------------------------------------------------------------------------------
THE CHESAPEAKE GROWTH FUND
------------------------------------------------------------------------------
a series of the Gardner Lewis Investment Trust
Annual Report 1998
FOR THE YEAR ENDED FEBRUARY 28
INVESTMENT ADVISOR
Gardner Lewis Asset Management
285 Wilmington-West Chester Pike
Chadds Ford, Pennsylvania 19317
THE CHESAPEAKE GROWTH FUND
107 North Washington Street
Post Office Drawer 4365
Rocky Mount, North Carolina 27803-0365
1-800-430-3863
<PAGE>
April 1, 1998
Dear Shareholder:
The Chesapeake Growth Fund Institutional Class closed the first quarter
with a gain of 13.3%. This gain compares to gains of 13.9%, 11.5%, and 10.1% for
the S&P 500, Nasdaq Industrials, and Russell 2000, respectively. This certainly
is a great way to start the year, but as the quarter began, the story was
different. Asia continued to dominate Wall Street headlines, broadcasts, and
trading rooms. This in turn created massive pessimism among market participants
and from our perspective provided a form of cover, ideal for ferreting out the
market's inefficiencies. As it relates to investing, whenever so much thought is
directed toward one conclusion there is usually opportunity in another.
There is no doubt that Asia is a significant problem, but there is
doubt that its impact will be so great as to result in U.S. companies doing no
business there. However, if you were to have looked at many Wall Street
analysts' earnings estimates for companies with exposure to Asia, you would have
discovered that in a large number of cases, assumptions for the region were cut
to zero. This, in our minds, certainly constituted a maximum point of pessimism,
a point reflected in stock prices as they bottomed in the middle of January.
Thus, it became our view that this pessimism had created opportunity. Many
lesser known but fundamentally sound companies, despite little or no exposure to
the region, had suffered stock price compression as money fled to the largest
most recognizable names.
In the last several months, it has been phenomenal to watch this flow
of funds which until recently had been almost solely directed at large
companies. This has occurred despite the fact that those smaller typically have
far less macroeconomic sensitivity, are growing faster, and are selling at more
reasonable valuations. The return data related to the market's capitalization
skew still amazes us. Its significance is best demonstrated by looking at the
Nasdaq which has the broadest range of company sizes. Its largest capitalization
quintile, dominated by the likes of Microsoft and Intel is the only one to have
had a positive return since the index's peak in October of 1997. The smallest
quintile was still behind by almost 13%. It is no wonder that through February
two-thirds of Nasdaq companies were trading below their October levels.
The effect of these large cap fund flows has been to force managers to
put money to work in a segment of the market selling at historic levels of
valuation. These flows are fueled both by the continued movement toward
indexation and the stronger relative performance of these larger companies.
Thus, in a sense, gains in this segment have been self-fulfilling, and to the
extent money continues to flow in, they can continue. However, this, stand
alone, is not enough for us. Instead, we as fundamentalists rely on the quality
and value of each individual investment that we make. We would not want money
flows to be the prop for our stock prices. And, our strong gains so far this
year demonstrate that individual companies can and will appreciate despite
significant money flow to other areas.
<PAGE>
This having been said, preliminary data suggests March to be an
entirely different picture. It appears as though flows to funds investing in
large companies have been sluggish while flows to those investing down cap have
risen dramatically. In addition, many active large cap managers have grown
increasingly uncomfortable with the prices of companies in their universe and
those with enough latitude to do so have begun to look down cap as well. These
facts coupled with the recognition of their superior valuation characteristics,
to be evidenced by coming quarterly earnings announcements, could be all that
the smaller and mid capitalization names need to once again lead in performance.
As the data above demonstrates, the market's advance has yet to truly
broaden. This to us means opportunity. Therefore, in conjunction with having
maintained ownership in the vast majority of our portfolio, knowing that as the
fundamentals become more clearly understood their stock prices will reflect
them, we have intensified our efforts to add to our portfolio more of what we
believe will be the market's next movers. This has led us to increase our
exposure to a variety of industry groups after having raised needed cash by
taking profits in some of our technology holdings whose multiples, despite Asia,
had expanded to the point that we thought them fully valued. For, we think with
interest rates no longer a catalyst for higher price-earnings ratios, and the
crisis in Asia along with other macroeconomic concerns making it dicey to be
blindly invested, earnings should finally drive this market. To that end, our
companies continue to grow in excess of 35% and sell at about 17 times earnings.
This compares to the S&P 500 which is growing at 8% and selling at more than 22
times earnings. Simply put, our companies are selling at less than half their
growth rates while the S&P is selling at more than twice its growth rate.
Already we have seen a seeming desire on the part of investors to refocus on
fundamentals. The forthcoming quarters should only further this movement.
Many exciting advancements and changes are taking place. As just one
example, a typical doctor's office doesn't look any different today than it did
perhaps twenty-five years ago, excepting its current absence of shag carpet.
But, a look into the guts of forward thinking medical practices reveals an
industry undergoing tremendous change. Thus the opportunity is ripe for the
fundamental investor. In order to compete in an environment of cost containment,
doctors are faced with the dilemma of delivering quality medical care at lower
cost. Public companies have been born of physicians' practices consolidating
into organizations yielding overhead synergies, multi-specialty synergies, and
higher patient throughputs. Public companies have sprung up to provide industry
specific software aimed at facilitating the overwhelming paper pushing burden.
And, management of resources from nursing staffs to medical supplies is being
outsourced to public companies eager to administer a doctor's entire practice.
The point is that many practices are now being run as efficient businesses built
on the best possible service at the most reasonable price, a model that will
allow both the forward looking physician and the patient community to win.
In coming quarters, we will continue our discovery and culling process,
always attempting to own the best companies at the most reasonable prices. This
should both protect our fundamental downside and maximize our upside potential.
Have a pleasant Spring!
Sincerely,
W. Whitfield Gardner John L. Lewis, IV
<PAGE>
April 1, 1998
Dear Shareholder:
The Chesapeake Growth Fund Series A closed the first quarter with a
gain of 13.2%. This gain compares to gains of 13.9%, 11.5%, and 10.1% for the
S&P 500, Nasdaq Industrials, and Russell 2000, respectively. This certainly is a
great way to start the year, but as the quarter began, the story was different.
Asia continued to dominate Wall Street headlines, broadcasts, and trading rooms.
This in turn created massive pessimism among market participants and from our
perspective provided a form of cover, ideal for ferreting out the market's
inefficiencies. As it relates to investing, whenever so much thought is directed
toward one conclusion there is usually opportunity in another.
There is no doubt that Asia is a significant problem, but there is
doubt that its impact will be so great as to result in U.S. companies doing no
business there. However, if you were to have looked at many Wall Street
analysts' earnings estimates for companies with exposure to Asia, you would have
discovered that in a large number of cases, assumptions for the region were cut
to zero. This, in our minds, certainly constituted a maximum point of pessimism,
a point reflected in stock prices as they bottomed in the middle of January.
Thus, it became our view that this pessimism had created opportunity. Many
lesser known but fundamentally sound companies, despite little or no exposure to
the region, had suffered stock price compression as money fled to the largest
most recognizable names.
In the last several months, it has been phenomenal to watch this flow
of funds which until recently had been almost solely directed at large
companies. This has occurred despite the fact that those smaller typically have
far less macroeconomic sensitivity, are growing faster, and are selling at more
reasonable valuations. The return data related to the market's capitalization
skew still amazes us. Its significance is best demonstrated by looking at the
Nasdaq which has the broadest range of company sizes. Its largest capitalization
quintile, dominated by the likes of Microsoft and Intel is the only one to have
had a positive return since the index's peak in October of 1997. The smallest
quintile was still behind by almost 13%. It is no wonder that through February
two-thirds of Nasdaq companies were trading below their October levels.
The effect of these large cap fund flows has been to force managers to
put money to work in a segment of the market selling at historic levels of
valuation. These flows are fueled both by the continued movement toward
indexation and the stronger relative performance of these larger companies.
Thus, in a sense, gains in this segment have been self-fulfilling, and to the
extent money continues to flow in, they can continue. However, this, stand
alone, is not enough for us. Instead, we as fundamentalists rely on the quality
and value of each individual investment that we make. We would not want money
flows to be the prop for our stock prices. And, our strong gains so far this
year demonstrate that individual companies can and will appreciate despite
significant money flow to other areas.
<PAGE>
This having been said, preliminary data suggests March to be an
entirely different picture. It appears as though flows to funds investing in
large companies have been sluggish while flows to those investing down cap have
risen dramatically. In addition, many active large cap managers have grown
increasingly uncomfortable with the prices of companies in their universe and
those with enough latitude to do so have begun to look down cap as well. These
facts coupled with the recognition of their superior valuation characteristics,
to be evidenced by coming quarterly earnings announcements, could be all that
the smaller and mid capitalization names need to once again lead in performance.
As the data above demonstrates, the market's advance has yet to truly
broaden. This to us means opportunity. Therefore, in conjunction with having
maintained ownership in the vast majority of our portfolio, knowing that as the
fundamentals become more clearly understood their stock prices will reflect
them, we have intensified our efforts to add to our portfolio more of what we
believe will be the market's next movers. This has led us to increase our
exposure to a variety of industry groups after having raised needed cash by
taking profits in some of our technology holdings whose multiples, despite Asia,
had expanded to the point that we thought them fully valued. For, we think with
interest rates no longer a catalyst for higher price-earnings ratios, and the
crisis in Asia along with other macroeconomic concerns making it dicey to be
blindly invested, earnings should finally drive this market. To that end, our
companies continue to grow in excess of 35% and sell at about 17 times earnings.
This compares to the S&P 500 which is growing at 8% and selling at more than 22
times earnings. Simply put, our companies are selling at less than half their
growth rates while the S&P is selling at more than twice its growth rate.
Already we have seen a seeming desire on the part of investors to refocus on
fundamentals. The forthcoming quarters should only further this movement.
Many exciting advancements and changes are taking place. As just one
example, a typical doctor's office doesn't look any different today than it did
perhaps twenty-five years ago, excepting its current absence of shag carpet.
But, a look into the guts of forward thinking medical practices reveals an
industry undergoing tremendous change. Thus the opportunity is ripe for the
fundamental investor. In order to compete in an environment of cost containment,
doctors are faced with the dilemma of delivering quality medical care at lower
cost. Public companies have been born of physicians' practices consolidating
into organizations yielding overhead synergies, multi-specialty synergies, and
higher patient throughputs. Public companies have sprung up to provide industry
specific software aimed at facilitating the overwhelming paper pushing burden.
And, management of resources from nursing staffs to medical supplies is being
outsourced to public companies eager to administer a doctor's entire practice.
The point is that many practices are now being run as efficient businesses built
on the best possible service at the most reasonable price, a model that will
allow both the forward looking physician and the patient community to win.
In coming quarters, we will continue our discovery and culling process,
always attempting to own the best companies at the most reasonable prices. This
should both protect our fundamental downside and maximize our upside potential.
Have a pleasant Spring!
Sincerely,
W. Whitfield Gardner John L. Lewis, IV
<PAGE>
April 1, 1998
Dear Shareholder:
The Chesapeake Growth Fund Series C closed the first quarter with a
gain of 12.7%. This gain compares to gains of 13.9%, 11.5%, and 10.1% for the
S&P 500, Nasdaq Industrials, and Russell 2000, respectively. This certainly is a
great way to start the year, but as the quarter began, the story was different.
Asia continued to dominate Wall Street headlines, broadcasts, and trading rooms.
This in turn created massive pessimism among market participants and from our
perspective provided a form of cover, ideal for ferreting out the market's
inefficiencies. As it relates to investing, whenever so much thought is directed
toward one conclusion there is usually opportunity in another.
There is no doubt that Asia is a significant problem, but there is
doubt that its impact will be so great as to result in U.S. companies doing no
business there. However, if you were to have looked at many Wall Street
analysts' earnings estimates for companies with exposure to Asia, you would have
discovered that in a large number of cases, assumptions for the region were cut
to zero. This, in our minds, certainly constituted a maximum point of pessimism,
a point reflected in stock prices as they bottomed in the middle of January.
Thus, it became our view that this pessimism had created opportunity. Many
lesser known but fundamentally sound companies, despite little or no exposure to
the region, had suffered stock price compression as money fled to the largest
most recognizable names.
In the last several months, it has been phenomenal to watch this flow
of funds which until recently had been almost solely directed at large
companies. This has occurred despite the fact that those smaller typically have
far less macroeconomic sensitivity, are growing faster, and are selling at more
reasonable valuations. The return data related to the market's capitalization
skew still amazes us. Its significance is best demonstrated by looking at the
Nasdaq which has the broadest range of company sizes. Its largest capitalization
quintile, dominated by the likes of Microsoft and Intel is the only one to have
had a positive return since the index's peak in October of 1997. The smallest
quintile was still behind by almost 13%. It is no wonder that through February
two-thirds of Nasdaq companies were trading below their October levels.
The effect of these large cap fund flows has been to force managers to
put money to work in a segment of the market selling at historic levels of
valuation. These flows are fueled both by the continued movement toward
indexation and the stronger relative performance of these larger companies.
