As filed with the Securities and Exchange Commission on September 3, 1997
Securities Act File No. 33-53800
Investment Company Act File No. 811-7324
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933|X|
Post-Effective Amendment No. 14
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940|X|
Amendment No. 15
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:
C. Frank Watson III, Secretary
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 , 1997 pursuant
to Rule 485(b), or to Rule 485(b), or
|_| 60 days after filing pursuant |_| on , 1997 pursuant
to Rule 485(a)(1), to Rule 485(a)(1), or
|X| 75 days after filing pursuant |_| on , 1997 pursuant
to Rule 485(a)(2) to Rule 485(a)(2)
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, 1996 was filed on October 30, 1996. The Rule 24f-2
Notice for The Chesapeake Fund for the year ended February 28, 1997 was filed on
April 29, 1997.
<PAGE>
This filing includes the Prospectus and Statement of Additional Information of
The Chesapeake Growth Fund, which are incorporated herein by reference to
Post-Effective Amendment No. 12 to the Registrant's Registration Statement on
Form N-1A filed with the Commission on December 11, 1996.
This filing also includes the Prospectus and Statement of Additional Information
of The Chesapeake Fund, which are incorporated herein by reference to
Post-Effective Amendment No. 13 to the Registrant's Registration Statement on
Form N-1A filed with the Commission on June 30, 1997.
<PAGE>
PART A
PROSPECTUS Cusip Number 36559B___
THE CHESAPEAKE CORE GROWTH FUND
A No Load Fund
The investment objective of The Chesapeake Core Growth Fund (the "Fund") is to
seek capital appreciation through investments in equity securities, consisting
primarily of common and preferred stocks and securities convertible into common
stocks. The Fund follows the same investment policies and principles of other
funds managed by Gardner Lewis Asset Management (the "Advisor"), while investing
primarily in those securities of the largest 1000 companies domiciled in the
United States. 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. The shares of the Fund, which
are designed to provide investors with core growth investment management by the
Advisor, are offered without any sales or redemption charges or shareholder
servicing or distribution fees.
INVESTMENT ADVISOR
Gardner Lewis Asset Management
Chadds Ford, Pennsylvania
The Fund is a no load diversified series of the Gardner Lewis Investment Trust
(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 (the "SEC") and
is available upon request and without charge. You may request the Statement of
Additional Information, which is incorporated in this Prospectus by reference,
by writing the Fund at Post Office Box 4365, Rocky Mount, North Carolina
27803-0365, or by calling 1-800-430-3863. The SEC also maintains an Internet Web
site (http://www.sec.gov) that contains the Statement of Additional Information,
material incorporated by reference, and other information regarding the Fund.
Investment in 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 and the Statement of Additional Information is
___________, 1997.
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUMMARY.......................................................... 2
FEE TABLE................................................................... 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................................................. 12
MANAGEMENT OF THE FUND..................................................... 13
OTHER INFORMATION.......................................................... 15
This Prospectus is not an offering of the securities described herein 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.
<PAGE>
PROSPECTUS SUMMARY
The Fund. The Chesapeake Core Growth Fund (the "Fund") is a no load diversified
series of the Gardner Lewis Investment Trust (the "Trust"), a registered
open-end management investment company organized as a Massachusetts business
trust. See "Other Information - Description of Shares."
Offering Price. Shares of the Fund are offered to investors at net asset value
without a sales charge. The shares are not subject to any 12b-1 distribution or
shareholder service fees. The minimum initial investment is $25,000. The minimum
subsequent investment is $500 ($100 for those participating in the Automatic
Investment Plan). See "How Shares May be Purchased."
Investment Objective and Policies. The investment objective of the Fund is to
seek capital appreciation through investments in equity securities, consisting
primarily of common and preferred stocks and securities 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. The Fund follows the same investment policies and principles of other
funds managed by the Advisor, while investing primarily in those securities of
the largest 1000 companies domiciled in the United States. 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.
Special Risk Considerations. 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 (in the form traded on domestic U.S. exchanges),
illiquid securities, real estate 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 (included 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 $3 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 generally 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 Fund 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 Shares. There is no charge for redemptions, other than possible
charges associated with wire transfers of redemption proceeds. Shares may be
redeemed at any time at the net asset value next determined after receipt of a
redemption request by the Fund. A shareholder who submits appropriate written
authorization may redeem shares by telephone. See "How Shares May Be Redeemed."
<PAGE>
FEE TABLE
The following table sets forth certain information in connection with the
expenses of the Fund anticipated for the current fiscal year. The information is
intended to assist the investor in understanding the various costs and expenses
borne by the Fund, and therefore indirectly by its investors, the payment of
which will reduce an investor's return on an annual basis.
Shareholder Transaction Expenses for Shares
Maximum sales load imposed on purchases
(as a percentage of offering price)...................................None
Maximum sales load imposed on
reinvested dividends..................................................None
Maximum deferred sales load..............................................None
Redemption fees*.........................................................None
Exchange fee.............................................................None
* The Fund in its discretion may choose to pass through to redeeming
shareholders any charges imposed by the Custodian for wiring redemption
proceeds. The Custodian currently charges the Fund $7.00 per transaction
for wiring redemption proceeds.
Annual Fund Operating Expenses
(as a percentage of average net assets)
Investment advisory fees.................................................1.00%
12b-1 fees................................................................None
Other expenses...........................................................0.24%
Total operating expenses1................................................1.24%
EXAMPLE: You would pay the following expenses on a $1,000 investment in the
Fund, whether or not you redeem at the end of the period, assuming a 5% annual
return:
---------------------
1 Year 3 Years
=====================
$12 $37
THE FOREGOING SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
1 The "Total operating expenses" shown above are based upon contractual
amounts and other operating expenses estimated to be incurred by the Fund
for the current fiscal year.
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%. Further
information about the performance of the Fund will be contained in the Annual
Report of the Fund, a copy of which, when available, may be obtained 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, 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 follows the same investment policies and
principles of other funds managed by the Advisor, while investing primarily in
those securities of the largest 1000 companies domiciled in the United States.
The Fund's investment objective and fundamental investment limitations may not
be altered without the prior approval of a majority of the Fund's shareholders.
Investment Policies. The Fund's portfolio will include equity securities which
the Advisor feels show superior prospects for growth. Under normal market
conditions, the portfolio will invest primarily in those securities, both
domestic and foreign, with market capitalizations approximately equal to the
1,000 largest companies domiciled in the United States.
The remainder of the portfolio will not be limited by market capitalization.
The Fund will focus attention on proven 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. Investing
in companies which are undergoing internal change, such as implementing new
strategies or introducing new technologies, may involve greater than average
risk due to their unproven nature. By focusing upon internal rather than
external factors, the Fund will seek to minimize the risk associated with
macro-economic forces.
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 earnings ratio when purchased is less than that company's projected
earnings growth rate 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. The
securities in which the Fund may invest will generally be traded on domestic
securities exchanges or on the over-the-counter markets. Any foreign securities
the Fund may acquire will be traded on domestic U.S. exchanges.
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,
repurchase agreements, or money market instruments as a temporary defensive
measure, it is not pursuing its stated investment objective. Under normal
circumstances, however, the Fund will 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.
Money Market Instruments. Money market instruments may be purchased for
temporary defensive purposes, to accumulate cash for anticipated purchases of
portfolio securities and to provide for shareholder redemptions and operating
expenses of the Fund. Money market instruments mature in thirteen months or less
from the date of purchase and may include U.S. Government Securities, corporate
debt securities (including those subject to repurchase agreements), bankers
acceptances and certificates of deposit of domestic branches of U.S. banks, and
commercial paper (including variable amount demand master notes) rated in one of
the two highest rating categories by any of the nationally recognized
statistical rating organizations or if not rated, of equivalent quality in the
Advisor's opinion. The Advisor may, when it believes that unusually volatile or
unstable economic and market conditions exist, depart from the Fund's investment
approach and assume temporarily a defensive portfolio posture, increasing the
Fund's percentage investment in money market instruments, even to the extent
that 100% of the Fund's total assets may be so invested.
U.S. Government Securities. The Fund may invest a portion of the portfolio in
U.S. Government Securities, defined to be U.S. Government obligations such as
U.S. Treasury notes, U.S. Treasury bonds, and U.S. Treasury bills, obligations
guaranteed by the U.S. Government such as Government National Mortgage
Association ("GNMA") as well as obligations of U.S. Government authorities,
agencies and instrumentalities such as Federal National Mortgage Association
("FNMA"), Federal Home Loan Mortgage Corporation ("FHLMC"), Federal Home
Administration ("FHA"), Federal Farm Credit Bank ("FFCB"), Federal Home Loan
Bank ("FHLB"), Student Loan Marketing Association ("SLMA"), and The Tennessee
Valley Authority. U.S. Government Securities may be acquired subject to
repurchase agreements. While obligations of some U.S. Government sponsored
entities are supported by the full faith and credit of the U.S. Government (e.g.
