As filed with the Securities and Exchange Commission on April 25, 1996
Securities Act File No. 33-53800
Investment Company Act File No. 811-7324
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 10 X
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 12 X
GARDNER LEWIS INVESTMENT TRUST
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
Telephone (919) 972-9922
AGENT FOR SERVICE:
Frank P. Meadows III, Chairman
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
With copies to:
M. Guy Brooks, III, Esq.
Poyner & Spruill, L.L.P.
3600 Glenwood Avenue
Raleigh, North Carolina 27612
It is proposed that this filing will become effective:
_ Immediately upon filing pursuant _ on , 1995 pursuant
to Rule 485(b), or to Rule 485(b), or
X 60 days after filing pursuant _ on , 1995 pursuant
to Rule 485(a)(1), to Rule 485(a)(1), or
_ 75 days after filing pursuant _ on , 1995 pursuant
to Rule 485(a)(2) to Rule 485(a)(2), or
The issuer has previously registered an indefinite number of shares of two
series: The Chesapeake Growth Fund and The Chesapeake Fund, under the
Securities Act of 1933, as amended, pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended. The Rule 24f-2 Notice for The
Chesapeake Growth Fund for the year ended August 31, 1995 was filed on October
25, 1995. The Rule 24f-2 Notice for The Chesapeake Fund for the year ended
February 29, 1996 was filed on April 26, 1996.
This filing includes the Prospectuses and Statement of Additional Information
of The Chesapeake Fund - Institutional Shares, The Chesapeake Fund - Investor
Shares, and The Chesapeake Growth Fund, which are incorporated herein by
reference to Post-Effective Amendments Nos. 7, 8, and 9 to the Registrant's
Registration Statement on Form N-1A filed with the Commission on February 7,
1995, July 3, 1995, and October 26, 1995, respectively. Supplements to the
Prospectuses of such Funds and the Statement of Additional Information of The
Chesapeake Growth Fund are set forth herein, along with a new Prospectus for
The Chesapeake Fund - Super-Institutional Shares and a new Statement of
Additional Information for The Chesapeake Fund.
GARDNER LEWIS INVESTMENT TRUST
The Chesapeake Growth Fund
Cross Reference Sheet
Pursuant to Rule 481(a) Under the Securities Act of 1933
Form N-1A Item No. Prospectus Caption
PART A
Item 1 Cover Page Cover Page
Item 2 Synopsis Synopsis of Costs and Expenses
Prospectus Summary
Item 3 Condensed Financial Information Financial Highlights
Other Information - Calculation
of Performance Data
Item 4 General Description of Registrant Investment Objective and
Policies
Risk Factors
Investment Limitations
Item 5 Management of the Fund Management of the Fund
Item 6 Capital Stock and Other Securities Dividends and Distributions
Federal Income Taxes
Other Information - Description
of Shares
Item 7 Purchase of Securities Being Offered How Shares May Be Purchased
How Shares Are Valued
Item 8 Redemption or Repurchase How Shares May Be Redeemed
Item 9 Pending Legal Proceedings Not Applicable
Statement of Additional
Information Caption
PART B
Item 10 Cover Page Cover Page
Item 11 Table of Contents Cover Page
Item 12 General Information and History Investment Objective and
Policies
Investment Limitations
Management of the Fund
Description of the Trust
Item 13 Investment Objectives and Policies Investment Objective and
Policies
Investment Limitations
Appendix A - Description of
Ratings
Item 14 Management of the Fund Management of the Fund
Item 15 Control Persons and Principal Management of the Fund -
Holders of Securities Trustees and Officers
Item 16 Investment Advisory and Other Management of the Fund -
Services Investment Advisor
Item 17 Brokerage Allocation and Other Management of the Fund -
Practices Distributor
Investment Objective and
Policies - Investment
Transactions
Item 18 Capital Stock and Other Securities Description of the Trust
Item 19 Purchase, Redemption and Pricing Additional Purchase and
of Securities Being Offered Redemption Information
Item 20 Tax Status Additional Information
Concerning Taxes
Item 21 Underwriters Management of the Fund -
Distributor
Item 22 Calculation of Performance Data Additional Information on
Performance
Item 23 Financial Statements Annual Report of the Fund for
the Fiscal Year Ended
August 31, 1995
PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
GARDNER LEWIS INVESTMENT TRUST
THE CHESAPEAKE GROWTH FUND
SUPPLEMENT TO PROSPECTUS
The Prospectus dated October 26, 1995 of The Chesapeake Growth Fund (the
"Fund") is hereby supplemented with the following additional information:
The section "INVESTMENT OBJECTIVE AND POLICIES - Foreign Securities" is hereby
amended to reflect the following:
The Fund may invest up to 10% of its total assets in foreign securities.
For purposes of this limitation, American Depository Receipts ("ADRs")
will not be considered foreign securities.
The section "RISK FACTORS" is hereby amended to reflect the following:
Borrowing. The Fund may borrow, temporarily, up to 5% of its total
assets for extraordinary or emergency purposes and 15% of its total
assets to meet redemption requests, which might otherwise require
untimely disposition of portfolio holdings. To the extent the Fund
borrows for these purposes, the effects of market price fluctuations on
portfolio net asset value will be exaggerated. If, while such borrowing
is in effect, the value of the Fund's assets declines, the Fund could be
forced to liquidate portfolio securities when it is disadvantageous to
do so. The Fund would incur interest and other transaction costs in
connection with borrowing. The Fund will borrow only from a bank. The
Fund will not make any investments if the borrowing exceeds 5% of its
assets until such time as repayment has been made to bring the total
borrowing below 5% of its total assets.
The section "INVESTMENT LIMITATIONS" is hereby amended to revise the
first and seventh investment limitations to read as follows:
(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 the Fund's total assets or, (b) in order to meet redemption
requests, in amounts not exceeding 15% of its total assets. The
Fund will not make any investments if borrowing exceeds 5% of its
total assets;
(7) invest more than 10% of the Fund's total assets in foreign
securities (excluding ADRs);
The date of this Supplement is July *, 1996.
GARDNER LEWIS INVESTMENT TRUST
THE CHESAPEAKE GROWTH FUND
SUPPLEMENT TO STATEMENT OF ADDITIONAL INFORMATION
The Statement of Additional Information dated October 26, 1995 of The
Chesapeake Growth Fund is hereby supplemented with the following additional
information.
The section "INVESTMENT LIMITATIONS" is hereby amended to revise the third and
thirteenth investment limitations as follows:
(3) Invest more than 10% of the value of its total assets in foreign
securities (which shall not be deemed to include American Depository
Receipts ("ADRs"));
(13) 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 further investments if
borrowing exceeds 5% of its total assets until such time as total
borrowing represents less than 5% of Fund assets;
The section "MANAGEMENT OF THE FUND - Trustees and Officers" is hereby amended
to add the following new Trustees:
Name, Age*, Position(s) Principal Occupation(s)
and Address During Past 5 Years
W. Whitfield Gardner, 33 Analyst, Portfolio Manager
Trustee** Gardner Lewis Asset Management
Chief Executive Officer Chadds Ford, Pennsylvania
The Chesapeake Funds
285 Wilmington - West Chester Pike
Chadds Ford, Pennsylvania 19317
Stephen J. Kneeley, 33 Chief Operating Officer
Trustee Turner Investment Partners
1235 Westlakes Drive Berwyn, Pennsylvania
Suite 350
Berwyn, Pennsylvania 19312
The date of this Supplement is July *, 1996.
GARDNER LEWIS INVESTMENT TRUST
The Chesapeake Fund
Super-Institutional Shares
Cross Reference Sheet
Pursuant to Rule 481(a) Under the Securities Act of 1933
Form N-1A Item No. Prospectus Caption
PART A
Item 1 Cover Page Cover Page
Item 2 Synopsis Synopsis of Costs and Expenses
Prospectus Summary
Item 3 Condensed Financial Information Financial Highlights
Other Information - Calculation
of Performance Data
Item 4 General Description of Registrant Investment Objective and
Policies
Risk Factors
Investment Limitations
Item 5 Management of the Fund Management of the Fund
Item 6 Capital Stock and Other Securities Dividends and Distributions
Federal Income Taxes
Other Information - Description
of Shares
Item 7 Purchase of Securities Being Offered How Shares May Be Purchased
How Shares Are Valued
Item 8 Redemption or Repurchase How Shares May Be Redeemed
Item 9 Pending Legal Proceedings Not Applicable
Statement of Additional
Information Caption
PART B
Item 10 Cover Page Cover Page
Item 11 Table of Contents Cover Page
Item 12 General Information and History Investment Objective and
Policies
Investment Limitations
Management of the Fund
Description of the Trust
Item 13 Investment Objectives and Policies Investment Objective and
Policies
Investment Limitations
Appendix A - Description of
Ratings
Item 14 Management of the Fund Management of the Fund
Item 15 Control Persons and Principal Management of the Fund -
Holders of Securities Trustees and Officers
Item 16 Investment Advisory and Other Management of the Fund -
Services Investment Advisor
Item 17 Brokerage Allocation and Other Management of the Fund -
Practices Distributor
Investment Objective and
Policies - Investment
Transactions
Item 18 Capital Stock and Other Securities Description of the Trust
Item 19 Purchase, Redemption and Pricing Additional Purchase and
of Securities Being Offered Redemption Information
Item 20 Tax Status Additional Information
Concerning Taxes
Item 21 Underwriters Management of the Fund -
Distributor
Item 22 Calculation of Performance Data Additional Information on
Performance
Item 23 Financial Statements Not Applicable
PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
PROSPECTUS
THE CHESAPEAKE FUND
SUPER-INSTITUTIONAL SHARES
The Super-Institutional Shares of The Chesapeake Fund (the "Fund"), a series
of the Gardner Lewis Investment Trust (the "Trust"), are designed to provide
institutional clients purchasing substantial amounts of shares in the Fund
with core growth investment management by Gardner Lewis Asset Management. The
investment objective of the Fund is to seek capital appreciation through
investments in equity securities of medium and large capitalization companies,
consisting primarily of common and preferred stocks and securities convertible
into common stocks. While there is no assurance that the Fund will achieve
its investment objective, it endeavors to do so by following the investment
policies described in this Prospectus. The Fund has a net asset value that
will fluctuate in accordance with the value of its portfolio securities. An
investor may invest, reinvest or redeem shares at any time.
This Prospectus relates to shares ("Super-Institutional Shares") representing
interests in the Fund. The Super-Institutional Shares are offered to
institutional investors described herein without any sales or redemption
charges or shareholder servicing or distribution fees. See "Prospectus
Summary - Offering Price."
INVESTMENT ADVISOR
Gardner Lewis Asset Management
Chadds Ford, Pennsylvania
The Fund is a diversified series of the Trust, a registered open-end
management investment company. This Prospectus sets forth concisely the
information about the Fund that a prospective investor should know before
investing. Investors should read this Prospectus and retain it for future
reference. Additional information about the Fund has been filed with the
Securities and Exchange Commission and is available upon request and without
charge. You may request the Statement of Additional Information dated July *,
1996, and as amended from time to time, which is incorporated in this
Prospectus by reference, by writing the Fund at Post Office Drawer 69, Rocky
Mount, North Carolina 27802-0069, or by calling 1-800-430-3863.
Investment in the Fund involves risks, including the possible loss of
principal. Shares of the Fund are not deposits or obligations of, or
guaranteed or endorsed by, any financial institution, and such shares are not
federally insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board, or any other agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is July *, 1996.
TABLE OF CONTENTS
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SYNOPSIS OF COSTS AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . 3
FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
INVESTMENT OBJECTIVE AND POLICIES. . . . . . . . . . . . . . . . . . . . . 4
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
INVESTMENT LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 7
FEDERAL INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
DIVIDENDS AND DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . . . 8
HOW SHARES ARE VALUED. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
HOW SHARES MAY BE PURCHASED. . . . . . . . . . . . . . . . . . . . . . . . 9
HOW SHARES MAY BE REDEEMED . . . . . . . . . . . . . . . . . . . . . . . . 11
MANAGEMENT OF THE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . 12
OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
This Prospectus is not an offering of the securities herein described in any
state in which the offering is unauthorized. No sales representative, dealer
or other person is authorized to give any information or make any
representations other than those contained in this Prospectus.
The Fund reserves the right in its sole discretion to withdraw all or any part
of the offering made by this Prospectus or to reject purchase orders. All
orders to purchase shares are subject to acceptance by the Fund and are not
binding until confirmed or accepted in writing.
PROSPECTUS SUMMARY
The Fund The Chesapeake Fund (the "Fund") is a diversified series
of the Gardner Lewis Investment Trust (the "Trust"), a
registered open-end management investment company
organized as a Massachusetts business trust. This
Prospectus relates to Super-Institutional Shares of the
Fund. See "Other Information - Description of Shares."
Offering Price The Super-Institutional Shares are sold to institutional
investors at net asset value without a sales charge and
are not subject to any shareholder servicing or
distribution fees. The minimum initial investment is
$50,000,000. The minimum subsequent investment is
$100,000. See "How Shares May be Purchased."
Investment The investment objective of the Fund is to seek capital
Objective appreciation through investments in equity securities of
and Special medium and large capitalization companies, consisting
Risk primarily of common and preferred stocks and securities
Considerations convertible into common stocks. Realization of current
income is not a significant investment consideration, and
any income realized will be incidental to the Fund's
objective. See "Investment Objective and Policies." The
Fund is not intended to be a complete investment program,
and there can be no assurance that the Fund will achieve
its investment objective. While the Fund will invest
primarily in common stocks traded in U.S. securities
markets, some of the Fund's investments may include
foreign securities, illiquid securities, and securities
purchased subject to a repurchase agreement or on a
"when-issued" basis, which involve certain risks. The
Fund may borrow only under certain limited conditions
(including to meet redemption requests) and not to
purchase securities. It is not the intent of the Fund to
borrow except for temporary cash requirements.
Borrowing, if done, would tend to exaggerate the effects
of market and interest rate fluctuations on the Fund's
net asset value until repaid. See "Risk Factors."
Manager Subject to the general supervision of the Trust's Board
of Trustees and in accordance with the Fund's investment
policies, Gardner Lewis Asset Management of Chadds Ford,
Pennsylvania (the "Advisor") manages the Fund's
investments. The Advisor currently manages approximately
$2.6 billion in assets. For its advisory services, the
Advisor receives a monthly fee based on the Fund's daily
net assets at the annual rate of 1.00%. See "Management
of the Fund - The Advisor."
Dividends Income dividends, if any, are paid at least annually;
capital gains, if any, are distributed at least annually
or retained for reinvestment by the Fund. Dividends and
capital gains distributions are automatically reinvested
in additional shares of the same Class at net asset value
unless the shareholder elects to receive cash. See
"Dividends and Distributions."
Distributor Capital Investment Group, Inc. (the "Distributor") serves
as distributor of shares of the Fund. See "How Shares
May Be Purchased - Distributor."