Thus, in a sense, gains in this segment have been self-fulfilling, and to the
extent money continues to flow in, they can continue. However, this, stand
alone, is not enough for us. Instead, we as fundamentalists rely on the quality
and value of each individual investment that we make. We would not want money
flows to be the prop for our stock prices. And, our strong gains so far this
year demonstrate that individual companies can and will appreciate despite
significant money flow to other areas.
<PAGE>
This having been said, preliminary data suggests March to be an
entirely different picture. It appears as though flows to funds investing in
large companies have been sluggish while flows to those investing down cap have
risen dramatically. In addition, many active large cap managers have grown
increasingly uncomfortable with the prices of companies in their universe and
those with enough latitude to do so have begun to look down cap as well. These
facts coupled with the recognition of their superior valuation characteristics,
to be evidenced by coming quarterly earnings announcements, could be all that
the smaller and mid capitalization names need to once again lead in performance.
As the data above demonstrates, the market's advance has yet to truly
broaden. This to us means opportunity. Therefore, in conjunction with having
maintained ownership in the vast majority of our portfolio, knowing that as the
fundamentals become more clearly understood their stock prices will reflect
them, we have intensified our efforts to add to our portfolio more of what we
believe will be the market's next movers. This has led us to increase our
exposure to a variety of industry groups after having raised needed cash by
taking profits in some of our technology holdings whose multiples, despite Asia,
had expanded to the point that we thought them fully valued. For, we think with
interest rates no longer a catalyst for higher price-earnings ratios, and the
crisis in Asia along with other macroeconomic concerns making it dicey to be
blindly invested, earnings should finally drive this market. To that end, our
companies continue to grow in excess of 35% and sell at about 17 times earnings.
This compares to the S&P 500 which is growing at 8% and selling at more than 22
times earnings. Simply put, our companies are selling at less than half their
growth rates while the S&P is selling at more than twice its growth rate.
Already we have seen a seeming desire on the part of investors to refocus on
fundamentals. The forthcoming quarters should only further this movement.
Many exciting advancements and changes are taking place. As just one
example, a typical doctor's office doesn't look any different today than it did
perhaps twenty-five years ago, excepting its current absence of shag carpet.
But, a look into the guts of forward thinking medical practices reveals an
industry undergoing tremendous change. Thus the opportunity is ripe for the
fundamental investor. In order to compete in an environment of cost containment,
doctors are faced with the dilemma of delivering quality medical care at lower
cost. Public companies have been born of physicians' practices consolidating
into organizations yielding overhead synergies, multi-specialty synergies, and
higher patient throughputs. Public companies have sprung up to provide industry
specific software aimed at facilitating the overwhelming paper pushing burden.
And, management of resources from nursing staffs to medical supplies is being
outsourced to public companies eager to administer a doctor's entire practice.
The point is that many practices are now being run as efficient businesses built
on the best possible service at the most reasonable price, a model that will
allow both the forward looking physician and the patient community to win.
In coming quarters, we will continue our discovery and culling process,
always attempting to own the best companies at the most reasonable prices. This
should both protect our fundamental downside and maximize our upside potential.
Have a pleasant Spring!
Sincerely,
W. Whitfield Gardner John L. Lewis, IV
<PAGE>
April 1, 1998
Dear Shareholder:
The Chesapeake Growth Fund Series D closed the first quarter with a
gain of 13.0%. This gain compares to gains of 13.9%, 11.5%, and 10.1% for the
S&P 500, Nasdaq Industrials, and Russell 2000, respectively. This certainly is a
great way to start the year, but as the quarter began, the story was different.
Asia continued to dominate Wall Street headlines, broadcasts, and trading rooms.
This in turn created massive pessimism among market participants and from our
perspective provided a form of cover, ideal for ferreting out the market's
inefficiencies. As it relates to investing, whenever so much thought is directed
toward one conclusion there is usually opportunity in another.
There is no doubt that Asia is a significant problem, but there is
doubt that its impact will be so great as to result in U.S. companies doing no
business there. However, if you were to have looked at many Wall Street
analysts' earnings estimates for companies with exposure to Asia, you would have
discovered that in a large number of cases, assumptions for the region were cut
to zero. This, in our minds, certainly constituted a maximum point of pessimism,
a point reflected in stock prices as they bottomed in the middle of January.
Thus, it became our view that this pessimism had created opportunity. Many
lesser known but fundamentally sound companies, despite little or no exposure to
the region, had suffered stock price compression as money fled to the largest
most recognizable names.
In the last several months, it has been phenomenal to watch this flow
of funds which until recently had been almost solely directed at large
companies. This has occurred despite the fact that those smaller typically have
far less macroeconomic sensitivity, are growing faster, and are selling at more
reasonable valuations. The return data related to the market's capitalization
skew still amazes us. Its significance is best demonstrated by looking at the
Nasdaq which has the broadest range of company sizes. Its largest capitalization
quintile, dominated by the likes of Microsoft and Intel is the only one to have
had a positive return since the index's peak in October of 1997. The smallest
quintile was still behind by almost 13%. It is no wonder that through February
two-thirds of Nasdaq companies were trading below their October levels.
The effect of these large cap fund flows has been to force managers to
put money to work in a segment of the market selling at historic levels of
valuation. These flows are fueled both by the continued movement toward
indexation and the stronger relative performance of these larger companies.
Thus, in a sense, gains in this segment have been self-fulfilling, and to the
extent money continues to flow in, they can continue. However, this, stand
alone, is not enough for us. Instead, we as fundamentalists rely on the quality
and value of each individual investment that we make. We would not want money
flows to be the prop for our stock prices. And, our strong gains so far this
year demonstrate that individual companies can and will appreciate despite
significant money flow to other areas.
<PAGE>
This having been said, preliminary data suggests March to be an
entirely different picture. It appears as though flows to funds investing in
large companies have been sluggish while flows to those investing down cap have
risen dramatically. In addition, many active large cap managers have grown
increasingly uncomfortable with the prices of companies in their universe and
those with enough latitude to do so have begun to look down cap as well. These
facts coupled with the recognition of their superior valuation characteristics,
to be evidenced by coming quarterly earnings announcements, could be all that
the smaller and mid capitalization names need to once again lead in performance.
As the data above demonstrates, the market's advance has yet to truly
broaden. This to us means opportunity. Therefore, in conjunction with having
maintained ownership in the vast majority of our portfolio, knowing that as the
fundamentals become more clearly understood their stock prices will reflect
them, we have intensified our efforts to add to our portfolio more of what we
believe will be the market's next movers. This has led us to increase our
exposure to a variety of industry groups after having raised needed cash by
taking profits in some of our technology holdings whose multiples, despite Asia,
had expanded to the point that we thought them fully valued. For, we think with
interest rates no longer a catalyst for higher price-earnings ratios, and the
crisis in Asia along with other macroeconomic concerns making it dicey to be
blindly invested, earnings should finally drive this market. To that end, our
companies continue to grow in excess of 35% and sell at about 17 times earnings.
This compares to the S&P 500 which is growing at 8% and selling at more than 22
times earnings. Simply put, our companies are selling at less than half their
growth rates while the S&P is selling at more than twice its growth rate.
Already we have seen a seeming desire on the part of investors to refocus on
fundamentals. The forthcoming quarters should only further this movement.
Many exciting advancements and changes are taking place. As just one
example, a typical doctor's office doesn't look any different today than it did
perhaps twenty-five years ago, excepting its current absence of shag carpet.
But, a look into the guts of forward thinking medical practices reveals an
industry undergoing tremendous change. Thus the opportunity is ripe for the
fundamental investor. In order to compete in an environment of cost containment,
doctors are faced with the dilemma of delivering quality medical care at lower
cost. Public companies have been born of physicians' practices consolidating
into organizations yielding overhead synergies, multi-specialty synergies, and
higher patient throughputs. Public companies have sprung up to provide industry
specific software aimed at facilitating the overwhelming paper pushing burden.
And, management of resources from nursing staffs to medical supplies is being
outsourced to public companies eager to administer a doctor's entire practice.
The point is that many practices are now being run as efficient businesses built
on the best possible service at the most reasonable price, a model that will
allow both the forward looking physician and the patient community to win.
In coming quarters, we will continue our discovery and culling process,
always attempting to own the best companies at the most reasonable prices. This
should both protect our fundamental downside and maximize our upside potential.
Have a pleasant Spring!
Sincerely,
W. Whitfield Gardner John L. Lewis, IV
<PAGE>
THE CHESAPEAKE GROWTH FUND
Super-Institutional Shares
Performance Update - $50,000,000 Investment
For the period from June 12, 1996 (commencement of operations) to February 28,
1998
Chesapeake Fund
Super Inst S&P 500 NASDAQ
Shares Total Return Ind Index
6/12/96 50,000,000.00 50,000,000.00 50,000,000.00
6/30/96 46,361,880.00 50,145,489.00 47,710,503.00
7/31/96 42,144,237.00 47,929,797.00 42,422,054.00
8/31/96 44,816,484.00 48,940,746.00 45,188,818.00
9/30/96 48,744,366.00 51,695,941.00 47,647,561.00
10/31/96 48,776,561.00 53,121,406.00 46,327,320.00
11/30/96 51,513,200.00 56,981,759.00 48,033,613.00
12/31/96 51,191,243.00 56,004,738.00 47,786,797.00
1/31/97 53,509,337.00 59,503,381.00 49,921,942.00
2/28/97 52,446,877.00 59,969,752.00 47,256,720.00
3/31/97 50,096,587.00 57,506,785.66 43,899,542.55
4/30/97 50,096,587.00 60,938,721.99 43,006,837.88
5/31/97 55,730,844.00 64,648,985.60 48,958,650.86
6/30/97 58,338,699.00 67,545,544.46 51,065,308.56
7/31/97 64,037,347.00 72,920,021.16 54,440,546.36
8/31/97 64,713,458.00 68,834,820.81 55,463,314.83
9/30/97 68,963,297.00 72,604,315.22 59,414,809.79
10/31/97 63,650,998.00 70,179,877.63 54,825,038.09
11/30/97 62,649,033.00 73,428,370.98 54,059,331.06
12/31/97 59,164,455.00 74,689,469.57 52,813,061.74
1/31/98 59,861,371.00 75,916,639.83 52,468,682.33
2/28/98 65,766,812.00 80,962,184.29 56,725,008.09
This graph depicts the performance of The Chesapeake Growth Fund
Super-Institutional Shares versus the NASDAQ Industrials Index and the S&P 500
Total Return Index. It is important to note that The Chesapeake Growth Fund is a
professionally managed mutual fund while the indexes are not available for
investment and are unmanaged. The comparison is shown for illustrative purposes
only.
Annualized Total Return
- ---------------------------------------------------
Since Inception One Year
- ---------------------------------------------------
17.36% 25.40%
- ---------------------------------------------------
The graph assumes an initial $50,000,000 investment at June 12, 1996. All
dividends and distributions are reinvested.
At February 28, 1998, the Super-Institutional Shares of the Fund would have
grown to $65,766,812 - total investment return of 31.53% since June 12, 1996.
At February 28, 1998, a similar investment in the NASDAQ Industrials Index would
have been worth $56,725,008 - total investment return of 13.45%; while a similar
investment in the S&P 500 Total Return Index would have grown to $80,962,184
total investment return of 61.92% since June 12, 1996.
Past performance is not a guarantee of future results. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost. Average annual returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming
reinvestments of dividends.
<PAGE>
THE CHESAPEAKE GROWTH FUND
Institutional Shares
Performance Update - $1,000,000 Investment
For the period from April 6,1994 (commencement of operations) to February 28,
1998
Chesapeake S&P 500 NASDAQ
Institutional Total Return Industrial
Shares Index Index
4/6/94 1,000,000.00 1,000,000.00 1,000,000.00
5/31/94 1,013,000.00 1,023,703.00 947,950.00
8/31/94 1,058,200.00 1,073,692.00 979,838.00
11/31/94 1,081,100.00 1,031,962.00 961,061.00
2/28/95 1,128,600.00 1,116,296.00 988,000.00
5/31/95 1,247,000.00 1,230,372.00 1,053,310.00
8/31/95 1,535,000.00 1,303,973.00 1,226,306.00
11/30/95 1,467,366.00 1,413,574.18 1,240,874.00
2/29/96 1,463,316.00 1,503,656.41 1,287,605.00
5/31/96 1,571,672.00 1,580,240.85 1,516,725.00
8/31/96 1,408,631.00 1,548,169.98 1,347,959.00
11/30/96 1,618,255.00 1,802,535.84 1,432,818.00
2/28/97 1,646,610.00 1,897,056.68 1,409,644.00
5/31/97 1,748,889.93 2,045,077.49 1,460,157.90
8/31/97 2,030,413.61 2,177,490.36 1,654,155.00
11/30/97 1,965,453.51 2,322,800.70 1,612,282.16
2/28/98 2,062,398.96 2,561,122.03 1,691,784.13
This graph depicts the performance of The Chesapeake Growth Fund Institutional
Shares versus the NASDAQ Industrials Index and the S&P 500 Total Return Index.
It is important to note that The Chesapeake Growth Fund is a professionally
managed mutual fund while the indexes are not available for investment and are
unmanaged. The comparison is shown for illustrative purposes only.
