securities in the various states ("Blue Sky Laws"):
a. The Distributor, as agent for the Fund, shall sell Shares to the
public against orders therefor at the public offering price, as
determined in accordance with the Fund's then current Prospectus and
Statement of Additional Information.
b. The net asset value of the Shares shall be determined in the manner
provided in the then current Prospectus and Statement of Additional
Information. The net asset value of the Shares shall be calculated by
the Fund or by another entity on behalf of the Fund. The Distributor
shall have no duty to inquire into or liability for the accuracy of
the net asset value per Share as calculated.
c. Upon receipt of purchase instructions, the Distributor shall transmit
such instructions to the Fund or its transfer agent for registration
of the Shares purchased.
d. The Distributor shall also have the right to take, as agent for the
Fund, all actions which, in the Distributor's judgment, are necessary
to effect the distribution of Shares.
e. Nothing in this Agreement shall prevent the Distributor or any
"affiliated person" from buying, selling or trading any securities for
its or their own account or for the accounts of others for whom it or
they may be acting; provided, however, that the Distributor expressly
agrees that it shall not for its own account purchase any Shares of
the Fund except for investment purposes and that it shall not for its
own account sell any such Shares except for redemption of such Shares
by the Fund, and that it shall not undertake activities which, in its
judgment, would adversely affect the performance of its obligations to
the Fund under this Agreement.
f. The Distributor, as agent for the Fund, shall repurchase Shares at
such prices and upon such terms and conditions as shall be specified
in the Prospectus.
4. Distribution Support Services. In addition to the sale and repurchase of
Shares, the Distributor shall perform the distribution support services set
forth on Schedule B attached hereto, as may be amended from time to time. Such
distribution support services shall include: Review of sales and marketing
literature and submission to the NASD; NASD recordkeeping; and quarterly reports
to the Fund's Board of Directors. Such distribution support services may also
include: fulfillment services, including telemarketing, printing, mailing and
follow-up tracking of sales leads; and licensing Adviser or Fund personnel as
registered representatives of the Distributor and related supervisory
activities.
5. Reasonable Efforts. The Distributor shall use all reasonable efforts in
connection with the distribution of Shares. The Distributor shall have no
obligation to sell any specific number of Shares and shall only sell Shares
against orders received therefor. The Fund shall retain the right to refuse at
any time to sell any of its Shares for any reason deemed adequate by it.
6. Compliance. In furtherance of the distribution services being provided
hereunder, the Distributor and the Fund agree as follows:
a. The Distributor shall comply with the Rules of Conduct of the NASD and
the securities laws of any jurisdiction in which it sells, directly or
indirectly, Shares.
b. The Distributor shall require each dealer with whom the Distributor
has a selling agreement to conform to the applicable provisions of the
Fund's most current Prospectus and Statement of Additional
Information, with respect to the public offering price of the Shares.
c. The Fund agrees to furnish to the Distributor sufficient copies of any
agreements, plans, communications with the public or other materials
it intends to use in connection with any sales of Shares in a timely
manner in order to allow the Distributor to review, approve and file
such materials with the appropriate regulatory authorities and obtain
clearance for use. The Fund agrees not to use any such materials until
so filed and cleared for use by appropriate authorities and the
Distributor.
d. The Distributor, at its own expense, shall qualify as a broker or
dealer, or otherwise, under all applicable Federal or state laws
required to permit the sale of Shares in such states as shall be
mutually agreed upon by the parties; provided, however that the
Distributor shall have no obligation to register as a broker or dealer
under the Blue Sky Laws of any jurisdiction if it determines that
registering or maintaining registration in such jurisdiction would be
uneconomical.
e. The Distributor shall not, in connection with any sale or solicitation
of a sale of the Shares, or make or authorize any representative,
service organization, broker or dealer to make, any representations
concerning the Shares except those contained in the Fund's most
current Prospectus covering the Shares and in communications with the
public or sales materials approved by the Distributor as information
supplemental to such Prospectus.
7. Expenses. Expenses shall be allocated as follows:
a. The Fund shall bear the following expenses: preparation, setting in
type, and printing of sufficient copies of the Prospectus and
Statement of Additional Information for distribution to existing
shareholders; preparation and printing of reports and other
communications to existing shareholders; distribution of copies of the
Prospectus, Statement of Additional Information and all other
communications to existing shareholders; registration of the Shares
under the Federal securities laws; qualification of the Shares for
sale in the jurisdictions mutually agreed upon by the Fund and the
Distributor; transfer agent/shareholder servicing agent services;
supplying information, prices and other data to be furnished by the
Fund under this Agreement; and any original issue taxes or transfer
taxes applicable to the sale or delivery of the Shares or certificates
therefor.
b. The Adviser shall pay all other expenses incident to the sale and
distribution of the Shares sold hereunder, including, without
limitation: printing and distributing copies of the Prospectus,
Statement of Additional Information and reports prepared for use in
connection with the offering of Shares for sale to the public;
advertising in connection with such offering, including public
relations services, sales presentations, media charges, preparation,
printing and mailing of advertising and sales literature; data
processing necessary to support a distribution effort; distribution
and shareholder servicing activities of broker-dealers and other
financial institutions; filing fees required by regulatory authorities
for sales literature and advertising materials; any additional
out-of-pocket expenses incurred in connection with the foregoing and
any other costs of distribution.
8. Compensation. For the distribution and distribution support services
provided by the Distributor pursuant to the terms of the Agreement, the Adviser
shall pay to the Distributor the compensation set forth in Schedule A attached
hereto, which schedule may be amended from time to time. The Adviser shall also
reimburse the Distributor for its out-of-pocket expenses related to the
performance of its duties hereunder, including, without limitation,
telecommunications charges, postage and delivery charges, record retention
costs, reproduction charges and traveling and lodging expenses incurred by
officers and employees of the Distributor. The Adviser shall pay the
Distributor's monthly invoices for distribution fees and out-of-pocket expenses
within ten days of the respective month-end. If this Agreement becomes effective
subsequent to the first day of the month or terminates before the last day of
the month, the Fund shall pay to the Distributor a distribution fee that is
prorated for that part of the month in which this Agreement is in effect. All
rights of compensation and reimbursement under this Agreement for services
performed by the Distributor as of the termination date shall survive the
termination of this Agreement.
9. Use of Distributor's Name. The Fund shall not use the name of the
Distributor or any of its affiliates in the Prospectus, Statement of Additional
Information, sales literature or other material relating to the Fund in a manner
not approved prior thereto in writing by the Distributor; provided, however,
that the Distributor shall approve all uses of its and its affiliates' names
that merely refer in accurate terms to their appointments or that are required
by the Securities and Exchange Commission (the "SEC") or any state securities
commission; and further provided, that in no event shall such approval be
unreasonably withheld.
10. Use of Fund's Name. Neither the Distributor nor any of its affiliates
shall use the name of the Fund or material relating to the Fund on any forms
(including any checks, bank drafts or bank statements) for other than internal
use in a manner not approved prior thereto by the Fund; provided, however, that
the Fund shall approve all uses of its name that merely refer in accurate terms
to the appointment of the Distributor hereunder or that are required by the SEC
or any state securities commission; and further provided, that in no event shall
such approval be unreasonably withheld.
11. Liability of Distributor. The duties of the Distributor shall be
limited to those expressly set forth herein, and no implied duties are assumed
by or may be asserted against the Distributor hereunder. The Distributor shall
not be liable for any error of judgment or mistake of law or for any loss
suffered by the Fund in connection with the matters to which this Agreement
relates, except to the extent of a loss resulting from willful misfeasance, bad
faith or negligence, or reckless disregard of its obligations and duties under
this Agreement. As used in this Section 9 and in Section 10 (except the second
paragraph of Section 10), the term "Distributor" shall include directors,
officers, employees and other agents of the Distributor.
12. Indemnification of Distributor. The Fund shall indemnify and hold
harmless the Distributor against any and all liabilities, losses, damages,
claims and expenses (including, without limitation, reasonable attorneys' fees
and disbursements and investigation expenses incident thereto) which the
Distributor may incur or be required to pay hereafter, in connection with any
action, suit or other proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which the Distributor may be involved as
a party or otherwise or with which the Distributor may be threatened, by reason
of the offer or sale of the Fund shares prior to the effective date of this
Agreement.
Any director, officer, employee, shareholder or agent of the Distributor
who may be or become an officer, director, employee or agent of the Fund, shall
be deemed, when rendering services to the Fund or acting on any business of the
Fund (other than services or business in connection with the Distributor's
duties hereunder), to be rendering such services to or acting solely for the
Fund and not as a director, officer, employee, shareholder or agent, or one
under the control or direction of the Distributor, even though receiving a
salary from the Distributor.