Redemption of There is no charge for redemptions. Shares may be
Shares redeemed at any time at the net asset value next
determined after receipt of a redemption request by the
Fund. A shareholder who submits appropriate written
authorization may redeem shares by telephone. See "How
Shares May Be Redeemed."
SYNOPSIS OF COSTS AND EXPENSES
The following tables set forth certain information in connection with the
expenses of the Super-Institutional Shares of the Fund for the current fiscal
year. The information is intended to assist the investor in understanding the
various costs and expenses borne by the Super-Institutional Shares of the
Fund, and therefore indirectly by its investors, the payment of which will
reduce an investor's return on an annual basis.
Shareholder Transaction Expenses for Super-Institutional Shares
Maximum sales load imposed on purchases
(as a percentage of offering price). . . . . . . . . . . . .None
Maximum sales charge imposed on reinvested dividends . . . . .None
Deferred sales load. . . . . . . . . . . . . . . . . . . . . .None
Redemption fees. . . . . . . . . . . . . . . . . . . . . . . .None
Exchange fee . . . . . . . . . . . . . . . . . . . . . . . . .None
Annual Fund Operating Expenses for Super-Institutional Shares
(as a percentage of average net assets)
Investment advisory fees . . . . . . . . . . . . . . . . . .1.000%1
12b-1 fees . . . . . . . . . . . . . . . . . . . . . . . . . .None
Other expenses . . . . . . . . . . . . . . . . . . . . . . 0.045%1
Total operating expenses . . . . . . . . . . . . . . . . 1.045%1
EXAMPLE: You would pay the following expenses on a $1,000 investment in
Super-Institutional Shares of the Fund, whether or not you redeem at the end
of the period, assuming a 5% annual return:
1 Year 3 Years 5 Years 10 Years
$** $** $** $**
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
1 The "Total operating expenses" shown above reflect the expenses anticipated
to be incurred by the Super-Institutional Shares of the Fund for the
current fiscal year. The investment advisory fee is higher than that paid
by most other investment companies.
See "Management of the Fund" below for more information about the fees and
costs of operating the Fund. The assumed 5% annual return in the example is
required by the Securities and Exchange Commission. The hypothetical rate of
return is not intended to be representative of past or future performance of
the Fund; the actual rate of return for the Fund may be greater or less than
5%.
FINANCIAL HIGHLIGHTS
The shares of the Fund are divided into multiple Classes representing
interests in the Fund. This Prospectus relates to Super-Institutional Shares
of the Fund. See "Other Information - Description of Shares." Since the
public offering of Super-Institutional Shares of the Fund had not commenced
during the fiscal periods covered by the Fund's financial statements and
related Financial Highlights pertaining to the other Classes of shares of the
Fund, no financial statements or related Financial Highlights are available
pertaining to the Super-Institutional Shares of the Fund. Further information
about the performance of the Fund is contained in the Annual Report of the
Fund, a copy of which may be obtained at no charge by calling the Fund.
INVESTMENT OBJECTIVE AND POLICIES
Investment Objective. The investment objective of the Fund is to seek capital
appreciation through investments in equity securities of medium and large
capitalization companies, consisting primarily of common and preferred stocks
and securities convertible into common stocks. Realization of current income
will not be a significant investment consideration, and any such income
realized should be considered incidental to the Fund's objective. The Fund's
investment objective and fundamental investment limitations described herein
may not be altered without the prior approval of a majority of the Fund's
shareholders.
Investment Selection. The Fund's portfolio will include equity securities
which the Advisor feels show superior prospects for growth. The Advisor will
focus attention on proven medium and large capitalization companies which, in
the view of the Advisor, exhibit internal changes such as a promising new
product, new distribution strategy, new manufacturing technology, or new
management team or management philosophy. Many of the portfolio companies
will be responsible for technological breakthroughs and/or unique solutions to
market needs. By focusing upon internal rather than external factors, the
Fund will seek to minimize the risk associated with macro-economic forces such
as changes in commodity prices, currency exchange rates and interest rates.
In selecting portfolio companies, the Advisor uses analysis which includes the
growth rate in earnings, financial performance, management strengths and
weaknesses, and current market valuation in relation to earnings growth as
well as historic and comparable company valuations. The Advisor also analyzes
the level and nature of the company's debt, cash flow, working capital and the
quality of the company's assets. Typically companies included in the Fund's
portfolio will show strong earnings growth versus the previous year's
comparable period. Companies that the Advisor determines have excessive
levels of debt are generally avoided.
By developing and maintaining contacts with management, customers, competitors
and suppliers of current and potential portfolio companies, the Advisor
attempts to invest in those companies undergoing positive changes that have
not yet been recognized by "Wall Street" analysts and the financial press.
Lack of recognition of these changes often causes securities to be less
efficiently priced. The Advisor believes these companies offer unique and
potentially superior investment opportunities. The Advisor favors portfolio
companies whose price when purchased is between 8 and 15 times projected
earnings for the coming year.
While portfolio securities are generally acquired for the long term, they may
be sold under any of the following circumstances:
a) the anticipated price appreciation has been achieved or is no
longer probable;
b) the company's fundamentals appear, in the analysis of the Advisor,
to be deteriorating;
c) general market expectations regarding the company's future
performance exceed those expectations held by the Advisor;
d) alternative investments offer, in the view of the Advisor,
superior potential for appreciation.
The equity securities in which the Fund may invest include common stock,
convertible preferred stock, straight preferred stock, participating and non-
participating preferred stock, and investment grade convertible bonds. All
securities will be traded on domestic and foreign securities exchanges or on
the over-the-counter markets. Up to 10% of the Fund's total assets may
consist of foreign securities.
Under normal conditions, at least 90% of the Fund's total assets will be
invested in equity securities. As a temporary defensive measure, however,
when the Advisor determines that market conditions so warrant, the Fund may
invest up to 100% of the Fund's total assets in investment grade bonds, U.S.
Government Securities, repurchase agreements, or money market instruments.
When the Fund invests its assets in investment grade bonds, U.S. Government
Securities or money market instruments as a temporary defensive measure, it is
not pursuing its stated investment objective. Under normal circumstances,
however, the Fund will also 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.
U.S. Government Securities. The Fund may invest a portion of the portfolio in
U.S. Government Securities, defined to be U.S. Government obligations such as
U.S. Treasury notes, U.S. Treasury bonds, and U.S. Treasury bills, obligations
guaranteed by the U.S. Government such as Government National Mortgage
Association ("GNMA") as well as obligations of U.S. Government authorities,
agencies and instrumentalities such as Federal National Mortgage Association
("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"), Federal Home
Administration ("FHA"), Federal Farm Credit Bank ("FFCB"), Federal Home Loan
Bank ("FHLB"), Student Loan Marketing Association ("SLMA"), Resolution Trust
Corporation, and The Tennessee Valley Authority. U.S. Government Securities
may be acquired subject to repurchase agreements. While obligations of some
U.S. Government sponsored entities are supported by the full faith and credit
of the U.S. Government (e.g. GNMA), several are supported by the right of the
issuer to borrow from the U.S. Government (e.g. FNMA, FHLMC), and still others
are supported only by the credit of the issuer itself (e.g. SLMA, FFCB). No
assurances can be given that the U.S. Government will provide financial
support to U.S. Government agencies or instrumentalities in the future, other
than as set forth above, since it is not obligated to do so by law. The
guarantee of the U.S. Government does not extend to the yield or value of the
Fund's shares.
Money Market Instruments. Money market instruments may be purchased for
temporary defensive purposes, to accumulate cash for anticipated purchases of
portfolio securities and to provide for shareholder redemptions and operating
expenses of the Fund. Money market instruments mature in thirteen months or
less from the date of purchase and may include U.S. Government Securities,
corporate debt securities (including those subject to repurchase agreements),
bankers acceptances and certificates of deposit of domestic branches of U.S.
banks, and commercial paper (including variable amount demand master notes)
rated in one of the two highest rating categories by any of the nationally
recognized statistical rating organizations or if not rated, of equivalent
quality in the Advisor's opinion. The Advisor may, when it believes that
unusually volatile or unstable economic and market conditions exist, depart
from the Fund's investment approach and assume temporarily a defensive
portfolio posture, increasing the Fund's percentage investment in money market
instruments, even to the extent that 100% of the Fund's total assets may be so
invested.
Repurchase Agreements. The Fund may acquire U.S. Government Securities or
corporate debt securities subject to repurchase agreements. A repurchase
agreement transaction occurs when the Fund acquires a security and
simultaneously resells it to the vendor (normally a member bank of the Federal
Reserve or a registered Government Securities dealer) for delivery on an
agreed upon future date. The repurchase price exceeds the purchase price by
an amount that reflects an agreed upon market interest rate earned by the Fund
effective for the period of time during which the repurchase agreement is in
effect. Delivery pursuant to the resale typically will occur within one to
five days of the purchase. The Fund will not enter into any repurchase
agreement that will cause more than 10% of its net assets to be invested in
repurchase agreements that extend beyond seven days. In the event of the
bankruptcy of the other party to a repurchase agreement, the Fund could
experience delays in recovering its cash or the securities lent. To the
extent that in the interim the value of the securities purchased may have
declined, the Fund could experience a loss. In all cases, the
creditworthiness of the other party to a transaction is reviewed and found
satisfactory by the Advisor. Repurchase agreements are, in effect, loans of
Fund assets. The Fund will not engage in reverse repurchase transactions,
which are considered to be borrowings under the 1940 Act.
Foreign Securities. The Fund may invest up to 10% of its total assets in
foreign securities. The same factors would be considered in selecting foreign
securities as with domestic securities. Foreign securities investment
presents special consideration not typically associated with investment in
domestic securities. Foreign taxes may reduce income. Currency exchange
rates and regulations may cause fluctuations in the value of foreign
securities. Foreign securities are subject to different regulatory
environments than in the United States and, compared to the United States,
there may be a lack of uniform accounting, auditing and financial reporting
standards, less volume and liquidity and more volatility, less public
information, and less regulation of foreign issuers. Countries have been
known to expropriate or nationalize assets, and foreign investments may be
subject to political, financial, or social instability, or adverse diplomatic
developments. There may be difficulties in obtaining service of process on
foreign issuers and difficulties in enforcing judgments with respect to claims
under the U.S. Securities laws against such issuers. Favorable or unfavorable
differences between U.S. and foreign economies could affect foreign securities
values. The U.S. Government has, in the past, discouraged certain foreign
investments by U.S. investors through taxation or other restrictions and it is
possible that such restrictions could be imposed again.
Because of the inherent risk of foreign securities over domestic issues, the
Fund will generally limit foreign investments to those traded domestically as
American Depository Receipts (ADRs). ADRs are receipts issued by a U.S. bank
or trust company evidencing ownership of securities of a foreign issuer. ADRs
may be listed on a national securities exchange or may trade in the over-the-
counter market. The prices of ADRs are denominated in U.S. dollars while the
underlying security may be denominated in a foreign currency. ADRs purchased
by the Fund, if any, will not be considered foreign securities for purposes of
the 10% limit on investments in foreign securities. To the extent the Fund
invests in other foreign securities, subject to the 10% limit, it will
generally limit such investments to foreign securities traded on foreign
securities exchanges.
Investment Companies. In order to achieve its investment objective, the Fund
may invest up to 10% of the value of its total assets in securities of other
investment companies whose investment objectives are consistent with the
Fund's investment objective. The Fund will not acquire securities of any one
investment company if, immediately thereafter, the Fund would own more than 3%
of such company's total outstanding voting securities, securities issued by
such company would have an aggregate value in excess of 5% of the Fund's total
assets, or securities issued by such company and securities held by the Fund
issued by other investment companies would have an aggregate value in excess
of 10% of the Fund's total assets. The Fund will only invest in other
investment companies by purchase of such securities on the open market where
no commission or profit to a sponsor or dealer results from the purchase other
than the customary broker's commissions or when the purchase is part of a plan
of merger, consolidation, reorganization, or acquisition. To the extent the
Fund invests in other investment companies, the shareholders of the Fund would
indirectly pay a portion of the operating costs of the underlying investment
companies. These costs include management, brokerage, shareholder servicing
and other operational expenses. Shareholders of the Fund would then
indirectly pay higher operational costs than if they owned shares of the
underlying investment companies directly. The Advisor will waive its advisory
fee for that portion of the Fund's assets invested in other investment
companies, except when such purchase is part of a plan of merger,
consolidation, reorganization, or acquisition.
Real Estate Securities. The Fund will not invest in real estate or real
estate mortgage loans (including limited partnership interests), but may
invest in readily marketable securities secured by real estate or interests
therein or issued by companies that invest in real estate or interests
therein. The Fund may also invest in readily marketable interests in real
estate investment trusts ("REITs"). REITs are generally publicly traded on
the national stock exchanges and in the over-the-counter market and have
varying degrees of liquidity. Although the Fund is not limited in the amount
of these types of real estate securities it may acquire, it is not presently
expected that within the next 12 months the Fund will have in excess of 5% of
its total assets in real estate securities.
RISK FACTORS
Investment Policies and Techniques. Reference should be made to "Investment
Objective and Policies" above for a description of special risks presented by
the investment policies of the Fund and the specific securities and investment
techniques that may be employed by the Fund, including the risks associated
with repurchase agreements and foreign securities. A more complete discussion
of certain of these securities and investment techniques and their associated
risks is contained in the Statement of Additional Information.
Fluctuations in Value. To the extent that the major portion of the Fund's
portfolio consists of common stocks, it may be expected that its net asset
value will be subject to greater fluctuation than a portfolio containing
mostly fixed income securities. Given that a portion of the Fund's assets
will be invested in equity securities of medium capitalization companies, that
portion of the Fund's portfolio may exhibit more volatility than the portion
of the Fund's portfolio invested in large capitalization companies. Because
there is risk in any investment, there can be no assurance that the Fund will
achieve its investment objective.
Portfolio Turnover. The Fund sells portfolio securities without regard to the
length of time they have been held in order to take advantage of new
investment opportunities. Nevertheless, the Fund's portfolio turnover
generally will not exceed 75% in any one year. Portfolio turnover generally
involves some expense to the Fund, including brokerage commissions or dealer
mark-ups and other transaction costs on the sale of securities and the
reinvestment in other securities. Portfolio turnover may also have capital
gains tax consequences. The Fund's portfolio turnover rate for the fiscal
year ended February 29, 1996 was **% and for the fiscal period ended February
28, 1995 was 64.92%.
Borrowing. The Fund may borrow, temporarily, up to 5% of its total assets for
extraordinary or emergency purposes and 15% of its total assets to meet
redemption requests, which might otherwise require untimely disposition of
portfolio holdings. To the extent the Fund borrows for these purposes, the
effects of market price fluctuations on portfolio net asset value will be
exaggerated. If, while such borrowing is in effect, the value of the Fund's
assets declines, the Fund could be forced to liquidate portfolio securities
when it is disadvantageous to do so. The Fund would incur interest and other
transaction costs in connection with borrowing. The Fund will borrow only
from a bank. The Fund will not make any investments if the borrowing exceeds
5% of its assets until such time as repayment has been made to bring the total
borrowing below 5% of its total assets.
