THE CHESAPEAKE FUND
PORTFOLIO OF INVESTMENTS
August 31, 1997
(Unaudited)
Value
Shares (note 1)
COMMON STOCKS - 96.81%
Aerospace & Defense - 1.03%
(a)BE Aerospace, Inc. .......................... 79,500 $ 2,822,250
Auto Parts - Original Equipment - 1.50%
Federal-Mogul Corporation ................... 114,900 4,107,675
Commercial Services - 0.72%
(a)CORESTAFF, Inc. ............................. 66,300 1,972,425
Computers - 19.41%
(a)Adaptec, Inc. ............................... 175,300 8,414,400
(a)Dell Computer Corporation ................... 70,400 5,777,200
(a)EMC Corporation ............................. 152,400 7,820,025
(a)Gateway 2000, Inc. .......................... 93,200 3,640,625
(a)Gulfstream Aerospace Corporation ............ 81,900 2,426,288
(a)Quantum Corporation ......................... 76,900 2,696,305
(a)Read-Rite Corporation ....................... 97,600 2,799,900
(a)Sequent Computer Systems, Inc. .............. 132,500 3,734,844
(a)Sun Microsystems, Inc. ...................... 102,900 4,939,200
(a)Tandem Computers Incorporated ............... 230,800 7,904,900
(a)Western Digital Corporation ................. 63,400 3,051,125
------ ---------
53,204,812
Computer Software & Services - 5.94%
(a)BMC Software, Inc. .......................... 42,700 2,674,088
(a)Cadence Design Systems, Inc. ................ 58,600 2,787,163
(a)Structural Dynamics Research Corporation .... 108,600 2,884,688
(a)Synopsys, Inc. .............................. 63,800 2,209,075
(a)System Software Associates, Inc. ............ 297,900 4,524,355
(a)Vanstar Corporation ......................... 77,200 1,211,075
------ ---------
16,290,444
Electrical Equipment - 0.78%
(a)Cable Design Technologies ................... 63,800 2,133,313
Electronics - 3.77%
(a)Coltec Industries, Inc. ..................... 167,600 3,750,050
Polaroid Corporation ........................ 23,300 1,236,356
(a)Teradyne, Inc. .............................. 96,100 5,351,568
------ ---------
10,337,974
(Continued)
<PAGE>
THE CHESAPEAKE FUND
PORTFOLIO OF INVESTMENTS
August 31, 1997
(Unaudited)
Value
Shares (note 1)
COMMON STOCKS - (Continued)
Electronics - Semiconductor - 2.04%
(a)Hadco Corporation ............................... 20,400 $ 1,430,550
(a)National Semiconductor Corporation .............. 121,000 4,166,937
------- ---------
5,597,487
Emerging Technology - 2.60%
Cognizant Corporation ........................... 66,400 2,788,800
(a)Microchip Technology, Inc. ...................... 107,200 4,334,900
------- ---------
7,123,700
Entertainment - 2.01%
(a)Anchor Gaming ................................... 69,000 5,520,000
Environmental Control - 1.50%
(a)USA Waste Services, Inc. ........................ 98,000 4,116,000
Financial - Banks, Money Center - 1.00%
The Money Store, Inc. ........................... 96,600 2,753,100
Foreign Securities - 4.15%
ECI Telecommunications Limited .................. 126,200 3,762,337
(a)Petroleum Geoservices ASA - ADR ................. 26,900 1,632,494
SmithKline Beecham Plc - ADR .................... 79,200 3,430,350
Teva Pharmaceutical Industries Ltd. - ADR ....... 48,700 2,550,663
------ ---------
11,375,844
Industrial Materials - Specialty - 1.33%
(a)General Cable Corporation ....................... 105,700 3,659,863
Medical - Hospital Management & Service - 7.33%
(a)Genesis Health Ventures, Inc. ................... 113,300 3,951,337
(a)HEALTHSOUTH Corporation ......................... 98,300 2,451,356
Integrated Health Services, Inc. ................ 117,400 3,874,200
(a)MedPartners, Inc. ............................... 113,300 2,421,788
(a)Quorum Health Group, Inc. ....................... 111,000 3,780,938
(a)Tenet Healthcare Corporation .................... 132,700 3,616,075
------- ---------
20,095,694
Medical Supplies - 3.23%
Biomet, Inc. .................................... 164,800 3,419,600
