______________________________
THE CHESAPEAKE FUNDS
______________________________
October 1, 1999
Dear Shareholder:
The Chesapeake Aggressive Growth Fund closed the third quarter with a
year-to-date gain of 9.0%. This gain compares to gains of 2.4% for the Russell
2000 and 5.4% for the S&P 500. This year-to-date gain comes on the back of a
third quarter gain of 0.7%, versus a loss of 6.3% in the Russell 2000, and a
loss of 6.2% in the S&P. Our relative success through the past two quarters
reinforces our belief that the environment has truly improved for our
methodology of investing.
Economic growth throughout the world has stabilized or is improving,
though attention is now focused on the potential inflationary ramifications of
resurgent growth. Labor markets are tight; crude oil prices rose 20% this
quarter; the dollar declined steadily against the yen since mid-July; and gold
prices spiked 20% this past week. Yet productivity gains continue to absorb
these pressures, and so inflation has not materialized to the extent feared. As
a result, interest rates were little changed this quarter, after rising steadily
through the first half of the year. Nevertheless, despite a healthy business
environment and robust corporate earnings, present concerns about interest rate
policy will most likely dominate investor sentiment until the Fed meets on
October 5th.
The resulting trepidation on the part of investors generated a broad
sell-off in stocks this quarter that spanned most economic sectors and all
market capitalizations. For the first time in years, investors did not seek
refuge in the largest capitalization names during a time of market uncertainty.
Consequently, losses in smaller and midcap stocks were in line with losses in
the larger cap universe.
In an environment characterized by interest rate concerns, it should
come as no surprise that larger cap stocks, with slower earnings growth and
higher valuations, would experience compression. Much of their appreciation over
the past several years has been dependent upon price/earnings multiple expansion
driven by falling interest rates. In an environment of stable or rising rates,
investors will turn to stocks with more reasonable valuations and with the
ability to grow their earnings rapidly enough to outpace inflation. This
phenomenon was largely responsible for the long period of outperformance in the
small cap universe through the late 70's and early 80's.
Our focus on company specific research continues to lead us to
businesses where earnings growth is strongest. And this focus on strong
fundamentals at the company level often leads us to discover strong fundamentals
at the industry level. Thus our recent outperformance was both a result of
picking good stocks and of being led by those stock picks to good industries.
<PAGE>
Our fundamental analysis at the company level led us to invest in a
number of broadband communication enabling companies that are benefiting from
the demands of the continued evolution of information and internet technology.
These investments proved quite profitable through the quarter, and we now have
begun to pare back our exposure here, making room for investment in other areas,
including retail and healthcare, where we think business prospects for some
companies are stronger than currently perceived.
As is often the case, many companies with excellent fundamentals and
growth prospects have been oversold with their respective industry groups. When
investors retreated from the retail sector because of environmental concerns,
for example, few individual companies were spared. Because our discipline
focuses on those companies with relatively less macroeconomic exposure, we often
find excellent investment opportunities in these situations. We seek companies
whose prospects are underpinned by proprietary products and defensible market
positions, and whose growth is typically much faster than that of their
industries. We believe these companies are better able to sustain earnings
growth through changes in their business environments, and are also better
positioned to generate real earnings growth through inflationary periods.
We are encouraged after this period of broad selling, by the current
opportunity to find mispriced stocks with superior growth prospects. And we are
comforted by the wide disparity in valuations between the largest capitalization
stocks and those smaller. The past two quarters were completely different market
environments, but both evidence that ultra-cap dominance may finally be coming
to an end. As investors extend their search down the capitalization spectrum for
more compelling growth and valuation, we are poised to benefit from both the
quality of our earnings growth and the potential expansion of valuation
multiples in our universe.
Have a pleasant autumn.
Sincerely,
/S/ William D. Zantzinger, Jr. /S/ John L. Lewis, IV
William D. Zantzinger, Jr. John L. Lewis, IV
[Whit Gardner was less involved in this quarter's letter than is typically the
case. He has taken a few days to spend time with his family due to the passing
of his mother. wdz]
<PAGE>
_____________________________________________________________
THE CHESAPEAKE AGGRESSIVE GROWTH FUND
_____________________________________________________________
September 30, 1999
Investment Strategy
- -------------------
The Chesapeake Aggressive Growth Fund seeks capital appreciation primarily
through investments in small and medium growth equities. The cornerstone of the
fund's intensive in-house fundamental analysis is constant contact with the
management, customers, competitors, and suppliers of both current and potential
investments.
Investment Guidelines
- ---------------------
The Fund seeks companies that:
o are experiencing a rapid growth rate - companies in our portfolio are
forecasted to grow their profits in excess of 20% annually;
o are selling at a stock price not yet fully reflective of their growth rate;
o are undergoing a positive change created by new products, managements,
distribution strategies or manufacturing technologies;
o have a strong balance sheet
o are less susceptible to macroeconomic change.
The Largest Industry Groups
- ---------------------------
[Pie Chart Here]
Apparel 5.6%
Business Services 6.9%
Computer Software 6.2%
Computers and Peripherals 8.0%
Electronics/Instruments 6.5%
Financial Services 5.7%
Healthcare Delivery 5.7%
Retail Sales & Distribution 9.8%
Semiconductors & Related 19.8%
Telecommunications 7.0%
All Others 18.7%
About The Investment Advisor
- ----------------------------
Gardner Lewis Asset management serves as investment advisor to the Chesapeake
Family of Funds. Overall, through the funds and separately managed accounts,
Gardner Lewis invests approximately $3 billion in growth equities for both
institutions and individuals including some of the top foundations, endowments,
and pension plans in the U.S. Gardner Lewis was founded in 1990 and employs a
staff of 28. The research team is comprised of 15.
<PAGE>
Ten Largest Holdings
- --------------------
1. LSI Logic Corp. 4.3%
2. Jones Apparel Group, Inc. 4.2%
3. BMC Software, Inc. 3.4%
4. EMC Corporation 3.4%
5. Pinnacle Systems, Inc. 3.0%
6. Checkfree Holdings Corp. 2.4%
7. Antec Corp. 2.3%
8. Ames Department Stores 2.1%
9. CEC Entertainment Inc. 2.1%
10. CTS Corp. 2.0%
Portfolio Characteristics
- -------------------------
Overall Assets ($MM) 274
Number of Companies 86
5 Yr. Historical Earnings Growth 23%
Earnings Growth - next year 40%
P/E Ratio - next year 19
(Gardner Lewis earnings estimates)
Performance Summary
- -------------------
Annualized
- --------------------------------------------------------------------------------
The Chesapeake Quarter 1 Year 5 Year Since
Aggressive Growth Fund End Inception
- --------------------------------------------------------------------------------
Without the sales load
deduction 0.7% 35.9% 11.7% 14.6%
- --------------------------------------------------------------------------------
Net of the maximum
Sales load^1 -2.3% 31.8% 11.0% 14.0%
- --------------------------------------------------------------------------------
1 The maximum sales load for the Fund is 3%. The inception date of the Fund
was January 4, 1993. The performance quoted represents past performance
and is not a guarantee of future results. Share price and investment
return will vary, so you may have a gain or loss when you sell shares.
For more complete information regarding The Fund including charges and expenses,
obtain a prospectus by calling the Fund directly at (800)430-3863 or Gardner
Lewis Asset Management, the Investment Advisor at (610)558-2800.