Illiquid Investments. The Fund may invest up to 10% of its net assets in
illiquid securities. Illiquid securities are those that may not be sold or
disposed of in the ordinary course of business within seven days at
approximately the price at which they are valued. Under the supervision of
the Board of Trustees, the Advisor determines the liquidity of the Fund's
investments. The absence of a trading market can make it difficult to
ascertain a market value for illiquid investments. Disposing of illiquid
securities before maturity may be time consuming and expensive, and it may be
difficult or impossible for the Fund to sell illiquid investments promptly at
an acceptable price. The Fund will not invest in restricted securities, which
cannot be sold to the public without registration under the federal securities
laws. Unless registered for sale, restricted securities can only be sold in
privately negotiated transactions or pursuant to an exemption from
registration.
Forward Commitments and When-Issued Securities. The Fund 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 the settlement date, cash, U.S.
Government Securities or high-grade debt obligations in an amount sufficient
to meet the purchase price. Purchasing securities on a when-issued or forward
commitment basis involves a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in addition to
the risk of decline in value of the Fund's other assets. In addition, no
income accrues to the purchaser of when-issued securities during the period
prior to issuance. Although the 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 the Advisor deems it appropriate
to do so. The Fund may realize short-term gains or losses upon such sales.
INVESTMENT LIMITATIONS
To limit the Fund's exposure to risk, the Fund has adopted certain fundamental
investment limitations. Some of these restrictions are that the Fund will
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 the Fund's total assets or,
(b) in order to meet redemption requests, in amounts not exceeding 15% of its
total assets. The Fund will not make any investments if borrowing exceeds 5%
of its total assets; (2) make loans of money or securities, except that the
Fund may invest in repurchase agreements (but repurchase agreements having a
maturity of longer than seven days, together with other illiquid securities,
are limited to 10% of the Fund's net assets); (3) 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; (4) write,
purchase or sell puts, calls, warrants or combinations thereof, or purchase or
sell commodities, commodities contracts, futures contracts or related options,
or invest in oil, gas or mineral leases or exploration programs, or real
estate; (5) invest more than 5% of the value of its total assets in the
securities of any one issuer nor hold more than 10% of the voting stock of any
issuer; (6) invest in restricted securities; (7) invest more than 10% of the
Fund's total assets in foreign securities (excluding ADRs); (8) invest more
than 25% of the Fund's total assets in the securities of issuers in any one
industry; and (9) invest more than 10% of its total assets in the securities
of one or more investment companies. See "Investment Limitations" in the
Fund's Statement of Additional Information for a complete list of investment
limitations.
If the Board of Trustees of the Trust determines that the Fund's investment
objective can best be achieved by a substantive change in a non-fundamental
investment limitation, the Board can make such change without shareholder
approval and will disclose any such material changes in the then current
Prospectus. Any limitation that is not specified in the Fund's Prospectus, or
in the Statement of Additional Information, as being fundamental, is non-
fundamental. If a percentage limitation is satisfied at the time of
investment, a later increase or decrease in such percentage resulting from a
change in the value of the Fund's portfolio securities will not constitute a
violation of such limitation. In order to permit the sale of the Fund's
shares in certain states, the Fund may make commitments that are more
restrictive than the investment policies and limitations described above and
in the Statement of Additional Information. Such commitments may have an
effect on the investment performance of the Fund. Should the Fund determine
that any such commitment is no longer in the best interests of the Fund, it
may revoke the commitment and terminate sales of its shares in the state
involved.
FEDERAL INCOME TAXES
Taxation of the Fund. The Internal Revenue Code of 1986, as amended (the
"Code"), treats each series in the Trust, including the Fund, as a separate
regulated investment company. Each series of the Trust, including the Fund,
intends to qualify or remain qualified as a regulated investment company under
the Code by distributing substantially all of its "net investment income" to
shareholders and meeting other requirements of the Code. For the purpose of
calculating dividends, net investment income consists of income accrued on
portfolio assets, less accrued expenses. Upon qualification, the Fund will
not be liable for federal income taxes to the extent earnings are distributed.
The Board of Trustees retains the right for any series of the Trust, including
the Fund, to determine for any particular year if it is advantageous not to
qualify as a regulated investment company. Regulated investment companies,
such as each series of the Trust, including the Fund, are subject to a
non-deductible 4% excise tax to the extent they do not distribute the
statutorily required amount of investment income, determined on a calendar
year basis, and capital gain net income, using an October 31 year end
measuring period. The Fund intends to declare or distribute dividends during
the calendar year in an amount sufficient to prevent imposition of the 4%
excise tax.
Taxation of Shareholders. For federal income tax purposes, any dividends and
distributions from short-term capital gains that a shareholder receives in
cash from the Fund or which are re-invested in additional shares will be
taxable ordinary income. If a shareholder is not required to pay a tax on
income, he will not be required to pay federal income taxes on the amounts
distributed to him. A dividend declared in October, November or December of a
year and paid in January of the following year will be considered to be paid
on December 31 of the year of declaration.
Distributions paid by the Fund from long-term capital gains, whether received
in cash or reinvested in additional shares, are taxable as long-term capital
gains, regardless of the length of time an investor has owned shares in the
Fund. Capital gain distributions are made when the Fund realizes net capital
gains on sales of portfolio securities during the year. Dividends and capital
gain distributions paid by the Fund shortly after shares have been purchased,
although in effect a return of investment, are subject to federal income
taxation.
The sale of shares of the Fund is a taxable event and may result in a capital
gain or loss. Capital gain or loss may be realized from an ordinary
redemption of shares or an exchange of shares between two mutual funds (or two
series of a mutual fund).
The Trust will inform shareholders of the Fund of the source of their
dividends and capital gains distributions at the time they are paid and,
promptly after the close of each calendar year, will issue an information
return to advise shareholders of the federal tax status of such distributions
and dividends. Dividends and distributions may also be subject to state and
local taxes. Shareholders should consult their tax advisors regarding
specific questions as to federal, state or local taxes.
Federal income tax law requires investors to certify that the social security
number or taxpayer identification number provided to the Fund is correct and
that the investor is not subject to 31% withholding for previous
under-reporting to the Internal Revenue Service (the "IRS"). Investors will
be asked to make the appropriate certification on their application to
purchase shares. If a shareholder of the Fund has not complied with the
applicable statutory and IRS requirements, the Fund is generally required by
federal law to withhold and remit to the IRS 31% of reportable payments (which
may include dividends and redemption amounts).
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to distribute substantially all of its net investment income,
if any, in the form of dividends and distribute capital gains, if any, once
each year. The Fund may, however, determine either to distribute or to retain
all or part of any long-term capital gains in any year for reinvestment.
Unless a shareholder elects to receive cash, dividends and capital gains will
be automatically reinvested in additional full and fractional shares of the
same Class of the Fund at the net asset value per share next determined.
Shareholders wishing to receive their dividends or capital gains in cash may
make their request in writing to the Fund at 105 North Washington Street, Post
Office Drawer 69, Rocky Mount, North Carolina 27802-0069. That request must
be received by the Fund prior to the record date to be effective as to the
next dividend. If cash payment is requested, checks will be mailed within
five business days after the last day of each quarter or the Fund's fiscal
year end, as applicable. Each shareholder of the Fund will receive a
quarterly summary of his or her account, including information as to
reinvested dividends from the Fund. Tax consequences to shareholders of
dividends and distributions are the same if received in cash or in additional
shares of the Fund.
In order to satisfy certain requirements of the Code, the Fund may declare
special year-end dividend and capital gains distribution during December.
Such distributions, if received by shareholders by January 31, are deemed to
have been paid by the Fund and received by shareholders on December 31 of the
prior year.
There is no fixed dividend rate, and there can be no assurance as to the
payment of any dividends or the realization of any gains. The Fund's net
investment income available for distribution to holders of Super-Institutional
Shares will be reduced by the amount of any expenses allocated to the Super-
Institutional Shares.
HOW SHARES ARE VALUED
Net asset value for each Class of Shares of the Fund is determined at 4:00
p.m., New York time, Monday through Friday, except on business holidays when
the New York Stock Exchange is closed. The net asset value of the shares of
the Fund for purposes of pricing sales and redemptions is equal to the total
market value of its investments, less all of its liabilities, divided by the
number of its outstanding shares. Net asset value is determined separately
for each Class of Shares of the Fund and reflects any liabilities allocated to
a particular Class as well as the general liabilities of the Fund.
Securities that are listed on a securities exchange are valued at the last
quoted sales price at the time the valuation is made. Price information on
listed securities is taken from the exchange where the security is primarily
traded by the Fund. Securities that are listed on an exchange and which are
not traded on the valuation date are valued at the mean of the bid and asked
prices. Unlisted securities for which market quotations are readily available
are valued at the latest quoted sales price, if available, at the time of
valuation, otherwise, at the latest quoted bid price. Temporary cash
investments with maturities of 60 days or less will be valued at amortized
cost, which approximates market value. Securities for which no current
quotations are readily available are valued at fair value as determined in
good faith using methods approved by the Board of Trustees of the Trust.
Securities may be valued on the basis of prices provided by a pricing service
when such prices are believed to reflect the fair market value of such
securities.
HOW SHARES MAY BE PURCHASED
Assistance in opening accounts and a purchase application may be obtained from
the Fund by calling 1-800-430-3863, or by writing to the Fund at the address
shown below for purchases by mail. Assistance is also available through any
broker-dealer authorized to sell shares in the Fund. Payment for shares
purchased may also be made through your account at the broker-dealer
processing your application and order to purchase. Your investment will
purchase shares at the Fund's net asset value next determined after your order
is received by the Fund in proper form as indicated herein.
The minimum initial investment is $50,000,000. The minimum subsequent
investment is $100,000. The Fund may, in the Advisor'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 to the Fund, to The Chesapeake Fund, Super-Institutional Shares, 105
North Washington Street, Post Office Drawer 69, Rocky Mount, North Carolina
27802-0069. Subsequent investments in an existing account in the Fund may be
made at any time by sending a check payable to the Fund, to the address stated
above. Please enclose the stub of your account statement and include the
amount of the investment, the name of the account for which the investment is
to be made and the account number. Please remember to add a reference to
"Super-Institutional Shares" to your check to ensure proper credit to your
account.
Purchases by Wire. To purchase shares by wiring federal funds, the Fund must
first be notified by calling 1-800-430-3863 to request an account number and
furnish the Fund with your tax identification number. Following notification
to the Fund, federal funds and registration instructions should be wired
through the Federal Reserve System to:
Wachovia Bank of North Carolina, N.A.
Winston-Salem, North Carolina
ABA # 053100494
For credit to the Rocky Mount Office
For The Chesapeake Fund - Super-Institutional Shares
Acct #6764-020807
For further credit to (shareholder's name and SS# or EIN#)
It is important that the wire contain all the information and that the Fund
receive prior telephone notification to ensure proper credit. A completed
application with signature(s) of registrant(s) must be mailed to the Fund
immediately after the initial wire as described under "Purchases by Mail"
above. Investors should be aware that some banks may impose a wire service
fee.
General. All purchases of shares are subject to acceptance and are not
binding until accepted. The Fund reserves the right to reject any application
or investment. Orders become effective, and shares are purchased at, the next
determined net asset value per share after an investment has been received by
the Fund, which is as of 4:00 p.m., New York time, Monday through Friday,
exclusive of business holidays. Orders received by the Fund and effective
prior to 4:00 p.m. will purchase shares at the net asset value determined at
that time. Otherwise, your order will purchase shares as of 4:00 p.m. New
York time on the next business day. For orders placed through a qualified
broker-dealer, such firm is responsible for promptly transmitting purchase
orders to the Fund.
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 Fund, 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 Fund 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 Administrator, that your taxpayer
identification number is correct and that you are not currently subject to
backup withholding or you are exempt from backup withholding.
Distributor. Capital Investment Group, Inc., Post Office Box 32249, Raleigh,
North Carolina 27622 (the "Distributor"), is the national distributor for the
Fund under a Distribution Agreement with the Trust. The Distributor may sell
Fund shares to or through qualified securities dealers or others.
The Distributor, at its expense, may provide compensation to dealers in
connection with sales of shares of the Fund. Compensation may include
financial assistance to dealers in connection with conferences, sales or
training programs for their employees, seminars for the public, advertising
campaigns regarding the Fund, and/or other dealer-sponsored special events.
In some instances, this compensation may be made available only to certain
dealers whose representatives have sold or are expected to sell a significant
amount of such shares. Compensation may include payment for travel expenses,
including lodging, incurred in connection with trips taken by invited
registered representatives and members of their families to locations within
or outside of the United States for meetings or seminars of a business nature.
Dealers may not use sales of the Fund shares to qualify for this compensation
to the extent such may be prohibited by the laws of any state or any
self-regulatory agency, such as the National Association of Securities
Dealers, Inc. None of the aforementioned compensation is paid for by the Fund
or its shareholders.
Stock Certificates. Stock certificates will not be issued for your shares.
Evidence of ownership will be given by issuance of periodic account statements
that will show the number of shares owned.
HOW SHARES MAY BE REDEEMED
Shares of the Fund may be redeemed (the Fund will repurchase them from
shareholders) by mail or telephone. Any redemption may be more or less than
the purchase price of your shares depending on the market value of the Fund's
portfolio securities. All redemption orders received in proper form, as
indicated herein, by the 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 determined at that time. Otherwise, your
order will redeem shares as of 4:00 p.m. New York time on the next business
day. There is no charge for redemptions from the Fund. 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 $10,000,000 (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
$10,000,000 or more during the notice period, the account will not be
redeemed. Redemptions from retirement plans may be subject to tax
withholding.
If you are uncertain of the requirements for redemption, please contact the
Fund, at 1-800-430-3863, or write to the address shown below.
Regular Mail Redemptions. Your request should be addressed to The Chesapeake
Fund, Super-Institutional Shares, 105 North Washington Street, Post Office
Drawer 69, Rocky Mount, North Carolina 27802-0069. Your request for
redemption must include:
1) Your letter of instruction specifying the account number, and the number
of shares or dollar amount to be redeemed. This request must be signed
by all registered shareholders in the exact names in which they are
registered;
2) Any required signature guarantees (see "Signature Guarantees" below);
and
3) Other supporting legal documents, if required in the case of estates,
trusts, guardianships, custodianships, corporations, partnerships,
pension or profit sharing plans, and other organizations.
Your redemption proceeds will be sent to you within seven days after receipt
of your redemption request. However, the Fund may delay forwarding a
redemption check for recently purchased shares while it determines whether the
purchase payment will be honored. Such delay (which may take up to 15 days
from the date of purchase) may be reduced or avoided if the purchase is made
by certified check or wire transfer. In all cases the net asset value next
determined after the receipt of the request for redemption will be used in
processing the redemption. The Fund may suspend redemption privileges or
postpone the date of payment (i) during any period that the New York Stock
Exchange is closed, or trading on the New York Stock Exchange is restricted as
determined by the Securities and Exchange Commission (the "Commission"), (ii)
during any period when an emergency exists as defined by the rules of the
Commission as a result of which it is not reasonably practicable for the Fund
to dispose of securities owned by it, or to fairly determine the value of its
assets, and (iii) for such other periods as the Commission may permit.