(a)Steris Corporation .............................. 88,000 3,300,000
Stewart Enterprises, Inc. ....................... 54,000 2,133,000
------ ---------
8,852,600
(Continued)
<PAGE>
THE CHESAPEAKE FUND
PORTFOLIO OF INVESTMENTS
August 31, 1997
(Unaudited)
Value
Shares (note 1)
COMMON STOCKS - (Continued)
Office & Business Equipment - 1.58%
(a)U.S. Office Products Company ................ 132,400 $ 4,336,100
Oil & Gas - Equipment & Services - 4.57%
Diamond Offshore Drilling, Inc. ............. 52,000 2,840,500
(a)Global Industries, Ltd. ..................... 125,800 4,583,837
(a)Pride International, Inc. ................... 67,400 2,156,800
(a)Rowan Companies, Inc. ....................... 99,100 2,960,613
------ ---------
12,541,750
Oil & Gas - Exploration - 2.31%
(a)J. Ray McDermott, S.A ....................... 129,500 5,115,250
(a)Noble Drilling Corporation .................. 42,900 1,219,968
------ ---------
6,335,218
Pharmaceuticals - 1.48%
Jones Medical Industries, Inc. .............. 76,000 2,261,000
(a)Watson Pharmaceuticals, Inc. ................ 34,300 1,802,893
------ ---------
4,063,893
Real Estate - 1.28%
(a)Signature Resorts, Inc. ..................... 98,100 3,519,338
Restaurants & Food Service - 0.91%
CKE Restaurants, Inc. ....................... 77,100 2,486,475
Retail - Apparel - 8.45%
(a)Jones Apparel Group, Inc. ................... 160,000 8,030,000
Liz Claiborne, Inc. ......................... 81,900 3,649,668
(a)Nautica Enterprises, Inc. ................... 162,000 3,857,625
Ross Stores, Inc. ........................... 74,700 2,194,312
TJX Companies, Inc. ......................... 98,100 2,697,750
Warnaco Group, Inc. ......................... 84,600 2,744,213
------ ---------
23,173,568
Retail - Department Stores - 4.52%
Claire's Stores, Inc. ....................... 89,400 1,877,400
(a)Consolidated Stores Corporation ............. 53,556 2,005,003
(a)Fred Meyer, Inc. ............................ 77,200 4,014,400
(a)Proffitt's, Inc. ............................ 84,000 4,509,750
------ ---------
12,406,553
(Continued)
<PAGE>
THE CHESAPEAKE FUND
PORTFOLIO OF INVESTMENTS
August 31, 1997
(Unaudited)
Value
Shares (note 1)
COMMON STOCKS - (Continued)
Retail - Specialty Line - 3.26%
(a)Borders Group, Inc. ......................... 142,700 $ 3,398,044
(a)Cole National Corporation ................... 85,000 3,787,813
(a)Hollywood Entertainment Corporation ......... 106,700 1,747,213
------- ---------
8,933,070
Shoes - Leather - 2.48%
(a)Nine West Group, Inc ........................ 96,100 4,060,225
Wolverine World Wide, Inc. .................. 121,400 2,731,500
------- ---------
6,791,725
Telecommunications Equipment - 2.81%
(a)DSP Communications, Inc. .................... 77,500 1,520,937
(a)Essex International, Inc. ................... 43,300 1,664,344
(a)Newbridge Networks Corporation .............. 52,200 2,375,100
(a)QUALCOMM, Inc. .............................. 46,200 2,136,750
------ ---------
7,697,131
Transportation - Air - 0.67%
Airborne Freight Corporation ................ 37,500 1,846,875
Utilities - Electric - 2.24%
(a)CalEnergy Co., Inc. ......................... 185,100 6,131,438
Utilities - Telecommunications - 1.91%
(a)WorldCom, Inc. .............................. 175,300 5,248,044
Total Common Stocks (Cost $210,347,617) ........... 265,474,359
INVESTMENT COMPANY - 3.50%
Evergreen Money Market Treasury
Institutional Money Market Fund
Institutional Service Shares
(Cost $9,582,590) 9,582,590 9,582,590
Total Value of Investments (Cost $219,930,207 (b)) 100.30 % $ 275,056,949
Liabilities In Excess of Other Assets ............. (0.30)% (832,889)
----- -------------
Net Assets ..................................... 100.00 % $ 274,224,060
====== =============
(Continued)
<PAGE>
THE CHESAPEAKE FUND
PORTFOLIO OF INVESTMENTS
August 31, 1997
(Unaudited)
(a) Non-income producing investment.