Must be accompanied or preceded by a prospectus.
Capital Investment Group, Inc., Distributor
Raleigh, NC (800)525-3863
<PAGE>
<TABLE>
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_____________________________________________________________
THE CHESAPEAKE AGGRESSIVE GROWTH FUND
_____________________________________________________________
PORTFOLIO OF INVESTMENTS
(unaudited)
September 30, 1999
===================================================== ====================================================
Quantity Security Market Value Quantity Security Market Value
===================================================== ====================================================
47,600 AVT Corp 1,457,750 93,250 Insight Enterprises, Inc. 3,030,625
139,900 Adaptec, Inc. 5,552,281 23,000 InterVU, Inc. 853,875
115,800 Advanced Radio Telecom 1,461,975 152,300 International Fibercom Inc. 799,575
97,100 Advantage Learning System 1,808,487 400,300 Jones Apparel Group, Inc. 11,508,625
149,200 Aeroflex, Inc. 1,818,375 112,400 Kent Electronics Corp. 2,079,400
57,800 Alpha Industries, Inc. 3,260,281 227,200 LSI Logic Corp. 11,814,400
176,600 American Capital Strategies 3,267,100 141,700 LTX Corp. 1,939,519
78,900 American Eagle Outfitters 3,821,719 60,400 Lason, Inc. 2,689,687
326,700 Americredit Corp. 4,880,081 253,400 Lifepoint Hospitals Inc. 2,201,412
182,900 Ames Department Stores 5,829,937 106,200 MMC Networks, Inc. 3,312,112
235,200 Amkor Technology Inc. 3,792,600 58,600 MRV Communications, Inc. 1,388,087
89,900 Ancor Communications, Inc. 2,180,075 94,900 MidAmerican Energy Holdings Co. 2,799,550
117,200 Antec Corp. 6,226,250 115,200 Nova Corporation 2,880,000
50,800 Arthrocare 2,774,950 45,100 Novellus Systems, Inc. 3,041,431
113,650 Atlas Air Inc. 2,486,094 62,100 O'Reilly Automotive, Inc. 2,959,453
125,700 Atmel Corp. 4,250,231 35,700 PRI Automation, Inc. 1,289,662
131,200 BMC Software, Inc. 9,389,000 73,800 Papa Johns Intl Inc Com 3,044,250
148,600 Bally Total Fitness Holdings 4,541,587 522,000 Per-Se Technologies, Inc. 1,794,375
24,700 Bell & Howell Company 906,181 80,700 Peregrine Systems, Inc. 3,288,525
131,100 Biomatrix, Inc. 2,941,556 194,100 Pinnacle Systems, Inc. 8,224,987
46,200 Biomet, Inc. 1,215,637 60,000 PolyMedica Corp. 1,395,000
65,700 Brooks Automation, Inc. 1,153,856 51,100 QLogic Corporation 3,567,419
79,800 CDW Computer Centers,Inc. 3,900,225 93,900 Quantum Corp - DLT & Storage 1,320,469
159,200 CEC Entertainment Inc. 5,711,300 139,800 Renal Care Group, Inc. 3,062,494
53,100 CSG Systems International 1,455,272 71,900 Rent-Way Inc. 1,366,100
98,100 CTS Corp. 5,640,750 161,700 Republic Services, Inc. 1,758,487
396,800 Caremark RX, Inc. 2,281,600 76,300 Roberts Pharmaceutical 2,308,075
23,800 Carrier Access Corp. 995,137 50,300 SEI Investments Company 4,490,847
151,500 Cash America International 1,429,781 109,300 SLI, Inc. 2,329,456
110,900 Celgene Corp. 3,001,231 111,600 Semtech Corp. 4,087,350
157,500 Checkfree Holdings Corp. 6,477,187 212,900 Sonic Automotive, Inc. 2,767,700
125,300 Children's Place Retail Stores 3,336,112 77,900 Stanford Telecommunications 2,478,194
100,300 Cognizant Technology Solutions 3,171,987 121,412 System Software Associates, Inc. 235,237
91,480 Comair Holdings, Inc. 1,526,572 93,800 Terex Corp. 2,954,700
58,460 Comverse Technology, Inc. 5,513,509 96,500 TriQuint Semiconductor 5,518,594
74,400 Credence Systems Corp. 3,338,700 115,100 Trigon Healthcare, Inc. 3,366,675
114,600 Digital Microwave Corp. 1,797,787 125,000 U.S.Foodservice 2,250,000
148,000 Dollar Thrifty Automotive Group 3,061,750 70,500 Unify 1,586,250
131,400 EMC Corporation 9,378,675 77,200 Universal Health Services, Inc. 1,997,550
67,300 Federal-Mogul Corp. 1,854,956 65,100 Value America Inc. 830,025
51,300 Flextronics International 2,985,019 189,400 ValueVision International 4,924,400
120,300 Galileo Technology Ltd. 3,007,500 164,700 Varco International, Inc. 2,007,281
66,100 Gerald Stevens Inc. 925,400 117,800 iMall, Inc. 2,201,387
TOTAL EQUITY 275,549,702
CASH EQUIVALENT** (1,486,538)
TOTAL ASSETS 274,063,164
**Pending securities settlement
</TABLE>
<PAGE>
________________________________________________________________________________
THE CHESAPEAKE AGGRESSIVE
GROWTH FUND
________________________________________________________________________________
a series of the Gardner Lewis Investment Trust
Annual Report 1999
FOR THE YEAR ENDED AUGUST 31,
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>
THE CHESAPEAKE AGGRESSIVE GROWTH FUND
Performance Update - $25,000 Investment
For the period from January 4, 1993
(Commencement of Operations) to August 31, 1999
====================================================================
The Chesapeake NASDAQ S&P 500 Total
Aggressive Industrials Total Return
Growth Fund Index Index
====================================================================
1/4/93 $24,250 $25,000 $25,000
2/28/93 24,066 24,231 25,562
5/31/93 26,474 25,487 26,006
8/31/93 28,765 26,299 27,113
11/30/93 30,203 27,207 27,200
2/28/94 35,797 29,006 27,692
5/31/94 32,132 25,932 27,265
8/31/94 33,489 26,804 28,596
11/30/94 34,520 26,291 27,485
2/28/95 36,044 27,028 29,731
5/31/95 40,252 28,814 32,769
8/31/95 51,058 33,547 34,730
11/30/95 48,684 33,945 37,649
2/29/96 46,152 35,224 40,048
5/31/96 51,084 41,492 42,088
8/31/96 44,517 36,875 41,234
11/30/96 49,643 39,196 48,008
2/28/97 50,735 38,562 50,526
5/31/97 54,207 39,944 54,468
8/31/97 62,831 45,251 57,995
11/30/97 60,932 44,105 61,865
2/28/98 64,010 46,280 68,212
5/31/98 62,182 47,037 71,182
8/31/98 42,652 34,279 62,689
11/30/98 51,247 43,029 76,503
2/28/99 51,097 46,207 81,675
5/31/99 56,832 52,133 86,148
8/31/99 58,075 55,572 87,655
This graph depicts the performance of The Chesapeake Aggressive Growth Fund
versus the NASDAQ Industrials Index and the S&P 500 Total Return Index. It is
important to note that The Chesapeake Aggressive Growth Fund is a professionally
managed mutual fund while the indices are not available for investment and are
unmanaged. The comparison is shown for illustrative purposes only.