Annualized Total Return
- ------------------------------------------------------
Since Inception One Year Three Years
- ------------------------------------------------------
20.39% 25.25% 22.24%
- ------------------------------------------------------
The graph assumes an initial $1,000,000 investment at April 6, 1994. All
dividends and distributions are reinvested.
At February 28, 1998, the Institutional Shares of the Fund would have grown to
$2,062,399 - total investment return of 106.24% since April 6, 1994.
At February 28, 1998, a similar investment in the NASDAQ Industrials Index would
have grown to $1,691,784 - total investment return of 69.18%; while a similar
investment in the S&P 500 Total Return Index would have grown to $2,561,122 -
total investment return of 156.11% since April 6, 1994.
Past performance is not a guarantee of future results. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost. Average annual returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming
reinvestments of dividends.
<PAGE>
THE CHESAPEAKE GROWTH FUND
Series A Investor Shares
Performance Update - $25,000 Investment
For the period from April 7,1995 (commencement of operations) to February 28,
1998
Chesapeake Fund NASDAQ S&P 500
Series A Ind Index Total Return Index
4/7/95 24,250.00 25,000.00 25,000.00
5/31/95 25,628.00 25,834.00 26,443.00
8/31/95 31,572.00 30,077.00 28,025.00
11/30/95 30,140.00 30,434.00 32,020.00
2/29/96 30,036.00 31,580.00 33,109.00
5/31/96 32,244.00 37,200.00 33,963.00
8/31/96 28,890.00 33,061.00 33,274.00
11/31/96 33,139.00 35,142.00 38,741.00
2/28/97 33,702.00 34,574.00 40,772.00
5/31/97 35,784.79 35,812.53 43,983.30
8/31/97 41,492.03 40,570.59 46,799.15
11/31/97 40,136.35 39,543.60 49,922.20
2/28/98 42,061.19 41,493.50 55,044.26
This graph depicts the performance of The Chesapeake Growth Fund Series A
Investor Shares versus the NASDAQ Industrials Index and the S&P 500 Total Return
Index. It is important to note that The Chesapeake Growth Fund is a
professionally managed mutual fund while the indexes are not available for
investment and are unmanaged. The comparison is shown for illustrative purposes
only.
Annualized Total Return
- --------------------------------------------------------------
Since Inception One Year
- --------------------------------------------------------------
No Sales Load 20.92% 24.80%
- --------------------------------------------------------------
With 3.0% Sales Load 19.66% 21.06%
- --------------------------------------------------------------
The graph assumes an initial $25,000 investment at April 7, 1995 ($24,250 after
maximum sales load of 3%). All dividends and distributions are reinvested.
At February 28, 1998, the Series A Investor Shares of the Fund would have grown
to $42,061 - total investment return of 68.24% since April 7, 1995. Without the
deduction of the 3% maximum sales load, the Series A Investor Shares of the Fund
would have grown to $43,362 - total investment return of 73.45% since April 7,
1995. The sales load may be reduced or eliminated for larger purchases.
At February 28, 1998, a similar investment in the NASDAQ Industrials Index would
have grown to $41,494 - total investment return of 65.97%; while a similar
investment in the S&P 500 Total Return Index would have grown to $55,044 - total
investment return of 120.18% since April 7, 1995.
Past performance is not a guarantee of future results. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost. Average annual returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming
reinvestments of dividends.
<PAGE>
THE CHESAPEAKE GROWTH FUND
Series C Investor Shares
Performance Update - $25,000 Investment
For the period from April 7,1995 (commencement of operations) to February 28,
1998
Chesapeake Fund NASDAQ S&P 500
Serties C Ind Index Total Return Index
4/7/95 25,000.00 25,000.00 25,000.00
5/31/95 26,421.00 25,834.00 26,443.00
8/31/95 32,528.00 30,077.00 28,025.00
11/30/95 30,966.00 30,434.00 32,020.00
2/29/96 30,794.00 31,580.00 33,109.00
5/31/96 33,028.00 37,200.00 33,963.00
8/31/96 29,506.00 33,061.00 33,274.00
11/30/96 33,779.00 35,142.00 38,741.00
2/28/97 34,273.00 34,574.00 40,772.00
5/31/97 36,291.80 35,812.53 43,983.30
8/31/97 41,982.53 40,570.59 46,799.15
11/31/97 40,367.70 39,543.60 49,922.20
2/28/98 42,137.78 41,493.50 55,044.26
This graph depicts the performance of The Chesapeake Growth Fund Series C
Investor Shares versus the NASDAQ Industrials Index and the S&P 500 Total Return
Index. It is important to note that The Chesapeake Growth Fund is a
professionally managed mutual fund while the indexes are not available for
investment and are unmanaged. The comparison is shown for illustrative purposes
only.
Annualized Total Return
- --------------------------------------------------
Since Inception One Year
- --------------------------------------------------
NO SALES LOAD 19.73% 22.95%
- --------------------------------------------------
The graph assumes an initial $25,000 investment at April 7, 1995. All dividends
and distributions are reinvested.
At February 28, 1998, the Series C Investor Shares of the Fund would have grown
to $42,138 - total investment return of 68.55% since April 7, 1995.
At February 28, 1998, a similar investment in the NASDAQ Industrials Index would
have grown to $41,494 - total investment return of 65.79%; while a similar
investment in the S&P 500 Total Return Index would have grown to $55,044 - total
investment return of 120.18% since April 7, 1995.
Past performance is not a guarantee of future results. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost. Average annual returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming
reinvestments of dividends.
<PAGE>
THE CHESAPEAKE GROWTH FUND
Series D Investor Shares
Performance Update - $25,000 Investment
For the period from April 7,1995 (commencement of operations) to February 28,
1998
Chesapeake Fund NASDAQ S&P 500
Series A Ind Index Total Return Index
4/7/95 24,625.00 25,000.00 25,000.00
5/31/95 26,045.00 25,834.00 26,443.00
8/31/95 32,040.00 30,077.00 28,025.00
11/30/95 30,606.00 30,434.00 32,020.00
2/29/96 30,479.00 31,580.00 33,109.00
5/31/96 32,700.00 37,200.00 33,963.00
8/31/96 29,231.00 33,061.00 33,274.00
11/30/96 33,504.00 35,142.00 38,741.00
2/28/97 34,012.00 34,574.00 40,772.00
5/31/97 36,084.35 35,812.53 43,983.30
8/31/97 41,795.24 40,570.59 46,799.15
11/31/97 40,310.49 39,543.60 49,922.20
2/28/98 42,195.51 41,493.50 55,044.26
This graph depicts the performance of The Chesapeake Growth Fund Series D
Investor Shares versus the NASDAQ Industrials Index and the S&P 500 Total Return
Index. It is important to note that The Chesapeake Growth Fund is a
professionally managed mutual fund while the indexes are not available for
investment and are unmanaged. The comparison is shown for illustrative purposes
only.
Annualized Total Return
- --------------------------------------------------------------
Since Inception One Year
- --------------------------------------------------------------
No Sales Load 20.42% 24.06%
- --------------------------------------------------------------
With 1.5% Sales Load 19.79% 22.20%
- ---------------------------------------------------------------
The graph assumes an initial $25,000 investment at April 7, 1995 ($24,625 after
maximum sales load of 1.5%). All dividends and distributions are reinvested.
At February 28, 1998, the Series D Investor Shares of the Fund would have grown
to $42,195.51 - total investment return of 68.78% since April 7, 1995. Without
the deduction of the 1.5% maximum sales load, the Series D Investor Shares of
the Fund would have grown to $42,838.08 - total investment return of 71.35%
since April 7, 1995. The sales load may be reduced or eliminated for larger
purchases.
At February 28, 1998, a similar investment in the NASDAQ Industrials Index would
have grown to $41,493.50 - total investment return of 65.79%; while a similar
investment in the S&P 500 Total Return Index would have grown to $55,044.26 -
total investment return of 120.18% since April 7, 1995.
Past performance is not a guarantee of future results. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost. Average annual returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming
reinvestments of dividends.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 28, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 98.02%
Aerospace & Defense - 1.85%
(a) BE Aerospace, Inc. ................................................... 77,400 $ 2,278,462
(a) Gulfstream Aerospace Corporation ..................................... 65,900 2,668,950
-----------
4,947,412
-----------
Apparel Manufacturing - 8.29%
(a) Jones Apparel Group, Inc. ............................................ 191,100 10,486,613
Liz Claiborne, Inc. .................................................. 79,200 3,960,000
(a) Nautica Enterprises, Inc. ............................................ 154,700 4,457,294
The Warnaco Group, Inc. .............................................. 89,300 3,315,263
-----------
22,219,170
-----------
Auto Parts - Replacement Equipment - 2.02%
Federal-Mogul Corporation ............................................ 110,500 5,421,406
-----------
Commercial Services - 1.08%
(a) CORESTAFF, Inc. ...................................................... 93,000 2,900,438
-----------
Computers - 9.51%
(a) Adaptec, Inc. ........................................................ 175,300 4,634,493
Compaq Computer Corporation .......................................... 97,240 3,129,913
(a) EMC Corporation ...................................................... 294,700 11,106,506
(a) Quantum Corporation .................................................. 76,900 1,932,113
(a) Sun Microsystems, Inc. ............................................... 98,100 4,672,013
-----------
25,475,038
-----------
Computer Software & Services - 6.52%
(a) BMC Software, Inc. ................................................... 41,400 3,167,100
(a) Cadence Design Systems, Inc. ......................................... 78,400 2,739,100
(a) Ceridian Corporation ................................................. 75,500 3,515,468
(a) Structural Dynamics Research Corporation ............................. 116,500 3,349,375
(a) Symantec Corporation ................................................. 103,200 2,599,350
System Software Associates, Inc. ..................................... 283,900 2,111,506
-----------
17,481,899
-----------
Electronics - 1.96%
(a) SCI Systems, Inc. .................................................... 58,200 2,619,000
(a) The DII Group, Inc. .................................................. 99,500 2,636,750
-----------
5,255,750
-----------
Electronics - Semiconductor - 4.04%
(a) Kulicke and Soffa Industries, Inc. ................................... 62,100 1,723,275
(a) LSI Logic Corporation ................................................ 47,800 1,132,262
(a) National Semiconductor Corporation ................................... 60,900 1,453,987
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 28, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Electronics - Semiconductor - (Continued)
(a) Novellus Systems, Inc. ................................................. 29,800 $ 1,428,537
(a) Teradyne, Inc. ......................................................... 108,000 5,096,250
-----------
10,834,311
-----------
Entertainment - 1.10%
(a) Signature Resorts, Inc. ................................................ 142,250 2,951,688
-----------
Environmental Control - 1.44%
(a) USA Waste Services, Inc. ............................................... 93,000 3,871,125
-----------
Food - Wholesale - 0.87%
(a) Keebler Foods Company .................................................. 74,200 2,328,025
-----------
Foreign Securities - 2.73%
ECI Telecommunications Limited ......................................... 118,900 3,455,531
(a) Petroleum Geo-Services - ADR ........................................... 67,700 3,841,975
-----------
7,297,506
-----------
Insurance - Multiline - 1.54%
Allmerica Financial Corporation ........................................ 67,200 4,132,800
-----------
Machine - Diversified - 1.00%
(a) Coltec Industries, Inc. ................................................ 103,100 2,687,043
-----------
Marketing Information Services - 1.21%
Cognizant Corporation .................................................. 64,900 3,240,944
-----------
Medical - Hospital Management & Services - 8.19%
(a) Genesis Health Ventures, Inc. .......................................... 94,100 2,728,900
(a) HEALTHSOUTH Corporation ................................................ 94,800 2,565,525
Integrated Health Services, Inc. ....................................... 112,300 3,811,181
(a) PhyCor, Inc. ........................................................... 110,400 2,839,344
Tenet Healthcare Corporation ........................................... 127,100 4,742,419
United Healthcare Corporation .......................................... 86,600 5,255,538
-----------
21,942,907
-----------
Medical Supplies - 1.77%
Biomet, Inc. ........................................................... 159,300 4,749,131
-----------
Office & Business Equipment - 1.45%
(a) U.S. Office Products Company ........................................... 209,900 3,883,150
-----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 28, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Oil & Gas - Equipment & Services - 6.30%
(a) BJ Services Company ................................................ 80,600 $ 2,770,625
(a) Global Industries Ltd. ............................................. 237,600 4,098,600
(a) Pride International, Inc. .......................................... 94,800 2,162,625
(a) Rowan Companies, Inc. .............................................. 99,100 2,793,381
Transocean Offshore Inc. ........................................... 32,100 1,392,337
(a) Varco International, Inc. .......................................... 147,100 3,659,113
-----------
16,876,681
-----------
Oil & Gas - Exploration - 0.96%
(a) J. Ray McDermott, S.A .............................................. 60,500 2,571,250
-----------
Pharmaceuticals - 5.31%
(a) Forest Laboratories, Inc. .......................................... 65,400 4,091,588
Jones Medical Industries, Inc. ..................................... 96,600 3,586,275
Mylan Laboratories Inc. ............................................ 200,900 4,093,338
(a) Watson Pharmeuticals, Inc. ......................................... 68,600 2,461,025
-----------
14,232,226
-----------
Restaurants & Food Service - 1.28%
CKE Restaurants, Inc. .............................................. 81,070 3,440,408
-----------
Retail - Automotive Parts - 1.46%
(a) AutoZone, Inc. ..................................................... 129,100 3,905,275
-----------
Retail - Department Stores - 4.96%
(a) Consolidated Stores Corporation .................................... 67,156 2,761,791
(a) Fred Meyer, Inc. ................................................... 149,200 6,630,075
(a) Proffitt's, Inc. ................................................... 114,800 3,888,850
-----------
13,280,716
-----------
Retail - Grocery - 0.98%
American Stores Company ............................................ 104,400 2,629,575
-----------
Retail - Specialty Line - 2.93%
(a) Borders Group, Inc. ................................................ 80,300 2,674,993
(a) Cole National Corporation .......................................... 82,000 2,752,125
Heilig-Meyers Company .............................................. 156,300 2,422,650
-----------
7,849,768
-----------
Shoes - Leather - 2.67%
(a) Nine West Group Inc. ............................................... 92,100 2,532,750
Wolverine World Wide, Inc. ......................................... 164,400 4,623,750
-----------
7,156,500
-----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 28, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Telecommunications - 2.49%
(a) DSP Communications, Inc. .............................................. 127,400 $ 2,253,387
(a) Premiere Technologies, Inc. ........................................... 87,400 2,742,175
(a) Tel-Save Holdings, Inc. ............................................... 60,500 1,675,094
-------------
6,670,656
-------------
Telecommunications Equipment - 3.29%
(a) Cable Design Technologies ............................................. 92,550 2,689,734
(a) DSC Communications Corporation ........................................ 96,500 1,893,813
(a) General Cable Corporation ............................................. 102,200 4,234,913
-------------
8,818,460
-------------
Textiles - 0.99%
(a) Mohawk Industries, Inc. ............................................... 101,500 2,664,375
-------------
Transportation - Air - 1.74%
Airborne Freight Corporation .......................................... 66,800 2,417,325
Comair Holdings, Inc. ................................................. 84,800 2,257,800
-------------
4,675,125
-------------
Utilities - Electric - 2.31%
(a) CalEnergy Company, Inc. ............................................... 231,000 6,193,687
-------------
Utilities - Telecommunications - 2.41%
(a) WorldCom, Inc. ........................................................ 169,400 6,468,963
-------------
Utilities - Water - 1.37%
(a) US Filter Corporation ................................................. 108,100 3,668,644
-------------
Total Common Stocks (Cost $210,637,903) ............................... 262,722,052
-------------
INVESTMENT COMPANY - 2.89%
Evergreen Money Market Treasury Institutional Money ........................ 7,727,137 7,727,137
-------------
Market Fund Institutional Service Shares
(Cost $7,727,137)
Total Value of Investments (Cost $218,365,040 (b)) ................................ 100.91% $ 270,449,189
Liabilities In Excess of Other Assets ............................................. (0.91)% (2,432,264)
------------- -------------
Net Assets ................................................................. 100.00% $ 268,016,925
============= =============
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 28, 1998
(a) Non-income producing investment.