GNMA), several are supported by the right of the issuer to borrow from the U.S.
Government (e.g. FNMA, FHLMC), and still others are supported only by the credit
of the issuer itself (e.g. SLMA, FFCB). No assurances can be given that the U.S.
Government will provide financial support to U.S. Government agencies or
instrumentalities in the future, 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.
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 seven 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 Investment Company Act of 1940
(the "1940 Act").
Foreign Securities. The Fund may invest in foreign securities traded on domestic
U.S. exchanges. 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 limit foreign investments to those traded on domestic U.S. exchanges,
including American Depository Receipts ("ADRs"). The prices of such securities
are denominated in U.S. dollars. 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. To the extent the Fund
invests in other foreign securities, it will limit such investments to foreign
securities traded on domestic U.S. securities exchanges. Although the Fund is
not limited in the amount of these types of foreign securities it may acquire,
it is not presently expected that within the next 12 months the Fund will have
in excess of 10% of its assets in foreign securities.
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. 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.
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. 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. The Fund's portfolio turnover generally is not expected to exceed
100% 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.
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 the portfolio's 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 further investments if the borrowing exceeds 5%
of its total assets until such time as repayment has been made to bring the
total borrowing below 5% of its total assets.
Illiquid Investments. The Fund may invest up to 10% of its net assets in
illiquid securities. Illiquid securities are those that may not be sold or
disposed of in the ordinary course of business within seven days at
approximately the price at which they are valued. Under the supervision of the
Board of Trustees, the Advisor determines the liquidity of the Fund's
investments. The absence of a trading market can make it difficult to ascertain
a market value for illiquid investments. Disposing of illiquid securities before
maturity may be time consuming and expensive, and it may be difficult or
impossible for the Fund to sell illiquid investments promptly at an acceptable
price. The Fund may not invest in restricted securities, which are securities
that cannot be sold to the public without registration under the federal
securities laws.
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 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) 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 not readily marketable securities, are limited to 10%
of the Fund's net assets), money market instruments, and other debt securities;
(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) purchase foreign securities other than those traded on domestic
U.S. exchanges; (5) with respect to 75% of its total assets, invest more than 5%
of its total assets at cost in the securities of any one issuer nor hold more
than 10% of the voting stock of any issuer; and (6) write, purchase, or sell
puts, calls, straddles, spreads, or combinations thereof, or purchase or sell
commodities, commodity contracts, futures contracts, or related options.
Investment restrictions (1), (2), (5), and (6) are fundamental investment
limitations that cannot be altered without the prior approval of a majority of
the Fund's shareholders. The other investment restrictions listed above are
non-fundamental and can be changed without shareholder approval. 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.
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 generally intends to distribute substantially all of its net investment
income, if any, in the form of dividends and distribute capital gains, if any,
at least 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 Fund at
the net asset value per share next determined. Shareholders wishing to receive
their dividends or capital gains in cash may make their request in writing to
the Fund at 107 North Washington Street, Post Office Box 4365, Rocky Mount,
North Carolina 27803-0365. That request must be received by the Fund prior to
the record date to be effective as to the next dividend. If cash payment is
requested, checks will be mailed within five business days after the
distribution of the dividends or capital gains, 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 distributions 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.
HOW SHARES ARE VALUED
Net asset value for each share 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 and other assets, less all of its liabilities, divided by the number
of its outstanding shares.
Securities that are listed on a securities exchange are valued at the last
quoted sales price at the time the valuation is made. Price information on
listed securities is taken from the exchange where the security is primarily
traded by the Fund. Securities that are listed on an exchange and which are not
traded on the valuation date are valued at the mean of the bid and asked prices.
Unlisted securities for which market quotations are readily available are valued
at the latest quoted sales price, if available, at the time of valuation,
otherwise, at the latest quoted bid price. Temporary cash investments with
maturities of 60 days or less will be valued at amortized cost, which
approximates market value. Securities for which no current quotations are
readily available are valued at fair value as determined in good faith using
methods approved by the Board of Trustees of the Trust. Securities may be valued
on the basis of prices provided by a pricing service when such prices are
believed to reflect the fair market value of such securities.
HOW SHARES MAY BE PURCHASED
Assistance in opening accounts and a purchase application may be obtained 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 $25,000. The minimum subsequent investment is
$500 ($100 for those investing through the Automatic Investment Plan). 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 Core Growth Fund, 107 North Washington
Street, Post Office Box 4365, Rocky Mount, North Carolina 27803-0365. Subsequent
investments in an existing account in the Fund may be made at any time 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
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:
First Union National Bank of North Carolina
Charlotte, North Carolina
ABA # 053000219
For The Chesapeake Core Growth Fund
Acct #2000000______
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 such 4:00 p.m. time will purchase shares at the net asset value determined at
that time. Otherwise, your order will purchase shares as of such 4:00 p.m. time
on the next business day. For orders placed through a qualified broker-dealer,
such firm is responsible for promptly transmitting purchase orders to the Fund.
Investors may be charged a fee if they effect transactions in the Fund shares
through a broker or agent.
The Fund may enter into agreements with one or more brokers, including discount
brokers and other brokers associated with investment programs, including mutual
fund "supermarkets," pursuant to which such brokers may be authorized to accept
on the Fund's behalf purchase and redemption orders that are in "good form."
Such brokers may be authorized to designate other intermediaries to accept
purchase and redemption orders on the Fund's behalf. Under such circumstances,
the Fund will be deemed to have received a purchase or redemption order when an
authorized broker or, if applicable, a broker's authorized designee, accepts the
order. Such orders will be priced at the Fund's net asset value next determined
after they are accepted by an authorized broker or the broker's designee.
If checks are returned unpaid due to nonsufficient funds, stop payment or other
reasons, the Trust will charge $20. To recover any such loss or charge, the
Trust reserves the right, without further notice, to redeem shares of any fund
of the Trust already owned by any purchaser whose order is 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 Fund, that your taxpayer identification number is correct and
that you are not currently subject to backup withholding or you are exempt from
backup withholding.
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.
Exchange Feature. Investors will have the privilege of exchanging shares of the
Fund for shares of any other series of the Trust established by Advisor. An
exchange involves the simultaneous redemption of shares of one series and
purchase of shares of another series at the respective closing net asset value
next determined after a request for redemption has been received plus applicable
sales charge, and is a taxable transaction. Each series of the Trust will have a
different investment objective, which may be of interest to investors in each
series. Shares of the Fund may be exchanged for shares of any other series of
the Trust affiliated with the Advisor at the net asset value plus the percentage
difference between that series' sales charge and any sales charge, if any,
previously paid in connection with the shares being exchanged. For example, if a
2% sales charge was paid on shares that are exchanged into a series with a 3%
sales charge, there would be an additional sales charge of 1% on the exchange.
Exchanges may only be made by investors in states where shares of the other
series are qualified for sale. An investor may direct the Fund to exchange his
shares by writing to the Fund at its principal office. The request must be
signed exactly as the investor's name appears on the account, and it must also
provide the account number, number of shares to be exchanged, the name of the
series to which the exchange will take place and a statement as to whether the
exchange is a full or partial redemption of existing shares. Notwithstanding the
foregoing, unless otherwise determined by the Fund, an investor may not exchange
shares of the Fund for shares of The Chesapeake Growth Fund, another series of
the Trust affiliated with the Advisor, unless such investor has an existing
account with such Fund.
A pattern of frequent exchange transactions may be deemed by the Advisor to be
an abusive practice that is not in the best interests of the shareholders of the
Fund. Such a pattern may, at the discretion of the Advisor, be limited by the
Fund's refusal to accept further purchase and/or exchange orders from an
investor, after providing the investor with 60 days prior notice. The Advisor
will consider all factors it deems relevant in determining whether a pattern of
frequent purchases, redemptions and/or exchanges by a particular investor is
abusive and not in the best interests of the Fund or its other shareholders.
A shareholder should consider the investment objectives and policies of any
series into which the shareholder will be making an exchange, as described in
the prospectus for that other series. The Board of Trustees of the Trust
reserves the right to suspend or terminate, or amend the terms of, the exchange
privilege upon 60 days written notice to the shareholders.
Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investments in shares through automatic
charges to their checking account. With shareholder authorization and bank
approval, the Fund will automatically charge the checking account for the amount
specified ($100 minimum), which will be automatically invested in shares at the
public offering price on or about the 21st day of the month. The shareholder may
change the amount of the investment or discontinue the plan at any time by
writing to the Fund.