Average Annual Total Returns
- --------------------------------------------------------------------------------
One Year Five Years Since Inception
- --------------------------------------------------------------------------------
No Sales Load 36.16% 11.63% 14.02%
- --------------------------------------------------------------------------------
Maximum 3.0% Sales Load 32.08% 10.96% 13.50%
- --------------------------------------------------------------------------------
The graph assumes an initial $25,000 investment at January 4, 1993 ($24,250
after maximum sales load of 3.0%). All dividends and distributions are
reinvested.
At August 31, 1999, The Chesapeake Aggressive Growth Fund would have grown to
$58,075 - total investment return of 132.30% since January 4, 1993. Without the
deduction of the 3.0% maximum sales load, The Chesapeake Aggressive Growth Fund
would have grown to $59,872 - total investment return of 139.49% since January
4, 1993. The sales load may be reduced or eliminated for larger purchases.
At August 31, 1999, a similar investment in the NASDAQ Industrials Index would
have grown to $55,572 - total investment return of 122.29% since January 4,
1993; while a similar investment in the S&P 500 Total Return Index would have
grown to $87,655 - total investment return of 250.62% since January 4, 1993.
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 total returns are historical in nature and measure net
investment income and capital gain or loss from portfolio investments assuming
reinvestment of dividends.
<PAGE>
<TABLE>
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THE CHESAPEAKE AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS
August 31, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 98.35%
Aerospace & Defense - 0.57%
(a)BE Aerospace Corporation ............................................... 94,200 $ 1,630,837
------------
Apparel Manufacturing - 3.83%
(a)Jones Apparel Group, Inc. .............................................. 422,300 10,953,406
------------
Auto Parts - Original Equipment - 1.25%
Federal-Mogul Corporation .............................................. 78,500 3,581,563
------------
Auto - Rental/Leasing - 1.59%
(a)Dollar Thrifty Automotive Group, Inc. .................................. 148,000 2,784,250
(a)Rent-Way, Inc. ......................................................... 85,000 1,753,125
------------
4,537,375
------------
Broadcast - Radio and Television - 1.45%
(a)ValueVision International, Inc. ........................................ 173,400 4,139,925
------------
Commercial Services - 3.22%
(a)Lason, Inc. ............................................................ 63,700 2,878,444
(a)Navigant Consulting, Inc. .............................................. 72,900 3,198,487
(a)NOVA Corporation ....................................................... 120,400 3,130,400
------------
9,207,331
------------
Computers - 6.16%
(a)EMC Corporation ........................................................ 140,900 8,454,000
(a)Pinnacle Systems, Inc. ................................................. 218,200 7,118,775
(a)Quantum Corporation-DLT & Storage System ............................... 93,900 1,719,544
(a)Quantum Corporation-Hard Disk Drive .................................... 46,950 334,519
------------
17,626,838
------------
Computer Software & Services - 8.38%
(a)Bell & Howell Company .................................................. 56,200 1,882,700
(a)BMC Software, Inc. ..................................................... 138,900 7,474,556
(a)CheckFree Holdings Corporation ......................................... 162,300 4,747,275
(a)CSG Systems International, Inc. ........................................ 61,400 1,385,338
(a)Cognizant Technology Solutions Corporation ............................. 110,300 2,660,987
(a)IMRglobal Corp. ........................................................ 76,300 1,301,869
(a)Peregrine Systems, Inc. ................................................ 88,100 2,907,300
(a)System Software Associates, Inc. ....................................... 582,850 637,521
(a)Unify Corporation ...................................................... 75,000 975,000
------------
23,972,546
------------
(Continued)
</TABLE>
<PAGE>
<TABLE>
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THE CHESAPEAKE AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS
August 31, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Electrical Equipment - 0.99%
(a)SLI, Inc. .............................................................. 115,800 $ 2,837,100
------------
Electronics - 4.89%
(a)Aeroflex Incorporated .................................................. 172,900 2,831,238
CTS Corporation ........................................................ 110,400 5,257,800
(a)Flextronics International Ltd. ......................................... 65,100 3,820,556
(a)Kent Electronics Corporation ........................................... 123,100 2,085,006
------------
13,994,600
------------
Electronics - Semiconductor - 21.76%
(a)Adaptec, Inc. .......................................................... 146,200 5,701,800
(a)Alpha Industries, Inc. ................................................. 65,600 3,735,100
(a)Amkor Technology, Inc. ................................................. 315,100 5,553,637
(a)Atmel Corporation ...................................................... 127,900 5,028,069
(a)Brooks Automation, Inc. ................................................ 71,200 1,548,600
(a)Credence Systems Corporation ........................................... 74,400 3,199,200
(a)Galileo Technology Ltd. ................................................ 64,200 3,346,425
(a)LSI Logic Corporation .................................................. 248,900 14,125,075
(a)LTX Corporation ........................................................ 141,700 1,842,100
(a)QLogic Corporation ..................................................... 59,800 5,206,337
(a)Semtech Corporation .................................................... 55,800 3,909,487
(a)Teradyne, Inc. ......................................................... 51,600 3,512,025
(a)TriQuint Semiconductor, Inc. ........................................... 104,800 5,541,300
------------
62,249,155
------------
Environmental Control - 0.65%
(a)Republic Services, Inc. ................................................ 171,200 1,861,800
------------
Financial Consumer Credit - 1.58%
(a)AmeriCredit Corp. ...................................................... 353,500 4,529,219
------------
Financial Services - 2.90%
American Capital Strategies, Ltd. ...................................... 176,600 3,057,388
SEI Investments Company ................................................ 57,100 5,249,631
------------
8,307,019
------------
Food - Wholesale - 0.99%
(a)U.S. Foodservice ....................................................... 135,500 2,820,094
------------
Leisure Time - 1.74%
(a)Bally Total Fitness Holding Corporation ................................ 155,400 4,982,513
------------
(Continued)
</TABLE>
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<TABLE>
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THE CHESAPEAKE AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS
August 31, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Machine - Construction & Mining - 0.91%
(a)Terex Corporation ...................................................... 97,000 $ 2,606,875
------------
Medical - Services - 6.22%
(a)Dendrite International, Inc. ........................................... 46,800 1,948,050
(a)LifePoint Hospitals, Inc. .............................................. 267,100 1,836,313
(a)MedPartners, Inc. ...................................................... 427,000 2,989,000
(a)Per-Se Technologies, Inc. .............................................. 563,000 2,005,687
(a)MedQuist Inc. .......................................................... 56,300 1,959,944
(a)Trigon Healthcare, Inc. ................................................ 120,000 4,357,500
(a)Universal Health Services, Inc. ........................................ 80,700 2,693,363
------------
17,789,857
------------
Medical Supplies - 2.17%
(a)ArthroCare Corporation ................................................. 51,800 1,855,088
(a)Biomatrix, Inc. ........................................................ 131,100 2,572,837
Biomet, Inc. ........................................................... 49,900 1,783,925
------------
6,211,850
------------
Miscellaneous - Manufacturing - 0.00%
Wilshire Technologies, Warrants, expires 11/28/2002 .................... 11,956 0
------------
Oil & Gas - Exploration - 0.77%
(a)Varco International, Inc. .............................................. 176,500 2,184,187
------------
Pharmaceuticals - 2.50%
ICN Pharmaceuticals, Inc. .............................................. 97,500 2,023,125
(a)Renal Care Group, Inc. ................................................. 156,900 3,000,712
(a)Roberts Pharmaceutical Corporation ..................................... 79,200 2,118,600
------------
7,142,437
------------
Restaurants & Food Service - 2.32%
(a)CEC Entertainment Inc. ................................................. 125,500 3,498,313
(a)Papa John's International, Inc. ........................................ 78,700 3,128,325
------------
6,626,638
------------
Retail - Apparel - 1.13%
(a)American Eagle Outfitters, Inc. ........................................ 82,400 3,234,200
------------
Retail - Automotive Parts - 1.75%