(b) Aggregate cost for federal income tax purposes is $218,737,760. Unrealized appreciation (depreciation) of investments
for federal income tax purposes is as follows:
Unrealized appreciation $63,211,317
Unrealized depreciation (11,499,888)
----------------
Net unrealized appreciation $51,711,429
================
The following acronym is used in this portfolio:
ADR - American Depository Receipt
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1998
ASSETS
Investments, at value (cost $218,365,040) ....................................................... $270,449,189
Income receivable ............................................................................... 82,503
Receivable for investments sold ................................................................. 5,166,778
Receivable for fund shares sold ................................................................. 1,970
Deferred organization expenses, net (note 3) .................................................... 8,636
Due from administrator (note 2) ................................................................. 30,887
Other assets .................................................................................... 14,422
------------
Total assets ............................................................................... 275,754,385
------------
LIABILITIES
Accrued expenses ................................................................................ 85,224
Payable for investment purchases ................................................................ 7,551,666
Payable for fund shares redeemed ................................................................ 100,000
Disbursements in excess of cash on demand deposit ............................................... 570
------------
Total liabilities .......................................................................... 7,737,460
------------
NET ASSETS ............................................................................................. $268,016,925
============
NET ASSETS CONSIST OF
Paid-in capital ................................................................................. $210,487,681
Undistributed net realized gain on investments .................................................. 5,445,095
Net unrealized appreciation on investments ...................................................... 52,084,149
------------
$268,016,925
============
INSTITUTIONAL SHARES
Net asset value, redemption and offering price per share
($92,857,905 / 5,199,166 shares outstanding) ............................................... $ 17.86
============
SERIES A INVESTOR SHARES
Net asset value, redemption and offering price per share
($40,923,832 / 2,313,441 shares outstanding) ............................................... $ 17.69
============
Maximum offering price per share (100 / 97 of $17.69) ........................................... $ 18.24
============
SERIES C INVESTOR SHARES
Net asset value, redemption and offering price per share
($4,541,223 / 265,318 shares outstanding) .................................................. $ 17.12
============
SERIES D INVESTOR SHARES
Net asset value, redemption and offering price per share
($11,447,923 / 656,142 shares outstanding) ................................................. $ 17.45
============
Maximum offering price per share (100 / 98.5 of $17.45) ......................................... $ 17.71
============
SUPER-INSTITUTIONAL SHARES
Net asset value, redemption and offering price per share
($118,246,042 / 6,599,065 shares outstanding) .............................................. $ 17.92
============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE GROWTH FUND
STATEMENT OF OPERATIONS
Year ended February 28, 1998
INVESTMENT LOSS
Income
Interest ....................................................................................... $ 404,134
Dividends ...................................................................................... 322,749
------------
Total income .............................................................................. 726,883
------------
Expenses
Investment advisory fees (note 2) .............................................................. 2,532,147
Fund administration fees (note 2) .............................................................. 125,209
Distribution fees - Series A (note 4) .......................................................... 101,946
Distribution fees - Series C (note 4) .......................................................... 41,669
Distribution fees - Series D (note 4) .......................................................... 62,905
Custody fees ................................................................................... 19,604
Registration and filing administration fees (note 2) ........................................... 23,581
Fund accounting fees (note 2) .................................................................. 84,000
Audit fees ..................................................................................... 14,300
Legal fees ..................................................................................... 16,143
Securities pricing fees ........................................................................ 5,529
Shareholder administration fees ................................................................ 59,291
Shareholder recordkeeping fees ................................................................. 22,464
Shareholder servicing expenses ................................................................. 14,909
Registration and filing expenses ............................................................... 28,540
Printing expenses .............................................................................. 24,423
Amortization of deferred organization expenses (note 3) ........................................ 13,181
Trustee fees and meeting expenses .............................................................. 9,957
Other operating expenses ....................................................................... 30,412
------------
Total expenses ............................................................................ 3,230,210
------------
Less:
Expense reimbursements - Super-Institutional Class (note 2) ......................... (14,785)
Expense reductions (note 6) ......................................................... (26,313)
Shareholder administration fees waived (note 2) ..................................... (25,000)
------------
Net expenses .............................................................................. 3,164,112
------------
Net investment loss ................................................................. (2,437,229)
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investment transactions ...................................................... 34,915,833
Increase in unrealized appreciation on investments .................................................. 22,557,525
------------
Net realized and unrealized gain on investments ................................................ 57,473,358
------------
Net increase in net assets resulting from operations ...................................... $ 55,036,129
============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Year ended Year ended
February 28, February 28,
1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net investment loss ..................................................... $(2,437,229) $(1,866,690)
Net realized gain from investment transactions .......................... 34,915,833 4,887,131
Increase in unrealized appreciation on investments ...................... 22,557,525 17,077,631
------------- -------------
Net increase in net assets resulting from operations ............... 55,036,129 20,098,072
------------- -------------
Distributions to shareholders from
Tax return of capital ................................................... (7,366,935) 0
Net realized gain from investment transactions .......................... (26,747,385) 0
------------- -------------
Decrease in net assets resulting from distributions ................ (34,114,320) 0
------------- -------------
Capital share transactions
Increase in net assets resulting from capital share transactions (a) .... 15,554,185 78,804,804
------------- -------------
Total increase in net assets .................................. 36,475,994 98,902,876
NET ASSETS
Beginning of year ........................................................... 231,540,931 132,638,055
------------- -------------
End of year ................................................................. $ 268,016,925 $ 231,540,931
============= =============
(a) A summary of capital share activity follows:
-----------------------------------------------------------------------
Year ended Year ended
February 28, 1998 February 28, 1997
Shares Value Shares Value
-----------------------------------------------------------------------
- --------------------------------------------------------
Institutional Shares
- --------------------------------------------------------
Shares sold ............................................ 1,051,514 $ 19,879,652 1,194,039 $ 17,551,689
Shares issued for reinvestment of distributions ........ 700,580 12,393,286 0 0
Shares redeemed ........................................ (1,340,894) (23,569,381) (1,960,761) (29,179,867)
------------- ------------- ------------- -------------
Net increase (decrease) ........................... 411,200 $ 8,703,557 (766,722)$ $ (11,628,178)
============= ============= ============= =============
- --------------------------------------------------------
Series A Shares
- --------------------------------------------------------
Shares sold ............................................ 530,549 $ 9,940,125 886,587 $ 13,180,184
Shares issued for reinvestment of distributions ........ 285,571 5,008,907 0 0
Shares redeemed ........................................ (936,063) (17,142,515) (711,164) (10,814,500)
------------- ------------- ------------- -------------
Net increase (decrease) ........................... (119,943) $ (2,193,483) 175,423 $ 2,365,684
============= ============= ============= =============
- --------------------------------------------------------
Series C Shares
- --------------------------------------------------------
Shares sold ............................................ 51,400 $ 892,071 51,704 $ 764,137
Shares issued for reinvestment of distributions ........ 30,187 514,986 0 0
Shares redeemed ........................................ (391,932) (6,437,614) (27,426) (414,118)
------------- ------------- ------------- -------------
Net increase (decrease) ........................... (310,345) $ (5,030,557) 24,278 $ 350,019
============= ============= ============= =============
- --------------------------------------------------------
Series D Shares
- --------------------------------------------------------
Shares sold ............................................ 21,553 $ 358,036 80,650 $ 1,210,179
Shares issued for reinvestment of distributions ........ 81,859 1,418,612 0 0
Shares redeemed ........................................ (116,844) (2,013,186) (239,185) (3,492,900)
------------- ------------- ------------- -------------
Net decrease ..................................... (13,432) $ (236,538) (158,535) $ (2,282,721)
============= ============= ============= =============
- --------------------------------------------------------
Super-Institutional Shares
- --------------------------------------------------------
Shares sold ............................................ 0 $ 0 5,792,346 $ 90,000,000
Shares issued for reinvestment of distributions ........ 806,720 14,311,206 0 0
Shares redeemed ........................................ 0 0 0 0
------------- ------------- ------------- -------------
Net increase ...................................... 806,720 $ 14,311,206 5,792,346 $ 90,000,000
============= ============= ============= =============
- --------------------------------------------------------
Fund Summary
- --------------------------------------------------------
Shares sold ............................................ 1,655,016 $ 31,069,884 8,005,326 $ 122,706,189
Shares issued for reinvestment of distributions ........ 1,904,917 33,646,997 0 0
Shares redeemed ........................................ (2,785,733) (49,162,696) (2,938,536) (43,901,385)
------------- ------------- ------------- -------------
Net increase ...................................... 774,200 $ 15,554,185 5,066,790 $ 78,804,804
============= ============= ============= =============
See accompanying notes to financial statements.
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
------------------------------------------------ ------------------------
Institutional Super-Institutional
------------------------------------------------ ------------------------
For the For the
period from period from
Apr 6, 1994 Jul 12, 1996
Year ended Year ended Year ended (comm of op) Year ended (comm of op)
Feb 28, Feb 28, Feb 28, to Feb 28, Feb 28, to Feb 28,
1998 1997 1996 1995 1998 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 ........................... (0.15) (0.13) (0.05) (0.04) (0.12) (0.07)
Net realized and unrealized gain on investments 4.22 1.94 3.38 1.35 4.22 0.83
---------- ---------- ---------- ---------- ----------- ----------
Total from investment operations ......... 4.07 1.81 3.33 1.31 4.10 0.76
---------- ---------- ---------- ---------- ----------- ----------
Distributions to shareholders from
Net investment income ......................... (0.00) 0.00 (0.11) 0.00 (0.00) 0.00
Tax return of capital ......................... (0.53) 0.00 0.00 0.00 (0.53) 0.00
Net realized gain from investment transactions (1.94) 0.00 (0.08) 0.00 (1.94) 0.00
---------- ---------- ---------- ---------- ----------- ----------
Total distributions ...................... (2.47) 0.00 (0.19) 0.00 (2.47) 0.00
---------- ---------- ---------- ---------- ----------- ----------
Net asset value, end of period ........................ $17.86 $16.26 $14.45 $11.31 $17.92 $16.29
========== ========== ========== ========== =========== ==========
Total return (a) ...................................... 25.25% 12.53% 29.66% 13.12%(d) 25.40% 4.89%(d)
========== ========== ========== ========== =========== ==========
Ratios/supplemental data
Net assets, end of period (000's) ................ $92,858 $77,858 $80,252 $15,088 $118,246 $94,340
========== ========== ========== ========== =========== ==========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 1.19% 1.23% 1.65% 2.75%(b) 1.06% 1.08% (b)
After expense reimbursements and waived fees 1.16% 1.22% 1.49% 1.73%(b) 1.04% 1.04% (b)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees (0.90)% (0.85)% (0.98)% (1.80)%(b) (0.77)% (0.75)%(b)
After expense reimbursements and waived fees (0.88)% (0.84)% (0.82)% (0.78)%(b) (0.75)% (0.72)%(b)
Portfolio turnover rate 105.60% 126.44% 99.33% 64.92% 105.60% 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.