The Fund agrees to indemnify and hold harmless the Distributor, and each
person, who controls the Distributor within the meaning of Section 15 of the
1933 Act, or Section 20 of the Securities Exchange Act of 1934, as amended
("1934 Act"), against any and all liabilities, losses, damages, claims and
expenses, joint or several (including, without limitation, reasonable attorneys'
fees and disbursements and investigation expenses incident thereto) to which
they, or any of them, may become subject under the 1933 Act, the 1934 Act, the
1940 Act or other Federal or state laws or regulations, at common law or
otherwise, insofar as such liabilities, losses, damages, claims and expenses (or
actions, suits or proceedings in respect thereof) arise out of or relate to any
untrue statement or alleged untrue statement of a material fact contained in a
Prospectus, Statement of Additional Information, supplement thereto, sales
literature or other written information prepared by the Fund and provided by the
Fund to the Distributor for the Distributor's use hereunder, or arise out of or
relate to any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading. The Distributor (or any person controlling the Distributor) shall
not be entitled to indemnity hereunder for any liabilities, losses, damages,
claims or expenses (or actions, suits or proceedings in respect thereof)
resulting from (i) an untrue statement or omission or alleged untrue statement
or omission made in the Prospectus, Statement of Additional Information, or
supplement, sales or other literature, in reliance upon and in conformity with
information furnished in writing to the Fund by the Distributor specifically for
use therein or (ii) the Distributor's own willful misfeasance, bad faith,
negligence or reckless disregard of its duties and obligations in the
performance of this Agreement.
The Distributor agrees to indemnify and hold harmless the Fund, and each
person who controls the Fund within the meaning of Section 15 of the 1933 Act,
or Section 20 of the 1934 Act, against any and all liabilities, losses, damages,
claims and expenses, joint or several (including, without limitation reasonable
attorneys' fees and disbursements and investigation expenses incident thereto)
to which they, or any of them, may become subject under the 1933 Act, the 1934
Act, the 1940 Act or other Federal or state laws, at common law or otherwise,
insofar as such liabilities, losses, damages, claims or expenses arise out of or
relate to any untrue statement or alleged untrue statement of a material fact
contained in the Prospectus or Statement of Additional Information or any
supplement thereto, or arise out of or relate to any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, if based upon
information furnished in writing to the Fund by the Distributor specifically for
use therein.
A party seeking indemnification hereunder (the "Indemnitee") shall give
prompt written notice to the party from whom indemnification is sought
("Indemnitor") of a written assertion or claim of any threatened or pending
legal proceeding which may be subject to indemnity under this Section; provided,
however, that failure to notify the Indemnitor of such written assertion or
claim shall not relieve the Indemnitor of any liability arising from this
Section. The Indemnitor shall be entitled, if it so elects, to assume the
defense of any suit brought to enforce a claim subject to this Indemnity and
such defense shall be conducted by counsel chosen by the Indemnitor and
satisfactory to the Indemnitee; provided, however, that if the defendants
include both the Indemnitee and the Indemnitor, and the Indemnitee shall have
reasonably concluded that there may be one or more legal defenses available to
it which are different from or additional to those available to the Indemnitor
("conflict of interest"), the Indemnitor shall not have the right to elect to
defend such claim on behalf of the Indemnitee, and the Indemnitee shall have the
right to select separate counsel to defend such claim on behalf of the
Indemnitee. In the event that the Indemnitor elects to assume the defense of any
suit pursuant to the preceding sentence and retains counsel satisfactory to the
Indemnitee, the Indemnitee shall bear the fees and expenses of additional
counsel retained by it, except for reasonable investigation costs which shall be
borne by the Indemnitor. If the Indemnitor (i) does not elect to assume the
defense of a claim, (ii) elects to assume the defense of a claim but chooses
counsel that is not satisfactory to the Indemnitee or (iii) has no right to
assume the defense of a claim because of a conflict of interest, the Indemnitor
shall advance or reimburse the Indemnitee, at the election of the Indemnitee,
reasonable fees and disbursements of any counsel retained by Indemnitee,
including reasonable investigation costs.
13. Dual Employees. The Adviser agrees that only its employees who are
registered representatives of the Distributor ("dual employees") shall offer or
sell Shares of the Portfolios and further agrees that the activities of any such
employees as registered representatives of the Distributor shall be limited to
offering and selling Shares. If there are dual employees, one employee of the
Adviser shall register as a principal of the Distributor and assist the
Distributor in monitoring the marketing and sales activities of the dual
employees. The Adviser shall maintain errors and omissions and fidelity bond
insurance policies providing reasonable coverage for its employees activities
and shall provide copies of such policies to the Distributor. The Adviser shall
indemnify and hold harmless the Distributor against any and all liabilities,
losses, damages, claims and expenses (including reasonable attorneys' fees and
disbursements and investigation costs incident thereto) arising from or related
to the Adviser's employees' activities as registered representatives of the
Distributor, including, without limitation, any and all such liabilities,
losses, damages, claims and expenses arising from or related to the breach by
such dual employees of any rules or regulations of the NASD or SEC.
14. Force Majeure. The Distributor shall not be liable for any delays or
errors occurring by reason of circumstances not reasonably foreseeable and
beyond its control, including, but not limited, to acts of civil or military
authority, national emergencies, work stoppages, fire, flood, catastrophe, acts
of God, insurrection, war, riot or failure of communication or power supply. In
the event of equipment breakdowns which are beyond the reasonable control of the
Distributor and not primarily attributable to the failure of the Distributor to
reasonably maintain or provide for the maintenance of such equipment, the
Distributor shall, at no additional expense to the Fund, take reasonable steps
in good faith to minimize service interruptions, but shall have no liability
with respect thereto.
15. Scope of Duties. The Distributor and the Fund shall regularly consult
with each other regarding the Distributor's performance of its obligations and
its compensation under the foregoing provisions. In connection therewith, the
Fund shall submit to the Distributor at a reasonable time in advance of filing
with the SEC copies of any amended or supplemented Registration Statement of the
Fund (including exhibits) under the 1940 Act and the 1933 Act, and at a
reasonable time in advance of their proposed use, copies of any amended or
supplemented forms relating to any plan, program or service offered by the Fund.
Any change in such materials that would require any change in the Distributor's
obligations under the foregoing provisions shall be subject to the Distributor's
approval. In the event that a change in such documents or in the procedures
contained therein increases the cost or burden to the Distributor of performing
its obligations hereunder, the Distributor shall be entitled to receive
reasonable compensation therefore.
16. Duration. This Agreement shall become effective as of the date first
above written, and shall continue in force for two years from that date and
thereafter from year to year, provided continuance is approved at least annually
by either (i) the vote of a majority of the Directors of the Fund, or by the
vote of a majority of the outstanding voting securities of the Fund, and (ii)
the vote of a majority of those Directors of the Fund who are not interested
persons of the Fund, and who are not parties to this Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on the approval.
17. Termination. This Agreement shall terminate as follows:
a. This Agreement shall terminate automatically in the event of its
assignment.
b. This Agreement shall terminate upon the failure to approve the
continuance of the Agreement after the initial two year term as set
forth in Section 16 above.
c. This Agreement shall terminate at any time upon a vote of the majority
of the Directors who are not interested persons of the Fund or by a
vote of the majority of the outstanding voting securities of the Fund,
upon not less than 60 days prior written notice to the Distributor.
d. The Distributor may terminate this Agreement upon not less than 60
days prior written notice to the Fund.
Upon the termination of this Agreement, the Fund shall pay to the
Distributor such compensation and out-of-pocket expenses as may be payable for
the period prior to the effective date of such termination. In the event that
the Fund designates a successor to any of the Distributor's obligations
hereunder, the Distributor shall, at the expense and direction of the Fund,
transfer to such successor all relevant books, records and other data
established or maintained by the Distributor pursuant to the foregoing
provisions.
Sections 7, 8, 9, 10, 11, 12, 13, 14, 15, 17, 21, 22, 24, 25 and 26 shall
survive any termination of this Agreement.
18. Amendment. The terms of this Agreement shall not be waived, altered,
modified, amended or supplemented in any manner whatsoever except by a written
instrument signed by the Distributor, the Adviser and the Fund and shall not
become effective unless its terms have been approved by the majority of the
Directors of the Fund or by a "vote of a majority of the outstanding voting
securities" of the Fund and by a majority of those Directors who are not
"interested persons" of the Fund or any party to this Agreement.
19. Non-Exclusive Services. The services of the Distributor rendered to the
Fund are not exclusive. The Distributor may render such services to any other
investment company.
20. Definitions. As used in this Agreement, the terms "vote of a majority
of the outstanding voting securities," "assignment," "interested person" and
"affiliated person" shall have the respective meanings specified in the 1940 Act
and the rules enacted thereunder as now in effect or hereafter amended.
21. Confidentiality. The Distributor shall treat confidentially and as
proprietary information of the Fund all records and other information relating
to the Fund and prior, present or potential shareholders and shall not use such
records and information for any purpose other than performance of its
responsibilities and duties hereunder, except as may be required by
administrative or judicial tribunals or as requested by the Fund.