(a)O'Reilly Automotive, Inc. .............................................. 63,900 2,444,175
(a)Sonic Automotive, Inc. ................................................. 212,900 2,568,106
------------
5,012,281
------------
(Continued)
</TABLE>
<PAGE>
<TABLE>
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THE CHESAPEAKE AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS
August 31, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Retail - Department Stores - 1.73%
(a)Ames Department Stores, Inc. ........................................... 168,700 $ 4,955,562
------------
Retail - Speciality Line - 1.86%
Cash America International, Inc. ....................................... 159,800 1,148,563
(a)Gerald Stevens, Inc. ................................................... 66,100 776,675
(a)iMALL, Inc. ............................................................ 130,800 2,264,475
(a)Value America, Inc. .................................................... 106,300 1,122,794
------------
5,312,507
------------
Telecommunications - 2.10%
(a)Amdocs Limited ......................................................... 138,000 3,622,500
(a)DSP Communications, Inc. ............................................... 101,700 2,389,950
------------
6,012,450
------------
Telecommunications Equipment - 7.01%
(a)Ancor Communications, Inc. ............................................. 89,900 2,382,350
(a)ANTEC Corporation ...................................................... 123,400 5,622,412
(a)Carrier Access Corporation ............................................. 23,800 1,154,300
(a)CommScope, Inc. ........................................................ 27,500 947,031
(a)Comverse Technology, Inc. .............................................. 61,260 4,778,280
(a)Digital Microwave Corporation .......................................... 121,100 1,657,556
(a)International FiberCom, Inc. ........................................... 152,300 1,142,250
(a)Stanford Telecommunications, Inc. ...................................... 82,400 2,369,000
------------
20,053,179
------------
Transportation - Air - 2.13%
(a)Atlas Air, Inc. ........................................................ 113,650 3,096,962
COMAIR Holdings, Inc. .................................................. 142,180 3,003,553
------------
6,100,515
------------
Utilities - Electric - 1.49%
MidAmerican Energy Holding Company ..................................... 149,000 4,265,125
------------
Wholesale & Distribution - Specialty Line - 2.31%
(a)CDW Computer Centers, Inc. ............................................. 82,900 3,678,688
(a)Insight Enterprises, Inc. .............................................. 97,050 2,935,763
------------
6,614,451
------------
Total Common Stocks (Cost $213,176,462) ................................ 281,353,435
------------
(Continued)
</TABLE>
<PAGE>
<TABLE>
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THE CHESAPEAKE AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS
August 31, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANY - 0.52%
Evergreen Money Market Treasury Institutional Money ......................... 1,485,508 $ 1,485,508
Market Fund Institutional Service Shares ------------
(Cost $1,485,508)
Total Value of Investments (Cost $214,661,970 (b)) ................................. 98.87 % $282,838,943
Other Assets Less Liabilities ...................................................... 1.13 % 3,242,125
------ ------------
Net Assets .................................................................. 100.00 % $286,081,068
====== ============
(a) Non-income producing investment.
(b) Aggregate cost for federal income tax purposes is $214,910,760. Unrealized appreciation (depreciation)
of investments for federal income tax purposes is as follows:
Unrealized appreciation ................................................................................ $ 88,469,254
Unrealized depreciation ................................................................................ (20,541,071)
------------
Net unrealized appreciation ............................................................ $ 67,928,183
============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
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THE CHESAPEAKE AGGRESSIVE GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1999
ASSETS
Investments, at value (cost $214,661,970) ..................................................... $282,838,943
Cash .......................................................................................... 20,708
Income receivable ............................................................................. 89,629
Receivable for investments sold ............................................................... 3,145,202
Receivable for fund shares sold ............................................................... 115,523
Other assets .................................................................................. 4,894
------------
Total assets ............................................................................. 286,214,899
------------
LIABILITIES
Accrued expenses .............................................................................. 42,225
Payable for investment purchases .............................................................. 87,975
Payable for fund shares redeemed .............................................................. 3,631
------------
Total liabilities ........................................................................ 133,831
------------
NET ASSETS
(applicable to 17,021,028 shares outstanding; unlimited
shares of no par value beneficial interest authorized) ....................................... $286,081,068
============
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($286,081,068 / 17,021,028 shares) ............................................................ $16.81
============
OFFERING PRICE PER SHARE
(100 / 97% of $16.81) ......................................................................... $17.33
============
NET ASSETS CONSIST OF
Paid-in capital ............................................................................... $219,466,768
Accumulated net realized loss on investments .................................................. (1,562,673)
Net unrealized appreciation on investments .................................................... 68,176,973
------------
$286,081,068
============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
THE CHESAPEAKE AGGRESSIVE GROWTH FUND
STATEMENT OF OPERATIONS
Year ended August 31, 1999
INVESTMENT LOSS
Income
Dividends .................................................................................. $ 976,486
------------
Expenses
Investment advisory fees (note 2) .......................................................... 4,502,788
Fund administration fees (note 2) .......................................................... 320,167
Custody fees ............................................................................... 21,428
Registration and filing administration fees (note 2) ....................................... 6,580
Fund accounting fees (note 2) .............................................................. 21,000
Audit fees ................................................................................. 16,250
Legal fees ................................................................................. 17,500
Securities pricing fees .................................................................... 5,907
Shareholder recordkeeping fees ............................................................. 12,984
Shareholder administrative fees (note 2) ................................................... 50,000
Shareholder servicing expenses ............................................................. 68,232
Registration and filing expenses ........................................................... 7,377
Printing expenses .......................................................................... 23,000
Trustee fees and meeting expenses .......................................................... 9,007
Other operating expenses ................................................................... 41,097
------------
Total expenses ....................................................................... 5,123,317
------------
Less expense reimbursements (note 4) ............................................ (104,940)
------------
Net expenses .................................................................... 5,018,377
------------
Net investment loss ............................................................. (4,041,891)
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss from investment transactions .................................................. (1,409,378)
Decrease in unrealized depreciation on investments .............................................. 119,786,543
------------
Net realized and unrealized gain on investments ............................................ 118,377,165
------------
Net increase in net assets resulting from operations ................................. $114,335,274
============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE AGGRESSIVE GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Year ended Year ended
August 31, August 31,
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
DECREASE IN NET ASSETS
Operations
Net investment loss ...................................................... $ (4,041,891) $ (6,758,939)
Net realized (loss) gain from investment transactions .................... (1,409,378) 38,364,114