Telephone and Bank Wire Redemptions. The Fund offers shareholders the option
of redeeming shares by telephone under certain limited conditions. The Fund
will redeem shares when requested by the shareholder if, and only if, the
shareholder confirms redemption instructions in writing.
The Fund may rely upon confirmation of redemption requests transmitted via
facsimile (FAX# 919-972-1908). The confirmation instructions must include:
1) Shareholder name and account number;
2) Number of shares or dollar amount to be redeemed;
3) Instructions for transmittal of redemption funds to the shareholder; and
4) Shareholder signature as it appears on the application then on file with
the Fund.
The net asset value used in processing the redemption will be the net asset
value next determined after the telephone request is received. Redemption
proceeds will not be distributed until written confirmation of the redemption
request is received, per the instructions above. Shareholders can choose to
have redemption proceeds mailed to them at their address of record, their
bank, or to any other authorized person, or they can have the proceeds sent by
bank wire to their bank ($5,000 minimum). Shareholders can change redemption
instructions anytime by filing a letter including new redemption instructions
with the Fund. (See "Signature Guarantees" below.) The Fund reserves the
right to restrict or cancel telephone and bank wire redemption privileges for
shareholders, without notice, if the Fund believes it to be in the best
interest of the shareholders to do so. During drastic economic and market
changes, telephone redemption privileges may be difficult to implement.
There is currently no charge by the Administrator for wire redemptions.
However, the Administrator reserves the right, upon thirty days' written
notice, to make reasonable charges for wire redemptions. All charges will be
deducted from the shareholder's account by redemption of shares in the
account. The shareholder's bank or brokerage firm may also impose a charge
for processing the wire. If wire transfer of funds is impossible or
impractical, the redemption proceeds will be sent by mail to the designated
account.
Shareholders may redeem shares, subject to the procedures outlined above, by
calling the Fund at 1-800-430-3863. Redemption proceeds will only be sent to
the bank account or person named in the Fund Shares Application currently on
file with the Fund. Telephone redemption privileges authorize the Fund to act
on telephone instructions from any person representing himself or herself to
be the investor and reasonably believed by the Fund to be genuine. The Fund
will employ reasonable procedures, such as requiring a form of personal
identification, to confirm that instructions are genuine, and, if it does not
follow such procedures, the Fund will be liable for any losses due to
fraudulent or unauthorized instructions. The Fund will not be liable for
following telephone instructions reasonably believed to be genuine.
Signature Guarantees. To protect your account and the Fund from fraud,
signature guarantees are required to be sure that you are the person who has
authorized a change in registration, or standing instructions, for your
account. Signature guarantees are required for (1) change of registration
requests, (2) requests to establish or change exchange privileges or telephone
redemption service other than through your initial account application, and
(3) requests for redemptions in excess of $50,000. Signature guarantees are
acceptable from a member bank of the Federal Reserve System, a savings and
loan institution, credit union (if authorized under state law), registered
broker-dealer, securities exchange or association clearing agency, and must
appear on the written request for redemption, establishment or change in
exchange privileges, or change of registration.
MANAGEMENT OF THE FUND
Trustees and Officers. The Fund is a diversified series of the Gardner Lewis
Investment Trust (the "Trust"), an investment company organized as a
Massachusetts business trust. The Board of Trustees of the Trust is
responsible for the management of the business and affairs of the Trust. The
Trustees and executive officers of the Trust and their principal occupations
for the last five years are set forth in the Statement of Additional
Information under "Management of the Fund - Trustees and Officers." The Board
of Trustees of the Trust is primarily responsible for overseeing the conduct
of the Trust's business. The Board of Trustees elects the officers of the
Trust who are responsible for its and the Fund's day-to-day operations.
The Advisor. Subject to the authority of the Board of Trustees, Gardner Lewis
Asset Management (the "Advisor") provides the Fund with a continuous program
of supervision of the Fund's assets, including the composition of its
portfolio, and furnishes advice and recommendations with respect to
investments, investment policies and the purchase and sale of securities,
pursuant to an Investment Advisory Agreement (the "Advisory Agreement") with
the Trust.
The Advisor is registered under the Investment Advisors Act of 1940.
Registration of the Advisor does not involve any supervision of management or
investment practices or policies by the Securities and Exchange Commission.
The Advisor, established as a Delaware corporation in 1990 and converted to a
Pennsylvania limited partnership in 1994, is controlled by W. Whitfield
Gardner. The Advisor currently serves as investment advisor to approximately
$2.6 billion in assets. The Advisor has been rendering investment counsel,
utilizing investment strategies substantially similar to that of the Fund, to
individuals, banks and thrift institutions, pension and profit sharing plans,
trusts, estates, charitable organizations and corporations since its
formation. The Advisor's address is 285 Wilmington-West Chester Pike, Chadds
Ford, Pennsylvania 19317.
Under the Advisory Agreement with the Fund, the Advisor receives a monthly
management fee equal to an annual rate of 1.00% of the average daily net asset
value of the Fund. Although the investment advisory fee is higher than that
paid by most other investment companies, the Board of Trustees believes the
fee to be comparable to advisory fees paid by many funds having similar
objectives and policies. The Advisor may periodically voluntarily waive or
reduce its advisory fee to increase the net income of the Fund. The Advisor
has voluntarily waived a portion of its fee and reimbursed a portion of the
Fund's operating expenses for the fiscal year ended February 29, 1996. The
total fees waived amounted to $***** (the Advisor received *** of its fee) and
expenses reimbursed amounted to $*****.
The Advisor supervises and implements the investment activities of the Fund,
including the making of specific decisions as to the purchase and sale of
portfolio investments. Among the responsibilities of the Advisor under the
Advisory Agreement is the selection of brokers and dealers through whom
transactions in the Fund's portfolio investments will be effected. The
Advisor attempts to obtain the best execution for all such transactions. If
it is believed that more than one broker is able to provide the best
execution, the Advisor will consider the receipt of quotations and other
market services and of research, statistical and other data and the sale of
shares of the Fund in selecting a broker. The Advisor 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. Research services
obtained through Fund brokerage transactions may be used by the Advisor for
its other clients and, conversely, the Fund may benefit from research services
obtained through the brokerage transactions of the Advisor's other clients.
For further information, see "Investment Objective and Policies - Investment
Transactions" in the Statement of Additional Information.
W. Whitfield Gardner and John L. Lewis, IV, principals of the Advisor and
executive officers of the Trust, have been responsible for day-to-day
management of the Fund's portfolio since its inception in 1994. They have
been with the Advisor since its inception. Additional information about these
gentlemen is set forth in the Statement of Additional Information under
"Management of the Fund - Trustees and Officers."
The Administrator. The Trust has entered into an Administration Agreement
with The Nottingham Company, L.L.C. (the "Administrator"), 105 North
Washington Street, Post Office Drawer 69, Rocky Mount, North Carolina 27802-
0069, pursuant to which the Administrator receives a fee at the annual rate of
0.015% of the average daily net assets of the Super-Institutional Shares of
the Fund. In addition, the Administrator currently receives a base monthly
fee of $1,750 for each Class of shares of the Fund for accounting and
recordkeeping services for the Fund. The Administrator also charges the Fund
for certain costs involved with the daily valuation of investment securities
and is reimbursed for out-of-pocket expenses.
Subject to the authority of the Board of Trustees, the services the
Administrator provides to the Fund include coordinating and monitoring any
third parties furnishing services to the Fund; providing the necessary office
space, equipment and personnel to perform administrative and clerical
functions for the Fund; preparing, filing and distributing proxy materials,
periodic reports to shareholders, registration statements and other documents;
and responding to shareholder inquiries.
The Administrator was established as a North Carolina corporation in 1988 and
converted to a North Carolina limited liability company in 1995. With its
affiliates and predecessors, the Administrator has been operating as a
financial services firm since 1985.
The Custodian, Transfer Agent and Fund Accounting/Pricing Agent. Wachovia
Bank of North Carolina, N.A. (the "Custodian"), 301 North Main Street,
Winston-Salem, North Carolina 27102, serves as Custodian of the Fund's assets.
The Custodian acts as the depository for the Fund, safekeeps 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.
The Administrator also serves as the Fund's transfer agent. As transfer
agent, it maintains the records of each shareholder's account, answers
shareholder inquiries concerning accounts, processes purchases and redemptions
of the Fund's shares, acts as dividend and distribution disbursing agent and
performs other shareholder services functions.
The Administrator also performs certain accounting and pricing services for
the Fund as pricing agent, including the daily calculation of the Fund's net
asset value.
Other Expenses. The Fund is responsible for the payment of its expenses.
These include, for example, the fees payable to the Advisor, or expenses
otherwise incurred in connection with the management of the investment of the
Fund's assets, the fees and expenses of the Custodian, the fees and expenses
of the Administrator, the fees and expenses of Trustees, outside auditing and
legal expenses, all taxes and corporate fees payable by the Fund, Securities
and Exchange Commission fees, state securities qualification fees, costs of
preparing and printing prospectuses for regulatory purposes and for
distribution to shareholders, costs of shareholder reports and shareholder
meetings, and any extraordinary expenses. The Fund also pays for brokerage
commissions and transfer taxes (if any) in connection with the purchase and
sale of portfolio securities. Expenses attributable to a particular series of
the Trust, including the Fund, 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. Any expenses relating
only to a particular Class of Shares of the Fund will be borne solely by such
Class.
OTHER INFORMATION
Description of Shares. The Trust was organized as a Massachusetts business
trust on August 12, 1992 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. The Trust currently has the number of
authorized series of shares, including the Fund, and classes of shares,
described in the Statement of Additional Information under "Description of the
Trust." Pursuant to its authority under the Declaration of Trust, the Board
of Trustees has authorized the issuance of an unlimited number of shares in
each of five Classes ("Series A, Series C, and Series D Investor Shares,"
"Institutional Shares," and "Super-Institutional Shares") representing equal
pro rata interests in the Fund, except that the Classes bear different
expenses that reflect the differences in services provided to them. Investor
Shares are sold with a sales charge (except for Series C Shares) and bear
potential distribution expenses and service fees at different levels.
Institutional and Super-Institutional Shares are sold without a sales charge
and bear no shareholder servicing or distribution fees. The Super-
Institutional Shares, however, receive fewer investor services than the
Institutional and Investor Shares due to the size and nature of accounts
holding Super-Institutional Shares. As a result of different charges, fees,
and expenses between the Classes, the total return of the Fund's Investor
Shares will generally be lower than the total return on the Institutional and
Super-Institutional Shares, and the total return on the Institutional Shares
will generally be lower than the total return on the Super-Institutional
Shares. Standardized total return quotations will be computed separately for
each Class of Shares of the Fund.
THIS PROSPECTUS RELATES PRIMARILY TO THE FUND'S SUPER-INSTITUTIONAL SHARES AND
DESCRIBES ONLY THE POLICIES, OPERATIONS, CONTRACTS, AND OTHER MATTERS
PERTAINING TO THE SUPER-INSTITUTIONAL SHARES. THE FUND ALSO ISSUES A CLASS OF
INSTITUTIONAL SHARES AND THREE CLASSES OF INVESTOR SHARES. SUCH OTHER CLASSES
MAY HAVE DIFFERENT SALES CHARGES AND EXPENSES, WHICH MAY AFFECT PERFORMANCE.
INVESTORS MAY CALL THE FUND AT 1-800-430-3863 TO OBTAIN MORE INFORMATION
CONCERNING OTHER CLASSES AVAILABLE TO THEM THROUGH THEIR SALES REPRESENTATIVE.
INVESTORS MAY OBTAIN INFORMATION CONCERNING THOSE CLASSES FROM THEIR SALES
REPRESENTATIVE, THE DISTRIBUTOR, THE FUND, OR ANY OTHER PERSON WHICH IS
OFFERING OR MAKING AVAILABLE TO THEM THE SECURITIES OFFERED IN THIS
PROSPECTUS.
When issued, the shares of each series of the Trust, including the Fund, and
each class of shares, 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.
The Trust's shareholders will vote in the aggregate and not by series (fund)
or class, except where otherwise required by law 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, such as the Fund, 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 or class are entitled to vote on matters affecting only that
series or class. Shares do not have cumulative voting rights. Therefore, the
holders of more than 50% of the aggregate number of shares of all series of
the Trust may elect all the Trustees.
Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable as partners for the obligations of
the trust. The Declaration of Trust, therefore, contains provisions which are
intended to mitigate such liability. See "Description of the Trust" in the
Statement of Additional Information for further information about the Trust
and its shares.
Reporting to Shareholders. The Fund will send to its shareholders Annual and
Semi-Annual Reports; the financial statements appearing in Annual Reports for
the Fund will be audited by independent accountants. In addition, the
Administrator, as transfer agent, will send to each shareholder having an
account directly with the Fund a quarterly statement showing transactions in
the account, the total number of shares owned and any dividends or
distributions paid. Inquiries regarding the Fund may be directed in writing
to 105 North Washington Street, Post Office Drawer 69, Rocky Mount, North
Carolina 27802-0069 or by calling 1-800-430-3863.
Calculation of Performance Data. From time to time the Fund may advertise its
average annual total return for each Class of Shares. The "average annual
total return" 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. The calculation
further assumes the maximum sales load is deducted from the initial payment.
If the Fund has been operating less than 1, 5 or 10 years, the time period
during which the Fund has been operating is substituted.
In addition, the Fund may advertise other total return performance data other
than average annual total return for each Class of Shares. This data shows as
a percentage rate of return encompassing all elements of return (i.e. income
and capital appreciation or depreciation); it assumes reinvestment of all
dividends and capital gain distributions. Such other total return data may be
quoted for the same or different periods as those for which average annual
total return is quoted. This data may consist of a cumulative percentage rate
of return, actual year-by-year rates or any combination thereof. Cumulative
total return represents the cumulative change in value of an investment in the
Fund for various periods.
The total return of the Fund could be increased to the extent the Advisor may
waive all or a portion of its fees or may reimburse all or a portion of the
Fund's expenses. Total return figures are based on the historical performance
of the Fund, show the performance of a hypothetical investment, and are not
intended to indicate future performance. The Fund's quotations may from time
to time be used in advertisements, sales literature, shareholder reports, or
other communications. For further information, see "Additional Information on
Performance" in the Statement of Additional Information.
THE CHESAPEAKE FUND
SUPER-INSTITUTIONAL SHARES
PROSPECTUS
July *, 1996
THE CHESAPEAKE FUND
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
1-800-430-3863
INVESTMENT ADVISOR
Gardner Lewis Asset Management
285 Wilmington-West Chester Pike
Chadds Ford, Pennsylvania 19317
ADMINISTRATOR, FUND ACCOUNTANT, AND
DIVIDEND DISBURSING & TRANSFER AGENT
The Nottingham Company
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
DISTRIBUTOR
Capital Investment Group, Inc.