(b) Aggregate cost for financial reporting and federal income tax purposes is
the same. Unrealized appreciation (depreciation) of investments for
financial reporting and federal income tax purposes is as follows:
Unrealized appreciation $59,153,007
Unrealized depreciation (4,026,265)
----------
Net unrealized appreciation $55,126,742
===========
The following acronyms are used throughout this portfolio:
ADR - American Depositary Receipt
PLC - Public Liability Company
See accompanying notes to financial statements
<PAGE>
THE CHESAPEAKE FUND
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1997
(Unaudited)
ASSETS
Investments, at value (cost $219,930,207) .................... $275,056,949
Cash ......................................................... 701
Income receivable ............................................ 81,661
Receivable for investments sold .............................. 4,705,789
Receivable for fund shares sold .............................. 19,600
Prepaid expenses ............................................. 18,252
Deferred organization expenses, net (note 3) ................. 15,261
Other assets ................................................. 2,269
------------
Total assets .............................................. 279,900,482
------------
LIABILITIES
Accrued expenses ............................................. 62,065
Payable for investment purchases ............................. 5,614,357
------------
Total liabilities ......................................... 5,676,422
------------
NET ASSETS ...................................................... $274,224,060
============
NET ASSETS CONSIST OF
Paid-in capital .............................................. $193,660,487
Undistributed net realized gain on investments ............... 25,436,831
Net unrealized appreciation on investments ................... 55,126,742
------------
$274,224,060
============
INSTITUTIONAL SHARES
Net asset value, redemption and maximum offering price per share $ 20.05
($98,140,996 / 4,894,151 shares) =======
SERIES A INVESTOR SHARES
Net asset value, redemption and offering price per share ..... $ 19.92
($42,666,988 / 2,141,892 shares) =======
Maximum offering price per share (100 / 97% of $19.92) ....... $ 20.54
=======
SERIES C INVESTOR SHARES
Net asset value, redemption and maximum offering price per share $ 19.54
($5,257,220 / 269,026 shares) =======
SERIES D INVESTOR SHARES
Net asset value, redemption and offering price per share ..... $ 19.76
($11,723,974 / 593,462 shares) =======
Maximum offering price per share (100 / 98.5% of $19.76) ..... $ 20.06
=======
SUPER INSTITUTIONAL SHARES
Net asset value, redemption and maximum offering price per share $ 20.10
($116,434,882 / 5,792,346 shares) =======
See accompanying notes to financial statements
<PAGE>
THE CHESAPEAKE FUND
STATEMENT OF OPERATIONS
Period ended August 31, 1997
(Unaudited)
INVESTMENT LOSS
Income
Interest ................................................. $111,277
Dividends ................................................ 187,531
Miscellaneous ............................................ 145
---------
Total income .......................................... 298,953
---------
Expenses
Investment advisory fees (note 2) ........................ 1,216,800
Fund administration fees (note 2) ........................ 91,260
Distribution and service fees - Class A (note 4) ......... 50,149
Distribution and service fees - Class C (note 4) ......... 20,840
Distribution and service fees - Class D (note 4) ......... 27,311