(d) Aggregate return. Not annualized.
See accompanying notes to financial statements (Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
(Continued)
----------------------------------- ----------------------------------
Series A Series C
----------------------------------- ----------------------------------
For the For the
period from period from
Apr 7, 1995 Apr 7, 1995
Year ended Year ended (comm of op) Year ended Yearended (comm of op)
Feb 28, Feb 28, to Feb 29, Feb 28, Feb 28, to Feb 29,
1998 1997 1996 1998 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......................... (0.21) (0.18) (0.06) (0.52) (0.29) (0.12)
Net realized and unrealized gain on investments.... 4.19 1.94 2.88 4.14 1.92 2.86
-------- -------- --------- --------- -------- --------
Total from investment operations................ 3.98 1.76 2.82 3.62 1.63 2.74
-------- -------- --------- --------- -------- --------
Distributions to shareholders from
Net investment income.............................. (0.00) 0.00 (0.11) (0.00) 0.00 (0.11)
Tax return of capital.............................. (0.53) 0.00 0.00 (0.53) 0.00 0.00
Net realized gain from investment transactions..... (1.94) 0.00 (0.08) (1.94) 0.00 (0.08)
-------- -------- --------- --------- -------- --------
Total distributions............................. (2.47) 0.00 (0.19) (2.47) 0.00 (0.19)
-------- -------- --------- --------- -------- --------
Net asset value, end of period........................... $17.69 $16.18 $14.42 $17.12 $15.97 $14.34
======== ======== ========= ========= ======== ========
Total return (a)......................................... 4.80% 12.21% 23.86%(d) 22.95% 11.30% 23.18%(d)
======== ======== ========= ========= ======== ========
Ratios/supplemental data
Net assets, end of period (000's)..................... $40,924 $39,376 $32,549 $4,541 $9,192 $7,908
======== ======== ========= ========= ======== ========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees...... 1.55% 1.54% 1.88%(b) 3.11% 2.34% 2.38%(b)
After expense reimbursements and waived fees....... 1.52% 1.53% 1.71%(b) 3.05% 2.33% 2.18%(b)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees...... (1.27)% (1.16)% (1.20)%(b) (2.84)% (1.97)% (1.77)%(b)
After expense reimbursements and waived fees....... (1.24)% (1.15)% (1.04)%(b) (2.78)% (1.96)% (1.57)%(b)
Portfolio turnover rate............................... 105.60% 126.44% 99.33% 105.60% 126.64% 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.
(d) Aggregate return. Not annualized.
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
(Continued)
---------------------------------
Series D
---------------------------------
For the
period from
Apr 7, 1995
Year ended Year ended (comm of op)
Feb 28, Feb 28, Feb 29,
1998 1997 1996
- ------------------------------------------------------------------------------------------------
Net asset value, beginning of period..................... $16.09 $14.41 $11.79
Income from investment operations
Net investment income loss......................... (0.32) (0.29) (0.11)
Net realized and unrealized gain on investments.... 4.15 1.97 2.92
----------- -------- --------
Total from investment operations................ 3.83 1.68 2.81
----------- -------- --------
Distributions to shareholders from
Net investment income.............................. (0.00) 0.00 (0.11)
Tax return of capital.............................. (0.53) 0.00 0.00
Net realized gain from investment transactions..... (1.94) 0.00 (0.08)
----------- -------- --------
Total distributions............................. (2.47) 0.00 (0.19)
----------- -------- --------
Net asset value, end of period........................... $17.45 $16.09 $14.41
=========== ======== ========
Total return (a)......................................... 24.06% 11.59% 23.77%(d)
=========== ======== ========
Ratios/supplemental data
Net assets, end of period (000's)..................... $11,448 $10,774 $11,929
=========== ======== ========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees...... 2.22% 2.02% 2.13% (b)
After expense reimbursements and waived fees....... 2.18% 2.01% 1.73% (b)
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees...... (1.94)% (1.64)% (1.54)% (b)
After expense reimbursements and waived fees....... (1.89)% (1.63)% (1.14)% (b)
Portfolio turnover rate............................... 105.60% 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.
(d) Aggregate return. Not annualized.
See accompanying notes to financial statements
</TABLE>
<PAGE>
THE CHESAPEAKE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
February 28, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The Chesapeake Growth Fund (the "Fund"), formerly known as The Chesapeake
Fund prior to November 1, 1997, 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.
<PAGE>
THE CHESAPEAKE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
February 28, 1998
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
annually, generally payable 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.
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.
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.
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 fiscal
year ended February 28, 1998, the Distributor retained sales charges in the
amount of $5,616.
<PAGE>
THE CHESAPEAKE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
February 28, 1998
NC Shareholder Services, LLC (the "Transfer Agent") has been retained by
the Administrator to serve as the Fund's transfer, dividend paying, and
shareholder servicing agent. The Transfer Agent maintains the records of
each shareholder's account, answers shareholder inquiries concerning
accounts, processes purchases and redemptions of Fund shares, acts as
dividend and distribution disbursing agent, and performs other shareholder
servicing functions. The Transfer Agent is compensated for its services by
the Administrator and not directly by the Fund.
Certain Trustees and officers of the Trust are also officers or directors
of the Advisor or the Administrator.
NOTE 3 - DEFERRED ORGANIZATION EXPENSES
Expenses totaling $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 all 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.
The Fund incurred $101,946, $41,669 and $62,905 in distribution and service
fees under the Plan with respect to Series A, Series C and Series D
Investor Shares, respectively, for the fiscal year ended February 28, 1998.
NOTE 5 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments other than short-term investments
aggregated $258,848,602 and $280,264,773 respectively, for the fiscal year
ended February 28, 1998.
NOTE 6 - EXPENSE REDUCTIONS
The Advisor has transacted certain portfolio trades with brokers who paid a
portion of the fund's expenses. For the fiscal year ended February 28,
1998, the Fund's expenses were reduced by $26,313 under this arrangement.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees of Gardner Lewis Investment Trust and Shareholdersof
The Chesapeake Growth Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of The Chesapeake Growth Fund (formerly, The
Chesapeake Fund) as of February 28, 1998 and the related statement of operations
for the year then ended, the statement of changes in net assets for the years
ended February 28, 1998 and February 28, 1997, and financial highlights for the
periods presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
February 28, 1998 by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of The Chesapeake
Growth Fund as of February 28, 1998, the results of its operations, the changes
in its net assets and its financial highlights for the respective stated periods
in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
March 20, 1998
<PAGE>
- --------------------------------------------------------------------------------
THE CHESAPEAKE AGGRESSIVE
GROWTH FUND
- --------------------------------------------------------------------------------
a series of the Gardner Lewis Investment Trust
Semi-Annual Report 1998
FOR THE PERIOD ENDED FEBRUARY 28
INVESTMENT ADVISOR
Gardner Lewis Asset Management
285 Wilmington-West Chester Pike
Chadds Ford, Pennsylvania 19317
THE CHESAPEAKE AGGRESSIVE GROWTH FUND
107 North Washington Street
Post Office Drawer 4365
Rocky Mount, North Carolina 27803-0365
1-800-430-3863
<PAGE>
April 1, 1998
Dear Shareholder:
The Chesapeake Aggressive Growth Fund closed the first quarter with a
gain of 13.6%. This gain compares to gains of 13.9%, 11.5%, and 10.1% for the
S&P 500, Nasdaq Industrials, and Russell 2000, respectively. This certainly is a
great way to start the year, but as the quarter began, the story was different.
Asia continued to dominate Wall Street headlines, broadcasts, and trading rooms.
This in turn created massive pessimism among market participants and from our
perspective provided a form of cover, ideal for ferreting out the market's
inefficiencies. As it relates to investing, whenever so much thought is directed
toward one conclusion there is usually opportunity in another.
There is no doubt that Asia is a significant problem, but there is
doubt that its impact will be so great as to result in U.S. companies doing no
business there. However, if you were to have looked at many Wall Street
analysts' earnings estimates for companies with exposure to Asia, you would have
discovered that in a large number of cases, assumptions for the region were cut
to zero. This, in our minds, certainly constituted a maximum point of pessimism,
a point reflected in stock prices as they bottomed in the middle of January.
Thus, it became our view that this pessimism had created opportunity. Many
lesser known but fundamentally sound companies, despite little or no exposure to
the region, had suffered stock price compression as money fled to the largest
most recognizable names.
In the last several months, it has been phenomenal to watch this flow
of funds which until recently had been almost solely directed at large
companies. This has occurred despite the fact that those smaller typically have
far less macroeconomic sensitivity, are growing faster, and are selling at more
reasonable valuations. The return data related to the market's capitalization
skew still amazes us. Its significance is best demonstrated by looking at the
Nasdaq which has the broadest range of company sizes. Its largest capitalization
quintile, dominated by the likes of Microsoft and Intel is the only one to have
had a positive return since the index's peak in October of 1997. The smallest
quintile was still behind by almost 13%. It is no wonder that through February
two-thirds of Nasdaq companies were trading below their October levels.
The effect of these large cap fund flows has been to force managers to
put money to work in a segment of the market selling at historic levels of
valuation. These flows are fueled both by the continued movement toward
indexation and the stronger relative performance of these larger companies.
Thus, in a sense, gains in this segment have been self-fulfilling, and to the
extent money continues to flow in, they can continue. However, this, stand
alone, is not enough for us. Instead, we as fundamentalists rely on the quality
and value of each individual investment that we make. We would not want money
flows to be the prop for our stock prices. And, our strong gains so far this
year demonstrate that individual companies can and will appreciate despite
significant money flow to other areas.
<PAGE>
This having been said, preliminary data suggests March to be an
entirely different picture. It appears as though flows to funds investing in
large companies have been sluggish while flows to those investing down cap have
risen dramatically. In addition, many active large cap managers have grown
increasingly uncomfortable with the prices of companies in their universe and
those with enough latitude to do so have begun to look down cap as well. These
facts coupled with the recognition of their superior valuation characteristics,
to be evidenced by coming quarterly earnings announcements, could be all that
the smaller and mid capitalization names need to once again lead in performance.
As the data above demonstrates, the market's advance has yet to truly
broaden. This to us means opportunity. Therefore, in conjunction with having
maintained ownership in the vast majority of our portfolio, knowing that as the
fundamentals become more clearly understood their stock prices will reflect
them, we have intensified our efforts to add to our portfolio more of what we
believe will be the market's next movers. This has led us to increase our
exposure to a variety of industry groups after having raised needed cash by
taking profits in some of our technology holdings whose multiples, despite Asia,
had expanded to the point that we thought them fully valued. For, we think with
interest rates no longer a catalyst for higher price-earnings ratios, and the
crisis in Asia along with other macroeconomic concerns making it dicey to be
blindly invested, earnings should finally drive this market. To that end, our
companies continue to grow in excess of 35% and sell at about 17 times earnings.
This compares to the S&P 500 which is growing at 8% and selling at more than 22
times earnings. Simply put, our companies are selling at less than half their
growth rates while the S&P is selling at more than twice its growth rate.
Already we have seen a seeming desire on the part of investors to refocus on
fundamentals. The forthcoming quarters should only further this movement.
Many exciting advancements and changes are taking place. As just one
example, a typical doctor's office doesn't look any different today than it did
perhaps twenty-five years ago, excepting its current absence of shag carpet.
But, a look into the guts of forward thinking medical practices reveals an
industry undergoing tremendous change. Thus the opportunity is ripe for the
fundamental investor. In order to compete in an environment of cost containment,
doctors are faced with the dilemma of delivering quality medical care at lower
cost. Public companies have been born of physicians' practices consolidating
into organizations yielding overhead synergies, multi-specialty synergies, and
higher patient throughputs. Public companies have sprung up to provide industry
specific software aimed at facilitating the overwhelming paper pushing burden.
And, management of resources from nursing staffs to medical supplies is being
outsourced to public companies eager to administer a doctor's entire practice.
The point is that many practices are now being run as efficient businesses built
on the best possible service at the most reasonable price, a model that will
allow both the forward looking physician and the patient community to win.
In coming quarters, we will continue our discovery and culling process,
always attempting to own the best companies at the most reasonable prices. This
should both protect our fundamental downside and maximize our upside potential.
Have a pleasant Spring!