Stock Certificates. Stock certificates will not be issued for your shares.
Evidence of ownership will be given by issuance of periodic account statements
that will show the number of shares owned.
HOW SHARES MAY BE REDEEMED
Shares of the Fund may be redeemed (the Fund will repurchase them from
shareholders) by mail or telephone. Any redemption may be more or less than the
purchase price of your shares depending on the market value of the Fund's
portfolio securities. 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 such 4:00 p.m. time on the next business day. There is
no charge for redemptions from the Fund other than possible charges for wiring
redemption proceeds. You may also redeem your shares through a broker-dealer or
other institution, who may charge you a fee for its services.
The Board of Trustees reserves the right to involuntarily redeem any account
having a net asset value of less than $25,000 (due to redemptions, exchanges or
transfers, and not due to market action) upon 30 days written notice. If the
shareholder brings his account net asset value up to $25,000 or more during the
notice period, the account will not be redeemed. Redemptions from retirement
plans may be subject to tax withholding.
If you are uncertain of the requirements for redemption, please contact the
Fund, at 1-800-430-3863, or write to the address shown below.
Regular Mail Redemptions. Your request should be addressed to The Chesapeake
Core Growth Fund, 107 North Washington Street, Post Office Box 4365, Rocky
Mount, North Carolina 27803-0365. Your request for redemption must include:
1) Your letter of instruction specifying the account number, and the number of
shares or dollar amount to be redeemed. This request must be signed by all
registered shareholders in the exact names in which they are registered;
2) Any required signature guarantees (see "Signature Guarantees" below); and
3) Other supporting legal documents, if required in the case of estates,
trusts, guardianships, custodianships, corporations, partnerships, pension
or profit sharing plans, and other organizations.
Your redemption proceeds will be sent to you within seven days after receipt of
your redemption request. However, the Fund may delay forwarding a redemption
check for recently purchased shares while 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). Shares of the Fund may not be redeemed by wire on
days on which the bank is not open for business. 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.
The Fund in its discretion may choose to pass through to redeeming shareholders
any charges by the Custodian for wire redemptions. The Custodian currently
charges $7.00 per transaction for wiring redemption proceeds. If this cost is
passed through to redeeming shareholders by the Fund, the charge will be
deducted automatically from the shareholder's account by redemption of shares in
the account. The shareholder's bank or brokerage firm may also impose a charge
for processing the wire. If wire transfer of funds is impossible or impractical,
the redemption proceeds will be sent by mail to the designated account.
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.
Systematic Withdrawal Plan. A shareholder who owns shares of the Fund valued at
$25,000 or more at current net asset value may establish a Systematic Withdrawal
Plan to receive a monthly or quarterly check in a stated amount not less than
$250. Each month or quarter as specified, the Fund will automatically redeem
sufficient shares from the account to meet the specified withdrawal amount. Call
or write the Fund for an application form. See the Statement of Additional
Information for further details.
Signature Guarantees. To protect an account and the Fund from fraud, signature
guarantees are required to authorize 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 the 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"), a registered open-end management 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, as amended.
Registration of the Advisor does not involve any supervision of management or
investment practices or policies by the Securities and Exchange Commission. The
Advisor, 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 $3 billion
in assets. The Advisor has been rendering investment counsel, utilizing
investment strategies substantially similar to that of the Fund, to two other
mutual funds, 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.
The Advisor supervises and implements the investment activities of the Fund,
including making 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
Fund may also enter into brokerage/service arrangements pursuant to which
selected brokers executing portfolio transactions for the Fund may pay a portion
of the Fund's operating expenses. 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 1997. 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 (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 Fund for general administration services. In addition, the
Administrator currently receives a base monthly fee of $1,750 for accounting and
recordkeeping services. The Administrator also receives a fee at the annual rate
of 0.015% of the average daily net assets of the Fund for shareholder
administration services. 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; and preparing, filing and distributing proxy materials, periodic reports
to shareholders, registration statements and other documents. The Administrator
also performs certain accounting and pricing services for the Fund as pricing
agent, including the daily calculation of the Fund's net asset value.
The Administrator was incorporated as a North Carolina corporation in 1988. With
its predecessors and affiliates, the Administrator has been operating as a
financial services firm since 1985. Frank P. Meadows III is the firm's Managing
Director and controlling shareholder.
The Transfer Agent. NC Shareholder Services, LLC (the "Transfer Agent") serves
as the Fund's transfer, dividend paying, and shareholder servicing agent. The
Transfer Agent, subject to the authority of the Board of Trustees, provides
transfer agency services pursuant to an agreement with the Administrator, which
has been approved by the Trust. The Transfer Agent maintains the records of each
shareholder's account, answers shareholder inquiries concerning accounts,
processes purchases and redemptions of the Fund's shares, acts as dividend and
distribution disbursing agent, and performs other shareholder servicing
functions. The Transfer Agent is compensated for its services by the
Administrator and not directly by the Fund.
The Transfer Agent, whose address is 107 North Washington Street, Post Office
Box 4365, Rocky Mount, North Carolina 27803-0365, was established as a North
Carolina limited liability company in 1997. John D. Marriott, Jr., is the firm's
controlling member.
The Custodian. First Union National Bank of North Carolina (the "Custodian"),
Two First Union Center, Charlotte, North Carolina 28288-1151, serves as
Custodian of the Fund's assets. The Custodian acts as the depository for the
Fund, 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.
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.
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."
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 Fund will
send to each shareholder having an account directly with the Fund a quarterly
statement showing transactions in the account, the total number of shares owned
and any dividends or distributions paid. Inquiries regarding the Fund may be
directed in writing to 107 North Washington Street, Post Office Box 4365, Rocky
Mount, North Carolina 27803-0365 or by calling 1-800-430-3863.
Calculation of Performance Data. From time to time the Fund may advertise its
average annual total return. 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. 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. 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 a portion of its fees or may reimburse 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.
<PAGE>
THE CHESAPEAKE CORE GROWTH FUND
A NO LOAD FUND
PROSPECTUS
___________, 1997
THE CHESAPEAKE CORE GROWTH FUND
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
1-800-430-3863
INVESTMENT ADVISOR
Gardner Lewis Asset Management
285 Wilmington-West Chester Pike
Chadds Ford, Pennsylvania 19317
ADMINISTRATOR & FUND ACCOUNTANT
The Nottingham Company
Post Office Drawer 69
Rocky Mount, North Carolina 27802-0069
DIVIDEND DISBURSING & TRANSFER AGENT
NC Shareholder Services
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
CUSTODIAN
First Union National Bank of North Carolina
Two First Union Center
Charlotte, North Carolina 28288-1151
INDEPENDENT AUDITORS
Deloitte & Touche LLP
2500 One PPG Place
Pittsburgh, Pennsylvania 15222-5401
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
THE CHESAPEAKE CORE GROWTH FUND
_________________, 1997
A Series of
GARDNER LEWIS INVESTMENT TRUST
107 North Washington Street, Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Telephone 1-800-430-3863
Table of Contents
INVESTMENT OBJECTIVE AND POLICIES.......................................... 3
INVESTMENT LIMITATIONS..................................................... 5
NET ASSET VALUE............................................................ 6
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION............................. 7
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................................................................. 16
This Statement of Additional Information (the "Additional Statement") is meant
to be read in conjunction with the Prospectus for The Chesapeake Core Growth
Fund (the "Fund"), dated the same date as this Additional Statement, and is
incorporated by reference in its entirety into the Prospectus. Because this
Additional Statement is not itself a prospectus, no investment in shares of the
Fund should be made solely upon the information contained herein. Copies of the
Fund's Prospectus 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.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The following policies supplement the Fund's investment objective and policies
as set forth in the Prospectus for the Fund. The Fund, organized in 1997, 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 Fund may also enter into brokerage/service arrangements pursuant to which
selected brokers executing portfolio transactions for the Fund may pay a portion
of the Fund's operating expenses. There can be no assurance that such
arrangement will occur now or in the future.
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.
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 seven 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
Ratings Group ("S&P"), Fitch Investors Service, Inc. ("Fitch") or Duff & Phelps
("D&P") or, if not rated, of equivalent quality in the Advisor's opinion.
Commercial Paper may include Master Notes of the same quality. Master Notes are
unsecured obligations which are redeemable upon demand of the holder and which
permit the investment of fluctuating amounts at varying rates of interest.