Decrease in unrealized depreciation (appreciation) on investments ........ 119,786,543 (211,160,640)
------------- -------------
Net increase (decrease) in net assets resulting from operations ...... 114,335,274 (179,555,465)
------------- -------------
Distributions to shareholders from
Net realized gain from investment transactions ........................... (26,811,798) (78,304,241)
------------- -------------
Capital share transactions
(Decrease) increase in net assets resulting from capital share transactions (a) (171,246,000) 14,174,396
------------- -------------
Total decrease in net assets ....................... (83,722,524) (243,685,310)
NET ASSETS
Beginning of year ............................................................. 369,803,592 613,488,902
------------- -------------
End of year ................................................................... $ 286,081,068 $ 369,803,592
============= =============
(a) A summary of capital share activity follows:
-----------------------------------------------------------------------------
Year ended Year ended
August 31, 1999 August 31, 1998
Shares Value Shares Value
-----------------------------------------------------------------------------
Shares sold ........................................ 2,212,958 $ 34,202,677 2,928,296 $ 59,641,139
Shares issued for reinvestment
of distributions .............................. 1,782,993 26,370,458 3,755,172 74,389,963
------------- ------------- ------------- -------------
3,995,951 60,573,135 6,683,468 134,031,102
Shares redeemed .................................... (14,770,790) (231,819,135) (6,228,186) (119,856,706)
------------- ------------- ------------- -------------
Net (decrease) increase ....................... (10,774,839) $(171,246,000) 455,282 $ 14,174,396
============= ============= ============= =============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE AGGRESSIVE GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Year)
- ------------------------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended Year ended
August 31, August 31, August 31, August 31, August 31,
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year ...................... $13.30 $22.44 $16.88 $20.70 $13.58
Income(loss) from investment operations
Net investment loss .......................... (0.24) (0.24) (0.22) (0.18) (0.15)
Net realized and unrealized gain (loss)
on investments ............................. 4.89 (6.02) 6.84 (2.53) 7.27
------------ ------------ ------------ ------------ ------------
Total from investment operations ........ 4.65 (6.26) 6.62 (2.71) 7.12
------------ ------------ ------------ ------------ ------------
Distributions to shareholders from
Net realized gain from investment transactions (1.14) (2.88) (1.06) (1.11) 0.00
------------ ------------ ------------ ------------ ------------
Net asset value, end of year ............................ $16.81 $13.30 $22.44 $16.88 $20.70
============ ============ ============ ============ ============
Total return (a) ........................................ 36.16 % (32.12)% 41.14 % (12.81)% 52.45 %
============ ============ ============ ============ ============
Ratios/supplemental data
Net assets, end of year ........................... $286,081,068 $369,803,592 $613,488,902 $460,307,496 $460,286,044
============ ============ ============ ============ ============
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 1.42 % 1.40 % 1.42 % 1.42 % 1.43 %
After expense reimbursements and waived fees 1.39 % 1.40 % 1.42 % 1.42 % 1.43 %
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees (1.15)% (1.15)% (1.17)% (1.05)% (1.07)%
After expense reimbursements and waived fees (1.12)% (1.15)% (1.17)% (1.05)% (1.07)%
Portfolio turnover rate ........................... 110.27 % 86.18 % 115.51 % 110.04 % 75.42 %
(a) Total return does not reflect payment of a sales charge.
See accompanying notes to financial statements
</TABLE>
<PAGE>
THE CHESAPEAKE AGGRESSIVE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1999
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. Investment companies are valued at net
asset value. 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.
The Fund has capital loss carryforwards for federal income tax
purposes of $1,160,588 which expires in the year 2007. It is
the intention of the Board of Trustees of the Trust not to
distribute any realized gains until the carryforwards have
been offset or expire.
As a result of the Fund's operating net investment loss, a
reclassification adjustment of $4,041,891 has been made on the
statement of assets and liabilities to decrease accumulated
net investment loss, bringing it to zero, and decrease paid-in
capital.
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.
(Continued)
<PAGE>
THE CHESAPEAKE AGGRESSIVE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1999
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 estimates.
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 a fund accounting and compliance agreement with the
Trust. As compensation for its services, the Administrator received 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 0.075% of
average daily net assets over $50 million. The Administrator also
receives a monthly fee of $1,750 for accounting and recordkeeping
services. The Administrator also charges for certain expenses involved
with the daily valuation of portfolio securities.
NC Shareholder Services, LLC (the "Transfer Agent") serves 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.
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 year ended August 31, 1999, the Distributor retained sales charges
in the amount of $315.
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 $385,391,285 and $577,421,952, respectively, for the year
ended August 31, 1999.
(Continued)
<PAGE>
THE CHESAPEAKE AGGRESSIVE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1999
NOTE 4 - EXPENSE REDUCTIONS
The Advisor has transacted certain portfolio trades with brokers who
paid a portion of the Fund's expenses. For the year ended August 31,
1999, the Fund's expenses were reduced by $104,940 under this
agreement.
NOTE 5 - DISTRIBUTIONS TO SHAREHOLDERS
For federal income tax purposes, the Fund must report distributions
from net realized gain from investment transactions that represent
long-term capital gain to its shareholders. The total amount of $1.14
per share distributions for the year ended August 31, 1999, was
classified as long-term capital gain. Shareholders should consult a tax
advisor on how to report distributions for state and local income tax
purposes.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees of Gardner Lewis Investment Trust and Shareholders of
The Chesapeake Aggressive Growth Fund:
We have audited the accompanying statement of assets and liabilities of The
Chesapeake Aggressive Growth Fund (the "Fund"), including the portfolio of
investments, as of August 31, 1999, and the related statement of operations for
the year then ended, the statements of changes in net assets for the years ended
August 31, 1999 and 1998, and the financial highlights for each of the five
years in the period then ended. 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
August 31, 1999, 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, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Chesapeake Aggressive Growth Fund as of August 31, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
September 17, 1999
<PAGE>
________________________________________________________________________________
THE CHESAPEAKE AGGRESSIVE
GROWTH FUND
________________________________________________________________________________
a series of the Gardner Lewis Investment Trust
This Report has been prepared for shareholders
and may be distributed to others only if preceded
or accompanied by a current prospectus.
<PAGE>
______________________________
THE CHESAPEAKE FUNDS
______________________________
October 1, 1999
Dear Shareholder:
The Chesapeake Growth Fund Institutional Class closed the third quarter
with a year-to-date gain of 6.2%. This gain compares to gains of 2.4% for the
Russell 2000 and 5.4% for the S&P 500. This year-to- date gain comes on the back
of a third quarter loss of 2.8%, versus a loss of 6.3% in the Russell 2000, and
a loss of 6.2% in the S&P. Our relative success through the past two quarters
reinforces our belief that the environment has truly improved for our
methodology of investing.
Economic growth throughout the world has stabilized or is improving,
though attention is now focused on the potential inflationary ramifications of
resurgent growth. Labor markets are tight; crude oil prices rose 20% this
quarter; the dollar declined steadily against the yen since mid-July; and gold
prices spiked 20% this past week. Yet productivity gains continue to absorb
these pressures, and so inflation has not materialized to the extent feared. As
a result, interest rates were little changed this quarter, after rising steadily
through the first half of the year. Nevertheless, despite a healthy business
environment and robust corporate earnings, present concerns about interest rate
policy will most likely dominate investor sentiment until the Fed meets on
October 5th.
The resulting trepidation on the part of investors generated a broad
sell-off in stocks this quarter that spanned most economic sectors and all
market capitalizations. For the first time in years, investors did not seek
refuge in the largest capitalization names during a time of market uncertainty.