Custody fees ............................................. 14,468
Registration and filing administration fees (note 2) ..... 12,361
Fund accounting fees (note 2) ............................ 42,000
Audit fees ............................................... 6,750
Legal fees ............................................... 8,398
Securities pricing fees .................................. 2,999
Shareholder servicing fees ............................... 30,752
Shareholder recordkeeping fees ........................... 4,460
Shareholder servicing expenses ........................... 5,348
Registration and filing expenses ......................... 21,739
Printing expenses ........................................ 8,773
Amortization of deferred organization expenses (note 3) .. 6,556
Trustee fees and meeting expenses ........................ 4,626
Other operating expenses ................................. 10,453
---------
Total expenses ........................................ 1,586,043
---------
Less:
Expense reimbursements (note 6) .................... (29,655)
Distribution and service fees waived (note 4) ...... (16,603)
- ---------
Net expenses .......................................... 1,539,785
---------
Net investment loss ................................ (1,240,832)
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investment transactions .............. 26,963,787
Increase in unrealized appreciation on investments .......... 25,600,118
----------
Net realized and unrealized gain on investments .......... 52,563,905
----------
Net increase in net assets resulting from operations .. $51,323,073
===========
See accompanying notes to financial statements
<PAGE>
THE CHESAPEAKE FUND
STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Period ended Year ended
August 31, February 28,
1997 1997
INCREASE IN NET ASSETS
Operations
Net investment loss ($1,240,832) ($1,866,690)
Net realized gain from investment transactions 26,963,787 4,887,131
Increase in unrealized appreciation on investments 25,600,118 17,077,631
---------- ----------
Net increase in net assets resulting from operations 51,323,073 20,098,072
---------- ----------
Capital share transactions
Increase (decrease) in net assets resulting from capital share transactions(a) (8,639,944) 78,804,804
---------- ----------
Total increase in net assets 42,683,129 98,902,876
NET ASSETS
Beginning of period 231,540,931 132,638,055
----------- -----------
End of period $274,224,060 $231,540,931
============ ============
(a) A summary of capital share activity follows:
Period ended Year ended
August 31, 1997 February 28, 1997
Shares Value Shares Value
Institutional Shares
Shares sold 344,781 $6,410,598 1,194,039 $17,551,689
Shares issued for reinvestment of distributions 0 0 0 0
Shares redeemed (238,594) (3,985,112) (1,960,761) (29,179,867)
-------- ---------- ---------- -----------
Net increase (decrease) 106,187 $2,425,486 (766,722) ($11,628,178)
======= ========== ======== ============
Series A Shares
Shares sold 314,761 $5,819,513 886,587 $13,180,184
Shares issued for reinvestment of distributions 0 0 0 0
Shares redeemed (606,254) (10,793,149) (711,164) (10,814,500)
-------- ----------- -------- -----------
Net increase (decrease) (291,493) ($4,973,636) 175,423 $2,365,684
======== =========== ======= ==========
Series C Shares
Shares sold 22,939 $394,143 51,704 $764,137
Shares issued for reinvestment of distributions 0 0 0 0
Shares redeemed (329,576) (5,197,192) (27,426) (414,118)