22. Notice. Any notices and other communications required or permitted
hereunder shall be in writing and shall be effective upon delivery by hand or
upon receipt if sent by certified or registered mail (postage prepaid and return
receipt requested) or by a nationally recognized overnight courier service
(appropriately marked for overnight delivery) or upon transmission if sent by
telex or facsimile (with request for immediate confirmation of receipt in a
manner customary for communications of such respective type and with physical
delivery of the communication being made by one or the other means specified in
this Section 20 as promptly as practicable thereafter). Notices shall be
addressed as follows: (a) if to the Trust: Quaker Investment Trust 1288 Valley
Forge Road, Suite 76 Valley Forge, PA 19482 Attention: Peter F. Waitneight
President
(b) if to the Distributor:
----------------------
Declaration Distributors, Inc.
555 North Lane, Suite 6160
Conshohocken, PA 19428
Attn: Terence P. Smith, President
or to such other respective addresses as the parties shall designate by like
notice, provided that notice of a change of address shall be effective only upon
receipt thereof.
23. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
24. Governing Law. This Agreement shall be administered, construed and
enforced in accordance with the laws of the Commonwealth of Pennsylvania to the
extent that such laws are not preempted by the provisions of any law of the
United States heretofore or hereafter enacted, as the same may be amended from
time to time.
25. Entire Agreement. This Agreement (including the Exhibits attached
hereto) contains the entire agreement and understanding of the parties with
respect to the subject matter hereof and supersedes all prior written or oral
agreements and understandings with respect thereto.
26. Miscellaneous. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof. The captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or otherwise
affect their construction. This Agreement may be executed in two counterparts,
each of which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first above written.
QUAKER INVESTMENT TRUST
By: ________________________________
Peter F. Waitneight
Chairman
Declaration Distributors, Inc.
By: ________________________________
Terence P. Smith, President
<PAGE>
SCHEDULE A
QUAKER INVESTMENT TRUST
Portfolio and Fee Schedule
Portfolios covered by Distribution Agreement:
QUAKER ENHANCED STOCK MARKET FUND
QUAKER CORE EQUITY FUND
QUAKER AGGRESSIVE GROWTH FUND
QUAKER SMALL-CAP VALUE FUND
QUAKER MID-CAP VALUE FUND
QUAKER FIXED-INCOME FUND
Fees for distribution and distribution support services on behalf of the
Portfolios:
$20, 000 Annual Fee
<PAGE>
SCHEDULE B
QUAKER INVESTMENT TRUST
Distribution Support Services
1. Provide national broker dealer for Fund registration.
2. Review and submit for approval to the NASD all advertising and promotional
materials.
3. Maintain all books and records required by the NASD.
4. Subject to approval of Distributor, license personnel as registered
representatives of the Distributor to distribute no load fund shares
sponsored by the Adviser.
5. Telemarketing services (additional cost- to be negotiated).
6. Fund fulfillment services, including sampling prospective shareholders
inquiries and related mailings (additional cost - to be negotiated).
- --------------------------------------------------------------------------------
EXHIBIT 9 INVESTMENT SERVICES AGREEMENT
INVESTMENT COMPANY SERVICES AGREEMENT
QUAKER INVESTMENT TRUST
THIS AGREEMENT, dated as of the 1st day of May, 1998 , made by and between
The Quaker Investment Trust (the "Trust"), a business trust operating as an
open-end, management investment company registered under the Investment Company
Act of 1940, as amended (the "Act"), duly organized and existing under the laws
of the State of Massachusetts, and Declaration Service Company ("Declaration"),
a corporation duly organized under the laws of the Commonwealth of Pennsylvania
(collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, the Trust is authorized by its Articles of Incorporation and By-
Laws to issue separate series of shares representing interests in separate
investment portfolios which are identified on Schedule "C" attached hereto and
which Schedule "C" may be amended from time to time by mutual agreement of the
Trust and Declaration; and
WHEREAS, the Parties desire to enter into an agreement whereby Declaration
will provide the services to the Trust as specified herein and set forth in
particular in Schedule "A" which is attached hereto and made a part hereof.
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, and in exchange for good and valuable consideration, the
sufficiency and receipt of which are hereby acknowledged, the Parties hereto,
intending to be legally bound, do hereby agree as follows:
GENERAL PROVISIONS
Section 1. Appointment. The Adviser hereby appoints Declaration as servicing
agent to the Trust and Declaration hereby accepts such appointment. In order
that Declaration may perform its duties under the terms of this Agreement, the
Board of Directors of the Trust shall direct the officers, investment adviser,
legal counsel, independent accountants and custodian of the Trust to cooperate
fully with Declaration and, upon request of Declaration, to provide such
information, documents and advice relating to the Trust which Declaration
requires to execute its responsibilities hereunder. In connection with its
duties, Declaration shall be entitled to rely, and will be held harmless by the
Trust when acting in reasonable reliance, upon any instruction, advice or
document relating to the Trust as provided to Declaration by any of the
aforementioned persons on behalf of the Trust. All fees charged by any such
persons acting on behalf of the Trust will be deemed an expense of the Trust.
Any services performed by Declaration under this Agreement will conform to the
requirements of:
(a) the provisions of the Act and the Securities Act of 1933, as amended,
and any rules or regulations in force thereunder;
(b) any other applicable provision of state and federal law;
(c) the provisions of the Articles of Incorporation and the by-laws of the
Trust, as amended from time to time and delivered to Declaration;
(d) any policies and determinations of the Board of Directors of the Trust
which are communicated to Declaration; and
(e) the policies of the Trust as reflected in the Trust's registration
statement as filed with the U.S. Securities and Exchange Commission.
Nothing in this Agreement will prevent Declaration or any officer thereof from
providing the same or comparable services for or with any other person, firm or
corporation. While the services supplied to the Trust may be different than
those supplied to other persons, firms or corporations, Declaration will provide
the Trust equitable treatment in supplying services. The Trust recognizes that
it will not receive preferential treatment from Declaration as compared with the
treatment provided to other Declaration clients.
Section 2. Duties and Obligations of Declaration.
Subject to the provisions of this Agreement, Declaration will provide to
the Trust the specific services as set forth in Schedule "A" attached hereto.
Section 3. Definitions. For purposes of this Agreement:
"Certificate" will mean any notice, instruction, or other instrument in
writing, authorized or required by this Agreement. To be effective, such
Certificate shall be given to and received by the custodian and shall be
signed on behalf of the Trust by any two of its designated officers, and
the term Certificate shall also include instructions communicated to the
custodian by Declaration.
"Custodian" will refer to that agent which provides safekeeping of the
assets of the Trust.
"Instructions" will mean communications containing instructions transmitted
by electronic or telecommunications media including, but not limited to,
Industry Standardization for Institutional Trade Communications,
computer-to-computer interface, dedicated transmission line, facsimile
transmission (which may be signed by an officer or unsigned) and tested
telex.
"Oral Instruction" will mean an authorization, instruction, approval, item
or set of data, or information of any kind transmitted to Declaration in
person or by telephone, telegram, telecopy or other mechanical or
documentary means lacking original signature, by a person or persons
reasonably identified to Declaration to be a person or persons so
authorized by a resolution of the Board of Directors of the Trust to give
Oral Instructions to Declaration on behalf of the Trust.
"Shareholders" will mean the registered owners of the shares of the Trust
in accordance with the share registry records maintained by Declaration for
the Trust.
"Shares" will mean the issued and outstanding shares of the Trust.
"Signature Guarantee" will mean the guarantee of signatures by an "eligible
guarantor institution" as defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Eligible guarantor
institutions include banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations. Broker-dealers guaranteeing signatures must be
members of a clearing corporation or maintain net capital of at least
$100,000. Signature guarantees will be accepted from any eligible guarantor
institution which participates in a signature guarantee program.
"Written Instruction" will mean an authorization, instruction, approval,
item or set of data or information of any kind transmitted to Declaration
in an original writing containing an original signature or a copy of such
document transmitted by telecopy including transmission of such signature
reasonably identified to Declaration to be the signature of a person or
persons so authorized by a resolution of the Board of Directors of the
Trust, or so identified by the Trust to give Written Instructions to
Declaration on behalf of the Trust.
Concerning Oral and Written Instructions For all purposes under this
Agreement, Declaration is authorized to act upon receipt of the first of
any Written or Oral Instruction it receives from the Trust or its agents.
In cases where the first instruction is an Oral Instruction that is not in
the form of a document or written record, a confirmatory Written
Instruction or Oral Instruction in the form of a document or written record
shall be delivered. In cases where Declaration receives an Instruction,
whether Written or Oral, to enter a portfolio transaction onto the Trust's
records, the Trust shall cause the broker/dealer executing such transaction
to send a written confirmation to the Custodian.
Declaration shall be entitled to rely on the first Instruction received.