Consequently, losses in smaller and midcap stocks were in line with losses in
the larger cap universe.
In an environment characterized by interest rate concerns, it should
come as no surprise that larger cap stocks, with slower earnings growth and
higher valuations, would experience compression. Much of their appreciation over
the past several years has been dependent upon price/earnings multiple expansion
driven by falling interest rates. In an environment of stable or rising rates,
investors will turn to stocks with more reasonable valuations and with the
ability to grow their earnings rapidly enough to outpace inflation. This
phenomenon was largely responsible for the long period of outperformance in the
small cap universe through the late 70's and early 80's.
Our focus on company specific research continues to lead us to
businesses where earnings growth is strongest. And this focus on strong
fundamentals at the company level often leads us to discover strong fundamentals
at the industry level. Thus our recent outperformance was both a result of
picking good stocks and of being led by those stock picks to good industries.
<PAGE>
Our fundamental analysis at the company level led us to invest in a
number of broadband communication enabling companies that are benefiting from
the demands of the continued evolution of information and internet technology.
These investments proved quite profitable through the quarter, and we now have
begun to pare back our exposure here, making room for investment in other areas,
including retail and healthcare, where we think business prospects for some
companies are stronger than currently perceived.
As is often the case, many companies with excellent fundamentals and
growth prospects have been oversold with their respective industry groups. When
investors retreated from the retail sector because of environmental concerns,
for example, few individual companies were spared. Because our discipline
focuses on those companies with relatively less macroeconomic exposure, we often
find excellent investment opportunities in these situations. We seek companies
whose prospects are underpinned by proprietary products and defensible market
positions, and whose growth is typically much faster than that of their
industries. We believe these companies are better able to sustain earnings
growth through changes in their business environments, and are also better
positioned to generate real earnings growth through inflationary periods.
We are encouraged after this period of broad selling, by the current
opportunity to find mispriced stocks with superior growth prospects. And we are
comforted by the wide disparity in valuations between the largest capitalization
stocks and those smaller. The past two quarters were completely different market
environments, but both evidence that ultra-cap dominance may finally be coming
to an end. As investors extend their search down the capitalization spectrum for
more compelling growth and valuation, we are poised to benefit from both the
quality of our earnings growth and the potential expansion of valuation
multiples in our universe.
Have a pleasant autumn.
Sincerely,
/S/ William D. Zantzinger, Jr. /S/ John L. Lewis, IV
William D. Zantzinger, Jr. John L. Lewis, IV
[Whit Gardner was less involved in this quarter's letter than is typically the
case. He has taken a few days to spend time with his family due to the passing
of his mother. wdz]
<PAGE>
___________________________________________________
THE CHESAPEAKE GROWTH FUND
___________________________________________________
September 30, 1999
Investment Strategy
- -------------------
The Chesapeake Growth Fund seeks capital appreciation through investments in
small, medium, and large growth equities. The cornerstone of the fund's
intensive in-house fundamental analysis is in constant contact with the
management, customers, competitors, and suppliers of both current and potential
investments.
Investment Guidelines
- ---------------------
The Fund seeks companies that:
o are experiencing a rapid growth rate - companies in our portfolio are
forecasted to grow their profits in excess of 15% annually;
o are selling at a stock price not yet fully reflective of their growth rate;
o are undergoing a positive change created by new products, managements,
distribution strategies or manufacturing technologies;
o have a strong balance sheet
o are less susceptible to macroeconomic change.
The Largest Industry Groups
- ---------------------------
[Pie Chart Here]
Apparel 7.0%
Business Services 9.7%
Computer Software 9.8%
Computers & Peripherals 16.5%
Electronics/Instruments 5.6%
Energy Services 8.6%
Pharmaceuticals 4.3%
Retail Sales & Distribution 6.2%
Semiconductors & Related 10.0%
Telecommunications 10.5%
All Others 11.9%
About The Investment Advisor
- ----------------------------
Gardner Lewis Asset management serves as investment advisor to the Chesapeake
Family of Funds. Overall, through the funds and separately managed accounts,
Gardner Lewis invests approximately $3 billion in growth equities for both
institutions and individuals including some of the top foundations, endowments,
and pension plans in the U.S. Gardner Lewis was founded in 1990 and employs a
staff of 28. The research team is comprised of 15.
<PAGE>
Ten Largest Holdings
- --------------------
1. EMC Corporation 6.2%
2. MCI Worldcom Inc. 4.1%
3. LSI Logic Corp. 3.5%
4. Jones Apparel Group, Inc. 3.7%
5. Sun Microsystems, Inc. 3.2%
6. BMC Software, Inc. 2.8%
7. Adaptec, Inc. 2.7%
8. Scientific-Atlanta, Inc. 2.6%
9. Atmel Corp. 2.6%
10. AES Corporation 2.4%
Portfolio Characteristics
- -------------------------
Overall Assets ($MM) 218
Number of Companies 65
5 Yr. Historical Earnings Growth 24%
Earnings Growth - net year 35%
P/E Ratio - next year 22
(Gardner Lewis earnings estimates)
Performance Summary
- -------------------
Annualized
- --------------------------------------------------------------------------------
Quarter 1 Year 5 Year Since
End Inception
- --------------------------------------------------------------------------------
The Chesapeake Growth
Fund Institutional Series -2.8% 35.8% 15.4% 15.6%
- --------------------------------------------------------------------------------
Historical performance for the Chesapeake Growth Fund Institutional Series has
been calculated by using the performance of an original class of The Fund (know
as the A Shares) from inception on April 6, 1994 until the date of issuance of
the new Institutional Series on April 7, 1995, and combining such performance
with the performance of the Institutional Series since April 7, 1995. The
performance quoted represents past performance and is not a guarantee of future
results. Share price and investment return will vary, so you may have a gain or
loss when you sell shares.
For More complete information regarding the Fund including charges and expenses,
obtain a prospectus by calling the Fund directly at (800)430-3863 or Gardner
Lewis Asset Management, the Investment Advisor at (610)558-2800.
Must be accompanied or preceded by a prospectus.