Post Office Box 32249
Raleigh, North Carolina 27622
CUSTODIAN
Wachovia Bank of North Carolina, N.A.
301 N. Main Street
Winston-Salem, North Carolina 27102
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
1021 East Cary Street, Suite 1900
Richmond, Virginia 23219-4023
STATEMENT OF ADDITIONAL INFORMATION
THE CHESAPEAKE FUND
July *, 1996
A Series of
GARDNER LEWIS INVESTMENT TRUST
105 North Washington Street, Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
Telephone 1-800-525-3863
Table of Contents
INVESTMENT OBJECTIVE AND POLICIES. . . . . . . . . . . . . . . . . . . . . 2
INVESTMENT LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 4
NET ASSET VALUE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION . . . . . . . . . . . . . . 6
DESCRIPTION OF THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . 7
ADDITIONAL INFORMATION CONCERNING TAXES. . . . . . . . . . . . . . . . . . 8
MANAGEMENT OF THE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SPECIAL SHAREHOLDER SERVICES . . . . . . . . . . . . . . . . . . . . . . . 13
ADDITIONAL INFORMATION ON PERFORMANCE. . . . . . . . . . . . . . . . . . . 14
APPENDIX A - DESCRIPTION OF RATINGS. . . . . . . . . . . . . . . . . . . . 17
ANNUAL REPORT OF THE FUND FOR THE FISCAL YEAR ENDED FEBRUARY 29, 1996.ATTACHED
This Statement of Additional Information (the "Additional Statement") is meant
to be read in conjunction with the Prospectus for the Institutional, Super-
Institutional, and Investor Shares of The Chesapeake Fund (the "Fund"), each
dated July *, 1996, and is incorporated by reference in its entirety into each
Prospectus. Because this Additional Statement is not itself a prospectus, no
investment in shares of the Fund should be made solely upon the information
contained herein. Copies of the Fund's Prospectuses may be obtained at no
charge by writing or calling the Fund at the address and phone number shown
above. This Additional Statement is not a prospectus but is incorporated by
reference in each Prospectus in its entirety. Capitalized terms used but not
defined herein have the same meanings as in each Prospectus.
INVESTMENT OBJECTIVE AND POLICIES
The following policies supplement the Fund's investment objective and policies
as set forth in the Prospectuses for each Class of Shares of the Fund. The
Fund, organized in 1994, has no prior operating history.
Additional Information on Fund Instruments. Attached to this Additional
Statement is Appendix A, which contains descriptions of the rating symbols
used by Rating Agencies for securities in which the Fund may invest.
Investment Transactions. Subject to the general supervision of the Trust's
Board of Trustees, the Advisor is responsible for, makes decisions with
respect to, and places orders for all purchases and sales of portfolio
securities for the Fund.
The annualized portfolio turnover rate for the 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 the Fund may vary greatly from year to year as
well as within a particular year, and may be affected by cash requirements for
redemption of shares and by requirements that enable the Fund to receive
favorable tax treatment. Portfolio turnover will not be a limiting factor in
making Fund decisions, and the Fund may engage in short term trading to
achieve its investment objectives.
Purchases of money market instruments by the Fund are made from dealers,
underwriters and issuers. The Fund currently does 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, or otherwise involve transactions directly with
the issuer of an instrument. The Fund's fixed income portfolio transactions
will normally be principal transactions executed in over-the-counter markets
and will be executed on a "net" basis, which may include a dealer markup.
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 Fund 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. The Fund will
engage in this practice, however, only when the Advisor, in its sole
discretion, believes such practice to be otherwise in the Fund's interest.
In executing Fund transactions and selecting brokers or dealers, the Advisor
will seek to obtain the best overall terms available for the Fund. In
assessing the best overall terms available for any transaction, the 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 Fund. In addition, the
Advisor 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 and does not reduce
the advisory fees payable by the Fund. The Trustees will periodically review
any commissions paid by the Fund to consider whether the commissions paid over
representative periods of time appear to be reasonable in relation to the
benefits inuring to the Fund. 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 the Advisor. Conversely, the Fund 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 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 Fund will not execute portfolio transactions through,
acquire securities issued by, make savings deposits in or enter into
repurchase agreements with the Advisor or an affiliated person of the 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, the Fund will not purchase securities during the existence of any
underwriting or selling group relating thereto of which the Advisor, or an
affiliated person of the Advisor, is a member, except to the extent permitted
by the SEC. Under certain circumstances, the Fund may be at a disadvantage
because of these limitations in comparison with other investment companies
that have similar investment objectives but are not subject to such
limitations.
Investment decisions for the Fund will be made independently from those for
any other series of the Trust, if any, and for any other investment companies
and accounts advised or managed by the Advisor. Such other investment
companies and accounts may also invest in the same securities as the Fund. To
the extent permitted by law, the Advisor may aggregate the securities to be
sold or purchased for the Fund with those to be sold or purchased for 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 the Fund and 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 believes to be equitable to the Fund and such other
investment company or account. In some instances, this investment procedure
may adversely affect the price paid or received by the Fund or the size of the
position obtained or sold by the Fund.
For the fiscal year ended February 29, 1996 and the fiscal period ended
February 28, 1995, the Fund paid brokerage commissions of $***** and $29,966,
respectively.
Repurchase Agreements. The 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 the 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. The 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 Fund will not
enter into any repurchase agreement which will cause more than 10% of its net
assets to be invested in repurchase agreements which extend beyond seven days
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 Fund. 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 the 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 Fund 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 Corporation ("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 Fund only through the Master Note program of the
Fund's custodian bank, acting as administrator thereof. The Advisor will
monitor, on a continuous basis, the earnings power, cash flow and other
liquidity ratios of the issuer of a Master Note held by the Fund.
Illiquid Investments. The 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 determines the liquidity of the Fund's investments and,
through reports from the Advisor, the Board monitors investments in illiquid
instruments. In determining the liquidity of the Fund's investments, the
Advisor 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 Fund to be illiquid include repurchase agreements not
entitling the holder to payment of principal and interest within seven days.
If through a change in values, net assets or other circumstances, the 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.
INVESTMENT LIMITATIONS
The 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 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, the Fund may not:
(1) 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 or 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 these limitations);
(2) 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 these
limitations);
(3) Invest more than 10% of the value of its total assets in foreign
securities (which shall not be deemed to include American Depository
Receipts ("ADRs"));
(4) Invest in the securities of any issuer if any of the officers or
Trustees of the Trust or its Investment Advisor who own beneficially
more than 1/2 of 1% of the outstanding securities of such issuer
together own more than 5% of the outstanding securities of such issuer;
(5) Invest for the purpose of exercising control or management of another
issuer;
(6) Invest in interests in real estate, real estate mortgage loans, real
estate limited partnerships, oil, gas or other mineral exploration
leases or development programs, except that the Fund may invest in the
securities of companies (other than those which are not readily
marketable) which own or deal in such things;
(7) Underwrite securities issued by others except to the extent the Fund may
be deemed to be an underwriter under the federal securities laws, in
connection with the disposition of portfolio securities;
(8) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of transactions);
(9) Make short sales of securities or maintain a short position, except
short sales "against the box"; (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.);
(10) Participate on a joint or joint and several basis in any trading account
in securities;
(11) Make loans of money or securities, except that the Fund may invest in
repurchase agreements (but repurchase agreements having a maturity of
longer than seven days, together with other illiquid securities, are
limited to 10% of the Fund's net assets);
(12) 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 will be invested
in such securities;
(13) 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 further investments if
borrowing exceeds 5% of its total assets until such time as total
borrowing represents less than 5% of Fund assets;
(14) Write, purchase, or sell puts, calls, warrants, or combinations thereof,
or purchase or sell commodities, commodities contracts, futures
contracts, or related options; or
(15) Invest in restricted securities.
Percentage restrictions stated as an investment policy or investment
limitation apply at the time of investment; if a later increase or decrease in
percentage beyond the specified limits results from a change in securities
values or total assets, it will not be considered a violation.
While the Fund has reserved the right to make short sales "against the box"
(limitation number 9, above), the Advisor has no present intention of engaging
in such transactions at this time or during the coming year.
With respect to investments permitted in other investment companies, see
"Investment Objective and Policies - Investment Companies" in the Prospectus,
which reflects certain limitations placed on such investments, including the
Advisor's waiver of duplicative advisory fees. During any time that shares of
the Fund may be registered in the State of California, it is a fundamental
policy of the Fund that fees incurred in connection with the purchase of
shares of other investment companies will not be duplicative, management fees
will not be duplicated, and initial sales charges incurred for such purchases
will not exceed one percent (1%).
NET ASSET VALUE
The net asset value per share of each Class of the Fund is calculated
separately by adding the value of the Fund's securities and other assets
belonging to the Fund and attributable to that Class, subtracting the
liabilities charged to the Fund and to that Class, and dividing the result by
the number of outstanding shares of such Class. "Assets belonging to" the
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. Income, realized and unrealized
capital gains and losses, and any expenses of the Fund not allocated to a
particular Class of the Fund will be allocated to each Class of the Fund on
the basis of the net asset value of that Class in relation to the net asset
value of the Fund. Assets belonging to the 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. Certain expenses attributable to a particular Class of
shares (such as the distribution and service fees attributable to Investor
Shares) will be charged against that Class of shares. Certain other expenses
attributable to a particular Class of shares (such as registration fees,
professional fees, and certain printing and postage expenses) may be charged
against that Class of shares if such expenses are actually incurred in a
different amount by that Class or if the Class receives services of a
different kind or to a different degree than other Classes, and the Board of
Trustees approves such allocation. 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 the Fund and the Classes of the Fund are conclusive.
The net asset value per share of each Class of the Fund is determined at 4:00
p.m., New York time, Monday through Friday, except on business holidays when
the New York Stock Exchange is closed. The New York Stock Exchange generally
recognizes the following holidays: New Year's Day, President's Day, Good
Friday, Memorial Day, Fourth of July, Labor Day, Thanksgiving Day, Christmas
Day. Any other holiday recognized by the New York Stock Exchange will be
considered a business holiday on which the Fund's net asset value will not be
determined.
For the fiscal year ended February 29, 1996, the total expenses of the Fund
after fee waivers and expense reimbursements, were $*****, (***%, ***%, ***%,
and ***%, respectively, of the average daily net assets of the Fund's
Institutional Shares, Series A Shares, Series C Shares, and Series D Shares,
respectively). For the fiscal period ended February 28, 1995, the total
expenses of the Fund, after fee waivers and expense reimbursements, were
$122,384 (1.73% of the average daily net assets of the Institutional Shares).
Investor Shares of the Fund were not authorized for issuance during such
fiscal period. Super-Institutional Shares of the Fund were not authorized for
issuance during such fiscal year and period, respectively.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Purchases. Shares of the 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 Fund. Selling dealers have the
responsibility of transmitting orders promptly to the Fund. The public
offering price of shares of the Fund equals net asset value, plus a sales
charge generally for the Investor Shares. Capital Investment Group, Inc. (the
"Distributor") receives this sales charge as Distributor and may reallow it in
the form of dealer discounts and brokerage commissions. The current schedule
of sales charges and related dealer discounts and brokerage commissions is set
forth in the Prospectus for the Investor Shares, along with the information on
current purchases, rights of accumulation, and letters of intent. 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 Series of the Investor Shares of the Fund pursuant to Rule
12b-1 under the 1940 Act (see "How Shares May Be Purchased - Distribution
Plan" in the Prospectus). Under the Plan the Fund may expend a percentage of
the Investor Shares' average net assets annually to finance any activity which
is primarily intended to result in the sale of shares of the Investor Shares
of the Fund and the servicing of shareholder accounts, provided the Trust's
Board of Trustees has approved the category of expenses for which payment is
being made. This percentage is up to 0.25%, 0.50%, and 0.75%, respectively,
of the average net assets of the Series A, Series D, and Series C Investor
Shares, respectively. Such expenditures paid as service fees to any person
who sells shares of the Fund may not exceed 0.25% of the average annual net
asset value of such shares. Potential benefits of the Plan to the Fund
include improved shareholder servicing, savings to the Fund in transfer agency
costs, benefits to the investment process from growth and stability of assets
and maintenance of a financially healthy management organization.
All of the distribution expenses incurred by the Distributor and others, such
as broker-dealers, in excess of the amount paid by the Fund will be borne by
such persons without any reimbursement from the Fund. Subject to seeking best
price and execution, the Fund may, from time to time, buy or sell portfolio
securities from or to firms which receive payments under the Plan.
From time to time the Distributor may pay additional amounts from its own
resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.
The Plan 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 is in
the best interest of shareholders of the Fund and that there is a reasonable
likelihood of its providing a benefit to the Fund, and the Board of Trustees
has made such a determination for the current year of operations under the
Plan. The Plan, the Distribution Agreement and the Dealer Agreement with any
broker/dealers may be terminated at any time without penalty by a majority of
those trustees who are not "interested persons" or, with respect to a
particular Series of the Investor Shares, by a majority vote of the Investor
Shares' outstanding voting stock relating to that particular Series. Any
amendment materially increasing the maximum percentage payable under the Plan,
with respect to a particular Series of the Investor Shares, must likewise be
approved by a majority vote of the Investor Shares' outstanding voting stock
relating to that particular Series, 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 noninterested 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.
For the fiscal year ended February 29, 1996, the Fund incurred $***** for
costs in connection with the Plan under Rule 12b-1, representing 0.25%, 0.75%,
and 0.50%, respectively, of the average net assets of the Series A, Series C,
and Series D Investor Shares, respectively. Such costs were spent on
compensation to sales personnel for sale of Investor Shares and servicing of
shareholder accounts for Investor Shares.
Redemptions. Under the 1940 Act, the 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. The 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," the Fund may redeem shares involuntarily to reimburse the
Fund for any loss sustained by reason of the failure of a shareholder to make
full payment for shares purchased by the shareholder or to collect any charge
relating to a transaction effected for the benefit of a shareholder which is
applicable to Fund shares as provided in the Prospectus from time to time.
DESCRIPTION OF THE TRUST
The Trust is an unincorporated business trust organized under Massachusetts
law on August 12, 1992. 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 two series, as follows: the Fund
and The Chesapeake Growth Fund, both managed by the Advisor. The shares of
The Chesapeake Growth Fund are all of one class; the shares of the Fund are
divided into five classes (Institutional Shares, Super-Institutional Shares,
and Series A, Series C, and Series D Investor Shares). 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 the 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 Fund, 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 or any change in a fundamental investment policy would be
effectively acted upon with respect to a series only if approved by a majority
of the outstanding shares of such series. However, the Rule also provides
that the ratification of the appointment of independent accountants, the
approval of principal underwriting contracts and the election of Trustees may
be effectively acted upon by shareholders of the Trust voting together,
without regard to a particular series or class.