For any act or omission undertaken by Declaration in compliance therewith, it
shall be free of liability and fully indemnified and held harmless by the Trust,
provided however, that in the event a Written or Oral Instruction received by
Declaration is countermanded by a subsequent Written or Oral Instruction
received prior to acting upon such countermanded Instruction, Declaration shall
act upon such subsequent Written or Oral Instruction. The sole obligation of
Declaration with respect to any follow-up or confirmatory Written Instruction or
Oral Instruction in documentary or written form shall be to make reasonable
efforts to detect any such discrepancy between the original Instruction and such
confirmation and to report such discrepancy to the Trust. The Trust shall be
responsible and bear the expense of its taking any action, including any
reprocessing, necessary to correct any discrepancy or error. To the extent such
action requires Declaration to act, the Trust shall give Declaration specific
Written Instruction as to the action required. The Trust will file with
Declaration a certified copy of each resolution of the Trust's Board of
Directors authorizing execution of Written Instructions or the transmittal of
Oral Instructions as provided above.
Section 4. Indemnification.
(a) Declaration, its directors, officers, employees, shareholders, and
agents will be liable for any loss suffered by the Trust resulting from the
willful misfeasance, bad faith, gross negligence or reckless disregard on the
part of Declaration in the performance of its obligations and duties under this
Agreement.
(b) Any director, officer, employee, shareholder or agent of Declaration,
who may be or become an officer, director, employee or agent of the Trust, will
be deemed, when rendering services to the Trust, or acting on any business of
the Trust (other than services or business in connection with Declaration'
duties hereunder), to be rendering such services to or acting solely for the
Trust and not as a director, officer, employee, shareholder or agent of, or
under the control or direction of Declaration even though such person may be
receiving compensation from Declaration.
(c) The Fund agrees to indemnify and hold Declaration harmless, together
with its directors, officers, employees, shareholders and agents from and
against any and all claims, demands, expenses and liabilities (whether with or
without basis in fact or law) of any and every nature which Declaration may
sustain or incur or which may be asserted against Declaration by any person by
reason of, or as a result of:
(i) any action taken or omitted to be taken by Declaration except
claims, demands, expenses and liabilities arising from willful misfeasance,
bad faith, negligence or reckless disregard on the part of Declaration in
the performance of its obligations and duties under this Agreement; or
(ii) any action taken or omitted to be taken by Declaration in
reliance upon any Certificate, instrument, order or stock certificate or
other document reasonably believed by Declaration to be genuine and signed,
countersigned or executed by any duly authorized person, upon the Oral
Instructions or Written Instructions of an authorized person of the Fund,
or upon the written opinion of legal counsel for the Fund or Declaration;
or
(iii) the offer or sale of shares of the Fund to any person, natural
or otherwise, which is in violation of any state or federal law.
If a claim is made against Declaration as to which Declaration may seek
indemnity under this Section, Declaration will notify the Fund promptly after
receipt of any written assertion of such claim threatening to institute an
action or proceeding with respect thereto and will notify the Fund promptly of
any action commenced against Declaration within ten (10) days after Declaration
has been served with a summons or other legal process. Failure to notify the
Fund will not, however, relieve the Fund from any liability which it may have on
account of the indemnity under this Section so long as the Fund has not been
prejudiced in any material respect by such failure.
The Fund and Declaration will cooperate in the control of the defense of
any action, suit or proceeding in which Declaration is involved and for which
indemnity is being provided by the Fund to Declaration. The Fund may negotiate
the settlement of any action, suit or proceeding subject to Declaration's
approval, which will not be unreasonably withheld. Declaration reserves the
right, but not the obligation, to participate in the defense or settlement of a
claim, action or proceeding with its own counsel. Costs or expenses incurred by
Declaration in connection with, or as a result of such participation, will be
borne solely by the Fund if:
(i) Declaration has received an opinion of counsel from counsel to the
Fund stating that the use of counsel to the Fund by Declaration would
present an impermissible conflict of interest;
(ii) the defendants in, or targets of, any such action or proceeding
include both Declaration and the Fund, and legal counsel to
Declaration has reasonably concluded that there are legal defenses
available to it which are different from or additional to those
available to the Fund or which may be adverse to or inconsistent with
defenses available to the Fund (in which case the Fund will not have
the right to direct the defense of such action on behalf of
Declaration); or
(iii) the Fund authorizes Declaration to employ separate counsel at
the expense of the Fund.
(d) The terms of this Section will survive the termination of this
Agreement.
Section 5. Representations and Warranties.
(a) Declaration represents and warrants that:
(i) it is a corporation duly organized and existing and in good
standing under the laws of Pennsylvania;
(ii) it is empowered under applicable laws and by its Certificate of
Incorporation and by-laws to enter into and perform this Agreement;
(iii) all requisite corporate proceedings have been taken to authorize
Declaration to enter into and perform this Agreement;
(iv) it has and will continue to have access to the facilities,
personnel and equipment required to fully perform its duties and
obligations hereunder;
(v) no legal or administrative proceedings have been instituted or
threatened which would impair Declaration's ability to perform its
duties and obligations under this Agreement;
(vi) its entrance into this Agreement shall not cause a material
breach or be in material conflict with any other agreement or
obligation of Declaration or any law or regulation applicable to it;
(vii) it is registered as a transfer agent under Section 17A(c)(2) of
the Exchange Act;
(viii) this Agreement has been duly authorized by Declaration and,
when executed and delivered, will constitute valid, legal and binding
obligation of Declaration, enforceable in accordance with its terms.
(b) The Fund represents and warrants that:
(i) it is duly organized and existing and in good standing under the
laws of the State of Massachusetts;
(ii) it is empowered under applicable laws and by its Declaration of
Trust and by-laws to enter into and perform this Agreement;
(iii) all requisite proceedings have been taken to authorize the Fund
to enter into and perform this Agreement;
(iv) no legal or administrative proceedings have been instituted or
threatened which would impair the Fund's ability to perform its duties
and obligations under this Agreement;
(v) the Fund's entrance into this Agreement shall not cause a material
breach or be in material conflict with any other agreement or
obligations of the Fund, or any law or regulation applicable to
either;
(vi) the Shares are properly registered or otherwise authorized for
issuance and sale;
(vii) this Agreement has been duly authorized by the Fund and, when
executed and delivered, will constitute valid, legal and binding
obligation of the Fund, enforceable in accordance with its terms.
(vi) this Agreement has been duly authorized by the Adviser and, when
executed and delivered, will constitute valid, legal and binding
obligation of the Adviser, enforceable in accordance with its terms.
(d) Delivery of Documents
The Fund will furnish or cause to be furnished to Declaration the following
documents;
(i) current Prospectus and Statement of Additional Information;
(ii) most recent Annual Report;
(iii) most recent Semi-Annual Report for registered investment
companies on Form N-SAR;
(iv) certified copies of resolutions of the Fund's Board of Directors
authorizing the execution of Written Instructions or the transmittal
of Oral Instructions and those persons authorized to give those
Instructions.
(e) Record Keeping and Other Information
Declaration will create and maintain all records required of it pursuant to
its duties hereunder and as set forth in Schedule "A" in accordance with all
applicable laws, rules and regulations, including records required by Section
31(a) of the Act. All such records will be the property of the Fund and will be
available during regular business hours for inspection, copying and use by the
Fund. Where applicable, such records will be maintained by Declaration for the
periods and in the places required by Rule 31a-2 under the Act. Upon termination
of this Agreement, Declaration will deliver all such records to the Fund or such
person as the Fund may designate.
In case of any request or demand for the inspection of the Share records of
the Fund, Declaration shall notify the Fund and secure instructions as to
permitting or refusing such inspection. Declaration may, however, exhibit such
records to any person in any case where it is advised by its counsel that it may
be held liable for failure to do so.
Section 6. Compensation. The Adviser agrees to pay Declaration compensation for
its services, and to reimburse it for expenses at the rates, times, manner and
amounts as set forth in Schedule "B" attached hereto and incorporated herein by
reference and as will be set forth in any amendments to such Schedule "B" agreed
upon in writing by the Parties. Upon receipt of an invoice therefor, the Adviser
agrees to pay such fees within ten (10) business days. In addition, the Adviser
agrees to reimburse Declaration for any out-of-pocket expenses paid by
Declaration on behalf of the Fund within ten (10) calendar days of the Fund's
receipt of an invoice therefor. In the event Adviser is unable to pay such
invoices for services or out- of-pocket expenses, for any reason, the Fund
agrees to pay Declaration the full amount(s) due within ten (10) additional
business days.
For the purpose of determining fees payable to Declaration, the value of
the Fund's net assets will be computed at the times and in the manner specified
in the Fund's Prospectus and Statement of Additional Information then in effect.
During the term of this Agreement, should the Fund seek services or
functions in addition to those outlined below or in Schedule "A" attached
hereto, a written amendment to this Agreement specifying the additional services
and corresponding compensation will be executed by the Parties.