Sincerely,
W. Whitfield Gardner John L. Lewis, IV
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 28, 1998
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 99.79%
Aerospace & Defense - 2.55%
(a) BE Aerospace, Inc. ................................................. 195,600 $ 5,757,975
(a) Gulfstream Aerospace Corporation ................................... 151,400 6,131,700
(a) Triumph Group, Inc. ................................................ 87,300 3,753,900
-----------
15,643,575
-----------
Apparel Manufacturing - 7.10%
(a) Jones Apparel Group, Inc. .......................................... 348,500 19,123,937
Kellwood Company ................................................... 91,000 2,951,813
Liz Claiborne, Inc. ................................................ 184,500 9,225,000
(a) Nautica Enterprises, Inc. .......................................... 160,600 4,627,288
Warnaco Group, Inc. ................................................ 204,100 7,577,213
-----------
43,505,251
-----------
Auto - Rental/Leasing - 0.48%
(a) Dollar Thrifty Automotive Group, Inc. .............................. 146,800 2,936,000
-----------
Auto Parts - Original Equipment - 1.36%
Federal-Mogul Corporation .......................................... 170,500 8,365,156
-----------
Building Materials - 0.63%
Carlisle Companies, Inc. ........................................... 79,400 3,845,937
-----------
Commercial Services - 4.12%
(a) APAC Teleservices, Inc. ............................................ 258,300 3,809,925
(a) Caribiner International, Inc. ...................................... 45,000 1,513,125
(a) Ceridian Corporation ............................................... 119,700 5,573,531
(a) Consolidated Capital Corporation ................................... 295,200 7,232,400
(a) Sterling Commerce, Inc. ............................................ 156,800 7,154,000
-----------
25,282,981
-----------
Computers - 4.56%
Compaq Computer Corporation ........................................ 205,580 6,617,106
(a) EMC Corporation .................................................... 373,600 14,080,050
(a) Quantum Corporation ................................................ 172,200 4,326,525
(a) Splash Technology Holdings, Inc. ................................... 167,100 2,924,250
-----------
27,947,931
-----------
Computer Hardware & Software - 0.37%
(a) Network Computing Devices, Inc. .................................... 180,300 2,276,287
-----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 28, 1998
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Computer Software & Services - 4.27%
(a) BMC Software, Inc. ................................................... 97,100 $ 7,428,150
(a) Cadence Design Systems, Inc. ......................................... 181,600 6,344,650
(a) Structural Dynamics Research Corporation ............................. 256,100 7,362,875
(a) System Software Associates, Inc. ..................................... 675,850 5,026,634
-----------
26,162,309
-----------
Electrical Equipment - 1.07%
(a) Encore Wire Corporation .............................................. 212,650 6,538,987
-----------
Electronics - 2.98%
(a) American Power Conversion Corporation ................................ 198,600 5,759,400
(a) California Micro Devices Corporation ................................. 23,806 124,982
SCI Systems, Inc. .................................................... 137,200 6,174,000
Technitrol, Inc. ..................................................... 170,600 6,237,563
-----------
18,295,945
-----------
Electronics - Semiconductor - 7.67%
(a) Adaptec, Inc. ........................................................ 395,900 10,466,606
(a) Cirrus Logic, Inc. ................................................... 293,200 3,243,525
(a) Integrated Process Equipment Corporation ............................. 243,800 4,510,300
(a) Kulicke & Soffa Industries, Inc. ..................................... 202,700 5,624,925
(a) LSI Logic Corporation ................................................ 110,000 2,605,625
(a) National Semiconductor Corporation ................................... 145,100 3,464,263
(a) Novellus Systems, Inc. ............................................... 67,300 3,226,194
(a) SDL, Inc. ............................................................ 97,000 2,012,750
(a) Teradyne, Inc. ....................................................... 252,300 11,905,406
-----------
47,059,594
-----------
Engineering & Construction - 0.46%
(a) American Buildings Company ........................................... 94,000 2,831,750
-----------
Environmental Control - 1.48%
(a) USA Waste Services, Inc. ............................................. 218,600 9,099,225
-----------
Financial - Consumer Credit - 1.23%
(a) AmeriCredit Corporation .............................................. 276,000 7,538,250
-----------
Food - Wholesale - 1.36%
Michael Foods, Inc. .................................................. 135,300 3,433,238
Richfood Holdings, Inc. .............................................. 172,400 4,902,625
-----------
8,335,863
-----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 28, 1998
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Foreign - 2.34%
ECI Telecommunications Limited ......................................... 186,500 $ 5,420,156
(a) Petroleum Geo-Services -ADR ............................................ 157,800 8,955,150
-----------
14,375,306
-----------
Human Resources - 2.07%
(a) CORESTAFF, Inc. ........................................................ 217,000 6,767,688
(a) Personnel Group of America, Inc. ....................................... 145,400 5,906,875
-----------
12,674,563
-----------
Machine - Construction & Mining - 0.75%
(a) Terex Corporation ...................................................... 193,400 4,617,425
-----------
Machine - Diversified - 1.06%
Coltec Industries, Inc. ................................................ 249,900 6,513,019
-----------
Marketing Information Services - 0.97%
Cognizant Corporation .................................................. 118,800 5,932,575
-----------
Medical - Biotechnology - 0.81%
(a) Agouron Pharmaceuticals, Inc. .......................................... 135,400 4,992,875
-----------
Medical - Hospital Management & Service - 6.52%
(a) Genesis Health Ventures, Inc. .......................................... 94,500 2,740,500
(a) HEALTHSOUTH Corporation ................................................ 247,900 6,708,794
Integrated Health Services, Inc. ....................................... 216,000 7,330,500
(a) PhyCor, Inc. ........................................................... 267,500 6,879,752
(a) Tenet Healthcare Corporation ........................................... 296,000 11,044,500
(a) Trigon Healthcare, Inc. ................................................ 170,000 5,270,000
-----------
39,974,046
-----------
Medical Supplies - 1.96%
(a) Biomet, Inc. ........................................................... 402,300 11,993,569
-----------
Miscellaneous - Manufacturing - 0.00%
(a) Wilshire Technologies, Warrant ......................................... 11,956 0
-----------
Office & Business Equipment - 1.72%
(a) U.S. Office Products Company ........................................... 569,422 10,534,307
-----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 28, 1998
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Oil & Gas - Equipment & Services - 3.49%
(a) BJ Services Company ................................................ 187,400 $ 6,441,875
(a) J. Ray McDermott, S.A .............................................. 139,900 5,945,750
(a) Rowan Companies, Inc. .............................................. 319,200 8,997,450
-----------
21,385,075
-----------
Oil & Gas - Exploration - 1.47%
(a) Parker Drilling Company ............................................ 231,700 2,548,700
(a) Veritas DGC Inc. ................................................... 156,700 6,473,669
-----------
9,022,369
-----------
Oil & Gas - International - 1.44%
(a) Friede Goldman International, Inc. ................................. 194,900 5,920,087
(a) Pride International, Inc. .......................................... 126,400 2,883,500
-----------
8,803,587
-----------
Pharmaceuticals - 2.11%
Jones Medical Industries, Inc. ..................................... 222,700 8,267,737
(a) Watson Pharmaceuticals, Inc. ....................................... 130,200 4,670,925
-----------
12,938,662
-----------
Restaurants & Food Service - 2.34%
CKE Restaurants, Inc. .............................................. 185,900 7,889,131
(a) Foodmaker, Inc. .................................................... 356,800 6,489,300
-----------
14,378,431
-----------
Retail - Apparel - 5.83%
(a) Goody's Family Clothing, Inc. ...................................... 133,300 4,998,750
(a) Stage Stores, Inc. ................................................. 247,300 10,386,600
(a) The Dress Barn, Inc. ............................................... 211,400 6,170,238
(a) The Finish Line, Inc. .............................................. 362,400 5,934,300
(a) The Men's Wearhouse, Inc. .......................................... 59,600 2,153,050
(a) The Wet Seal, Inc. ................................................. 198,500 6,091,469
-----------
35,734,407
-----------
Retail - Automotive Parts - 0.74%
(a) AutoZone, Inc. ..................................................... 149,600 4,525,400
-----------
Retail - Department Stores - 4.14%
(a) Consolidated Stores Corporation .................................... 158,477 6,517,367
(a) Fred Meyer, Inc. ................................................... 225,200 10,007,325
(a) Proffitt's, Inc. ................................................... 260,900 8,837,988
-----------
25,362,680
-----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 28, 1998
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Retail - Specialty Line - 3.07%
(a) Borders Group, Inc. .................................................... 321,200 $10,699,975
Cash America International, Inc. ....................................... 291,900 3,502,800
(a) Michaels Stores, Inc. .................................................. 105,800 3,597,200
(a) Rainforest Cafe, Inc. .................................................. 61,800 1,019,700
(a) The Score Board, Inc. .................................................. 3,011 1,411
-----------
18,821,086
-----------
Scientific & Technical Instruments - 1.35%
(a) Waters Corporation ..................................................... 167,300 8,312,719
-----------
Shoes - Leather - 0.33%
(a) Nine West Group, Inc. .................................................. 74,100 2,037,750
-----------
Telecommunications - 2.54%
(a) DSP Communications, Inc. ............................................... 281,200 4,973,725
(a) Premiere Technologies, Inc. ............................................ 205,700 6,453,837
(a) Tel-Save Holdings, Inc. ................................................ 148,700 4,117,131
-----------
15,544,693
-----------
Telecommunications Equipment - 3.73%
(a) Cable Design Technologies .............................................. 134,850 3,919,078
(a) Comverse Technology, Inc. .............................................. 162,840 7,612,770
(a) Digital Microwave Corporation .......................................... 182,600 3,355,275
(a) DSC Communications Corporation ......................................... 224,200 4,399,925
(a) P-COM, Inc. ............................................................ 176,400 3,572,100
-----------
22,859,148
-----------
Textiles - 0.53%
(a) Dan River Inc. ......................................................... 197,500 3,258,750
-----------
Transportation - Air - 2.01%
Airborne Freight Corporation ........................................... 154,600 5,594,587
Comair Holdings, Inc. .................................................. 253,087 6,738,441
-----------
12,333,028
-----------
Utilities - Electric - 2.32%
(a) CalEnergy Company, Inc. ................................................ 529,600 14,199,900
-----------
Wholesale & Distribution - Special Line - 2.46%
(a) CellStar Corporation ................................................... 309,000 9,984,563
(a) Central Garden and Pet Company ......................................... 147,100 5,111,725
-----------
15,096,288
-----------
Total Common Stocks (Cost $465,315,890) ............................... 611,886,699
-----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 28, 1998
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANY - 0.88%
Evergreen Money Market Treasury Institutional Money ........................ 5,415,075 $ 5,415,075
Market Fund Institutional Service Shares -------------
(Cost $5,415,075)
Total Value of Investments (Cost $470,730,965 (b)) ............................... 100.67% $ 617,301,774
Liabilities In Excess of Other Assets ............................................. (0.67)% (4,131,465)
--------- -------------
Net Assets ................................................................. 100.00% $ 613,170,309
========= =============
(a) Non-income producing investment.