-------- ---------- ------- --------
Net increase (decrease) (306,637) ($4,803,049) 24,278 $350,019
======== =========== ====== ========
Series D Shares
Shares sold 4,662 $77,617 80,650 $1,210,179
Shares issued for reinvestment of distributions 0 0 0 0
Shares redeemed (80,774) (1,366,362) (239,185) (3,492,900)
------- ---------- -------- ----------
Net decrease (76,112) ($1,288,745) (158,535) ($2,282,721)
======= =========== ======== ===========
Super Institutional Shares
Shares sold 0 $0 5,792,346 $90,000,000
Shares issued for reinvestment of distributions 0 0 0 0
Shares redeemed 0 0 0 0
------- ---------- --------- -----------
Net increase 0 $0 5,792,346 $90,000,000
======= ========== ========= ===========
Fund Summary
Shares sold 687,143 $12,701,871 8,005,326 $122,706,189
Shares issued for reinvestment of distributions 0 0 0 0
Shares redeemed (1,255,198) (21,341,815) (2,938,536) (43,901,385)
---------- ----------- ---------- -----------
Net increase (decrease) (568,055) ($8,639,944) 5,066,790 $78,804,804
======== =========== ========= ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
(Unaudited)
-------------------------Institutional------------------- ----Super Institutional----
For the For the
period from period from
April 6, 1994 June 12, 1996
(commencement (commencement
Period ended Year ended Year ended of operations) Period ended of operations)
August 31, February 28, February 29, to February 28, August 31, to February 28
1997 1997 1996 1995 1997 1997
------------ ----------- ----------- -------------- ------------ --------------
Net asset value, beginning of period $16.26 $14.45 $11.31 $10.00 $16.29 $15.53
Income from investment operations
Net investment loss (0.08) (0.13) (0.05) (0.04) (0.07) (0.07)
Net realized and unrealized gain on investments 3.87 1.94 3.38 1.35 3.88 0.83
---- ---- ---- ---- ---- ----
Total from investment operations 3.79 1.81 3.33 1.31 3.81 0.76
---- ---- ---- ---- ---- ----
Distributions to shareholders from
Net investment income 0.00 0.00 (0.11) 0.00 0.00 0.00
Net realized gain from investment transactions 0.00 0.00 (0.08) 0.00 0.00 0.00
---- ---- ----- ---- ---- ----
Total distributions 0.00 0.00 (0.19) 0.00 0.00 0.00
---- ---- ----- ---- ---- ----
Net asset value, end of period $20.05 $16.26 $14.45 $11.31 $20.10 $16.29
====== ====== ====== ====== ====== ======
Total return 23.31%(a)(d) 12.53%(a) 29.66%(a) 13.12%(a)(d) 23.39%(a)(d) 4.89%(a)(d)
===== ===== ===== ===== ===== ====
Ratios/supplemental data
Net assets, end of period (000's) $98,141 $77,858 $80,252 $15,088 $116,435 $94,340
======= ======= ======= ======= ======== =======
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 1.25 %(b) 1.23 % 1.65 % 2.75 %(b) 1.07 %(b) 1.08 %(b)
After expense reimbursements and waived fees 1.21 %(b) 1.22 % 1.49 % 1.73 %(b) 1.04 %(b) 1.04 %(b)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees (0.99)%(b) (0.85)% (0.98)% (1.80)%(b) (0.82)%(b) (0.75)%(b)
After expense reimbursements and waived fees (0.96)%(b) (0.84)% (0.82)% (0.78)%(b) (0.79)%(b) (0.72)%(b)
Portfolio turnover rate 61.97 % 126.44 % 99.33 % 64.92 % 61.97 % 126.44 %
Average broker commission per share (c) $0.0576 $0.0600 - - $0.0576 $0.0600
(a) Total return does not reflect payment of a sales charge.
(b) Annualized.
(c) Represents total commission paid on portfolio securities divided by total portfolio share purchased or sold on which
commissions were charged. This disclosure is required for fiscal year beginning on or after September 1, 1995.
(d) Aggregate return. Not annualized.