Master Notes are acquired by the 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. 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)
to meet redemption requests in amounts not exceeding 15% of its total
assets. The Fund will not make any investments if borrowing exceeds 5% of
its total assets until such time as total borrowing represents less than 5%
of Fund assets;
2. With respect to 75% of its total assets, invest more than 5% of the value
of its total assets in the securities of any one issuer or purchase more
than 10% of the outstanding voting securities of any class of securities of
any one issuer (except that securities of the U.S. government, its
agencies, and instrumentalities are not subject to this limitation);
3. Invest 25% or more of the value of its total assets in any one industry
(except that securities of the U.S. Government, its agencies, and
instrumentalities are not subject to this limitation);
4. Invest for the purpose of exercising control or management of another
issuer;
5. Purchase or sell commodities or commodities contracts; real estate
(including limited partnership interests, but excluding readily marketable
interests in real estate investment trusts or other securities secured by
real estate or interests therein or readily marketable securities issued by
companies that invest in real estate or interests therein); or interests in
oil, gas, or other mineral exploration or development programs or leases
(although it may invest in readily marketable securities of issuers that
invest in or sponsor such programs or leases);
6. Underwrite securities issued by others except to the extent that the
disposition of portfolio securities, either directly from an issuer or from
an underwriter for an issuer, may be deemed to be an underwriting under the
federal securities laws;
7. Participate on a joint or joint and several basis in any trading account in
securities;
8. Invest its assets in the securities of one or more investment companies
except to the extent permitted by the 1940 Act;
9. Write, purchase, or sell puts, calls, straddles, spreads, or combinations
thereof or futures contracts or related options; or
10. Make loans of money or securities, except that the Fund may invest in
repurchase agreements, money market instruments, and other debt securities.
The following investment limitations are not fundamental and may be changed
without shareholder approval. As a matter of non-fundamental policy, the Fund
may not:
1. Invest in securities of issuers which have a record of less than three
years' continuous operation (including predecessors and, in the case of
bonds, guarantors) if more than 5% of its total assets would be invested in
such securities;
2. Invest more than 10% of its net assets in illiquid securities. For this
purpose, illiquid securities include, among others, (a) securities for
which no readily available market exists or which have legal or contractual
restrictions on resale, (b) fixed-time deposits that are subject to
withdrawal penalties and have maturities of more than seven days, and (c)
repurchase agreements not terminable within seven days;
3. Invest in the securities of any issuer if those officers or Trustees of the
Trust and those officers and directors of the Advisor who individually own
more than 1/2 of 1% of the outstanding securities of such issuer together
own more than 5% of such issuer's securities;
4. 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.) While the Fund has reserved
the right to make short sales "against the box," the Advisor has no present
intention of engaging in such transactions at this time or during the
coming year; or
5. Purchase foreign securities other than those traded on domestic U.S.
exchanges.
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.
NET ASSET VALUE
The net asset value per share of the Fund is calculated separately by adding the
value of the Fund's securities and other assets belonging to the Fund,
subtracting the liabilities charged to the Fund, and dividing the result by the
number of outstanding shares. "Assets belonging to" 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. 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. 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 are
conclusive.
The net asset value per share 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, Martin Luther King, Jr.'s Birthday,
President's Day, Good Friday, Memorial Day, Fourth of July, Labor Day,
Thanksgiving Day, and Christmas Day. Any other holiday recognized by the New
York Stock Exchange will be considered a business holiday on which the Fund's
net asset value will not be determined.
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. See "How Shares May Be Purchased" in the Prospectus.
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 three series, as follows: the Fund, The
Chesapeake Fund, and The Chesapeake Growth Fund, all managed by the Advisor. The
shares of the Fund and The Chesapeake Growth Fund are all of one class; the
shares of The Chesapeake 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 to properly
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
addresses and ages, and their principal occupations for the last five years are
as follows:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Name, Age*, Position(s) Principal Occupation(s)
and Address During Past 5 Years
- --------------------------------------------------------------------------------------------------------------------------
Jack E. Brinson, 64 President, Brinson Investment Co. (personal investments)
Trustee President, Brinson Chevrolet, Inc. (auto dealership)
1105 Panola Street Tarboro, North Carolina
Tarboro, North Carolina 27886
W. Whitfield Gardner, 34 Chairman and Executive Officer
Trustee** Gardner Lewis Asset Management (Advisor to the Chesapeake Funds)
Chief Executive Officer Chadds Ford, Pennsylvania
The Chesapeake Funds
285 Wilmington - West Chester Pike
Chadds Ford, Pennsylvania 19317
Stephen J. Kneeley, 34 Chief Operating Officer
Trustee Turner Investment Partners (investment manager)
1235 Westlakes Drive Berwyn, Pennsylvania
Suite 350
Berwyn, Pennsylvania 19312
John L. Lewis, IV, 33 President
President Gardner Lewis Asset Management (Advisor to the Chesapeake Funds)
The Chesapeake Funds Chadds Ford, Pennsylvania
285 Wilmington - West Chester Pike
Chadds Ford, Pennsylvania 19317
J. Hope Reese, 36 Comptroller
Treasurer and Assistant The Nottingham Company
Secretary Rocky Mount, North Carolina
105 North Washington Street (Administrator to the Chesapeake Core Growth Fund), since 1995;
Rocky Mount, North Carolina 27802 previously, Cash Manager, Law Companies Group, Atlanta, Georgia,
since 1993; previously, Financial Manager, MGR Food Services,
Atlanta, Georgia
C. Frank Watson III, 26 Vice President
Secretary and Assistant Treasurer The Nottingham Company
105 North Washington Street Rocky Mount, North Carolina (Administrator to the Chesapeake
Rocky Mount, North Carolina 27802 Funds)
William D. Zantzinger, 35 Director of Trading
Vice President Gardner Lewis Asset Management (Advisor to the Chesapeake Funds)
The Chesapeake Funds Chadds Ford, Pennsylvania
285 Wilmington - West Chester Pike
Chadds Ford, Pennsylvania 19317
- -------------------------------
* As of __________, 1997
</TABLE>
** 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.
Compensation. The officers of the Trust will not receive compensation from the
Trust for performing the duties of their offices. Each Trustee who is not an
"interested person" of the Trust receives a fee of $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
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
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 $10,200 None None $10,200
Trustee
W. Whitfield Gardner None None None None
Trustee
Stephen J. Kneeley $4,550 None None $4,550
Trustee
</TABLE>
Figures are for the calendar year ended December 31, 1996.
Principal Holders of Voting Securities. As of ____________, 1997, 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 the Fund. On
the same date the following shareholders owned of record more than 5% of the
outstanding shares of beneficial interest 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 the Fund as of ____________, 1997.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership* of Class
- -------------------------------------------------------------------------------------------------
</TABLE>
* The shares indicated are believed by the Fund to be owned both of record
and beneficially, except as indicated above.
** Pursuant to applicable SEC regulations, this shareholder is deemed to
control 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.
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.
Administrator and Transfer Agent. The Trust has entered into a Fund Accounting,
Dividend Disbursing & Transfer Agent and Administration Agreement with The
Nottingham Company (the "Administrator"), 105 North Washington Street, Post
Office Drawer 69, Rocky Mount, North Carolina 27802-0069, pursuant to which the
Administrator receives a fee at the annual rate of 0.075% of the average daily
net assets of the Fund for general administration services. In addition, the
Administrator currently receives a base monthly fee of $1,750 for accounting and
recordkeeping services for the Fund. The Administrator also receives a fee at
the annual rate of 0.015% of the average daily net assets of the Fund for
shareholder administration services. 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.
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 provide certain accounting and
pricing services for the Fund.
With the approval of the Trust, the Administrator has contracted with NC
Shareholder Services, LLC (the "Transfer Agent"), a North Carolina limited
liability company, to serve as transfer, dividend paying, and shareholder
servicing agent for the Fund. The Transfer Agent is compensated for its services
by the Administrator and not directly by the Fund. The address of the Transfer
Agent is 107 North Washington Street, Post Office Box 4365, Rocky Mount, North
Carolina 27803-0365.
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.
Custodian. First Union National Bank of North Carolina (the "Custodian"), Two
First Union Center, Charlotte, North Carolina 28288-1151, 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 Deloitte & Touche LLP, 2500 One PPG Place,
Pittsburgh, Pennsylvania 15222-5401, 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. 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
Fund will automatically charge the checking account for the amount specified
($100 minimum) which will be automatically invested in shares at the public
offering price on or about the 21st day of the month. The shareholder may change
the amount of the investment or discontinue the plan at any time by writing to
the Fund.
Systematic Withdrawal Plan. Shareholders owning shares with a value of $25,000
or more may establish a Systematic Withdrawal Plan. A shareholder may receive
monthly or quarterly payments, in amounts of not less than $250 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
1-800-430-3863, or by writing to:
The Chesapeake Core Growth Fund
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
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.
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 Fund may be quoted in advertisements,
sales literature, shareholder reports or other communications to shareholders.