In the event that Adviser is more than thirty (30) days delinquent in its
payments of monthly billings in connection with this Agreement (with the
exception of specific amounts which may be contested in good faith by the Fund),
this Agreement may be terminated upon thirty (30) days' written notice by
Declaration. The Adviser must notify Declaration in writing of any contested
amounts within ten (10) days of receipt of a billing for such amounts. Disputed
amounts are not due and payable while they are being disputed.
Section 7. Days of Operation. Nothing contained in this Agreement is intended to
or will require Declaration, in any capacity hereunder, to perform any functions
or duties on any holiday, day of special observance or any other day on which
the New York Stock Exchange ("NYSE") is closed. Functions or duties normally
scheduled to be performed on such days will be performed on and as of the next
succeeding business day on which the NYSE is open. Notwithstanding the
foregoing, Declaration will compute the net asset value of the Fund on each day
required pursuant to Rule 22c-1 promulgated under the Act.
Section 8. Acts of God, etc. Declaration will not be liable or responsible for
delays or errors caused by acts of God or by reason of circumstances beyond its
control including, acts of civil or military authority, national emergencies,
labor difficulties, mechanical breakdown, insurrection, war, riots, or failure
or unavailability of transportation, communication or power supply, fire, flood
or other catastrophe.
In the event of equipment failures beyond Declaration's control,
Declaration will, at no additional expense to the Fund, take reasonable steps to
minimize service interruptions but will have no liability with respect thereto.
The foregoing obligation will not extend to computer terminals located outside
of premises maintained by Declaration. Declaration has entered into and
maintains in effect agreements making reasonable provision for emergency use of
electronic data processing equipment to the extent appropriate equipment is
available.
Section 9. Inspection and Ownership of Records. In the event of a request or
demand for the inspection of the records of the Fund, Declaration will use its
best efforts to notify the Fund and to secure instructions as to permitting or
refusing such inspection. Declaration may, however, make such records available
for inspection to any person in any case where it is advised in writing by its
counsel that it may be held liable for failure to do so after notice to the
Fund.
Declaration recognizes that the records it maintains for the Fund are the
property of the Fund and will be surrendered to the Fund upon written notice to
Declaration as outlined under Section 10(c) below. The Fund is responsible for
the payment in advance of any fees owed to Declaration. Declaration agrees to
maintain the records and all other information of the Fund in a confidential
manner and will not use such information for any purpose other than the
performance of Declaration' duties under this Agreement.
Section 10. Duration and Termination.
(a) The initial term of this Agreement will be for the period of two (2)
years, commencing on the date hereinabove first written (the "Effective Date")
and will continue thereafter subject to termination by either Party as set forth
in subsection (c) below.
(b) The fee schedules set forth in Schedule "B" attached hereto will be
fixed for the initial term commencing on the Effective Date of this Agreement
and will continue thereafter subject to their review and any adjustment.
(c) After the initial term of this Agreement, a Party may give written
notice to the other (the day on which the notice is received by the Party
against which the notice is made shall be the "Notice Date") of a date on which
this Agreement shall be terminated ("Termination Date"). The Termination Date
shall be set on a day not less than ninety (90) days after the Notice Date. The
period of time between the Notice Date and the Termination Date is hereby
identified as the "Notice Period". Any time up to, but not later than fifteen
(15) days prior to the Termination Date, the Adviser or the Fund will pay to
Declaration such compensation as may be due as of the Termination Date and will
likewise reimburse Declaration for any out-of-pocket expenses and disbursements
reasonably incurred or expected to be incurred by Declaration up to and
including the Termination Date.
(d) In connection with the termination of this Agreement, if a successor to
any of Declaration' duties or responsibilities under this Agreement is
designated by the Fund by written notice to Declaration, Declaration will
promptly, on the Termination Date and upon receipt by Declaration of any
payments owed to it as set forth in Section 10(c) above, transfer to the
successor, at the Adviser's expense, all records which belong to the Fund and
will provide appropriate, reasonable and professional cooperation in
transferring such records to the named successor.
(e) Should the Fund desire to move any of the services outlined in this
Agreement to a successor service provider prior to the Termination Date,
Declaration shall make a good faith effort to facilitate the conversion on such
prior date, however, there can be no guarantee that Declaration will be able to
facilitate a conversion of services prior to the end of the Notice Period.
Should services be converted to a successor service provider prior to the end of
the Notice Period, or if the Fund is liquidated or its assets merged or
purchased or the like with another entity, payment of fees to Declaration shall
be accelerated to a date prior to the conversion or termination of services and
calculated as if the services had remained at Declaration until the expiration
of the Notice Period and shall be calculated at the asset levels on the Notice
Date.
(f) Notwithstanding any other provisions of Paragraph 10, in the event the
Fund deregisters as an Investment Company with the United States Securities and
Exchange Commission ("SEC"), this Agreement may be terminated by the Fund upon
ninety (90) days written notice to Declaration. The Termination Date shall be
ninety (90) days after the receipt of such notice by Declaration. Any time up
to, but not later than fifteen (15) days prior to the Termination Date, the
Adviser or the Fund will pay to Declaration such compensation as may be due as
of the Termination Date and will likewise reimburse Declaration for any out- of-
pocket expenses and disbursements reasonably incurred or expected to be incurred
by Declaration up to and including the Termination Date.
(g) Notwithstanding the foregoing, this Agreement may be terminated at any
time by either Party in the event of a material breach by the other Party
involving negligence, willful misfeasance, bad faith or a reckless disregard of
its obligations and duties under this Agreement provided that such breach shall
have remained unremedied for sixty (60) days or more after receipt of written
specification thereof.
Section 11. Rights of Ownership. All computer programs and procedures developed
to perform services required to be provided by Declaration under this Agreement
are the property of Declaration. All records and other data except such computer
programs and procedures are the exclusive property of the Fund and all such
other records and data will be furnished to the Fund in appropriate form as soon
as practicable after termination of this Agreement for any reason.
Section 12. Amendments to Documents. The Fund will furnish Declaration written
copies of any amendments to, or changes in, the Articles of Incorporation,
by-laws, Prospectus or Statement of Additional Information in a reasonable time
prior to such amendments or changes becoming effective. In addition, the Fund
agrees that no amendments will be made to the Prospectus or Statement of
Additional Information of the Fund which might have the effect of changing the
procedures employed by Declaration in providing the services agreed to hereunder
or which amendment might affect the duties of Declaration hereunder unless the
Fund first obtains Declaration' approval of such amendments or changes.
Section 13. Confidentiality. Both Parties hereto agree that any non-public
information obtained hereunder concerning the other Party is confidential and
may not be disclosed to any other person without the consent of the other Party,
except as may be required by applicable law or at the request of the U.S.
Securities and Exchange Commission or other governmental agency. Declaration
agrees that it will not use any non-public information for any purpose other
than performance of its duties or obligations hereunder. The obligations of the
Parties under this Section will survive the termination of this Agreement. The
Parties further agree that a breach of this Section would irreparably damage the
other Party and accordingly agree that each of them is entitled, without bond or
other security, to an injunction or injunctions to prevent breaches of this
provision.
Section 14. Notices. Except as otherwise provided in this Agreement, any notice
or other communication required by or permitted to be given in connection with
this Agreement will be in writing and will be delivered in person or sent by
first class mail, postage prepaid or by prepaid overnight delivery service to
the respective parties as follows:
If to the Trust: If to Declaration:
---------------- ------------------
Quaker Investment Trust Declaration Service Company
1288 Valley Forge Road, Suite 76 555 North Lane, Suite 6160
Valley Forge, PA 19482 Conshohocken, PA 19428
Attention: Peter F. Waitneight Attention: Terence P. Smith
President President
Section 15. Amendment. No provision of this Agreement may be amended or modified
in any manner except by a written agreement properly authorized and executed by
the Parties. This Agreement may be amended from time to time by supplemental
agreement executed by the Parties and the compensation stated in Schedule "B"
attached hereto may be adjusted accordingly as mutually agreed upon.
Section 16. Authorization. The Parties represent and warrant to each other that
the execution and delivery of this Agreement by the undersigned officer of each
Party has been duly and validly authorized; and when duly executed, this
Agreement will constitute a valid and legally binding enforceable obligation of
each Party.
Section 17. Counterparts. This Agreement may be executed in two or more
counterparts, each of which when so executed will be deemed to be an original,
but such counterparts will together constitute but one and the same instrument.
Section 18. Assignment. This Agreement will extend to and be binding upon the
Parties hereto and their respective successors and assigns; provided, however,
that this Agreement will not be assignable by any of the parties without the
written consent of the other parties, which consents shall be authorized or
approved by a resolution by its respective Boards of Directors.
Section 19. Governing Law. This Agreement will be governed by the laws of the
State of Pennsylvania.