When used in the Prospectus or this Additional Statement, a "majority" of
shareholders means the vote of the lesser of (1) 67% of the shares of the
Trust or the applicable series or class present at a meeting if the holders of
more than 50% of the outstanding shares are present in person or by proxy, or
(2) more than 50% of the outstanding shares of the Trust or the applicable
series or class.
When issued for payment as described in the Prospectus and this Additional
Statement, shares of the 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 the 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 the 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 the Fund, will be treated as a separate
corporate entity under the Code and intends to qualify or remain qualified as
a regulated investment company. In order to so qualify, each series must
elect to be a regulated investment company or have made such an election for a
previous year and must satisfy, in addition to the distribution requirement
described in the Prospectus, certain requirements with respect to the source
of its income for a taxable year. At least 90% of the gross income of each
series must be derived from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of stocks,
securities or foreign currencies, and other income derived with respect to the
series' business of investing in such stock, securities or currencies. Any
income derived by a series from a partnership or trust is treated as derived
with respect to the series' business of investing in stock, securities or
currencies only to the extent that such income is attributable to items of
income that would have been qualifying income if realized by the series in the
same manner as by the partnership or trust.
Another requirement for qualification as a regulated investment company under
the Code is that less than 30% of a series' gross income for a taxable year
must be derived from gains realized on the sale or other disposition of the
following investments held for less than three months: (l) stock and
securities (as defined in Section 2(a) (36) of the 1940 Act); (2) options,
futures and forward contracts other than those on foreign currencies; or (3)
foreign currencies (or options, futures or forward contracts on foreign
currencies) that are not directly related to a series' principal business of
investing in stocks or securities (or options and futures with respect to
stocks or securities). Interest (including original issue discount and, with
respect to certain debt securities, accrued market discount) received by a
series upon maturity or disposition of a security held for less than three
months will not be treated as gross income derived from the sale or other
disposition of such security within the meaning of this requirement. However,
any other income which is attributable to realized market appreciation will be
treated as gross income from the sale or other disposition of securities for
this purpose.
An investment company may not qualify as a regulated investment company for
any taxable year unless it satisfies certain requirements with respect to the
diversification of its investments at the close of each quarter of the taxable
year. In general, at least 50% of the value of its total assets must be
represented by cash, cash items, government securities, securities of other
regulated investment companies and other securities which, with respect to any
one issuer, do not represent more than 5% of the total assets of the
investment company nor more than 10% of the outstanding voting securities of
such issuer. In addition, not more than 25% of the value of the investment
company's total assets may be invested in the securities (other than
government securities or the securities of other regulated investment
companies) of any one issuer. The Fund intends to satisfy all requirements on
an ongoing basis for continued qualification as a regulated investment
company.
Each series of the Trust, including the 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 the 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 the 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 the 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, the 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 the Fund and its shareholders under such laws may
differ from their treatment under federal income tax laws.
MANAGEMENT OF THE FUND
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
Jack E. Brinson, 63 President, Brinson Investment Co.
Trustee President, Brinson Chevrolet, Inc.
1105 Panola Street Tarboro, North Carolina
Tarboro, North Carolina 27886
Dodie M. Duffy, 33 Compliance Administrator
Secretary The Nottingham Company
105 North Washington Street Rocky Mount, North Carolina
Rocky Mount, North Carolina 27802 since 1993; previously
Paralegal
W. Michael Stemmans
Attorney at Law
Baton Rouge, Louisiana
W. Whitfield Gardner, 33 Analyst, Portfolio Manager
Trustee** Gardner Lewis Asset Management
Chief Executive Officer Chadds Ford, Pennsylvania
The Chesapeake Funds
285 Wilmington - West Chester Pike
Chadds Ford, Pennsylvania 19317
Stephen J. Kneeley, 33 Chief Operating Officer
Trustee Turner Investment Partners
1235 Westlakes Drive Berwyn, Pennsylvania
Suite 350
Berwyn, Pennsylvania 19312
John L. Lewis, IV, 32 Analyst, Portfolio Manager
President Gardner Lewis Asset Management
The Chesapeake Funds Chadds Ford, Pennsylvania
285 Wilmington - West Chester Pike
Chadds Ford, Pennsylvania 19317
Frank P. Meadows III, 35 Managing Director
Chairman, Trustee** and Treasurer The Nottingham Company
105 North Washington Street Rocky Mount, North Carolina
Rocky Mount, North Carolina 27802
William D. Zantzinger, 34 Director of Trading
Vice President Gardner Lewis Asset Management
The Chesapeake Funds Chadds Ford, Pennsylvania
285 Wilmington - West Chester Pike since 1992; previously
Chadds Ford, Pennsylvania 19317 International Equity Trader
Morgan Stanley & Company
New York, New York
Morgan Stanley International
_______________________________ London, England
* As of June 1, 1996
** Indicates that Trustee is an "interested person" of the Trust for purposes
of the 1940 Act because of his position with the Advisor or Administrator to
the Trust.
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 $7,500 each year plus $400
per series of the Trust per meeting attended in person and $150 per series of
the Trust per meeting attended by telephone. 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
Jack E. Brinson $10,900 None None $10,900
Trustee
Frank P. Meadows IIINone None None None
Trustee
Figures are for the calendar year ended December 31, 1995. Messrs Gardner and
Kneeley were not Trustees of the Trust during such period.
Principal Holders of Voting Securities. As of April 23, 1996, the Trustees
and Officers of the Trust as a group owned beneficially (i.e., had voting
and/or investment power) less than 1% of the then outstanding shares of each
Class of the Fund except for the Series A Investor Shares, in which the group
owned ***% shares (***% of the Class). On the same date the following
shareholders owned of record more than 5% of the outstanding shares of
beneficial interest of a Class of the Fund. 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 a Class of the Fund as of April 23, 1996.
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership* of Class
INSTITUTIONAL SHARES
Alex Brown & Son's, Inc. 185,845.714 Shares 7.827%
House Account
PO Box 1346
Baltimore, MD 21203
The Jacob and Hilda Blaustein 168,119.552 Shares 7.081%
Foundation, Inc.
Blaustein Building
P.O. Box 238
Baltimore, Maryland 21203
Crestar Custodian FBO 615,384.615 Shares 5.918%**
Carpenter Co. Profit Sharing Plan
P.O. Box 26665
Richmond, Virginia 23267
Music Center Foundation 164,092.664 Shares 6.911%
135 North Grand Avenue
Los Angeles, California 90012
SERIES A INVESTOR SHARES
Alex Brown & Son's, Inc. 64,595.719 Shares 5.023%
House Account
PO Box 1346
Baltimore, MD 21203
SERIES C INVESTOR SHARES
JC Bradford & Company Cust FBO 257,997.936 Shares 86.730%**
Arthur Demoss Foundation
330 Commerce Street
Nashville, TN 37201
SERIES D INVESTOR SHARES
Alex Brown & Son's, Inc. 79,173.777 Shares 12.154%
House Account
PO Box 1346
Baltimore, MD 21203
* The shares indicated are believed by the Fund to be owned both of record
and beneficially, except as indicated above. The shares held by Alex
Brown & Son's, Inc. in its House Account are held of record for the
benefit of such firm's clients.
** Pursuant to applicable SEC regulations, this shareholder is deemed to
control the indicated Class of Shares of the Fund.
Investment Advisor. Information about Gardner Lewis Asset Management, Chadds
Ford, Pennsylvania (the "Advisor") and its duties and compensation as Advisor
is contained in the Prospectus.
The Advisor will receive a monthly management fee equal to an annual rate of
1.00% of the average daily net asset value of the Fund. Restrictive
limitations may be imposed on the Fund as a result of changes in current state
laws and regulations in those states where the Fund has qualified its shares,
or by a decision of the Trustees to qualify the shares in other states having
restrictive expense limitations.
The Advisor has voluntarily waived its fee and reimbursed a portion of the
Fund's operating expenses for the fiscal year ended February 29, 1996. The
total fees waived amounted to $***** and expenses reimbursed amounted to
$*****. The Advisor has voluntarily waived its fee and reimbursed a portion
of the Fund's operating expenses for the fiscal period ended February 28,
1995. The total fees waived amounted to $70,747 and expenses reimbursed
amounted to $1,080.
Under the Advisory Agreement, the Advisor is not liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the performance of such Agreement, except a loss resulting from a breach
of fiduciary duty with respect to the receipt of compensation for services or
a loss resulting from willful misfeasance, bad faith or gross negligence on
the part of the Advisor in the performance of its duties or from its reckless
disregard of its duties and obligations under the Agreement.
The Administrator and Transfer Agent. The Trust has entered into a Fund
Accounting, Dividend Disbursing & Transfer Agent and Administration Agreement
with The Nottingham Company, L.L.C. (the "Administrator"), 105 North
Washington Street, Post Office Drawer 69, Rocky Mount, North Carolina 27802-
0069, pursuant to which the Administrator receives a fee at the annual rate of
0.075% of the average daily net assets of the Institutional and Investor
Shares of the Fund and 0.015% of the average daily net assets of the Super-
Institutional Shares of the Fund. In addition, the Administrator currently
receives a base monthly fee of $1,750 for each Class of Fund shares for
accounting and recordkeeping services for the Fund. The Administrator also
charges the Fund for certain costs involved with the daily valuation of
investment securities and is reimbursed for out-of-pocket expenses. The
Administrator charges a minimum fee of $3,000 per month for all of its fees
for the Fund taken in the aggregate, analyzed monthly. For services to the
Fund for the fiscal year ended February 29, 1996 and the fiscal period ended
February 28, 1995, the Administrator received administration fees of $*****
and $9,449, respectively. For such fiscal year and period, the Administrator
received $***** and $19,250, respectively, for accounting and recordkeeping
services.
The Administrator will perform the following services for the 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 will also serve as the Fund's transfer agent and dividend
disbursing agent and will provide certain accounting and pricing services for
the Fund.
Distributor. Capital Investment Group, Inc. (the "Distributor"), Post Office
Box 32249, Raleigh, North Carolina 27622, acts as an underwriter and
distributor of the 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
the 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.
For the fiscal year ended February 29, 1996, the aggregate dollar amount of
sales charges paid on the sale of Fund shares was $*****, from which the
Distributor retained sales charges of $*****. For the fiscal period ended
February 28, 1995, the aggregate dollar amount of sales charges paid on the
sale of Fund shares was $114,948, from which the Distributor retained sales
charges of $9,495.
Custodian. Wachovia Bank of North Carolina, N.A. (the "Custodian"), 301 North
Main Street, Winston-Salem, North Carolina 27102 serves as custodian for the
Fund's assets. The Custodian acts as the depository for the Fund, safekeeps
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 the Fund an annual fee
based on the average net assets of the Fund held by the Custodian.
Independent Auditors. The firm of KPMG Peat Marwick LLP, 1021 East Cary
Street, Richmond, Virginia 23219-4023, serves as independent auditors for the
Fund, and will audit the annual financial statements of the Fund, prepare the
Fund's federal and state tax returns, and consult with the Fund on matters of
accounting and federal and state income taxation. A copy of the most recent
annual report of the Fund will accompany this Additional Statement whenever it
is requested by a shareholder or prospective investor.
SPECIAL SHAREHOLDER SERVICES
The 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 (Investor and Institutional Shares Only). The
automatic investment plan enables shareholders to make regular monthly or
quarterly investment in shares through automatic charges to their checking
account. With shareholder authorization and bank approval, the Administrator
will automatically charge the checking account for the amount specified ($100
minimum) which will be automatically invested in shares at the public offering
price on or about the 21st day of the month. The shareholder may change the
amount of the investment or discontinue the plan at any time by writing to the
Administrator.
Systematic Withdrawal Plan (Investor and Institutional Shares Only).
Shareholders owning shares with a value of $10,000 or more ($1,000,000 or more
for holders of Institutional Shares) may establish a Systematic Withdrawal
Plan. A shareholder may receive monthly or quarterly payments, in amounts of
not less than $100 per payment, by authorizing the Fund to redeem the
necessary number of shares periodically (each month, or quarterly in the
months of March, June, September and December) in order to make the payments
requested. The 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 Fund. 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 Fund. 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 Fund upon
sixty days written notice or by a shareholder upon written notice to the Fund.
Applications and further details may be obtained by calling the Fund at 1-800-
525-3863, or by writing to:
The Chesapeake Fund
[Investor Shares] or [Institutional Shares]
105 North Washington Street
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
Purchases in Kind. The 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 based upon the suitability of the
securities accepted for inclusion as a long term investment of the Fund, the
marketability of such securities, and other factors which the Advisor may deem
appropriate. If accepted, the securities will be valued using the same
criteria and methods as described in "How Shares are Valued" in the
Prospectus. Transactions involving the issuance of shares in the Fund for
securities in lieu of cash will be limited to acquisitions of securities
(except for municipal debt securities issued by state political subdivisions
or their agencies or instrumentalities) which: (a) meet the investment
objectives and policies of the Fund; (b) are acquired for investment and not
for resale; (c) are liquid securities which are not restricted as to transfer
either by law or liquidity of market; and (d) have a value which is readily
ascertainable (and not established only by evaluation procedures) as evidenced
by a listing on the American Stock Exchange, the New York Stock Exchange, or
NASDAQ.
Redemptions in Kind. The Fund does not intend, under normal circumstances, to
redeem its 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 Fund 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 the 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 Fund at the address shown herein. Your request should include
the following: (1) the Fund name and existing account registration; (2)
signature(s) of the registered owner(s) exactly as the signature(s) appear(s)
on the account registration; (3) the new account registration, address, social
security or taxpayer identification number and how dividends and capital gains
are to be distributed; (4) signature guarantees (See the Prospectus under the
heading "Signature Guarantees"); and (5) any additional documents which are
required for transfer by corporations, administrators, executors, trustees,
guardians, etc. If you have any questions about transferring shares, call or
write the Fund.
ADDITIONAL INFORMATION ON PERFORMANCE
From time to time, the total return of the each Class of the Fund may be
quoted in advertisements, sales literature, shareholder reports or other
communications to shareholders. The Fund computes the "average annual total
return" of each Class of the Fund by determining the average annual compounded
rates of return during specified periods that equate the initial amount
invested to the ending redeemable value of such investment. This is done by
determining the ending redeemable value of a hypothetical $1,000 initial
payment. This calculation is as follows:
P(1+T)n = ERV
Where: T = average annual total return.
ERV = ending redeemable value at the end of the period covered by
the computation of a hypothetical $1,000 payment made at the
beginning of the period.
P = hypothetical initial payment of $1,000 from which the
maximum sales load is deducted.
n = period covered by the computation, expressed in terms of
years.
The Fund may also compute the aggregate total return of each Class of the
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 the maximum sales load is deducted from the initial $1,000
investment at the time it is made and 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 Fund may also quote other total return information that does not reflect
the effects of the sales load.