The Fund computes the "average annual total return" 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 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
an initial $1,000 investment 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. These performance quotations 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 than
annualized.
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:
o Lipper Analytical Services, Inc. ranks funds in various fund categories
by making comparative calculations using total return. Total return
assumes the reinvestment of all capital gains distributions and income
dividends and takes into account any change in net asset value over a
specific period of time.
o Morningstar, Inc., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for
two weeks.
Investors may use such indices in addition to the 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.
<PAGE>
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 a very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics are given a
plus (+) designation.
Moody's Investors Service, Inc. The following summarizes the highest four
ratings used by Moody's Investors Service, Inc. ("Moody's") for bonds which are
deemed to be "Investment-Grade Debt Securities" by the Advisor:
Aaa - Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A - Debt which is rated A possesses many favorable investment attributes
and is to be considered as an upper medium grade obligation. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa - Debt which is rated Baa is considered as a medium grade obligation,
i.e., it is neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such debt lacks outstanding investment
characteristics and in fact has speculative characteristics as well.
Moody's applies numerical modifiers (l, 2 and 3) with respect to bonds rated Aa,
A and Baa. The modifier 1 indicates that the bond being rated ranks in the
higher end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the bond ranks in the lower end of
its generic rating category.
Bonds which are rated Ba, B, Caa, Ca or C by Moody's are not considered
"Investment-Grade Debt Securities" by the Advisor. Bonds rated Ba are judged to
have speculative elements because their future cannot be considered as well
assured. Uncertainty of position characterizes bonds in this class, because the
protection of interest and principal payments often may be very moderate and not
well safeguarded.
Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the security over any long period for time may be small. Bonds
which are rated Caa are of poor standing. Such securities may be in default or
there may be present elements of danger with respect to principal or interest.
Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
Bonds which are rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or related supporting institutions) are considered to
have a superior capacity for repayment of short-term promissory obligations.
Issuers rated Prime-2 (or related supporting institutions) are considered to
have a strong capacity for repayment of short-term promissory obligations. This
will normally be evidenced by many of the characteristics of issuers rated
Prime-1 but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics, while
still appropriated may be more affected by external conditions. Ample alternate
liquidity is maintained.
The following summarizes the highest rating used by Moody's for short-term notes
and variable rate demand obligations:
MIG-l; VMIG-l - Obligations bearing these designations are of the best
quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
Duff & Phelps Credit Rating Co. The following summarizes the highest four
ratings used by Duff & Phelps Credit Rating Co. ("D&P") for bonds which are
deemed to be "Investment-Grade Debt Securities" by the Advisor:
AAA - Bonds that are rated AAA are of the highest credit quality. The risk
factors are considered to be negligible, being only slightly more than for
risk-free U.S. Treasury debt.
AA - Bonds that are rated AA are of high credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to time because
of economic conditions.
A - Bonds rated A have average but adequate protection factors. The risk
factors are more variable and greater in periods of economic stress.
BBB - Bonds rated BBB have below average protection factors but are still
considered sufficient for prudent investment. There is considerable
variability in risk during economic cycles.
Bonds rated BB, B and CCC by D&P are not considered "Investment-Grade Debt
Securities" and are regarded, on balance, as predominantly speculative with
respect to the issuer's ability to pay interest and make principal payments in
accordance with the terms of the obligations. BB indicates the lowest degree of
speculation and CCC the highest degree of speculation.
The rating Duff l is the highest rating assigned by D&P for short-term debt,
including commercial paper. D&P employs three designations, Duff l+, Duff 1 and
Duff 1- within the highest rating category. Duff l+ indicates highest certainty
of timely payment. Short-term liquidity, including internal operating factors
and/or access to alternative sources of funds, is judged to be "outstanding, and
safety is just below risk-free U.S. Treasury short-term obligations." Duff 1
indicates very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
considered to be minor. Duff 1- indicates high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are very small.
Fitch Investors Service, Inc. The following summarizes the highest four ratings
used by Fitch Investors Service, Inc. ("Fitch") for bonds which are deemed to be
"Investment-Grade Debt Securities" by the Advisor:
AAA - Bonds are considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA - Bonds are considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
A - Bonds that are rated A are considered to be investment grade and of
high credit quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more vulnerable to adverse
changes in economic conditions and circumstances than bonds with higher
ratings.
BBB - Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and
repay principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have adverse
impact on these bonds, and therefore impair timely payment. The likelihood
that the ratings of these bonds will fall below investment grade is higher
than for bonds with higher ratings.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within a rating category.
Bonds rated BB, B and CCC by Fitch are not considered "Investment-Grade Debt
Securities" and are regarded, on balance, as predominantly speculative with
respect to the issuer's ability to pay interest and make principal payments in
accordance with the terms of the obligations. BB indicates the lowest degree of
speculation and CCC the highest degree of speculation.
The following summarizes the three highest ratings used by Fitch for short-term
notes, municipal notes, variable rate demand instruments and commercial paper:
F-1+ - Instruments assigned this rating are regarded as having the
strongest degree of assurance for timely payment.
F-1 - Instruments assigned this rating reflect an assurance of timely
payment only slightly less in degree than issues rated F-1+
F-2 - Instruments assigned this rating have satisfactory degree of
assurance for timely payment, but the margin of safety is not as great as
for issues assigned F-1+ and F-1 ratings.
<PAGE>
PART C
GARDNER LEWIS INVESTMENT TRUST
FORM N-1A
OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
a) Financial Statements:
Annual Reports for the fiscal year ended August 31, 1996 and
February 28, 1997 for the Chesapeake Growth Fund and the
Chesapeake Fund respectively are incorporated by reference to
Post-Effective Amendments 13 and 14 under Part B. The financial
statements for the Chesapeake Core Growth Fund will be filed by
amendment.
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
(c) Investment Advisory Agreement for The Chesapeake Core Growth Fund -
Enclosed Exhibit 5
(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
(c) Distribution Agreement for The Chesapeake Core Growth Fund - Enclosed
Exhibit 6 (7) Not applicable
(8) Custodian Agreement - Incorporated by reference; filed 6/30/97
(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 - Incorporated by reference; filed
7/08/1996
(d) Amendment to the Fund Accounting, Dividend Disbursing and Transfer
Agent and Administration Agreement - Incorporated by reference;
Enclosed Exhibit 9
(10) Opinion of Counsel - Incorporated by reference; filed 10/30/96 and 4/29/97
with 24f-2 notices; To be filed by amendment for the Chesapeake Core Growth
Fund
(11) Consent of Auditors - To be filed by amendment for the Chesapeake Core
Growth Fund
(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 - To be filed by amendment for the Chesapeake
Core Growth Fund
(17) Copies of Powers of Attorney - Incorporated by reference; filed 12/11/96
(18) Copies of Amended and Restated Rule 18f-3 Multi-Class Plan - Incorporated
by reference; filed 12/11/96
ITEM 25. Persons Controlled by or Under Common Control with Registrant
No person is controlled by or under common control with the
Registrant.
<PAGE>
ITEM 26. Number of Holders of Securities
As of August 29, 1997, 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..............................................2369
The Chesapeake Fund - Institutional Shares...............................223
The Chesapeake Fund - Series A Investor Shares...........................959
The Chesapeake Fund - Series C Investor Shares............................74
The Chesapeake Fund - Series D Investor Shares...........................320
The Chesapeake Fund - Super-Institutional Shares...........................1
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 Advisor 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
Asset Allocation Fund, The Brown Capital Management Equity Fund, The
Brown Capital Management Balanced Fund, The Brown Capital Management
Small Company Fund, GrandView REIT Index Fund and GrandView Realty
Growth Fund.
(b)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Name and Principal Position(s) and Offices Position(s) and Offices
Business Address Underwriter with Registrant
- -----------------------------------------------------------------------------------------------------------
Richard K. Bryant President No position with the Trust
17 Glenwood Avenue
Raleigh, North Carolina
Elmer O. Edgerton, Jr. Vice President No position with the Trust
17 Glenwood Avenue
Raleigh, North Carolina
</TABLE>
(c) Not applicable
ITEM 30. Location of Accounts and Records
All account books and records not normally held by First Union National
Bank of North Carolina, the Custodian to the Registrant, are held by the
Registrant, in the offices of The Nottingham Company, Fund Accountant and
Administrator, NC Shareholder Services, 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 NC
Shareholder Services is 107 North Washington Street. Post Office Box 4365,
Rocky Mount, North Carolina 27803-0365. The address of Gardner Lewis Asset
Management is 285 Wilmington West Chester Pike, Chadds Ford, Pennsylvania
19317. The address of First Union National Bank of North Carolina is Two
First Union Center, Charlotte, North Carolina 28288-1151.