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
(Unaudited)
(Continued)
---------------Series A------------------- ---------------Series C-------------------
For the For the
period from period from
April 7, 1995 April 7, 1995
(commencement (commencement
Period ended Year ended of operations) Period ended Year ended of operations)
August 31, February 28, to February 29, August 31, February 28, to February 29,
1997 1997 1996 1997 1997 1996
Net asset value, beginning of period $16.18 $14.42 $11.79 $15.97 $14.34 $11.79
Income from investment operations
Net investment income loss (0.12) (0.18) (0.06) (0.26) (0.29) (0.12)
Net realized and unrealized gain 3.86 1.94 2.88 3.83 1.92 2.86
---- ---- ---- ---- ---- ----
Total from investment operations 3.74 1.76 2.82 3.57 1.63 2.74
---- ---- ---- ---- ---- ----
Distributions to shareholders from
Net investment income 0.00 0.00 (0.11) 0.00 0.00 (0.11)
Net realized gain from investments 0.00 0.00 (0.08) 0.00 0.00 (0.08)
---- ---- ----- ---- ---- -----
Total distributions 0.00 0.00 (0.19) 0.00 0.00 (0.19)
---- ---- ----- ---- ---- -----
Net asset value, end of period $19.92 $16.18 $14.42 $19.54 $15.97 $14.34
====== ====== ====== ====== ====== ======
Total return 23.11 %(a)(d) 12.21 %(a) 23.86 %(a)(d) 22.49%(d) 11.30% 23.18 %(d)
===== ===== ===== ===== ===== =====
Ratios/supplemental data
Net assets, end of period (000's) $42,667 $39,376 $32,549 $5,257 $9,192 $7,908
======= ======= ======= ====== ====== ======
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 1.59 %(b) 1.54 % 1.88 %(b) 2.78 %(b) 2.34 % 2.38 %(b)
After expense reimbursements and waived fees 1.55 %(b) 1.53 % 1.71 %(b) 2.73 %(b) 2.33 % 2.18 %(b)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees (1.34)%(b) (1.16)% (1.20)%(b) (2.54)%(b) (1.97)% (1.77)%(b)
After expense reimbursements and waived fees (1.30)%(b) (1.15)% (1.04)%(b) (2.49)%(b) (1.96)% (1.57)%(b)
Portfolio turnover rate 61.97 % 126.44 % 99.33 % 61.97 % 126.44 % 99.33 %
Average broker commission per share (c) $0.0576 $0.0600 - $0.0576 $0.0600 -
(a) Total return does not reflect payment of a sales charge.
(b) Annualized.
(c) Represents total commission paid on portfolio securities divided by total portfolio share purchased or sold on which
commissions were charged. This disclosure is required for fiscal years beginning on or after September 1, 1995.
(d) Aggregate return. Not annualized.
-----------------Series D--------------------
For the
period from
April 7, 1995
(commencement
Period ended Year ended of operations to
August 31, February 28, February 29,
1997 1997 1996
Net asset value, beginning of period $16.09 $14.41 $11.79
Income from investment operations
Net investment income loss (0.17) (0.29) (0.11)
Net realized and unrealized gain on investments 3.84 1.97 2.92
---- ---- ----
Total from investment operations 3.67 1.68 2.81
---- ---- ----
Distributions to shareholders from
Net investment income 0.00 0.00 (0.11)
Net realized gain from investment transactions 0.00 0.00 (0.08)
---- ---- -----
Total distributions 0.00 0.00 (0.19)
---- ---- -----
Net asset value, end of period $19.76 $16.09 $14.41
====== ====== ======
Total return 22.89 %(a)(d) 11.59 %(a) 23.77 %(a)(d)
===== ===== =====
Ratios/supplemental data
Net assets, end of period (000's) $11,724 $10,774 $11,929
======= ======= =======
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 2.14 %(b) 2.02 % 2.13 %(b)
After expense reimbursements and waived fees 2.08 %(b) 2.01 % 1.73 %(b)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees (1.89)%(b) (1.64)% (1.54)%(b)
After expense reimbursements and waived fees (1.84)%(b) (1.63)% (1.14)%(b)
Portfolio turnover rate 61.97 % 126.44 % 99.33 %
Average broker commission per share (c) $0.0576 $0.0600 -
(a) Total return does not reflect payment of a sales charge.
(b) Annualized.
(c) Represents total commission paid on portfolio securities divided by total portfolio share purchased or sold on which
commissions were charged. This disclosure is required for fiscal years beginning on or after September 1, 1995.
(d) Aggregate return. Not annualized.