(b) Aggregate cost for federal income tax purposes is $ 470,755,076. Unrealized appreciation (depreciation) of investments
for federal income tax purposes is as follows:
Unrealized appreciation $ 166,234,495
Unrealized depreciation (19,687,797)
--------------
Net unrealized appreciation $ 146,546,698
==============
The following acronym is used throughout this portfolio:
ADR - American Depository Receipt
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE AGGRESSIVE GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1998
(Unaudited)
ASSETS
Investments, at value (cost $470,730,965) ....................................................... $617,301,774
Income receivable ............................................................................... 130,536
Receivable for investments sold ................................................................. 1,245,351
Receivable for fund shares sold ................................................................. 69,117
Other asset ..................................................................................... 18,308
------------
Total assets ............................................................................... 618,765,086
------------
LIABILITIES
Accrued expenses ................................................................................ 51,330
Payable for investment purchases ................................................................ 4,172,513
Payable for fund shares redeemed ................................................................ 965,867
Transaction gains payable ....................................................................... 2,641
Disbursements in excess of cash on demand deposit ............................................... 402,426
------------
Total liabilities .......................................................................... 5,594,777
------------
NET ASSETS
(applicable to 30,719,907 shares outstanding; unlimited
shares of no par value beneficial interest authorized) ........................................ $613,170,309
============
NET ASSET VALUE, REDEMPTION, AND OFFERING PRICE PER SHARE
($613,170,309 / 30,719,907 shares) .............................................................. $ 19.96
============
MAXIMUM OFFERING PRICE PER SHARE
(100 / 97% of $19.96) ........................................................................... $ 20.58
============
NET ASSETS CONSIST OF
Paid-in capital ................................................................................. $451,078,411
Accumulated net realized gain on investments .................................................... 15,521,089
Net unrealized appreciation on investments ...................................................... 146,570,809
------------
$613,170,309
============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE AGGRESSIVE GROWTH FUND
STATEMENT OF OPERATIONS
Period ended February 28, 1998
(Unaudited)
INVESTMENT LOSS
Income
Interest .................................................................................... $ 307,949
Dividends ................................................................................... 327,836
------------
Total income ........................................................................... 635,785
------------
Expenses
Investment advisory fees (note 2) ........................................................... 3,711,441
Fund administration fees (note 2) ........................................................... 294,437
Custody fees ................................................................................ 15,552
Registration and filing administration fees (note 2) ........................................ 3,410
Fund accounting fees (note 2) ............................................................... 10,500
Audit fees .................................................................................. 6,298
Legal fees .................................................................................. 4,860
Securities pricing fees ..................................................................... 3,300
Shareholder recordkeeping fees .............................................................. 7,331
Shareholder administrative fees ............................................................. 25,000
Shareholder servicing expenses .............................................................. 35,447
Registration and filing expenses ............................................................ 7,006
Printing expenses ........................................................................... 12,295
Amortization of deferred organization expenses .............................................. 3,446
Trustee fees and meeting expenses ........................................................... 3,526
Other operating expenses .................................................................... 14,630
------------
Total expenses ......................................................................... 4,158,479
------------
Net investment loss .............................................................. (3,522,694)
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain from investment transactions ................................................... 27,226,700
Decrease in unrealized appreciation on investments ............................................... (12,980,261)
------------
Net realized and unrealized gain on investments ............................................. 14,246,439
------------
Net increase in net assets resulting from operations ................................... $ 10,723,745
============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE AGGRESSIVE GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Period ended Year ended
February 28, August 31,
1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment loss ............................................................. $ (3,522,694) $ (6,082,087)
Net realized gain from investment transactions .................................. 27,226,700 72,981,586
Increase (decrease) in unrealized appreciation on investments ................... (12,980,261) 114,457,604
------------- -------------
Net increase in net assets resulting from operations ....................... 10,723,745 181,357,103
------------- -------------
Distribution to shareholders from
Net realized gain from investment transactions .................................. (78,304,241) (28,932,671)
------------- -------------
Capital share transactions
Increase in net assets resulting from capital share transactions (a) ............ 67,261,903 756,974
------------- -------------
Total increase (decrease) in net assets ............................... (318,593) 153,181,406
NET ASSETS
Beginning of period ................................................................. 613,488,902 460,307,496
------------- -------------
End of period ....................................................................... $ 613,170,309 $ 613,488,902
============= =============
(a) A summary of capital share activity follows:
=============================================================
Period ended Year ended
February 28, 1998 August 31, 1997
---------------------------- ------------------------------
Shares Value Shares Value
---------------------------- ------------------------------
Shares sold .......................... 1,636,792 $34,225,769 3,447,946 $64,609,895
Shares issued for reinvestment
of distributions ................ 3,755,172 74,389,963 1,565,933 26,934,053
------------ ------------ ------------ ------------
5,391,964 108,615,732 5,013,879 91,543,948
Shares redeemed ...................... (2,012,642) (41,353,829) (4,938,898) (90,786,974)
------------ ------------ ------------ ------------
Net increase .................... 3,379,322 $67,261,903 74,981 $756,974
=========== ============ ============ ============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE AGGRESSIVE GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Period ended Year ended Year ended Year ended Year ended
February 28, August 31, August 31, August 31, August 31,
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $22.44 $16.88 $20.70 $13.58 $11.86
Income (loss) from investment operations
Net investment loss (0.11) (0.22) (0.18) (0.15) (0.05)
Net realized and unrealized gain (loss)on
investments 0.51 6.84 (2.53) 7.27 1.98
------------- ------------ ------------ ------------- -------------
Total from investment operations 0.40 6.62 (2.71) 7.12 1.93
------------- ------------ ------------ ------------- -------------
Distributions to shareholders from
Net investment income (0.00) 0.00 0.00 0.00 (0.16)
Net realized gain from investment transactions (2.88) (1.06) (1.11) 0.00 (0.05)
------------- ------------ ------------ ------------- -------------
Total distributions (2.88) (1.06) (1.11) 0.00 (0.21)
------------- ------------ ------------ ------------- -------------
Net asset value, end of period $19.96 $22.44 $16.88 $20.70 $13.58
============= ============ ============ ============= =============
Total return (a) 1.88% 41.14% (12.81)% 52.45% 16.42%
============== ============ ============ ============= =============
Ratios/supplemental data
Net assets, end of period $613,170,309 $613,488,902 $460,307,496 $460,286,044 $179,222,758
============== ============ ============ ============= =============
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 1.39%(b) 1.42% 1.42% 1.43% 1.57%
After expense reimbursements and waived fees 1.39%(b) 1.42% 1.42% 1.43% 1.49%
Ratio of net investment income (loss) to average net assets
Before expense reimbursements and waived fees (1.19)%(b) (1.17)% (1.05)% (1.07)% (0.87)%
After expense reimbursements and waived fees (1.19)%(b) (1.17)% (1.05)% (1.07)% (0.79)%
Portfolio turnover rate 41.34% 115.51% 110.04% 75.42% 66.03%
Average broker commissions per share (c) $0.0563 $0.0568 - - -
(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 shares purchased or sold on which
commissions were charged.
See accompanying notes to financial statements
</TABLE>
<PAGE>
THE CHESAPEAKE AGGRESSIVE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
February 28, 1998
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The Chesapeake Aggressive Growth Fund (the "Fund"), formerly known as
The Chesapeake Growth Fund prior to November 1, 1997, is a diversified
series of shares of beneficial interest of the Gardner Lewis Investment
Trust (the "Trust"). The Trust is an open-end investment company which
was organized in 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 January 4, 1993. 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. 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 sales price
as of 4:00 p.m. New York time. 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.
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
annually, payable 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 ending August 31.
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.
(Continued)
<PAGE>
THE CHESAPEAKE AGGRESSIVE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
February 28, 1998
(Unaudited)
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 1.25% of the Fund's average daily net assets.
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 0.20% of the Fund's first $25 million of
average daily net assets, 0.15% of the next $25 million, and 0.10% of
average daily net assets over $50 million. The Administrator also
receives a monthly fee of $1,750 for accounting and recordkeeping
services. Additionally, the Administrator charges the Fund for
servicing of shareholder accounts and registration of the Fund's
shares. The Administrator also charges for certain expenses involved
with the daily valuation of portfolio securities.
NC Shareholder Services, LLC (the "Transfer Agent") has been retained
by the Administrator to serve as the Fund's transfer, dividend paying,
and shareholder servicing agent. The Transfer Agent maintains the
records of each shareholder's account, answers shareholder inquiries
concerning accounts, processes purchases and redemptions of Fund
shares, acts as dividend and distribution disbursing agent, and
performs other shareholder servicing functions. The Transfer Agent is
compensated for its services by the Administrator and not directly by
the Fund.
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 February 28, 1998, the Distributor retained sales
charges in the amount of $913.
Certain Trustees and officers of the Trust are also officers of the
Advisor or the Administrator.
NOTE 3 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments other than short-term investments
aggregated $244,835,415 and $246,108,296, respectively, for the period
ended February 28, 1998.
<PAGE>
- --------------------------------------------------------------------------------
THE CHESAPEAKE CORE GROWTH FUND
- --------------------------------------------------------------------------------
a series of the Gardner Lewis Investment Trust
Annual Report 1998
FOR THE YEAR ENDED FEBRUARY 28
INVESTMENT ADVISOR
Gardner Lewis Asset Management
285 Wilmington-West Chester Pike
Chadds Ford, Pennsylvania 19317
THE CHESAPEAKE CORE GROWTH FUND
107 North Washington Street
Post Office Drawer 4365
Rocky Mount, North Carolina 27803-0365
1-800-430-3863
<PAGE>
April 1, 1998
Dear Shareholder:
The Chesapeake Core Growth Fund closed the first quarter with a gain of
12.1% which compares to 13.9% for the S&P 500. This certainly is a solid start
to the year, but as the quarter began, the story was different. Asia continued
to dominate Wall Street headlines, broadcasts, and trading rooms. This in turn
created massive pessimism among market participants and from our perspective
provided a form of cover, ideal for ferreting out future opportunities. For, as
it relates to investing, whenever so much thought is directed toward one
conclusion there is usually opportunity in another.
There is no doubt that Asia is a significant problem, but there is
doubt that its impact will be so great as to result in U.S. companies doing no
business there. However, if you were to have looked at many Wall Street
analysts' earnings estimates for companies with exposure to Asia, you would have
discovered that in a large number of cases, assumptions for the region were cut
to zero. This, in our minds, certainly constituted a maximum point of pessimism,
a point reflected in stock prices as they bottomed in the middle of January.
Thus, it became our view that this pessimism had created opportunity. Many
fundamentally sound companies, despite little or no exposure to the region, had
suffered undue stock price compression which was exacerbated as money flows
narrowed into the largest most recognizable names.
In the last several months, it has been phenomenal to watch this flow
of funds which until recently had been almost solely directed at the largest of
large companies. This has occurred despite the fact that those smaller currently
have less macroeconomic sensitivity, are growing faster, and are selling at more
reasonable valuations. The return data related to the market's capitalization
skew still amazes us. The largest 5 companies in the S&P 500 had an average
return of 23% for the quarter, the largest 10 averaged 21%, and the largest 50
(which make up about half of the index's capitalization) averaged 18%.
The effect of these ultra-cap fund flows has been to force managers to
put money to work in a segment of the market selling at historic levels of
valuation. Capitalization weightings further concentrate investment into the
largest names, and valuations reflect this phenomenon. The S&P's largest 5 names
are now trading at over 36 times their forward earnings estimate, the largest 10
at 34 times. Fueled by the stronger relative performance of these larger
companies, gains in this segment have been somewhat self-fulfilling, and to the
extent money continues to flow in, they can continue. However, this, stand
alone, is not enough for us. For despite the inherent quality of many of these
names, their stock prices preclude our current ownership. Instead, we as
fundamentalists rely on both the quality and the value of each individual
investment that we make. We would not want money flows to be the prop for our
stock prices.
<PAGE>
As the data above demonstrates, the market's advance has yet to truly
broaden. This to us means opportunity. Therefore, in conjunction with having
maintained ownership in the vast majority of our portfolio, knowing that as the
fundamentals become more clearly understood their stock prices will further
reflect them, we have intensified our efforts to add to our portfolio more of
what we believe will be the market's next movers. This has led us to increase
our exposure to a variety of industry groups after having raised needed cash by
taking profits in some of our technology holdings whose multiples, despite Asia,
had expanded to the point that we thought them fully valued. For, we think with
interest rates no longer a catalyst for higher price-earnings ratios, and the
crisis in Asia along with other macroeconomic concerns making it dicey to be
blindly invested, earnings should finally drive this market. To that end, our
companies are growing in excess of 22% and selling at about 19 times earnings.
This compares to the S&P 500 which is growing at 8% and selling at more than 22
times earnings. Simply put, our companies are selling at well below their growth
rates while the S&P is selling at more than twice its growth rate. Already we
have seen a seeming desire on the part of investors to refocus on fundamentals.
The forthcoming quarters should only further this movement.
As always, we will continue our discovery and culling process, in an
attempt to own the best companies at the most reasonable prices. This should
both protect our fundamental downside and maximize our upside potential.
Have a pleasant Spring!
Sincerely,
W. Whitfield Gardner
<PAGE>
THE CHESAPEAKE CORE GROWTH FUND
Performance Update - $25,000 Investment
For the period from September 29,1997 (commencement of operations) to February
28, 1998
Chesapeake
Core Growth S&P 500
Fund Total Return Index
9/29/97 25,000.00 25,000.00
10/31/97 24,450.00 24,011.52
11/30/97 24,825.00 25,122.97
12/31/97 24,843.76 25,554.45
1/31/98 24,793.97 25,974.31
2/28/98 26,872.33 27,700.61
This graph depicts the performance of The Chesapeake Core Growth Fund versus the
S&P 500 Total Return Index. It is important to note that The Chesapeake Core
Growth Fund is a professionally managed mutual fund while the index is not
available for investment and is unmanaged. The comparison is shown for
illustrative purposes only.
Cumulative Total Return
- ------------------
Since Inception
- ------------------
7.49%
- ------------------
The graph assumes an initial $25,000 investment at September 29, 1997. All
dividends and distributions are reinvested.
At February 28, 1998, the Chesapeake Core Growth Fund would have grown to
$26,872 - total investment return of 7.49% since September 29, 1997.
At February 28, 1998, a similar investment in the S&P 500 Total Return Index
would have grown to $27,701 - total investment return of 10.80% since September
29, 1997.