The average annual total return for the Institutional Shares of the Fund for
the year ended February 29, 1996 and since inception (April 6, 1994 to
February 29, 1996) was ****% and ****%, respectively. The cumulative total
return for the Institutional Shares of the Fund since inception through
February 29, 1996 was ****%. The aggregate total return for the Series A,
Series C, and Series D Investor Shares of the Fund since inception (April 7,
1995 to February 29, 1996) was ****%, ****%, and ****%, respectively. Without
reflecting the effects of the maximum sales load, the aggregate total return
for the Series A and Series D Investor Shares of the Fund since inception
(April 7, 1995 to February 29, 1996) was ****% and ****%, respectively. This
performance quotation should not be considered representative of the Fund's
performance for any specified period in the future. Aggregate total return is
calculated in a similar manner to annual total return, except that the return
is aggregated, rather that annualized. The Super-Institutional Shares of the
Fund were not authorized for issuance during such periods.
The 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, the Fund may compare its
performance to the S&P 500 Total Return Index and the NASDAQ Industrials
Index, which are generally considered to be representative of the performance
of unmanaged common stocks that are publicly traded in the United States
securities markets. 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. The Fund may also
occasionally cite statistics to reflect its volatility and risk. The 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 the Fund will
experience the same results. Performance comparisons may be useful to
investors who wish to compare the Fund's past performance to that of other
mutual funds and investment products. Of course, past performance is not a
guarantee of future results.
The 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, the Fund may advertise its performance
compared to similar funds or portfolios using certain indices, reporting
services, and financial publications. These may include the following:
- - Lipper Analytical Services, Inc. ranks funds in various fund categories
by making comparative calculations using total return. Total return
assumes the reinvestment of all capital gains distributions and income
dividends and takes into account any change in net asset value over a
specific period of time.
- - Morningstar, Inc., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for
two weeks.
Investors may use such indices in addition to the Fund's Prospectus to obtain
a more complete view of the Fund's performance before investing. Of course,
when comparing the 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 the Fund may quote total returns
that are calculated on non-standardized base periods. The total returns
represent the historic change in the value of an investment in the Fund based
on monthly reinvestment of dividends over a specified period of time.
From time to time the Fund may include in advertisements and other
communications information, charts, and illustrations relating to inflation
and the effects of inflation on the dollar, including the purchasing power of
the dollar at various rates of inflation. The 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). The 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. The 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.
APPENDIX A
DESCRIPTION OF RATINGS
The Fund will normally be at least 90% invested in equities. As a temporary
defensive position, however, the Fund may invest up to 100% of its assets in
investment grade bonds, U.S. Government Securities, repurchase agreements, or
money market instruments ("Investment-Grade Debt Securities"). When the Fund
invests in Investment Grade-Debt Securities as a temporary defensive measure,
it is not pursuing its investment objective. Under normal circumstances,
however, the fund may invest in money market or repurchase agreement
instruments as described in the Prospectus. The various ratings used by the
nationally recognized securities rating services are described below.
A rating by a rating service represents the service's opinion as to the credit
quality of the security being rated. However, the ratings are general and are
not absolute standards of quality or guarantees as to the creditworthiness of
an issuer. Consequently, the Advisor believes that the quality of fixed
income securities in which the Fund may invest should be continuously reviewed
and that individual analysts give different weightings to the various factors
involved in credit analysis. A rating is not a recommendation to purchase,
sell or hold a security, because it does not take into account market value or
suitability for a particular investor. When a security has received a rating
from more than one service, each rating is evaluated independently. Ratings
are based on current information furnished by the issuer or obtained by the
rating services from other sources that they consider reliable. Ratings may
be changed, suspended or withdrawn as a result of changes in or unavailability
of such information, or for other reasons.
Standard & Poor's Ratings Group. The following summarizes the highest four
ratings used by Standard & Poor's Ratings Group ("S&P") for bonds which are
deemed to be "Investment-Grade Debt Securities" by the Advisor:
AAA - This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay
principal.
AA - Debt rated AA is considered to have a very strong capacity to pay
interest and repay principal and differs from AAA issues only in a small
degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher
rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than for debt in
higher rated categories.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show
relative standing within these major rating categories.
Bonds rated BB, B, CCC, CC and C are not considered by the Advisor to be
"Investment-Grade Debt Securities" and are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay
interest and principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and C the highest degree of
speculation. While such bonds may have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
Commercial paper rated A-1 by S&P indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted A-1+. Capacity for timely
payment on commercial paper rated A-2 is satisfactory, but the relative degree
of safety is not as high as for issues designated A-1.
The rating SP-1 is the highest rating assigned by S&P to municipal notes and
indicates very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics are given a
plus (+) designation.
Moody's Investors Service, Inc. The following summarizes the highest four
ratings used by Moody's Investors Service, Inc. ("Moody's") for bonds which
are deemed to be "Investment-Grade Debt Securities" by the Advisor:
Aaa - Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large or
by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A - Debt which is rated A possesses many favorable investment attributes
and is to be considered as an upper medium grade obligation. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa - Debt which is rated Baa is considered as a medium grade obligation,
i.e., it is neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such debt lacks outstanding
investment characteristics and in fact has speculative characteristics as
well.
Moody's applies numerical modifiers (l, 2 and 3) with respect to bonds rated
Aa, A and Baa. The modifier 1 indicates that the bond being rated ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the bond ranks in the
lower end of its generic rating category.
Bonds which are rated Ba, B, Caa, Ca or C by Moody's are not considered
"Investment-Grade Debt Securities" by the Advisor. Bonds rated Ba are judged
to have speculative elements because their future cannot be considered as well
assured. Uncertainty of position characterizes bonds in this class, because
the protection of interest and principal payments often may be very moderate
and not well safeguarded.
Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the security over any long period for time may be small. Bonds
which are rated Caa are of poor standing. Such securities may be in default
or there may be present elements of danger with respect to principal or
interest. Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings. Bonds which are rated C are the lowest rated class of
bonds and issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered to
have a superior capacity for repayment of short-term promissory obligations.
Issuers rated Prime-2 (or related supporting institutions) are considered to
have a strong capacity for repayment of short-term promissory obligations.
This will normally be evidenced by many of the characteristics of issuers
rated Prime-1 but to a lesser degree. Earnings trends and coverage ratios,
while sound, will be more subject to variation. Capitalization
characteristics, while still appropriated may be more affected by external
conditions. Ample alternate liquidity is maintained.
The following summarizes the highest rating used by Moody's for short-term
notes and variable rate demand obligations:
MIG-l; VMIG-l - Obligations bearing these designations are of the best
quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
Duff & Phelps Credit Rating Co. The following summarizes the highest four
ratings used by Duff & Phelps Credit Rating Co. ("D&P") for bonds which are
deemed to be "Investment-Grade Debt Securities" by the Advisor:
AAA - Bonds that are rated AAA are of the highest credit quality. The
risk factors are considered to be negligible, being only slightly more
than for risk-free U.S. Treasury debt.
AA - Bonds that are rated AA are of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to
time because of economic conditions.
A - Bonds rated A have average but adequate protection factors. The risk
factors are more variable and greater in periods of economic stress.
BBB - Bonds rated BBB have below average protection factors but are still
considered sufficient for prudent investment. There is considerable
variability in risk during economic cycles.
Bonds rated BB, B and CCC by D&P are not considered "Investment-Grade Debt
Securities" and are regarded, on balance, as predominantly speculative with
respect to the issuer's ability to pay interest and make principal payments in
accordance with the terms of the obligations. BB indicates the lowest degree
of speculation and CCC the highest degree of speculation.
The rating Duff l is the highest rating assigned by D&P for short-term debt,
including commercial paper. D&P employs three designations, Duff l+, Duff 1
and Duff 1- within the highest rating category. Duff l+ indicates highest
certainty of timely payment. Short-term liquidity, including internal
operating factors and/or access to alternative sources of funds, is judged to
be "outstanding, and safety is just below risk-free U.S. Treasury short-term
obligations." Duff 1 indicates very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are considered to be minor. Duff 1- indicates high
certainty of timely payment. Liquidity factors are strong and supported by
good fundamental protection factors. Risk factors are very small.
Fitch Investors Service, Inc. The following summarizes the highest four
ratings used by Fitch Investors Service, Inc. ("Fitch") for bonds which are
deemed to be "Investment-Grade Debt Securities" by the Advisor:
AAA - Bonds are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA - Bonds are considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated AAA. Because
bonds rated in the AAA and AA categories are not significantly vulnerable
to foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
A - Bonds that are rated A are considered to be investment grade and of
high credit quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more vulnerable to
adverse changes in economic conditions and circumstances than bonds with
higher ratings.
BBB - Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and
repay principal is considered to be adequate. Adverse changes in
economic conditions and circumstances, however, are more likely to have
adverse impact on these bonds, and therefore impair timely payment. The
likelihood that the ratings of these bonds will fall below investment
grade is higher than for bonds with higher ratings.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show
relative standing within a rating category.
Bonds rated BB, B and CCC by Fitch are not considered "Investment-Grade Debt
Securities" and are regarded, on balance, as predominantly speculative with
respect to the issuer's ability to pay interest and make principal payments in
accordance with the terms of the obligations. BB indicates the lowest degree
of speculation and CCC the highest degree of speculation.
The following summarizes the three highest ratings used by Fitch for
short-term notes, municipal notes, variable rate demand instruments and
commercial paper:
F-1+ - Instruments assigned this rating are regarded as having the
strongest degree of assurance for timely payment.
F-1 - Instruments assigned this rating reflect an assurance of timely
payment only slightly less in degree than issues rated F-1+
F-2 - Instruments assigned this rating have satisfactory degree of
assurance for timely payment, but the margin of safety is not as great as
for issues assigned F-1+ and F-1 ratings.
GARDNER LEWIS INVESTMENT TRUST
The Chesapeake Fund
Institutional Shares
Cross Reference Sheet
Pursuant to Rule 481(a) Under the Securities Act of 1933
Form N-1A Item No. Prospectus Caption
PART A
Item 1 Cover Page Cover Page
Item 2 Synopsis Synopsis of Costs and Expenses
Prospectus Summary
Item 3 Condensed Financial Information Financial Highlights
Other Information - Calculation
of Performance Data
Item 4 General Description of Registrant Investment Objective and
Policies
Risk Factors
Investment Limitations
Item 5 Management of the Fund Management of the Fund
Item 6 Capital Stock and Other Securities Dividends and Distributions
Federal Income Taxes
Other Information - Description
of Shares
Item 7 Purchase of Securities Being Offered How Shares May Be Purchased
How Shares Are Valued
Item 8 Redemption or Repurchase How Shares May Be Redeemed
Item 9 Pending Legal Proceedings Not Applicable
Statement of Additional
Information Caption
PART B
Item 10 Cover Page Cover Page
Item 11 Table of Contents Cover Page
Item 12 General Information and History Investment Objective and
Policies
Investment Limitations
Management of the Fund
Description of the Trust
Item 13 Investment Objectives and Policies Investment Objective and
Policies
Investment Limitations
Appendix A - Description of
Ratings
Item 14 Management of the Fund Management of the Fund
Item 15 Control Persons and Principal Management of the Fund -
Holders of Securities Trustees and Officers
Item 16 Investment Advisory and Other Management of the Fund -
Services Investment Advisor
Item 17 Brokerage Allocation and Other Management of the Fund -
Practices Distributor
Investment Objective and
Policies - Investment
Transactions
Item 18 Capital Stock and Other Securities Description of the Trust
Item 19 Purchase, Redemption and Pricing Additional Purchase and
of Securities Being Offered Redemption Information
Item 20 Tax Status Additional Information
Concerning Taxes
Item 21 Underwriters Management of the Fund -
Distributor
Item 22 Calculation of Performance Data Additional Information on
Performance
Item 23 Financial Statements Annual Report of the Fund for
the Fiscal Year Ended
August 31, 1995
PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
GARDNER LEWIS INVESTMENT TRUST
THE CHESAPEAKE FUND - INSTITUTIONAL SHARES
SUPPLEMENT TO PROSPECTUS
The Prospectus dated July 1, 1995 of The Chesapeake Fund - Institutional
Shares (the "Fund") is hereby supplemented with the following additional
information:
The section "INVESTMENT OBJECTIVE AND POLICIES - Foreign Securities" is hereby
amended to reflect the following:
The Fund may invest up to 10% of its total assets in foreign securities.
For purposes of this limitation, American Depository Receipts ("ADRs")
will not be considered foreign securities.
The section "RISK FACTORS" is hereby amended to reflect the following:
Borrowing. The Fund may borrow, temporarily, up to 5% of its total
assets for extraordinary or emergency purposes and 15% of its total
assets to meet redemption requests, which might otherwise require
untimely disposition of portfolio holdings. To the extent the Fund
borrows for these purposes, the effects of market price fluctuations on
portfolio net asset value will be exaggerated. If, while such borrowing
is in effect, the value of the Fund's assets declines, the Fund could be
forced to liquidate portfolio securities when it is disadvantageous to
do so. The Fund would incur interest and other transaction costs in
connection with borrowing. The Fund will borrow only from a bank. The
Fund will not make any investments if the borrowing exceeds 5% of its
assets until such time as repayment has been made to bring the total
borrowing below 5% of its total assets.
The section "INVESTMENT LIMITATIONS" is hereby amended to revise the
first and seventh investment limitations to read as follows:
(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 the Fund's total assets or, (b) in order to meet redemption
requests, in amounts not exceeding 15% of its total assets. The
Fund will not make any investments if borrowing exceeds 5% of its
total assets;
(7) invest more than 10% of the Fund's total assets in foreign
securities (excluding ADRs);
The date of this Supplement is July *, 1996.
GARDNER LEWIS INVESTMENT TRUST
The Chesapeake Fund
Investor Shares
Cross Reference Sheet
Pursuant to Rule 481(a) Under the Securities Act of 1933
Form N-1A Item No. Prospectus Caption
PART A
Item 1 Cover Page Cover Page
Item 2 Synopsis Synopsis of Costs and Expenses
Prospectus Summary
Item 3 Condensed Financial Information Financial Highlights
Other Information - Calculation
of Performance Data
Item 4 General Description of Registrant Investment Objective and
Policies
Risk Factors
Investment Limitations
Item 5 Management of the Fund Management of the Fund
Item 6 Capital Stock and Other Securities Dividends and Distributions
Federal Income Taxes
Other Information - Description
of Shares
Item 7 Purchase of Securities Being Offered How Shares May Be Purchased
How Shares Are Valued
Item 8 Redemption or Repurchase How Shares May Be Redeemed
Item 9 Pending Legal Proceedings Not Applicable
Statement of Additional
Information Caption
PART B
Item 10 Cover Page Cover Page
Item 11 Table of Contents Cover Page
Item 12 General Information and History Investment Objective and
Policies
Investment Limitations
Management of the Fund
Description of the Trust
Item 13 Investment Objectives and Policies Investment Objective and
Policies
Investment Limitations
Appendix A - Description of
Ratings
Item 14 Management of the Fund Management of the Fund
Item 15 Control Persons and Principal Management of the Fund -
Holders of Securities Trustees and Officers
Item 16 Investment Advisory and Other Management of the Fund -
Services Investment Advisor
Item 17 Brokerage Allocation and Other Management of the Fund -
Practices Distributor
Investment Objective and
Policies - Investment
Transactions
Item 18 Capital Stock and Other Securities Description of the Trust
Item 19 Purchase, Redemption and Pricing Additional Purchase and
of Securities Being Offered Redemption Information
Item 20 Tax Status Additional Information
Concerning Taxes
Item 21 Underwriters Management of the Fund -
Distributor
Item 22 Calculation of Performance Data Additional Information on
Performance
Item 23 Financial Statements Annual Report of the Fund for
the Fiscal Year Ended
August 31, 1995
PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
GARDNER LEWIS INVESTMENT TRUST
THE CHESAPEAKE FUND - INVESTOR SHARES
SUPPLEMENT TO PROSPECTUS
The Prospectus dated October 26, 1995 of The Chesapeake Fund - Investor Shares
(the "Fund") is hereby supplemented with the following additional information:
The section "INVESTMENT OBJECTIVE AND POLICIES - Foreign Securities" is hereby
amended to reflect the following:
The Fund may invest up to 10% of its total assets in foreign securities.