</TABLE>
<PAGE>
THE CHESAPEAKE FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1997
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The Chesapeake Fund (the "Fund") is a diversified series of shares of beneficial
interest of the Gardner Lewis Investment Trust (the "Trust"). The Trust, an
open-end investment company, was organized on August 12, 1992 as a Massachusetts
Business Trust and is registered under the Investment Company Act of 1940, (the
"Act") as amended. The Fund began operations on April 6, 1994. The investment
objective of the Fund is to seek capital appreciation through investments in
equity securities of medium and large capitalization companies, consisting
primarily of common and preferred stocks and securities convertible into common
stocks. Pursuant to a plan approved by the Board of Trustees of the Trust, the
existing single class of shares of the Fund was redesignated as the
Institutional Shares of the Fund on February 3, 1995, and three new classes of
shares - Series A, Series C and Series D Investor Shares (the "Investor Shares")
- - were authorized. On April 7, 1995, Series A, Series C and Series D Investor
Shares became effective. The Board of Trustees of the Trust approved on May 2,
1996 a plan to authorize a new class of shares designated as the Super
Institutional Shares. On June 12, 1996, the Super Institutional Shares became
effective. The Institutional Shares and Super Institutional Shares are offered
to institutional investors without a sales charge and bear no distribution and
service fees. The Investor Shares are offered with a sales charge (except for
Series C Shares) at different levels and bear distribution fees at different
levels.
Each class of shares has equal rights as to assets of the Fund, and the classes
are identical except for differences in their sales charge structures, ongoing
distribution and service fees, and various expenses that can be attributed to
specific class activity. Income, expenses (other than distribution and service
fees, which are attributable to each class of Investor Shares based upon a set
percentage of its net assets, and other expenses which can be traced to specific
class activity), and realized and unrealized gains or losses on investments are
allocated to each class of shares based upon its relative net assets. All
classes have equal voting privileges since the Trust shareholders vote in the
aggregate, not by 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 a particular fund or class. The following is a summary of
significant accounting policies followed by the Fund.
A. Security Valuation - The Fund's investments in securities are carried
at value. Securities listed on an exchange or quoted on a national
market system are valued at the last quoted sales price as of 4:00 p.m.
New York time on the day of valuation. Other securities traded in the
over-the-counter market and listed securities for which no sale was
reported on that date are valued at the most recent bid price.
Securities for which market quotations are not readily available, if
any, are valued by using an independent pricing service or by following
procedures approved by the Board of Trustees. Short-term investments
are valued at cost which approximates value.
B. Federal Income Taxes - No provision has been made for federal income
taxes since it is the policy of the Fund to comply with the provisions
of the Internal Revenue Code applicable to regulated investment
companies and to make sufficient distributions of taxable income to
relieve it from all federal income taxes.
Net investment income (loss) and net realized gains (losses) may
differ for financial statement and income tax purposes primarily
because of losses incurred subsequent to October 31, which are
deferred for income tax purposes. The character of distributions made
during the year from net investment income or net realized gains may
differ from their ultimate characterization for federal income tax
purposes. Also, due to the timing of dividend distributions, the
fiscal year in which amounts are distributed may differ from the year
that the income or realized gains were recorded by the Fund.
(Continued)
<PAGE>
THE CHESAPEAKE FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1997
(Unaudited)
C. Investment Transactions - Investment transactions are recorded on the
trade date. Realized gains and losses are determined using the specific
identification cost method. Interest income is recorded daily on an
accrual basis. Dividend income is recorded on the ex-dividend date.
D. Distributions to Shareholders - The Fund may declare dividends
quarterly, generally payable in March, June, September and December, on
a date selected by the Trust's Trustees. Distributions to shareholders
are recorded on the ex-dividend date. In addition, distributions may be
made annually in November out of net realized gains through October 31
of that year. The Fund may make a supplemental distribution subsequent
to the end of its fiscal year.
The Fund has capital loss carryforwards for federal income tax purposes
of $127,293 which expire in the year 2005. It is the intention of the
Board of Trustees of the Trust not to distribute any realized gains
until the carryforwards have been offset or expire.
E. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts of
assets, liabilities, expenses and revenues reported in the financial
statements. Actual results could differ from those estimated.
F. Repurchase Agreements - The Fund may acquire U. S. Government
Securities or corporate debt securities subject to repurchase
agreements. A repurchase agreement transaction occurs when the Fund
acquires a security and simultaneously resells it to the vendor
(normally a member bank of the Federal Reserve or a registered
Government Securities dealer) for delivery on an agreed upon future
date. The repurchase price exceeds the purchase price by an amount
which reflects an agreed upon market interest rate earned by the Fund
effective for the period of time during which the repurchase agreement
is in effect. Delivery pursuant to the resale typically will occur
within one to five days of the purchase. The Fund will not enter into a
repurchase agreement which will cause more than 10% of its net assets
to be invested in repurchase agreements which extend beyond seven days.