Section 20. Severability. If any part, term or provision of this Agreement is
held by any court to be illegal, in conflict with any law or otherwise invalid,
the remaining portion or portions will be considered severable and not be
affected and the rights and obligations of the parties will be construed and
enforced as if the Agreement did not contain the particular part, term or
provision held to be illegal or invalid, provided that the basic agreement is
not thereby materially impaired.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement
consisting of twenty (13) typewritten pages, together with Schedules "A," "B"
and "C" (Pages 14-21, attached), to be signed by their duly authorized officers
as of the day and year first above written.
Quaker Investment Trust Declaration Service Company
- --------------------------- ----------------------------------
By: Peter F. Waightneight By: Terence P. Smith
President President
<PAGE>
SCHEDULE A
Accounting Services Provided by Declaration Service Company
- --------------------------------------------------------------------------------
o Journalize each Portfolio's investment, capital share and income and
expense activities.
o Verify investment buy/sell trade tickets when received from the adviser and
transmit trades to the Fund's custodian for proper settlement.
o Maintain individual ledgers for investment securities.
o Maintain historical tax lots for each security.
o Reconcile cash and investment balances of each Portfolio with the
custodian, and provide the adviser with the beginning cash balance
available for investment purposes.
o Update the cash availability throughout the day as required by the adviser.
o Post to and prepare each Portfolio's Statement of Assets and Liabilities
and Statement of Operations.
o Calculate expenses payable pursuant to the Fund's various contractual
obligations.
o Control all disbursements from the Fund on behalf of each Portfolio and
authorize such disbursements upon instructions of the Fund.
o Calculate capital gains and losses.
o Determine each Portfolio's net income.
o At the Portfolio's expense, obtain security market prices or if such market
prices are not readily available, then obtain such prices from services
approved by the adviser, and in either case calculate the market or fair
value of each Portfolio's investments.
o Where applicable, calculate the amortized cost value of debt instruments.
o Transmit or mail a copy of the portfolio valuations to the adviser.
o Compute the net asset value of each Portfolio.
o Report applicable net asset value and performance data to performance
tracking organizations.
o Compute each Portfolio's yields, total returns, expense ratios and
portfolio turnover rate.
o Prepare and monitor the expense accruals and notify Fund management of any
proposed adjustments.
o Prepare monthly financial statements, which will include, without
limitation, the Schedule of Investments, the Statement of Assets and
Liabilities, the Statement of Operations, the Statement of Changes in Net
Assets, the Cash Statement, and the Schedule of Capital Gains and Losses.
o Prepare monthly security transactions listings.
o Prepare monthly broker security transactions summaries.
o Supply various Fund and Portfolio statistical data as requested on an
ongoing basis.
o Assist in the preparation of support schedules necessary for completion of
Federal and state tax returns.
o Assist in the preparation and filing of the Fund's annual and semiannual
reports with the SEC on Form N-SAR.
o Assist in the preparation and filing of the Fund's annual and semiannual
reports to shareholders and proxy statements.
o Assist with the preparation of amendments to the Fund's Registration
Statements on From N-1A and other filings relating to the registration of
shares.
o Monitor each Portfolio's status as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended from time to
time ("Code").
o Determine the amount of dividends and other distributions payable to
shareholders as necessary to, among other things, maintain the
qualification as a regulated investment company of each Portfolio of the
Fund under the Code.
o Provide other accounting services as may be agreed upon from time to time
in writing by the Fund and Declaration.
Administrative Services Provided by Declaration Service Company
- --------------------------------------------------------------------------------
o Provide overall day-to-day Fund administrative management, including
coordination of investment adviser, custodian, transfer agency,
distribution and pricing and accounting services.
o Preparation and filing of all Federal and State reports including:
o Fund's post-effective amendments under the Securities Act of 1933 and
the Investment Company Act of 1940.
o Form N-SAR - Semi-Annual report for Registered Investment Companies.
o The Fund's Annual and Semi-Annual Report.
o Rule 24f-2 Notice - filing regarding sale(s) of securities.
o Rule 17g-1 filing with the SEC regarding Fidelity Bond coverage.
o Ongoing monitoring and filing of State Blue Sky registrations.
o Prepare and file such reports, applications and documents as may be
necessary or desirable to register the Fund's shares with the Federal and
state securities authorities, and monitor the sale of Fund shares for
compliance with Federal and state securities laws.
o Prepare and file reports to shareholders, including the annual report to
shareholders, and coordinate mailing Prospectuses, notices, proxy
statements, proxies and other reports to shareholders.
o Assist with layout and printing of shareholder communications, including
Prospectuses and reports to shareholders.
o Administer contracts on behalf of the Fund with, among others, the Fund's
investment adviser, custodian, transfer agent/shareholder servicing agent,
distributor, and accounting services agent.
o Prepare and maintain materials for directors/management meetings including,
agendas, minutes, attendance records and minute books.
o Coordinate shareholder meetings, including assisting Fund counsel in
preparation of proxy materials, preparation of minutes and tabulation of
results.
o Monitor and pay Fund bills, maintain Fund budget and report budget expenses
and variances to Fund management.
o Monitor the Fund's compliance with the investment restrictions and
limitations imposed by the 1940 Act and state Blue Sky laws and applicable
regulations thereunder, the fundamental and non-fundamental investment
policies and limitations set forth in the Fund's Prospectuses and Statement
of Additional Information, and the investment restrictions and limitations
necessary for each Portfolio of the Fund to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986,
as amended, or any successor statute.
o Prepare and distribute to appropriate parties notices announcing the
declaration of dividends and other distributions to shareholders.
o Provide administrative services as may be agreed from time to time in
writing by Declaration.
Blue Sky Administration
- --------------------------------------------------------------------------------
o Produce and mail the following required filings:
o Initial Filings - produce all required forms and follow-up on any
comments, including notification of SEC effectiveness.
o Renewals - produce all renewal documents and mail to states, includes
follow-up to ensure all is in order to continue selling in states.
o Sales Reports - produce all the relevant sales reports for the states
and complete necessary documents to properly file sales reports with
states.
o Annual Report Filings - file copies of all annual reports with states.
Prospectus Filings - file all copies of Definitive SAI & Prospectuses
with the states.
o Post-Effective Amendment Filing - file all Post-Effective Amendments
with the states, as well as, any other required documents.
o On demand additional states - complete filing for any states that you would
like to add.
o Amendments to current permits - file in a timely manner any amendment to
registered share amounts.
o Update and file hard copy of all data pertaining to individual permits.
Transfer Agent, Shareholder Servicing Agent and Dividend Disbursing Agent
Services provided by Declaration Service Company
- --------------------------------------------------------------------------------
o Examine and process new accounts, subsequent payments, liquidations,
exchanges, transfers, telephone transactions, check redemptions automatic
withdrawals, and wire order trades.
o Reinvest or pay dividends and make other distributions.
o Answer investor and dealer telephone and/or written inquiries, except as
otherwise agreed by the Transfer Agent and the Fund.
o Process and confirm address changes.
o Process standard account record changes as required, i.e. Dividend Codes,
etc.
o Microfilm and/or store source documents for transactions, such as account
applications and correspondence.
o Perform backup withholding for those accounts in accordance with Federal
regulations.
o Solicit missing taxpayer identification numbers.
o Provide remote access inquiry to Fund records via Fund supplied hardware
(fund responsible for connection line and monthly fee).
o Maintain the following shareholder information in such a manner as the
Transfer Agent shall determine:
o Name and address, including zip code.
o Balance of Shares.
o Number of Shares, issuance date of each share outstanding and
cancellation date of each share no longer outstanding, if issued.
o Balance of dollars available for redemption.
o Dividend code (daily accrual, monthly reinvest, monthly cash or
quarterly cash).
o Type of account code.
o Establishment date indicating the date an account was opened, carrying
forward pre-conversion data as available.
o Original establishment date for accounts opened by exchange.
o W-9 withholding status and periodic reporting.
o State of residence code.
o Social security or taxpayer identification number, and indication of
certification.
o Historical transactions on the account for the most recent 18 months,
or other period as mutually agreed to from time to time.
o Indication as to whether phone transaction can be accepted for this
account. Beneficial owner code, i.e. male, female, joint tenant, etc.
o Provide the following reports and statements:
o Prepare daily journals for Fund reflecting all shares and dollar
activity for the previous day.
o Supply information monthly for Fund's preparation of Blue Sky
reporting.
o Supply monthly purchase, redemption and liquidation information for
use in Fund's N-SAR report.
o Provide monthly average daily balance reports for the Fund.
o Prepare and mail copies of summary statements to dealers and
investment advisers.
o Mail transaction confirmation statements daily to investors.
o Address and mail four periodic financial reports (material must be
adaptable to Transfer Agent's mechanical equipment as reasonably
specified by the Transfer Agent).
o Mail periodic statement to investors.
o Compute, prepare and furnish all necessary reports to governmental
authorities: Forms 1099R, 1099DIV, 1099B, 1042 and 1042S.
o Enclose various marketing material as designated by the Fund in
statement mailings, i.e. monthly and quarterly statements (material
must be adaptable to mechanical equipment as reasonably specified by
the Transfer Agent).
o Prepare and mail confirmation statements to dealers daily.
o Prepare certified list of stockholders for proxy mailing.