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
The Registrant hereby undertakes to file a post-effective amendment to this
Registration Statement, financial statements that need not be certified,
within four to six months following the effective date of this Registration
Statement.
The Registrant hereby undertakes to comply with Section 16(c) of the
Investment Company Act of 1940.
Registrant undertakes to furnish each person to whom a Prospectus is
delivered with a copy of the latest annual report o shareholders of each
series of Registrant upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Rocky Mount, State of North Carolina on the 3rd
day of September, 1997.
GARDNER LEWIS INVESTMENT TRUST
/s/ C. Frank Watson III
By: C. Frank Watson III
Secretary
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.
_*________________________________________________________________
Jack E. Brinson, Trustee
_*________________________________________________________________
W. Whitfield Gardner, Trustee and Chairman (Principal Executive Officer)
_*________________________________________________________________
Steve J. Kneeley, Trustee
_*_________________________________________________________________
J. Hope Reese, Treasurer
(Principal Financial Officer and Principal Accounting Officer)
* By: /s/ C. Frank Watson III
C. Frank Watson III
Attorney-in-Fact Dated: September 3, 1997
<PAGE>
GARDNER LEWIS INVESTMENT TRUST
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
EXHIBIT 5 INVESTMENT ADVISORY AGREEMENT
EXHIBIT 6 DISTRIBUTION AGREEMENT
EXHIBIT 9 FUND ACCOUNTING, DIVIDEND DISBURSING AND
TRANSFER AGENT AND ADMINISTRATION AGREEMENT
EXHIBIT 5
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, entered into as of the date the registration statement of the
CHESAPEAKE CORE GROWTH FUND of the Gardner Lewis Investment Trust becomes
effective with the Securities and Exchange Commission, by and between GARDNER
LEWIS INVESTMENT TRUST (the "Trust"), a Massachusetts Business Trust, and
GARDNER LEWIS ASSET MANAGEMENT, INC., a Pennsylvania corporation (the
"Advisor"), registered as an investment advisor under the Investment Advisors
Act of 1940, as amended (the "Advisors Act").
WHEREAS, the Trust is registered as a diversified, open-end management
investment company of the series type under the Investment Company Act of 1940,
as amended (the "1940 Act"); and
WHEREAS, the Trust desires to retain the Advisor to furnish investment advisory
and administrative services to the CHESAPEAKE CORE GROWTH FUND series of the
Trust, and the Advisor is willing to so furnish such services;
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints the Advisor to act as Investment
Advisor to the CHESAPEAKE CORE GROWTH FUND (the "Fund") series of the Trust
for the period and on the terms set forth in this Agreement. The Advisor
accepts such appointment and agrees to furnish the services herein set
forth, for the compensation herein provided.
2. Delivery of Documents. The Trust has furnished the Investment Advisor with
copies properly certified or authenticated of each of the following:
(a) The Trust's Declaration of Trust, as filed with the State of
Massachusetts (such Declaration, as presently in effect and as it
shall from time to time be amended, is herein called the
"Declaration");
(b) The Trust's By-Laws (such By-Laws, as presently in effect and as they
shall from time to time be amended, are herein called the "By-Laws");
(c) Resolutions of the Trust's Board of Trustees and the resolution
approved by a majority of the outstanding shares of the Fund
authorizing the appointment of the Advisor and approving this
Agreement;
(d) The Trust's Registration Statement on Form N-1A under the 1940 Act and
under the Securities Act of 1933 as amended, (the "1933 Act"),
relating to shares of beneficial interest of the Fund (herein called
the "Shares") as filed with the Securities and Exchange Commission
("SEC") and all amendments thereto;
(e) The Fund's Prospectus (such Prospectus, as presently in effect and all
amendments and supplements thereto are herein called the
"Prospectus").
The Trust will furnish the Advisor from time to time with copies, properly
certified or authenticated, of all amendments of or supplements to the
foregoing at the same time as such documents are required to be filed with
the SEC.
3. Management. Subject to the supervision of the Trust's Board of Trustees,
the Advisor will provide a continuous investment program for the Fund,
including investment research and management with respect to all
securities, investments, cash and cash equivalents in the Fund. The Advisor
will determine from time to time what securities and other investments will
be purchased, retained or sold by the Fund. The Advisor will provide the
services under this Agreement in accordance with the Fund's investment
objectives, policies and restrictions as stated in its Prospectus. The
Advisor further agrees that it:
(a) Will conform its activities to all applicable Rules and Regulations of
the Securities and Exchange Commission and will, in addition, conduct
its activities under this Agreement in accordance with regulations of
any other Federal and State agencies which may now or in the future
have jurisdiction over its activities under this Agreement;
(b) Will place orders pursuant to its investment determinations for the
Fund either directly with the issuer or with any broker or dealer. In
placing orders with brokers or dealers, the Advisor will attempt to
obtain the best net price and the most favorable execution of its
orders. Consistent with this obligation, when the Advisor believes two
or more brokers or dealers are comparable in price and execution, the
Advisor may prefer: (i) brokers and dealers who provide the Fund with
research advice and other services, or who recommend or sell Trust
shares, and (ii) brokers who are affiliated with the Fund or its
Advisor; provided, however, that in no instance will portfolio
securities be purchased from or sold to the Advisor or any affiliated
person of the Advisor in principal transactions;
(c) Will provide certain executive personnel for the Fund as may be
mutually agreed upon from time to time with the Board of Trustees, the
salaries and expenses of such personnel to be borne by the Advisor
unless otherwise mutually agreed upon; and
(d) Will provide, at its own cost, all office space, facilities and
equipment necessary for the conduct of its advisory activities on
behalf of the Fund.
4. Services Not Exclusive. The advisory services furnished by the Advisor
hereunder are not to be deemed exclusive, and the Advisor shall be free to
furnish similar services to others so long as its services under this
Agreement are not impaired thereby; provided, however, that without the
written consent of the Trustees, the Advisor will not serve as investment
advisor to any other investment company having a similar investment
objective to that of the Fund.
5. Books and Records. In compliance with the requirements of Rule 31a-3 under
the 1940 Act, the Advisor hereby agrees that all records which it maintains
for the benefit of the Fund are the property of the Fund and further agrees
to surrender promptly to the Fund any of such records upon the Fund's
request. The Advisor further agrees to preserve for the periods prescribed
by Rule 31a-2 under the 1940 Act the records required to be maintained by
it pursuant to Rule 31a-1 under the 1940 Act that are not maintained by
others on behalf of the Fund.
6. Expenses. During the term of this Agreement, the Advisor will pay all
expenses incurred by it in connection with its investment advisory services
pertaining to the Fund. In the event that there is no distribution plan
under Rule 12b-1 of the 1940 Act in effect for the Fund, the Advisor will
pay, out of the Advisor's resources generated from sources other than fees
received from the Fund, the entire cost of the promotion and sale of Trust
shares.
Notwithstanding the foregoing, the Fund shall pay the expenses and costs of the
following:
(a) Taxes, interest charges and extraordinary expenses;
(b) Brokerage fees and commissions with regard to portfolio
transactions of the Fund; (c) Fees and expenses of the custodian
of the Fund's portfolio securities; (d) Fees and expenses of the
Fund's administrator, transfer and dividend disbursing agent and
the Fund's fund accounting agent or, if the Fund performs any
such services without an agent, the costs of the same; (e)
Auditing and legal expenses;
(f) Cost of maintenance of the Fund's existence as a legal entity;
(g) Compensation of trustees who are not interested persons of the
Advisor as law defines that term;
(h) Costs of Trust meetings;
(i) Federal and State registration or qualification fees and
expenses;
(j) Costs of setting in type, printing and mailing Prospectuses,
reports and notices to existing shareholders;
(k) The investment advisory fee payable to the Advisor, as provided
in paragraph 7 herein; and
(l) Plan of Distribution expenses, but only in accordance with the
Plan of Distribution as approved by the shareholders of the Fund.
7. Compensation. The Trust will pay the Advisor and the Advisor will accept as
full compensation an investment advisory fee, based upon the daily average
net assets of each Fund, computed at the end of each month and payable
within five (5) business days thereafter, based upon the schedule attached
hereto as Exhibit A.
8.(a)Limitation of Liability. The Advisor shall not be liable for any error of
judgment, mistake of law or for any other loss whatsoever suffered by the
Fund in connection with the performance of this Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Advisor in the performance of
its duties or from reckless disregard by it of its obligations and duties
under this Agreement.