For purposes of this limitation, American Depository Receipts ("ADRs")
will not be considered foreign securities.
The section "RISK FACTORS" is hereby amended to reflect the following:
Borrowing. The Fund may borrow, temporarily, up to 5% of its total
assets for extraordinary or emergency purposes and 15% of its total
assets to meet redemption requests, which might otherwise require
untimely disposition of portfolio holdings. To the extent the Fund
borrows for these purposes, the effects of market price fluctuations on
portfolio net asset value will be exaggerated. If, while such borrowing
is in effect, the value of the Fund's assets declines, the Fund could be
forced to liquidate portfolio securities when it is disadvantageous to
do so. The Fund would incur interest and other transaction costs in
connection with borrowing. The Fund will borrow only from a bank. The
Fund will not make any investments if the borrowing exceeds 5% of its
assets until such time as repayment has been made to bring the total
borrowing below 5% of its total assets.
The section "INVESTMENT LIMITATIONS" is hereby amended to revise the
first and seventh investment limitations to read as follows:
(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 the Fund's total assets or, (b) in order to meet redemption
requests, in amounts not exceeding 15% of its total assets. The
Fund will not make any investments if borrowing exceeds 5% of its
total assets;
(7) invest more than 10% of the Fund's total assets in foreign
securities (excluding ADRs);
The date of this Supplement is July *, 1996.
PART C
GARDNER LEWIS INVESTMENT TRUST
FORM N1-A
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
a) Financial Statements: Not Applicable
b) Exhibits
(1) Amended and Restated Declaration of Trust - Incorporated by
reference; filed 2/3/95
(2) Amended and Restated By-Laws - Incorporated by reference; filed 2/3/95
(3) Not applicable
(4) Not applicable - the series of the Registrant do not issue certificates
(see Exhibit 1 and 2 for the relevant portions of the Declaration of
Trust and By-Laws)
(5) (a) Investment Advisory Agreement for The Chesapeake Growth Fund -
Incorporated by reference; filed 10/27/92
(b) Investment Advisory Agreement for The Chesapeake Fund - Incorporated
by reference; filed 1/27/94
(6) (a) Distribution Agreement for The Chesapeake Growth Fund - Incorporated
by reference; filed 11/16/94
(b) Distribution Agreement for The Chesapeake Fund - Incorporated by
reference; filed 1/27/94
(7) Not applicable
(8) Custodian Agreement - Incorporated by reference; filed
12/21/93
(9) (a) Fund Accounting, Dividend Disbursing and Transfer Agent and
Administration Agreement - Incorporated by reference; filed
12/21/93
(b) Amendment to the Fund Accounting, Dividend Disbursing and Transfer
Agent and Administration Agreement - Incorporated by reference; filed
10/26/95
(c) Amendment to the Fund Accounting, Dividend Disbursing and Transfer
Agent and Administration Agreement - Enclosed Exhibit 9(c)
(10) Opinion of Counsel - Incorporated by reference; filed
10/26/95
(11) Consent of Auditors - Incorporated by reference; filed 10/26/95
(12) Not Applicable
(13) Not Applicable
(14) Not applicable
(15) (a) Distribution Plan for The Chesapeake Fund Series A Investor
Shares - Incorporated by reference; filed 2/7/95
(b) Distribution Plan for The Chesapeake Fund Series C Investor Shares -
Incorporated by reference; filed 2/7/95
(c) Distribution Plan for The Chesapeake Fund Series D Investor Shares -
Incorporated by reference; filed 2/7/95
(16) Computation of Performance - Incorporated by reference; filed
10/26/95
(17) Copies of Powers of Attorney - Incorporated by reference;
filed 11/16/94
(18) Copies of Amended and Restated Rule 18f-3 Multi-Class Plan -
Incorporated by reference; filed 7/7/95
ITEM 25. Persons Controlled by or Under Common Control with Registrant
No person is controlled by or under common control with the
Registrant.
ITEM 26. Number of Holders of Securities
As of April 24, 1996, the number of record holders of each class of
securities of Registrant was as follows:
Number of
Title of Class Record Holders
The Chesapeake Growth Fund 1990
The Chesapeake Fund - Institutional Shares 169
The Chesapeake Fund - Series A Investor Shares 703
The Chesapeake Fund - Series C Investor Shares 56
The Chesapeake Fund - Series D Investor Shares 210
ITEM 27. Indemnification
The Declaration of Trust and Bylaws of the Registrant contain
provisions covering indemnification of the officers and trustees.
The following are summaries of the applicable provisions.
The Registrant's Declaration of Trust provides that every person who
is or has been a trustee, officer, employee or agent of the
Registrant and every person who serves at the trustees' request as
director, officer, employee or agent of another enterprise will be
indemnified by the Registrant to the fullest extent permitted by law
against all liabilities and against all expenses reasonably incurred
or paid by him in connection with any debt, claim, action, demand,
suit, proceeding, judgment, decree, liability or obligation of any
kind in which he becomes involved as a party or otherwise or is
threatened by virtue of his being or having been a trustee, officer,
employee or agent of the Registrant or of another enterprise at the
request of the Registrant and against amounts paid or incurred by him
in the compromise or settlement thereof.
No indemnification will be provided to a trustee or officer: (i)
against any liability to the Registrant or its shareholders by reason
of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office
("disabling conduct"); (ii) with respect to any matter as to which he
shall, by the court or other body by or before which the proceeding
was brought or engaged, have been finally adjudicated to be liable by
reason of disabling conduct; (iii) in the absence of a final
adjudication on the merits that such trustee or officer did not
engage in disabling conduct, unless a reasonable determination, based
upon a review of the facts that the person to be indemnified is not
liable by reason of such conduct, is made by vote of a majority of a
quorum of the trustees who are neither interested persons nor parties
to the proceedings, or by independent legal counsel, in a written
opinion.
The rights of indemnification may be insured against by policies
maintained by the Registrant, will be severable, will not affect any
other rights to which any trustee, officer, employee or agent may now
or hereafter be entitled, will continue as to a person who has ceased
to be such trustee, officer, employee, or agent and will inure to the
benefit of the heirs, executors and administrators of such a person;
provided, however, that no person may satisfy any right of indemnity
or reimbursement except out of the property of the Registrant, and no
other person will be personally liable to provide indemnity or
reimbursement (except an insurer or surety or person otherwise bound
by contract).
Article XIV of the Registrant's Bylaws provides that the Registrant
will indemnify each trustee and officer to the full extent permitted
by applicable federal, state and local statutes, rules and
regulations and the Declaration of Trust, as amended from time to
time. With respect to a proceeding against a trustee or officer
brought by or on behalf of the Registrant to obtain a judgment or
decree in its favor, the Registrant will provide the officer or
trustee with the same indemnification, after the same determination,
as it is required to provide with respect to a proceeding not brought
by or on behalf of the Registrant.
This indemnification will be provided with respect to an action, suit
proceeding arising from an act or omission or alleged act or
omission, whether occurring before or after the adoption of Article
XIV of the Registrant's Bylaws.
ITEM 28. Business and other Connections of Investment Advisor
See the Statement of Additional Information section entitled
"Management of the Fund" and the Investment Advisor's Form ADV filed
with the Commission for the activities and affiliations of the
officers and directors of the Investment Advisor 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 Advisor currently serves as investment
advisor to numerous institutional and individual clients.
ITEM 29. Principal Underwriter
(a) Capital Investment Group, Inc. is underwriter and distributor for The
Chesapeake Growth Fund, The Chesapeake Fund, Capital Value Fund, ZSA
Equity Fund, ZSA Asset Allocation Fund, ZSA Social Conscience Fund,
The Brown Capital Management Equity Fund, The Brown Capital
Management Balanced Fund, The Brown Capital Management Small Company
Fund, Amelia Earhart: Eagle Equity Fund, Legacy Equity Fund, Greater
Cincinnati Fund, The CarolinasFund, Mississippi Opportunity Fund,
GrandView REIT Index Fund, GrandView Realty Growth Fund, and
GrandView Healthcare Realty Income Fund.
(b)
Name and Principal Position(s) and Position(s) and
Business Address Offices Offices
with Underwriter with Registrant
Richard K. Bryant President No position with the
17 Glenwood Avenue Raleigh, NC Trust or its Series
Elmer O. Edgerton Vice President No position with the
17 Glenwood Avenue Trust or its Series
Raleigh, NC
(c) Not applicable
ITEM 30. Location of Accounts and Records
All account books and records not normally held by the Custodian are
held by the Registrant, in the offices of The Nottingham Company,
Fund Accountant, Administrator and Transfer Agent to the Registrant,
or by Gardner Lewis Asset Management, the advisor to the Registrant.
The address of The Nottingham Company is 105 North Washington Street,
Post Office Drawer 69, Rocky Mount, North Carolina 27802-0069. The
address of Gardner Lewis Asset Management is 285 Wilmington-West
Chester Pike, Chadds Ford, Pennsylvania 19317.
ITEM 31. Management Services
The substantive provisions of the Fund Accounting, Dividend
Disbursing & Transfer Agent and Administration Agreement between the
Registrant and The Nottingham Company are discussed in Part B hereof.
ITEM 32. Undertakings
Registrant undertakes to furnish each person to whom a Prospectus is
delivered with a copy of the latest annual report to shareholders of
each series of Registrant upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Rocky Mount, State of North Carolina on the
25th day of April 1996.
GARDNER LEWIS INVESTMENT TRUST
By: Frank P. Meadows III
Chairman, Board of Trustees
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.
Frank P. Meadows III Trustee, Chairman and Treasurer (Principal
Executive Officer, Principal Financial Officer
and Principal Accounting Officer)
Jack E. Brinson
* By: Frank P. Meadows III
Attorney-in-Fact Dated: April 25, 1996
GARDNER LEWIS INVESTMENT TRUST
EXHIBIT INDEX
SEQUENTIAL PAGE
EXHIBIT NUMBER DESCRIPTION NUMBER
EXHIBIT 99.9(c) AMENDMENT TO THE FUND ACCOUNTING,
DIVIDEND DISBURSING AND TRANSFER AGENT
AND ADMINISTRATION AGREEMENT
EXHIBIT 9(c)
AMENDMENT TO THE FUND ACCOUNTING,
DIVIDEND DISBURSING AND TRANSFER AGENT
AND ADMINISTRATION AGREEMENT
THIS AMENDMENT, made and entered into effective as of the 1st day of May,
1996, by and between GARDNER LEWIS INVESTMENT TRUST, a Massachusetts business
trust (the "Trust"), and THE NOTTINGHAM COMPANY, L.L.C., a North Carolina
limited liability company (the "Administrator").
WHEREAS, the parties have previously entered into that certain Amended and
Restated Fund Accounting, Dividend Disbursing & Transfer Agent and
Administration Agreement dated February 28, 1994 with respect to all series of
the Trust (the "Agreement").
WHEREAS, the Agreement has been continued from time to time by the parties as
provided therein, with amendments from time to time to Exhibit C thereof,
reflecting the Administrator's Compensation Schedule.
WHEREAS, the parties desire to again amend Exhibit C thereof, as provided
herein.
NOW THEREFORE, the Trust and the Administrator do mutually promise and agree
as follows:
1. Amendments. The Agreement is hereby amended by deleting Exhibit C
thereof and substituting in lieu thereof a new Exhibit C in the
form attached hereto.
2. Ratification. Except as amended above, the Agreement shall
continue in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be signed by
their duly authorized officers on the date first above written.
ATTEST: GARDNER LEWIS INVESTMENT TRUST
By:
(Seal)
ATTEST: THE NOTTINGHAM COMPANY, L.L.C.
By:
(Seal)
Exhibit C
ADMINISTRATOR'S COMPENSATION SCHEDULE
For the services delineated in the Amended and Restated Fund Accounting,
Dividend Disbursing & Transfer Agent and Administration Agreement, the
Administrator shall be compensated monthly, as of the last day of each month,
within five business days of the month end, a base fee plus a fee based upon
net assets according to the following schedule. The fee is calculated based
upon the Trust's average daily net assets of each Fund:
Base Fee
$1,750 per month per Fund or Class (if applicable)
The Chesapeake Growth Fund
Annual
Net Assets Fee
On the first $25 million 0.200%
On the next $25 million 0.150%
On all assets over $50 million 0.075%
The Chesapeake Fund - Series A, C, and D Investor Shares and Institutional
Shares
Annual
Net Assets Fee
On all assets 0.075%
The Chesapeake Fund - Super-Institutional Shares
Annual
Net Assets Fee
On all assets 0.015%
Shareholder Recordkeeping
$9 per shareholder per year
Blue Sky Administration
$100 per Fund (or Class if applicable) per registered state per year
IRA Accounts
$15 per year (billed directly to the shareholder)
Minimum fee per month
Minimum fee of $3,000 per Fund of the Trust per month for all fees taken
in the aggregate as outlined above, analyzed monthly.
Securities Pricing
$0.20 per equity security per pricing day
$0.20 per corporate bond, government bond, medium-term bond or mortgage backed
security per pricing day
$0.40 per CMO or asset backed securities per pricing day
$0.40 per municipal security per pricing day
$2.00 per equity per month for corporate action coverage
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<NAME> THE CHESAPEAKE GROWTH FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
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<PERIOD-END> FEB-29-1996
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<APPREC-INCREASE-CURRENT> (68612693)
<NET-CHANGE-FROM-OPS> (45350162)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 30366959
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<NUMBER-OF-SHARES-SOLD> 3922332
<NUMBER-OF-SHARES-REDEEMED> (1361368)
<SHARES-REINVESTED> 1453621
<NET-CHANGE-IN-ASSETS> 59722945
<ACCUMULATED-NII-PRIOR> 0
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<GROSS-EXPENSE> 3174965
<AVERAGE-NET-ASSETS> 447877404
<PER-SHARE-NAV-BEGIN> 20.70
<PER-SHARE-NII> (0.09)
<PER-SHARE-GAIN-APPREC> 0.91
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 1.16
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.50
<EXPENSE-RATIO> 1.43
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
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