<PAGE>
SCHEDULE B
Compensation Schedule for Services Provided by Declaration Service Company
Per Portfolio
- -------------
0.05% on first $25 million of average annual assets
0.09% on next $25 million of average annual assets
0.07% on next $50 million of average annual assets
0.06% in excess of $100 million of average annual assets
Transfer Agent/ Shareholder Services:
- -------------------------------------
$15.00 MINIMUM FEE
$ 7.50 per Shareholder Account
Fund Administration, on relationship:
- -------------------------------------
$20,000 Annual Fee
Fund Accounting/Pricing per Portfolio
- -------------------------------------
$17,000 Annual Fee
Reduction in first year fee:
- ----------------------------
Fees for the first year of the contract 9 May 1, 1998 through April 30, 1999)
will be reduced by 16.667% of the scheduled fees.
Plus out-of-pocket expenses to include, but not limited to:
- -----------------------------------------------------------
wire fees, Fund/SERV and Networking fees, bank service charges, printing,
copying, postage, courier, account statement/ confirmation (including
programming costs for specialized statements/ confirmations), portfolio price
quotation service, asset allocation charges, travel, telephone, registration
fees, and other standard miscellaneous items.
Additional classes of shares per portfolio
- ------------------------------------------
Each category of fee ( including annual minimums) increases by 50% for the
second class of shares per portfolio, and by 25% for each additional class of
shares per portfolio.
<PAGE>
SCHEDULE C
QUAKER INVESTMENT TRUST
Portfolios covered by this Agreement:
QUAKER ENHANCED STOCK MARKET FUND
QUAKER CORE EQUITY FUND
QUAKER AGGRESSIVE GROWTH FUND
QUAKER SMALL-CAP VALUE FUND
QUAKER MID-CAP VALUE FUND
QUAKER FIXED INCOME FUND
- --------------------------------------------------------------------------------
EXHIBIT 15 12B-1 PLAN OF DISTRIBUTION FOR CORE EQUITY
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
WHEREAS, Quaker Investment Trust, an unincorporated business trust organized and
existing under the laws of the Commonwealth of Massachusetts (the
"Trust"),engages in business as an open-end management investment company and is
registered as such under the Investment Company Act of 1940, as amended
(the"1940 Act"); and
WHEREAS, the Trust is authorized to issue an unlimited number of shares of
beneficial interest (the "Shares"), in separate series representing the
interests in separate funds of securities and other assets; and
WHEREAS, the Trust offers a series of such Shares representing interests in the
QUAKER CORE EQUITY FUND (the "Fund") of the Trust, which Shares are divided into
two Classes of Investor and Institutional Shares;
WHEREAS, the Trustees of the Trust as a whole, and the Trustees who are not
interested persons of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement relating hereto (the "Non-Interested Trustees"), having determined, in
the exercise of reasonable business judgment and in light of their fiduciary
duties under state law and under Section 36(a) and (b) of the 1940 Act, that
there is a reasonable likelihood that this Plan will benefit the Trust and its
shareholders, have approved this Plan by votes cast at a meeting called for the
purpose of voting hereon and on any agreements related hereto; and
NOW, THEREFORE, the Trust hereby adopts this Plan in accordance with Rule 12b-1
under the 1940 Act, on the following terms and conditions:
1. Distribution and Servicing Activities. Subject to the supervision of the
Trustees of the Trust, the Trust may, directly or indirectly, engage in any
activities primarily intended to result in the sale of Investor Shares of
the Fund, which activities may include, but are not limited to, the
following: (a)payments to the Trust's Distributor and to securities dealers
and others in respect of the sale of Investor Shares of the Fund; (b)
payment of compensation to and expenses of personnel (including personnel
of organizations with which the Trust has entered into agreements related
to this Plan) who engage in or support distribution of Investor Shares of
the Fund or who render shareholder support services not otherwise provided
by the Trust's transfer agent, administrator, or custodian, including but
not limited to, answering inquiries regarding the Trust, processing
shareholder transactions, providing personal services and/or the
maintenance of shareholder accounts, providing other shareholder liaison
services, responding to shareholder inquiries, providing information on
shareholder investments in the Fund, and providing such other shareholder
services as the Trust may reasonably request; (c) formulation and
implementation of marketing and promotional activities, including, but not
limited to, direct mail promotions and television, radio, newspaper,
magazine and other mass media advertising; (d) preparation, printing and
distribution of sales literature; (e) preparation, printing and
distribution of prospectuses and statements of additional information and
reports of the Trust for recipients other than existing shareholders of the
Trust; and (f) obtaining such information, analyses and reports with
respect to marketing and promotional activities as the Trust may, from time
to time, deem advisable. The Trust is authorized to engage in the
activities listed above, and in any other activities primarily intended to
result in the sale of Investor Shares of the Fund, either directly or
through other persons with which the Trust has entered into agreements
related to this Plan.
2. Maximum Expenditures. The expenditures to be made by the Trust pursuant to
this Plan and the basis upon which payment of such expenditures will be
made shall be determined by the Trustees of the Trust, but in no event may
such expenditures exceed an amount calculated at the rate of 0.25% per
annum of the average daily net asset value of the Investor Shares of the
Fund for each year or portion thereof included in the period for which the
computation is being made, elapsed since the inception of this Plan to the
date of such expenditures. Notwithstanding the foregoing, in no event may
such expenditures paid by the Trust as service fees exceed an amount
calculated at the rate of0.25% of the average annual net assets of the
Investor Shares of the Fund, nor may such expenditures paid as service fees
to any person who sells Investor Shares of the Fund exceed an amount
calculated at the rate of 0.25% of the average annual net asset value of
such shares. Such payments for distribution and shareholder servicing
activities may be made directly by the Trust or to other persons with which
the Trust has entered into agreements related to this Plan.
3. Term and Termination. (a) This Plan shall become effective as of the19th
day of October, 1998. Unless terminated as herein provided, this Plan shall
continue in effect for one year from the date hereof and shall continue in
effect for successive periods of one year thereafter, but only so long as
each such continuance is specifically approved by votes of a majority of
both (i) the Trustees of the Trust and (ii) the Non-Interested Trustees,
cast at a meeting called for the purpose of voting on such approval. (b)
This Plan may be terminated at any time with respect to the Fund bya vote
of a majority of the Non-Interested Trustees or by a vote of a majority of
the outstanding voting securities of the Investor Class of the Fund as
defined in the 1940 Act.
4. Amendments. This Plan may not be amended to increase materially the maximum
expenditures permitted by Section 2 hereof unless such amendment is
approved by a vote of the majority of the outstanding voting securities of
the Investor Class of the Fund as defined in the 1940 Act with respect to
which a material increase in the amount of expenditures is proposed, and no
material amendment to this Plan shall be made unless approved in the manner
provided for annual renewal of this Plan in Section 3(a) hereof.
5. Selection and Nomination of Trustees. While this Plan is n effect, the
selection and nomination of the Non-Interested Trustees of the Trust shall
be committed to the discretion of such Non-Interested Trustees.
6. Quarterly Reports. The Treasurer of the Trust shall provide to the Trustees
of the Trust and the Trustees shall review quarterly a written report of
the amounts expended pursuant to this Plan and any related agreement and
the purposes for which such expenditures were made.
7. Record keeping. The Trust shall preserve copies of this Plan and any
related agreement and all reports made pursuant to Section 6 hereof, for a
period of not less than six years from the date of this Plan. Any such
related agreement or such reports for the first two years will be
maintained in an easily accessible place.
8. Limitation of Liability. Any obligations of the Trust hereunder shall not
be binding upon any of the Trustees, officers or shareholders of the Trust
personally, but shall bind only the assets and property of the Trust. The
term "Quaker Investment Trust" means and refers to the Trustees from time
to time serving under the Agreement and Declaration of Trust of the Trust,
a copy of which is on file with the Secretary of The Commonwealth of
Massachusetts. The execution of this Plan has been authorized by the
Trustees, and this Plan has been signed on behalf of the Trust by an
authorized officer of the Trust, acting as such and not individually, and
neither such authorization by such Trustees nor such execution by such
officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the
assets and property of the Trust as provided in the Agreement and
Declaration of Trust.
IN WITNESS THEREOF, the parties hereto have caused this Plan to be executed as
of the date written above.