Past performance is not a guarantee of future results. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost. Average annual returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming
reinvestments of dividends.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE CORE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 28, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 96.76%
Aerospace & Defense - 1.97%
AlliedSignal, Inc. ................................................... 2,800 $119,175
--------
Apparel Manufacturing - 1.54%
Liz Claiborne, Inc. .................................................. 1,860 93,000
--------
Building Materials - 2.58%
Masco Corporation .................................................... 2,870 156,056
--------
Commercial Services - 7.04%
(a) Cendant Corporation .................................................. 3,510 131,625
Cognizant Corporation ................................................ 3,440 171,785
H&R Block, Inc. ...................................................... 2,600 122,362
--------
425,772
--------
Computers - 8.66%
(a) Adaptec, Inc. ........................................................ 1,950 51,553
Compaq Computer Corporation .......................................... 3,140 101,069
(a) EMC Corporation ...................................................... 2,920 110,048
International Business Machines ...................................... 970 101,365
(a) Sun Microsystems, Inc. ............................................... 3,370 160,496
--------
524,531
--------
Computer Software & Services - 4.26%
(a) BMC Software, Inc. ................................................... 960 73,440
(a) Cadence Design Systems, Inc. ......................................... 3,520 122,980
First Data Corporation ............................................... 1,800 61,200
--------
257,620
--------
Electronics - 2.75%
(a) Teradyne, Inc. ....................................................... 3,530 166,572
--------
Electronics - Semiconductor - 3.13%
Intel Corporation .................................................... 1,760 157,850
(a) National Semiconductor Corporation ................................... 1,330 31,754
--------
189,604
--------
Environmental Control - 1.96%
(a) USA Waste Services, Inc. ............................................. 2,850 118,631
--------
Financial - Banks, Commercial - 7.14%
Household International, Inc. ........................................ 1,000 129,875
NationsBank Corporation .............................................. 2,690 184,265
State Street Corporation ............................................. 1,900 117,444
--------
431,584
--------
(Continued)
</TABLE>
<PAGE>
<TABLE>
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THE CHESAPEAKE CORE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 28, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Financial - Banks, Money Center - 1.97%
Citicorp ................................................................. 900 $119,081
--------
Financial Services - 1.80%
(a) The CIT Group, Inc. ...................................................... 3,300 108,900
--------
Foreign Securities - 1.59%
Siemens AG - ADR ......................................................... 1,550 95,906
--------
Household Products & Housewares - 2.01%
Maytag Corporation ....................................................... 2,700 121,500
--------
Insurance - Multiline - 2.03%
Allmerica Financial Corporation .......................................... 2,000 123,000
--------
Medical - Hospital Management & Services - 8.53%
Columbia/HCA Healthcare Corporation ...................................... 4,550 123,419
(a) HEALTHSOUTH Corporation .................................................. 5,160 139,642
(a) Tenet Healthcare Corporation ............................................. 3,200 119,400
United Healthcare Corporation ............................................ 2,200 133,512
--------
515,973
--------
Miscellaneous - Manufacturing - 5.43%
Corning Inc. ............................................................. 2,220 90,188
Parker-Hannifin Corporation .............................................. 2,390 111,434
Tyco International Ltd. .................................................. 2,500 126,562
--------
328,184
--------
Office & Business Equipment - 2.20%
Xerox Corporation ........................................................ 1,500 133,031
--------
Oil & Gas - Exploration - 2.01%
Transocean Offshore, Inc. ................................................ 2,800 121,450
--------
Pharmaceuticals - 4.32%
Merck & Co., Inc. ........................................................ 900 114,806
Warner-Lambert Company ................................................... 1,000 146,375
--------
261,181
--------
Retail - Department Stores - 4.19%
(a) Fred Meyer, Inc. ......................................................... 3,000 133,313
J. C. Penney Company, Inc. ............................................... 1,700 120,169
--------
253,482
--------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE CORE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 28, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Retail - Drug Stores - 2.82%
CVS Corporation ......................................................... 2,300 $ 170,344
-----------
Retail - Grocery - 2.17%
American Stores Company ................................................. 5,200 130,975
-----------
Retail - Specialty Line - 2.42%
Intimate Brands, Inc. ................................................... 5,400 146,475
-----------
Telecommunications - 3.24%
MCI Communications Corporation .......................................... 4,100 196,031
-----------
Toys - 1.07%
(a) Toys "R" Us, Inc. ....................................................... 2,460 64,729
-----------
Transportation - Air - 5.17%
Southwest Airlines Company .............................................. 4,500 129,094
(a) US Airways Group, Inc. .................................................. 2,900 183,606
-----------
312,700
-----------
Utilities - Electric - 1.97%
(a) CalEnergy, Inc. ......................................................... 4,440 119,048
-----------
Utilities - Telecommunications - 0.79%
(a) WorldCom, Inc. .......................................................... 1,250 47,734
-----------
Total Common Stocks (Cost $5,416,956) ................................... 5,852,269
-----------
INVESTMENT COMPANIES - 7.12%
Evergreen Money Market Treasury Institutional Money
Market Fund Institutional Service Shares ................................ 306,187 306,187
Evergreen Money Market Treasury Institutional Treasury
Money Market Fund Institutional Service Shares .......................... 124,292 124,292
-----------
Total Investment Companies (Cost $430,479) .............................. 430,479
-----------
Total Value of Investments (Cost $5,847,435 (b)) .................................... 103.88% $ 6,282,748
Liabilities In Excess of Other Assets ............................................... (3.88)% (234,480)
----------- -----------
Net Assets ................................................................... 100.00% $ 6,048,268
=========== ===========
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE CORE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 28, 1998
(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 $587,659
Unrealized depreciation (152,346)
--------------
Net unrealized appreciation $435,313
==============
The following acronym is used in this portfolio:
ADR - American Depository Receipt
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE CORE GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1998
ASSETS
Investments, at value (cost $5,847,435) ......................................................... $ 6,282,748
Cash ............................................................................................ 222
Income receivable ............................................................................... 5,703
Receivable for fund shares sold ................................................................. 1,000
Due from advisor (note 2) ....................................................................... 8,432
-----------
Total assets ............................................................................... 6,298,105
-----------
LIABILITIES
Accrued expenses ................................................................................ 7,655
Payable for investment purchases ................................................................ 242,182
-----------
Total liabilities .......................................................................... 249,837
-----------
NET ASSETS
(applicable to 564,298 shares outstanding; unlimited
shares of no par value beneficial interest authorized) ......................................... $ 6,048,268
===========
NET ASSET VALUE, REDEMPTION AND MAXIMUM OFFERING PRICE
PER SHARE
($6,048,268 / 564,298 shares) ................................................................... $ 10.72
===========
NET ASSETS CONSIST OF
Paid-in capital ................................................................................. $ 5,831,369
Undistributed net realized loss on investments .................................................. (218,414)
Net unrealized oappreciation on investments ..................................................... 435,313
-----------
$ 6,048,268
===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE CORE GROWTH FUND
STATEMENT OF OPERATIONS
For the period from September 29, 1997
(commencement of operations)
to February 28, 1998
INVESTMENT LOSS
Income
Interest ...................................................................................... $ 10,566
Dividends ..................................................................................... 9,145
---------
Total income ............................................................................. 19,711
---------
Expenses
Investment advisory fees (note 2) ............................................................. 19,606
Fund administration fees (note 2) ............................................................. 1,470
Custody fees .................................................................................. 2,448
Registration and filing administration fees (note 2) .......................................... 541
Fund accounting fees (note 2) ................................................................. 8,750
Audit fees .................................................................................... 3,082
Legal fees .................................................................................... 4,568
Securities pricing fees ....................................................................... 1,168
Shareholder administration fees ............................................................... 5,206
Shareholder recordkeeping fees ................................................................ 3,726
Shareholder servicing expenses ................................................................ 1,334
Registration and filing expenses .............................................................. 4,719
Printing expenses ............................................................................. 1,825
Trustee fees and meeting expenses ............................................................. 3,442
Other operating expenses ...................................................................... 784
---------
Total expenses ........................................................................... 62,669
---------
Less:
Expense reimbursements (note 2) .................................................... (8,432)
Investment advisory fees waived (note 2) ........................................... (19,606)
Fund administration fees waived (note 2) ........................................... (1,470)
Shareholder recordkeeping fees waived (note 2) ..................................... (3,644)
Shareholder administration fees waived (note 2) .................................... (5,206)
---------
Net expenses ............................................................................. 24,311
---------
Net investment loss ................................................................ (4,600)
---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss from investment transactions ..................................................... (218,414)
Increase in unrealized appreciation on investments ................................................. 435,313
---------
Net realized and unrealized gain on investments ............................................... 216,899
---------
Net increase in net assets resulting from operations ..................................... $ 212,299
=========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE CORE GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
For the period from September 29, 1997
(commencement of operations)
to February 28, 1998
INCREASE IN NET ASSETS
Operations
Net investment loss .............................................................................. $ (4,600)
Net realized loss from investment transactions ................................................... (218,414)
Increase in unrealized appreciation on investments ............................................... 435,313
-----------
Net increase in net assets resulting from operations ........................................ 212,299
-----------
Distribution to shareholders
Distribution in excess of net investment income .................................................. (9,859)
-----------
Capital share transactions
Increase in net assets resulting from capital share transactions (a) ............................. 5,845,828
-----------
Total increase in net assets ........................................................... 6,048,268
NET ASSETS
Beginning of period .................................................................................. 0
-----------
End of period ........................................................................................ $ 6,048,268
===========
(a) A summary of capital share activity follows:
----------------------------------------------------
Shares Value
----------------------------------------------------
Shares sold .......................................................... 563,478 $ 5,837,694
Shares issued for reinvestment
of distributions ................................................ 830 8,231
----------- -----------
564,308 5,845,925
Shares redeemed ...................................................... (10) (97)
----------- -----------
Net increase .................................................... 564,298 $ 5,845,828
=========== ===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
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THE CHESAPEAKE CORE GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
For the period from September 29, 1997
(commencement of operations)
to February 28, 1998
Net asset value, beginning of period .............................................................. $10.00
Income from investment operations
Net investment loss .................................................................... (0.01)
Net realized and unrealized gain on investments ........................................ 0.75
---------------
Total from investment operations ................................................... 0.74
---------------
Distribution to shareholders
Distribution in excess of net investment income ........................................ (0.02)
---------------
Net asset value, end of period .................................................................... $10.72
===============
Total return ...................................................................................... 7.49%
===============
Ratios/supplemental data
Net assets, end of period ................................................................... $6,048,268
===============
Ratio of expenses to average net assets
Before expense reimbursements and waived fees .......................................... 3.19%(a)
After expense reimbursements and waived fees ........................................... 1.24%(a)
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees .......................................... (2.19)%(a)
After expense reimbursements and waived fees ........................................... (0.24)%(a)
Portfolio turnover rate ..................................................................... 29.83%
Average broker commissions per share (b) .................................................... $0.0486
(a) Annualized.
(b) Represents total commissions paid on portfolio securities divided by total portfolio shares purchased or sold on which
commissions were charged.
See accompanying notes to financial statements
</TABLE>
<PAGE>
THE CHESAPEAKE CORE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
February 28, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The Chesapeake Core Growth Fund (the "Fund") is a diversified series of
shares of beneficial interest of the Gardner Lewis Investment Trust (the
"Trust"). The Trust is an open-end investment company which was organized
in 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 September 29, 1997. 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. 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 sales price as of 4:00 p.m. New
York time. Other securities traded in the over-the-counter market and
listed securities for which no sale was reported on that date are
valued at the most recent bid price. Securities for which market
quotations are not readily available, if any, are valued by using an
independent pricing service or by following procedures approved by the
Board of Trustees. Short-term investments are valued at cost which
approximates value.
B. Federal Income Taxes - The Fund is considered a personal holding
company as defined under Section 542 of the Internal Revenue Code
since 50% of the value of the Fund's shares were owned directly or
indirectly by five or fewer individuals at certain times during the
last half of the year. As a personal holding company, the Fund is
subject to federal income taxes on undistributed personal holding
company income at the maximum individual income tax rate. No provision
has been made for federal income taxes since substantially all taxable
income has been distributed to shareholders. 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.
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
annually 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
ending February 28.
(Continued)
<PAGE>
THE CHESAPEAKE CORE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
February 28, 1998
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.
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. The Advisor intends
to voluntarily waive all or a portion of its fee and reimburse expenses of
the Fund to limit total Fund operating expenses to 1.24% of the average
daily net assets of the Fund. There can be no assurance that the foregoing
voluntary fee waivers or reimbursements will continue. The Advisor has
voluntarily waived its fee amounting to $19,606 ($0.04 per share) and has
voluntarily agreed to reimburse $8,432 of the Fund's operating expenses for
the fiscal year ended February 28, 1998.
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 Fund's average daily net assets. The Administrator also receives a
monthly fee of $1,750 for accounting and recordkeeping services.
Additionally, the Administrator charges the Fund for servicing of
shareholder accounts and registration of the Fund's shares. The
Administrator also charges for certain expenses involved with the daily
valuation of portfolio securities. The Administrator has voluntarily waived
a portion of its total fees amounting to $10,320 ($0.02 per share) for the
fiscal year ended February 28, 1998.
NC Shareholder Services, LLC (the "Transfer Agent") has been retained by
the Administrator to serve as the Fund's transfer, dividend paying, and
shareholder servicing agent. The Transfer Agent maintains the records of
each shareholder's account, answers shareholder inquiries concerning
accounts, processes purchases and redemptions of Fund shares, acts as
dividend and distribution disbursing agent, and performs other shareholder
servicing functions. The Transfer Agent is compensated for its services by
the Administrator and not directly by the Fund.
Certain Trustees and officers of the Trust are also officers of the Advisor
or the Administrator.
NOTE 3 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments other than short-term investments
aggregated $6,706,534 and $1,071,164 respectively, for the fiscal year
ended February 28, 1998.
<PAGE>
INDEPENDENT AUDITORS' REPORT
Tothe Board of Trustees of Gardner Lewis Investment Trust and Shareholders of
The Chesapeake Core Growth Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of The Chesapeake Core Growth Fund as of February
28, 1998, and the related statements of operations and changes in net assets,
and financial highlights for the period from September 30, 1997 (commencement of
operations) to February 28, 1998. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of the securities owned as of February 28, 1998
by correspondence with the custodian and brokers; where replies were not
received from brokers, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of The Chesapeake Core
Growth Fund as of February 28, 1998, the results of its operations, the changes
in its net assets and its financial highlights for the period from September 30,
1997 to February 28, 1998 in conformity with generally accepted accounting
principles.
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
March 20, 1998