8.(b)Indemnification of Advisor. Subject to the limitations set forth in this
Subsection 8(b), the Fund shall indemnify, defend and hold harmless (from
the assets of the Trust or Trusts to which the conduct in question relates)
the Advisor against all loss, damage and liability, including but not
limited to amounts paid in satisfaction of judgments, in compromise or as
fines and penalties, and expenses, including reasonable accountants' and
counsel fees, incurred by the Advisor in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or
criminal, before any court or administrative or legislative body, related
to or resulting from this Agreement or the performance of services
hereunder, except with respect to any matter as to which it has been
determined that the loss, damage or liability is a direct result of (i) a
breach of fiduciary duty with respect to the receipt of compensation for
services; or (ii) willful misfeasance, bad faith or gross negligence on the
part of the Advisor in the performance of its duties or from reckless
disregard by it of its duties under this Agreement (either and both of the
conduct described in clauses (i) and (ii) above being referred to
hereinafter as "Disabling Conduct"). A determination that the Advisor is
entitled to indemnification may be made by (i) a final decision on the
merits by a court or other body before whom the proceeding was brought that
the Advisor was not liable by reason of Disabling Conduct, (ii) dismissal
of a court action or an administrative proceeding against the Advisor for
insufficiency of evidence of Disabling Conduct, or (iii) a reasonable
determination, based upon a review of the facts, that the Advisor was not
liable by reason of Disabling Conduct by, (a) vote of a majority of a
quorum of Trustees who are neither "interested persons" of the Fund as the
quoted phrase is defined in Section 2(a)(19) of the 1940 Act nor parties to
the action, suit or other proceeding on the same or similar grounds that is
then or has been pending or threatened (such quorum of such Trustees being
referred to hereinafter as the "Independent Trustees"), or (b) an
independent legal counsel in a written opinion. Expenses, including
accountants' and counsel fees so incurred by the Advisor (but excluding
amounts paid in satisfaction of judgments, in compromise or as fines or
penalties), may be paid from time to time by the Fund or Trust to which the
conduct in question related in advance of the final disposition of any such
action, suit or proceeding; provided, that the Advisor shall have
undertaken to repay the amounts so paid if it is ultimately determined that
indemnification of such expenses is not authorized under this Subsection
8(b) and if (i) the Advisor shall have provided security for such
undertaking, (ii) the Fund shall be insured against losses arising by
reason of any lawful advances, or (iii) a majority of the Independent
Trustees, or an independent legal counsel in a written opinion, shall have
determined, based on a review of readily available facts (as opposed to a
full trial-type inquiry), that there is reason to believe that the Advisor
ultimately will be entitled to indemnification hereunder.
As to any matter disposed of by a compromise payment by the Advisor
referred to in this Subsection 8(b), pursuant to a consent decree or
otherwise, no such indemnification either for said payment or for any other
expenses shall be provided unless such indemnification shall be approved
(i) by a majority of the Independent Trustees or (ii) by an independent
legal counsel in a written opinion. Approval by the Independent Trustees
pursuant to clause (i) shall not prevent the recovery from the Advisor of
any amount paid to the Advisor in accordance with either of such clauses as
indemnification of the Advisor is subsequently adjudicated by a court of
competent jurisdiction not to have acted in good faith in the reasonable
belief that the Advisor's action was in or not opposed to the best interest
of the Fund or to have been liable to the Fund or its Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in its conduct under the Agreement.
The right of indemnification provided by this Subsection 8(b) shall not be
exclusive of or affect any of the rights to which the Advisor may be
entitled. Nothing contained in this Subsection 8(b) shall affect any rights
to indemnification to which Trustees, officers or other personnel of the
Fund, and other persons may be entitled by contract or otherwise under law,
nor the power of the Fund to purchase and maintain liability insurance on
behalf of any such person.
The Board of Trustees of the Trust shall take all such action as may be
necessary and appropriate to authorize the Fund hereunder to pay the
indemnification required by this Subsection 8(b) including, without
limitation, to the extent needed, to determine whether the Advisor is
entitled to indemnification hereunder and the reasonable amount of any
indemnity due it hereunder, or employ independent legal counsel for that
purpose.
8.(c)The provisions contained in Section 8 shall survive the expiration or
other termination of this Agreement, shall be deemed to include and protect
the Advisor and its directors, officers, employees and agents and shall
inure to the benefit of its/their respective successors, assigns and
personal representatives.
9. Duration and Termination. This Agreement shall become effective upon the
date the registration statement of the Trust containing the Fund's
Prospectus is declared effective by the Securities and Exchange Commission
and, unless sooner terminated as provided herein, shall continue in effect
for two years. Thereafter, this Agreement shall be renewable for successive
periods of one year each, provided such continuance is specifically
approved annually:
(a) By the vote of a majority of those members of the Board of Trustees
who are not parties to this Agreement or interested persons of any
such party (as that term is defined in the 1940 Act), cast in person
at a meeting called for the purpose of voting on such approval; and
(b) By vote of either the Board of Trustees or a majority (as that term is
defined in the 1940 Act) of the outstanding voting securities of the
Fund.
Notwithstanding the foregoing, this Agreement may be terminated by the Fund
or by the Advisor at any time on sixty (60) days' written notice, without
the payment of any penalty, provided that termination by the Fund must be
authorized either by vote of the Board of Trustees or by vote of a majority
of the outstanding voting securities of the Fund. This Agreement will
automatically terminate in the event of its assignment (as that term is
defined in the 1940 Act).
10. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by a written instrument
signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. No material amendment of this Agreement
shall be effective until approved by vote of the holders of a majority of
the Fund's outstanding voting securities (as defined in the 1940 Act).
11. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions
hereof or otherwise affect their construction or effect. If any provision
of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of the Agreement shall not be
affected thereby. This Agreement shall be binding and shall inure to the
benefit of the parties hereto and their respective successors.
12. Applicable Law. This Agreement shall be construed in accordance with, and
governed by, the laws of the State of North Carolina.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
ATTEST: GARDNER LEWIS INVESTMENT TRUST
By: By:
Title: Title:
ATTEST: GARDNER LEWIS ASSET MANAGEMENT, INC.
By: By:
Title: Title:
<PAGE>
EXHIBIT A
INVESTMENT ADVISOR'S COMPENSATION SCHEDULE
For the services delineated in the INVESTMENT ADVISORY AGREEMENT, the Investment
Advisor shall be compensated monthly, as of the last day of each month, within
five business days of the month end, a fee based upon the daily average net
assets of the Fund according to the following schedule.
--------------------------------------------------------------
Annual
Net Assets Fee
--------------------------------------------------------------
On all assets 1.00%
EXHIBIT 6
DISTRIBUTION AGREEMENT
AGREEMENT entered into as of the date the registration statement of the
Chesapeake Core Growth Fund of Gardner Lewis Investment Trust becomes effective
with the Securities and Exchange Commission, by and between Gardner Lewis
Investment Trust, an unincorporated business trust organized under the laws of
The Commonwealth of Massachusetts (the "Trust"), and Capital Investment Group,
Inc., a North Carolina corporation ("Distributor").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end management investment
company and is so registered under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue an unlimited number of shares of
beneficial interest, par value $0 per share, in separate series representing the
interests in separate funds of securities and other assets; and
WHEREAS, the Trust intends to offer a series of shares (the "Shares")
representing interests in The Chesapeake Core Growth Fund (the "Fund") of the
Trust and is registering the Shares under the Securities Act of 1933, as amended
(the "1933 Act"), pursuant to a registration statement on Form N-1A (the
"Registration Statement"), including a prospectus (the "Prospectus") and a
statement of additional information (the "Statement of Additional Information");
and
WHEREAS, the Trust has adopted a Distribution Plan pursuant to Rule 12b-1 under
the 1940 Act (the "Distribution Plan") and may enter into related agreements
providing for the distribution of Shares of the Fund; and
WHEREAS, Distributor has agreed to act as distributor of the shares of the Fund
for the period of this Agreement;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
1. Appointment of Distributor.
(a) The Trust hereby appoints Distributor its exclusive agent for the
distribution of the Shares of the Fund in jurisdictions wherein
such Shares may be legally offered for sale; provided, however,
that the Trust in its absolute discretion may issue Shares of the
Fund in connection with (i) the payment or reinvestment of
dividends or distributions, (ii) any merger or consolidation of
the Trust or of the Fund with any other investment company or
trust or any personal holding company, or the acquisition of the
assets of any such entity or another fund of the Trust; or (iii)
any offer of exchange permitted by Section 11 of the 1940 Act.
(b) Distributor hereby accepts such appointment as exclusive agent
for the distribution of the Shares of the Fund and agrees that it
will sell the Shares as agent for the Trust at prices determined
as hereinafter provided and on the terms hereinafter set forth,
all according to applicable federal and state laws and
regulations and to the Agreement and Declaration of Trust of the
Trust.