In the event of 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 Act.
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, 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. As compensation for its services, the
Advisor receives a fee at the annual rate of 1.00% of the Fund's average daily
net assets.
(Continued)
<PAGE>
THE CHESAPEAKE FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1997
(Unaudited)
The Fund's administrator, The Nottingham Company, (the "Administrator"),
provides administrative services to and is generally responsible for the overall
management and day-to-day operations of the Fund pursuant to an accounting and
administrative agreement with the Trust. As compensation for its services, the
Administrator receives a fee at the annual rate of 0.075% of the average daily
net assets for the Institutional Shares and for Series A, Series C, and Series D
Investor Shares. The Administrator also receives a monthly fee of $1,750 for the
Institutional Shares and for Series A, Series C, and Series D Investor Shares
for accounting and recordkeeping services. Additionally, the Administrator
charges the Fund for servicing of shareholder accounts and registration of the
Fund's shares. The contract with the Administrator provides that the aggregate
fees for the aforementioned administration, accounting and recordkeeping
services shall not be less than $3,000 per month. The Administrator receives a
fee at the annual rate of 0.015% of average daily net assets for shareholder
administration costs. The Administrator also charges the Fund for certain
expenses involved with the daily valuation of portfolio securities. The
Administrator currently intends to reimburse expenses of the Super-Institutional
Class to limit total Super-Institutional Class operating expenses to 1.045% of
the average daily net assets of that class. There can be no assurance that the
foregoing voluntary expense reimbursements will continue.
Capital Investment Group, Inc. (the "Distributor") serves as the Fund's
principal underwriter and distributor. The Distributor receives any sales
charges imposed on purchases of shares and re-allocates a portion of such
charges to dealers through whom the sale was made, if any. For the period ended
August 31, 1997, the Distributor retained sales charges in the amount of $2,341.
Certain Trustees and officers of the Trust are also officers or directors of the
Advisor or the Administrator.
NOTE 3 - DEFERRED ORGANIZATION EXPENSES
Expenses totalling $66,799 incurred in connection with its organization and the
registration of its shares have been assumed by the Fund.
The organization expenses are being amortized over a period of sixty months.
Investors purchasing shares of the Fund bear such expenses only as they are
amortized against the Fund's investment income.
NOTE 4 - DISTRIBUTION AND SERVICE FEES
The Board of Trustees, including a majority of the Trustees who are not
"interested persons" of the Trust as defined in the Act, adopted a distribution
plan with respect to Investor Shares pursuant to Rule 12b-1 of the Act (the
"Plan"). Rule 12b-1 regulates the manner in which a regulated investment company
may assume costs of distributing and promoting the sales of its shares and
servicing of its shareholder accounts.
The Plan provides that the Fund may incur certain costs, which may not exceed
0.25%, 0.75% and 0.50% per annum of the average daily net assets of Series A,
Series C and Series D Investor Shares, respectively, for each year elapsed
subsequent to adoption of the Plan, for payment to the Distributor and others
for items such as advertising expenses, selling expenses, commissions, travel or
other expenses reasonably intended to result in sales of Investor Shares of the
Fund or support servicing of shareholder accounts.
(Continued)
<PAGE>
THE CHESAPEAKE FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1997
(Unaudited)
The Fund incurred $50,149, $20,841 and $27,311 in distribution and service fees
under the Plan with respect to Series A, Series C and Series D Investor Shares,
respectively, for the period ended August 31, 1997.
NOTE 5 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments other than short-term investments aggregated
$146,996,054 and $160,749,773, respectively, for the period ended August 31,
1997.
NOTE 6 - EXPENSE REDUCTIONS
The Advisor has transacted certain portfolio trades with brokers who paid a
portion of the fund's expenses. For the period ended August 31, 1997, the Fund's
expenses were reduced by $27,072 under this arrangement.