Capital Investment Group, Inc., Distributor
Raleigh, NC (800)525-3863
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
___________________________________________________
THE CHESAPEAKE GROWTH FUND
___________________________________________________
PORTFOLIO OF INVESTMENTS
(unaudited)
September 30, 1999
====================================================== ======================================================
Quantity Security Market Value Quantity Security Market Value
====================================================== ======================================================
87,300 AES Corporation 5,150,700 84,200 Harrah's Entertainment 2,336,550
77,200 Abercrombie & Fitch Co. 2,629,625 48,100 Heller Financial 1,082,250
203,400 Acxiom Corp. 3,998,081 117,000 IMS Health Inc. 2,669,062
149,500 Adaptec, Inc. 5,933,281 50,200 Insight Communications, Inc. 1,436,975
84,700 American Eagle Outfitters 4,102,656 21,600 JDS Uniphase, Inc. 2,458,350
170,300 American Power Conversion 3,235,700 260,100 Jones Apparel Group, Inc. 7,477,875
155,800 Amerisource Health Corp. 3,690,512 42,200 KLA-Tencor Corp. 2,743,000
146,300 Ames Department Stores 4,663,312 146,700 LSI Logic Corp. 7,628,400
111,400 Amkor Technology Inc. 1,796,325 125,900 MCI Worldcom Inc. 9,049,062
168,200 Atmel Corp. 5,687,262 54,200 Mercury Interactive Corp. 3,499,287
96,200 BEA Systems, Inc. 3,397,062 129,600 MidAmerican Energy Holdings Co 3,823,200
95,400 BJ Services 3,034,912 78,700 Mohawk Industries, Inc. 1,569,081
86,100 BMC Software, Inc. 6,161,531 42,200 Navigant Consulting Co. 1,957,025
120,600 BioChem Pharma, Inc. 2,886,862 133,700 Nova Corporation 3,342,500
44,400 Biomet, Inc. 1,168,275 56,000 Papa Johns Intl Inc Com 2,310,000
119,800 Checkfree Holdings Corp. 4,926,775 246,600 Republic Services, Inc. 2,681,775
62,400 Ciena Corp. 2,277,600 90,200 Research In Motion Ltd. 2,790,562
56,600 Circuit City Stores, Inc. 2,387,812 51,700 Sanmina Corp. 4,000,287
63,500 Citrix Systems, Inc. 3,933,031 116,300 Scientific-Atlanta, Inc. 5,764,119
106,300 Columbia/HCA Healthcare Corp. 2,252,231 41,700 Shared Medical Systems 1,949,475
93,050 Comair Holdings, Inc. 1,552,772 74,600 Sun Microsystems, Inc. 6,937,800
183,800 Comdisco, Inc. 3,549,637 99,200 Symantec Corp. 3,568,100
130,150 Concord EFS, Inc. 2,684,344 53,550 System Software Associates, In 103,753
52,900 Conexant Systems, Inc. 3,843,516 71,600 Tandy Corp. 3,700,825
75,700 DSP Communications, Inc. 1,438,300 100,600 Tenet Healthcare Corp. 1,766,787
62,700 EG&G Inc. 2,492,325 66,800 Tommy Hilfiger Corp 1,882,925
189,400 EMC Corporation 13,518,425 120,100 Transocean Offshore, Inc. 3,678,062
26,800 Exodus Communications, Inc. 1,931,275 10,200 U.S.Foodservice 183,600
60,600 Federal-Mogul Corp. 1,670,287 75,000 Unisys Corp. 3,384,375
68,300 Forest Laboratories, Inc. 2,877,137 103,300 United Healthcare Corp. 5,029,419
9,882 Gartner Group Inc. Class B 164,906 93,600 Weatherford International, Inc 2,995,200
50,100 Gateway Inc. 2,204,400 74,800 Westpoint Stevens, Inc. 1,767,150
43,600 Young & Rubicam Inc. 1,918,400
TOTAL EQUITY 218,726,109
CASH EQUIVALENT** (972,297)
TOTAL ASSETS 217,753,812
**Pending securities settlement
</TABLE>
<PAGE>
______________________________
THE CHESAPEAKE FUNDS
______________________________
October 1, 1999
Dear Shareholder:
The Chesapeake Growth Fund Series A closed the third quarter with a
year-to-date gain of 5.9%. This gain compares to gains of 2.4% for the Russell
2000 and 5.4% for the S&P 500. This year-to- date gain comes on the back of a
third quarter loss of 2.8%, versus a loss of 6.3% in the Russell 2000, and a
loss of 6.2% in the S&P. Our relative success through the past two quarters
reinforces our belief that the environment has truly improved for our
methodology of investing.
Economic growth throughout the world has stabilized or is improving,
though attention is now focused on the potential inflationary ramifications of
resurgent growth. Labor markets are tight; crude oil prices rose 20% this
quarter; the dollar declined steadily against the yen since mid-July; and gold
prices spiked 20% this past week. Yet productivity gains continue to absorb
these pressures, and so inflation has not materialized to the extent feared. As
a result, interest rates were little changed this quarter, after rising steadily
through the first half of the year. Nevertheless, despite a healthy business
environment and robust corporate earnings, present concerns about interest rate
policy will most likely dominate investor sentiment until the Fed meets on
October 5th.
The resulting trepidation on the part of investors generated a broad
sell-off in stocks this quarter that spanned most economic sectors and all
market capitalizations. For the first time in years, investors did not seek
refuge in the largest capitalization names during a time of market uncertainty.
Consequently, losses in smaller and midcap stocks were in line with losses in
the larger cap universe.
In an environment characterized by interest rate concerns, it should
come as no surprise that larger cap stocks, with slower earnings growth and
higher valuations, would experience compression. Much of their appreciation over
the past several years has been dependent upon price/earnings multiple expansion
driven by falling interest rates. In an environment of stable or rising rates,
investors will turn to stocks with more reasonable valuations and with the
ability to grow their earnings rapidly enough to outpace inflation. This
phenomenon was largely responsible for the long period of outperformance in the
small cap universe through the late 70's and early 80's.
Our focus on company specific research continues to lead us to
businesses where earnings growth is strongest. And this focus on strong
fundamentals at the company level often leads us to discover strong fundamentals
at the industry level. Thus our recent outperformance was both a result of
picking good stocks and of being led by those stock picks to good industries.
<PAGE>
Our fundamental analysis at the company level led us to invest in a
number of broadband communication enabling companies that are benefiting from
the demands of the continued evolution of information and internet technology.
These investments proved quite profitable through the quarter, and we now have
begun to pare back our exposure here, making room for investment in other areas,
including retail and healthcare, where we think business prospects for some
companies are stronger than currently perceived.
As is often the case, many companies with excellent fundamentals and
growth prospects have been oversold with their respective industry groups. When
investors retreated from the retail sector because of environmental concerns,
for example, few individual companies were spared. Because our discipline
focuses on those companies with relatively less macroeconomic exposure, we often
find excellent investment opportunities in these situations. We seek companies
whose prospects are underpinned by proprietary products and defensible market
positions, and whose growth is typically much faster than that of their
industries. We believe these companies are better able to sustain earnings
growth through changes in their business environments, and are also better
positioned to generate real earnings growth through inflationary periods.
We are encouraged after this period of broad selling, by the current
opportunity to find mispriced stocks with superior growth prospects. And we are
comforted by the wide disparity in valuations between the largest capitalization
stocks and those smaller. The past two quarters were completely different market
environments, but both evidence that ultra-cap dominance may finally be coming
to an end. As investors extend their search down the capitalization spectrum for
more compelling growth and valuation, we are poised to benefit from both the
quality of our earnings growth and the potential expansion of valuation
multiples in our universe.
Have a pleasant autumn.
Sincerely,
/S/ William D. Zantzinger, Jr. /S/ John L. Lewis, IV
William D. Zantzinger, Jr. John L. Lewis, IV
[Whit Gardner was less involved in this quarter's letter than is typically the
case. He has taken a few days to spend time with his family due to the passing
of his mother. wdz]
<PAGE>
___________________________________________________
THE CHESAPEAKE GROWTH FUND
___________________________________________________
September 30, 1999
Investment Strategy
- -------------------
The Chesapeake Growth Fund seeks capital appreciation through investments in
small, medium, and large growth equities. The cornerstone of the fund's
intensive in-house fundamental analysis is in constant contact with the
management, customers, competitors, and suppliers of both current and potential
investments.
Investment Guidelines
- ---------------------
The Fund seeks companies that:
o are experiencing a rapid growth rate - companies in our portfolio are
forecasted to grow their profits in excess of 15% annually;
o are selling at a stock price not yet fully reflective of their growth rate;
o are undergoing a positive change created by new products, managements,
distribution strategies or manufacturing technologies;
o have a strong balance sheet
o are less susceptible to macroeconomic change.