(c) Distributor may sell Shares of the Fund to or through qualified
dealers or others. Distributor will require each dealer to
conform to the provisions hereof, the Registration Statement and
the Prospectus and Statement of Additional Information, and
applicable law; and neither Distributor nor any such dealers
shall withhold the placing of purchase orders for Shares so as to
make a profit thereby.
(d) Distributor shall order Shares of the Fund from the Trust only to
the extent that it shall have received purchase orders therefor.
Distributor will not make, or authorize any dealers or others to
make: (i) any short sales of Shares; or (ii) any sales of Shares
to any Trustee or officer of the Trust or to any officer or
director of Distributor or of any corporation or association
furnishing investment advisory, managerial or supervisory
services to the Trust, or to any such corporation or association,
unless such sales are made in accordance with the then current
Prospectus and Statement of Additional Information.
(e) Distributor is not authorized by the Trust to give any
information or make any representations regarding the Shares of
the Fund, except such information or representations as are
contained in the Registration Statement or in the current
Prospectus or Statement of Additional Information of the Fund, or
in sales literature prepared by or on behalf of the Trust for
Distributor's use.
(f) Notwithstanding any provision hereof, the Trust may terminate,
suspend or withdraw the offering of Shares of the Fund whenever,
in its sole discretion, it deems such action to be desirable.
2. Offering Price of Shares. All Fund Shares sold under this Agreement
shall be sold at the public offering price per Share in effect at the
time of the sale, as described in the then current Prospectus of the
Fund; provided, however, that any public offering price for the Shares
shall be the net asset value per Share. Distributor shall be entitled
to commissions and other fees and payments under the Distribution
Plan. At no time shall the Trust receive less than the full net asset
value of the Shares, determined in the manner set forth in the then
current Prospectus and Statement of Additional Information.
3. Furnishing of Information. The Trust shall furnish to Distributor
copies of any information, financial statements and other documents
that Distributor may reasonably request for use in connection with the
sale of shares of the Fund under this Agreement. The Trust shall also
make available a sufficient number of copies of the Fund's current
Prospectus and Statement of Additional Information for use by the
Distributor.
4. Expenses. (a) The Trust will pay or cause to be paid the following
expenses: (i) preparation, printing and distribution to shareholders
of the Prospectus and Statement of Additional Information; (ii)
preparation, printing and distribution of reports and other
communications to shareholders; (iii) registration of the Shares under
the federal securities laws; (iv) qualification of the Shares for sale
in certain states; (v) qualification of the Trust as a dealer or
broker under state law as well as qualification of the Trust as an
entity authorized to do business in certain states; (vi) maintaining
facilities for the issue and transfer of Shares; (vii) supplying
information, prices and other data to be furnished by the Trust under
this Agreement; and (viii) certain taxes applicable to the sale or
delivery of the Shares or certificates therefor.
(b) Except to the extent such expenses are borne by the Trust
pursuant to the Distribution Plan, Distributor will pay or cause
to be paid the following expenses: (i) payments to sales
representatives of the Distributor and to securities dealers and
others in respect of the sale of Shares of the Fund; (ii) payment
of compensation to and expenses of employees of the Distributor
and any of its affiliates to the extent they engage in or support
distribution of Fund Shares or render shareholder support
services not otherwise provided by the Trust's transfer agent,
including, but not limited to, office space and equipment,
telephone facilities and expenses, answering routine inquiries
regarding the Fund, processing shareholder transactions, and
providing such other shareholder services as the Trust may
reasonably request; (iii) formulation and implementation of
marketing and promotional activities, including, but not limited
to, direct mail promotions and television, radio, newspaper,
magazine and other mass media advertising; (iv) preparation,
printing and distribution of sales literature and of Prospectuses
and Statements of Additional Information and reports of the Trust
for recipients other than existing shareholders of the Fund; and
(v) obtaining such information, analyses and reports with respect
to marketing and promotional activities as the Trust may, from
time to time, reasonably request.
(c) Distributor in connection with the Distribution Plan shall
prepare and deliver reports to the Trustees of the Trust on a
regular basis, at least quarterly, showing the expenditures with
respect to the Fund pursuant to the Distribution Plan and the
purposes therefor, as well as any supplemental reports as the
Trustees of the Trust, from time to time, may reasonably request.
5. Repurchase of Shares. Distributor as agent and for the account of
the Trust may repurchase Shares of the Fund offered for resale to it
and redeem such Shares at their net asset value.
6. Indemnification by the Trust. In absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of obligations or
duties hereunder on the part of Distributor, the Trust agrees to
indemnify Distributor and its officers and partners against any and
all claims, demands, liabilities and expenses that Distributor may
incur under the 1933 Act, or common law or otherwise, arising out of
or based upon any alleged untrue statement of a material fact
contained in any registration statement or prospectus (except a
prospectus of the Fund prepared for use under Rule 482 under the 1933
Act) or statement of additional information of the Fund, or any
omission to state a material fact therein, the omission of which makes
any statement contained therein misleading, unless such statement or
omission was made in reliance upon and in conformity with information
furnished to the Trust in connection therewith by or on behalf of
Distributor. Nothing herein contained shall require the Trust to take
any action contrary to any provision of its Agreement and Declaration
of Trust or any applicable statute or regulation.
7. Indemnification by Distributor. Distributor agrees to indemnify the
Trust and its officers and Trustees against any and all claims,
demands, liabilities and expenses which the Trust may incur under the
1933 Act, or common law or otherwise, arising out of or based upon (i)
any alleged untrue statement of a material fact contained in any
registration statement or prospectus or statement of additional
information of the Fund, or any omission to state a material fact
therein if such statement or omission was made in reliance upon and in
conformity with information furnished to the Trust in connection
therewith by or on behalf of Distributor; (ii) any act or deed of
Distributor or its sales representatives which has not been authorized
by the Trust in any prospectus or statement of additional information
of the Fund or by this Agreement ; or (iii) any alleged untrue
statement of a material fact contained in any prospectus of the Fund
prepared for use under Rule 482 under the 1933 Act, or any omission to
state a material fact therein.
8. Term and Termination.
(a) This Agreement shall become effective upon the date the
registration statement of the Trust containing the Fund's
Prospectus is declared effective by the Securities and Exchange
Commission and, unless sooner terminated as provided herein,
shall continue in effect for two years thereafter and shall
continue in full force and effect for successive periods of one
year thereafter, but only so long as each such continuance is
approved (i) by either the Trustees of the Trust or by vote of a
majority of the outstanding voting securities (as defined in the
1940 Act) of the Fund and, in either event, (ii) by vote of a
majority of the Trustees of the Trust who are not parties to this
Agreement or interested persons (as defined in the 1940 Act) of
any such party and who have no direct or indirect financial
interest in this Agreement or in the operation of the
Distribution Plan or in any agreement related thereto
("Independent Trustees"), cast at a meeting called for the
purpose of voting on such approval.
(b) This Agreement may be terminated at any time without the payment
of any penalty by vote of the Trustees of the Trust or a majority
of the Independent Trustees or by vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of the
Fund or by Distributor, on sixty days' written notice to the
other party.
(c) This Agreement shall automatically terminate in the event of its
assignment (as defined in the 1940 Act).
9. Limitation of Liability. It is expressly agreed that the
obligations of the Trust hereunder shall not be binding upon any of
the Trustees, officers or shareholders of the Trust personally, but
shall bind only the assets and property of the Trust. The term
"Gardner Lewis Investment Trust" means and refers to the Trustees from
time to time serving under the Agreement and Declaration of Trust of
the Trust dated August 12, 1992, a copy of which is on file with the
Secretary of The Commonwealth of Massachusetts. The execution and
delivery of this Agreement has been authorized by the Trustees, and
this Agreement has been signed on behalf of the Trust by an authorized
officer of the Trust, acting as such and not individually, and neither
such authorization by such Trustees nor such execution and delivery by
such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but
shall bind only the assets and property of the Trust as provided in
the Agreement and Declaration of Trust.
IN WITNESS THEREOF, the parties hereto have caused this Agreement to be executed
as of the date first written above.
GARDNER LEWIS INVESTMENT TRUST
Attest:
By:
CAPITAL INVESTMENT GROUP, INC.
Attest:
By:
EXHIBIT 9
AMENDMENT TO FUND ACCOUNTING,
DIVIDEND DISBURSING & 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)
<PAGE>
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
The Chesapeake Fund-Series A, C, and D Investor Shares and Institutional Shares
The Chesapeake Growth Fund
$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 Administration Fee
The Chesapeake Fund-Series A, C, and D Investor Shares and Institutional Shares
The Chesapeake Growth Fund
Annual
Net Assets Fee
------------------------------------------------------------
On all assets 0.015%
Shareholder Recordkeeping
$9 per shareholder per year
Blue Sky Administration
$150 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