QUAKER INVESTMENT TRUST
Attest:
By__________________________________
QUAKER CORE EQUITY FUND
Attest:
By__________________________________
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> QUAKER CORE EQUITY FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 3,984,653
<INVESTMENTS-AT-VALUE> 4,715,500
<RECEIVABLES> 60,483
<ASSETS-OTHER> 27,983
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,803,966
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 26,866
<TOTAL-LIABILITIES> 26,866
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,032,994
<SHARES-COMMON-STOCK> 331,256
<SHARES-COMMON-PRIOR> 44,663
<ACCUMULATED-NII-CURRENT> 677
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 12,582
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 730,847
<NET-ASSETS> 4,777,100
<DIVIDEND-INCOME> 29,985
<INTEREST-INCOME> 3,047
<OTHER-INCOME> 0
<EXPENSES-NET> 32,357
<NET-INVESTMENT-INCOME> 677
<REALIZED-GAINS-CURRENT> 16,584
<APPREC-INCREASE-CURRENT> 662,487
<NET-CHANGE-FROM-OPS> 679,748
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 295,920
<NUMBER-OF-SHARES-REDEEMED> 9,731
<SHARES-REINVESTED> 404
<NET-CHANGE-IN-ASSETS> 4,258,575
<ACCUMULATED-NII-PRIOR> 1,024
<ACCUMULATED-GAINS-PRIOR> (4,002)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 17,770
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 83,235
<AVERAGE-NET-ASSETS> 2,393,422
<PER-SHARE-NAV-BEGIN> 11.61
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 2.81
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.42
<EXPENSE-RATIO> 1.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> QUAKER AGGRESSIVE GROWTH FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 1,386,084
<INVESTMENTS-AT-VALUE> 1,459,113
<RECEIVABLES> 275,150
<ASSETS-OTHER> 95,346
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,829,609
<PAYABLE-FOR-SECURITIES> 98,398
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17,626
<TOTAL-LIABILITIES> 116,024
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,553,060
<SHARES-COMMON-STOCK> 142,735
<SHARES-COMMON-PRIOR> 100,487
<ACCUMULATED-NII-CURRENT> (540)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 92,132
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 68,933
<NET-ASSETS> 1,713,585
<DIVIDEND-INCOME> 7,924
<INTEREST-INCOME> 10,399
<OTHER-INCOME> 0
<EXPENSES-NET> 18,863
<NET-INVESTMENT-INCOME> (540)
<REALIZED-GAINS-CURRENT> 297,196
<APPREC-INCREASE-CURRENT> 15,896
<NET-CHANGE-FROM-OPS> 312,552
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 12
<DISTRIBUTIONS-OF-GAINS> 153,326
<DISTRIBUTIONS-OTHER> 51,738
<NUMBER-OF-SHARES-SOLD> 37,598
<NUMBER-OF-SHARES-REDEEMED> 14,243
<SHARES-REINVESTED> 18,893
<NET-CHANGE-IN-ASSETS> 592,629
<ACCUMULATED-NII-PRIOR> 2,939
<ACCUMULATED-GAINS-PRIOR> 6,734
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 10,415
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 78,185
<AVERAGE-NET-ASSETS> 1,384,789
<PER-SHARE-NAV-BEGIN> 11.16
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 2.69
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 2
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.01
<EXPENSE-RATIO> 1.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> QUAKER AGGRESSIVE GROWTH FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 1,452,192
<INVESTMENTS-AT-VALUE> 1,572,922
<RECEIVABLES> 1,707
<ASSETS-OTHER> 36,651
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,611,280
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 12,746
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,278,620
<SHARES-COMMON-STOCK> 114,051
<SHARES-COMMON-PRIOR> 66,160
<ACCUMULATED-NII-CURRENT> 3,528
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 195,656
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 120,730
<NET-ASSETS> 1,598,534
<DIVIDEND-INCOME> 17,908
<INTEREST-INCOME> 2,476
<OTHER-INCOME> 0
<EXPENSES-NET> 12,856
<NET-INVESTMENT-INCOME> 7,528
<REALIZED-GAINS-CURRENT> 290,761
<APPREC-INCREASE-CURRENT> 24,466
<NET-CHANGE-FROM-OPS> 322,755
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,067
<DISTRIBUTIONS-OF-GAINS> 91,954
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 49,185
<NUMBER-OF-SHARES-REDEEMED> 8,976
<SHARES-REINVESTED> 7,682
<NET-CHANGE-IN-ASSETS> 815,960
<ACCUMULATED-NII-PRIOR> 3,607
<ACCUMULATED-GAINS-PRIOR> (3,149)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6,433
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 71,742
<AVERAGE-NET-ASSETS> 1,286,493
<PER-SHARE-NAV-BEGIN> 11.83
<PER-SHARE-NII> 0.07
<PER-SHARE-GAIN-APPREC> 3.10
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 1
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.02
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> QUAKER SMALL CAP FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 2,949,036
<INVESTMENTS-AT-VALUE> 3,255,391
<RECEIVABLES> 609,003
<ASSETS-OTHER> 139,972
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,004,366
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17,640
<TOTAL-LIABILITIES> 176,400
<SENIOR-EQUITY> 3,563,096
<PAID-IN-CAPITAL-COMMON> 296,051
<SHARES-COMMON-STOCK> 115,660
<SHARES-COMMON-PRIOR> (4,147)
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 121,425
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 306,355
<ACCUM-APPREC-OR-DEPREC> 3,986,726
<NET-ASSETS> 21,252
<DIVIDEND-INCOME> 4,501
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 29,585
<NET-INVESTMENT-INCOME> (3,832)
<REALIZED-GAINS-CURRENT> 259,589
<APPREC-INCREASE-CURRENT> 141,382
<NET-CHANGE-FROM-OPS> 397,139
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 464
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 138,164
<NUMBER-OF-SHARES-SOLD> 177,952
<NUMBER-OF-SHARES-REDEEMED> 8,876
<SHARES-REINVESTED> 11,315
<NET-CHANGE-IN-ASSETS> 2,653,253
<ACCUMULATED-NII-PRIOR> 1,230
<ACCUMULATED-GAINS-PRIOR> 54,417
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 16,356
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 91,810
<AVERAGE-NET-ASSETS> 2,182,840
<PER-SHARE-NAV-BEGIN> 11.53
<PER-SHARE-NII> (0.01)
<PER-SHARE-GAIN-APPREC> 2.99
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 1
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.47
<EXPENSE-RATIO> 1.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> QUAKER MID CAP FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 7,746,359
<INVESTMENTS-AT-VALUE> 8,247,583
<RECEIVABLES> 277,797
<ASSETS-OTHER> 676,293
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 9,201,673
<PAYABLE-FOR-SECURITIES> 112,145
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 56,348
<TOTAL-LIABILITIES> 168,493
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8,412,859
<SHARES-COMMON-STOCK> 826,469
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (10,859)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 120,957
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 510,223
<NET-ASSETS> 9,033,180
<DIVIDEND-INCOME> 23,712
<INTEREST-INCOME> 12,734
<OTHER-INCOME> 0
<EXPENSES-NET> 47,305
<NET-INVESTMENT-INCOME> (10,859)
<REALIZED-GAINS-CURRENT> 129,957
<APPREC-INCREASE-CURRENT> 501,223
<NET-CHANGE-FROM-OPS> 620,321
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 881,764
<NUMBER-OF-SHARES-REDEEMED> 55,295
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 9,033,180
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 26,346
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 69,224
<AVERAGE-NET-ASSETS> 7,115,357
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (0.03)
<PER-SHARE-GAIN-APPREC> 0.95
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.93
<EXPENSE-RATIO> 1.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> QUAKER FIXED INCOME FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 5,432,465
<INVESTMENTS-AT-VALUE> 5,487,073
<RECEIVABLES> 122,160
<ASSETS-OTHER> 93,983
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,703,216
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 21,064
<TOTAL-LIABILITIES> 21,064
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5,640,544
<SHARES-COMMON-STOCK> 546,029
<SHARES-COMMON-PRIOR> 58,205
<ACCUMULATED-NII-CURRENT> 784
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (13,784)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 54,608
<NET-ASSETS> 5,682,152
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 157,991
<OTHER-INCOME> 0
<EXPENSES-NET> 25,781
<NET-INVESTMENT-INCOME> 132,210
<REALIZED-GAINS-CURRENT> (13,784)
<APPREC-INCREASE-CURRENT> 56,616
<NET-CHANGE-FROM-OPS> 175,402
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 131,435
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 504,805
<NUMBER-OF-SHARES-REDEEMED> 29,724
<SHARES-REINVESTED> 12,743
<NET-CHANGE-IN-ASSETS> 5,106,222
<ACCUMULATED-NII-PRIOR> 12,277
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 12,948
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 72,664
<AVERAGE-NET-ASSETS> 2,878,326
<PER-SHARE-NAV-BEGIN> 9.89
<PER-SHARE-NII> 0.47
<PER-SHARE-GAIN-APPREC> 0.50
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.41
<EXPENSE-RATIO> 0.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