The Largest Industry Groups
- ---------------------------
[Pie Chart Here]
Apparel 7.0%
Business Services 9.7%
Computer Software 9.8%
Computers & Peripherals 16.5%
Electronics/Instruments 5.6%
Energy Services 8.6%
Pharmaceuticals 4.3%
Retail Sales & Distribution 6.2%
Semiconductors & Related 10.0%
Telecommunications 10.5%
All Others 11.9%
About The Investment Advisor
- ----------------------------
Gardner Lewis Asset management serves as investment advisor to the Chesapeake
Family of Funds. Overall, through the funds and separately managed accounts,
Gardner Lewis invests approximately $3 billion in growth equities for both
institutions and individuals including some of the top foundations, endowments,
and pension plans in the U.S. Gardner Lewis was founded in 1990 and employs a
staff of 28. The research team is comprised of 15.
<PAGE>
Ten Largest Holdings
- --------------------
1. EMC Corporation 6.2%
2. MCI Worldcom Inc. 4.1%
3. LSI Logic Corp. 3.5%
4. Jones Apparel Group, Inc. 3.7%
5. Sun Microsystems, Inc. 3.2%
6. BMC Software, Inc. 2.8%
7. Adaptec, Inc. 2.7%
8. Scientific-Atlanta, Inc. 2.6%
9. Atmel Corp. 2.6%
10. AES Corporation 2.4%
Portfolio Characteristics
- -------------------------
Overall Assets ($MM) 218
Number of Companies 65
5 Yr. Historical Earnings Growth 24%
Earnings Growth - net year 35%
P/E Ratio - next year 22
(Gardner Lewis earnings estimates)
Performance Summary
- -------------------
Annualized
- --------------------------------------------------------------------------------
The Chesapeake Quarter 1 Year 5 Year Since
Growth Fund Series A End Inception
- --------------------------------------------------------------------------------
Without the sales load
deduction -2.8% 35.4% 15.1% 15.3%
- --------------------------------------------------------------------------------
Net of the maximum
sales load^1 -5.7% 31.3% 14.4% 14.7%
- --------------------------------------------------------------------------------
1 The maximum sales load for the Fund is 3%. Historical performance for the
Chesapeake Growth Fund Series A has been calculated by using the performance
of an original class of The Fund (now called Institutional Shares) from
inception on April 6, 1994 until the date of issuance of the new Series A on
April 7, 1995, and combining such performance with the performance of the
Series A Shares since April 7, 1995. The performance quoted represents past
performance and is not a guarantee of future results. Share price and
investment return will vary, so you may have a gain or loss when you sell
shares.
For More complete information regarding the Fund including charges and expenses,
obtain a prospectus by calling the Fund directly at (800)430-3863 or Gardner
Lewis Asset Management, the Investment Advisor at (610)558-2800.
Must be accompanied or preceded by a prospectus.
Capital Investment Group, Inc., Distributor
Raleigh, NC (800)525-3863
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
___________________________________________________
THE CHESAPEAKE GROWTH FUND
___________________________________________________
PORTFOLIO OF INVESTMENTS
(unaudited)
September 30, 1999
====================================================== ======================================================
Quantity Security Market Value Quantity Security Market Value
====================================================== ======================================================
87,300 AES Corporation 5,150,700 84,200 Harrah's Entertainment 2,336,550
77,200 Abercrombie & Fitch Co. 2,629,625 48,100 Heller Financial 1,082,250
203,400 Acxiom Corp. 3,998,081 117,000 IMS Health Inc. 2,669,062
149,500 Adaptec, Inc. 5,933,281 50,200 Insight Communications, Inc. 1,436,975
84,700 American Eagle Outfitters 4,102,656 21,600 JDS Uniphase, Inc. 2,458,350
170,300 American Power Conversion 3,235,700 260,100 Jones Apparel Group, Inc. 7,477,875
155,800 Amerisource Health Corp. 3,690,512 42,200 KLA-Tencor Corp. 2,743,000
146,300 Ames Department Stores 4,663,312 146,700 LSI Logic Corp. 7,628,400
111,400 Amkor Technology Inc. 1,796,325 125,900 MCI Worldcom Inc. 9,049,062
168,200 Atmel Corp. 5,687,262 54,200 Mercury Interactive Corp. 3,499,287
96,200 BEA Systems, Inc. 3,397,062 129,600 MidAmerican Energy Holdings Co 3,823,200
95,400 BJ Services 3,034,912 78,700 Mohawk Industries, Inc. 1,569,081
86,100 BMC Software, Inc. 6,161,531 42,200 Navigant Consulting Co. 1,957,025
120,600 BioChem Pharma, Inc. 2,886,862 133,700 Nova Corporation 3,342,500
44,400 Biomet, Inc. 1,168,275 56,000 Papa Johns Intl Inc Com 2,310,000
119,800 Checkfree Holdings Corp. 4,926,775 246,600 Republic Services, Inc. 2,681,775
62,400 Ciena Corp. 2,277,600 90,200 Research In Motion Ltd. 2,790,562
56,600 Circuit City Stores, Inc. 2,387,812 51,700 Sanmina Corp. 4,000,287
63,500 Citrix Systems, Inc. 3,933,031 116,300 Scientific-Atlanta, Inc. 5,764,119
106,300 Columbia/HCA Healthcare Corp. 2,252,231 41,700 Shared Medical Systems 1,949,475
93,050 Comair Holdings, Inc. 1,552,772 74,600 Sun Microsystems, Inc. 6,937,800
183,800 Comdisco, Inc. 3,549,637 99,200 Symantec Corp. 3,568,100
130,150 Concord EFS, Inc. 2,684,344 53,550 System Software Associates, In 103,753
52,900 Conexant Systems, Inc. 3,843,516 71,600 Tandy Corp. 3,700,825
75,700 DSP Communications, Inc. 1,438,300 100,600 Tenet Healthcare Corp. 1,766,787
62,700 EG&G Inc. 2,492,325 66,800 Tommy Hilfiger Corp 1,882,925
189,400 EMC Corporation 13,518,425 120,100 Transocean Offshore, Inc. 3,678,062
26,800 Exodus Communications, Inc. 1,931,275 10,200 U.S.Foodservice 183,600
60,600 Federal-Mogul Corp. 1,670,287 75,000 Unisys Corp. 3,384,375
68,300 Forest Laboratories, Inc. 2,877,137 103,300 United Healthcare Corp. 5,029,419
9,882 Gartner Group Inc. Class B 164,906 93,600 Weatherford International, Inc 2,995,200
50,100 Gateway Inc. 2,204,400 74,800 Westpoint Stevens, Inc. 1,767,150
43,600 Young & Rubicam Inc. 1,918,400
TOTAL EQUITY 218,726,109
CASH EQUIVALENT** (972,297)
TOTAL ASSETS 217,753,812
**Pending securities settlement
</TABLE>
<PAGE>
______________________________
THE CHESAPEAKE FUNDS
______________________________
October 1, 1999
Dear Shareholder:
The Chesapeake Growth Fund Series C closed the third quarter with a
year-to-date gain of 4.5%. This gain compares to gains of 2.4% for the Russell
2000 and 5.4% for the S&P 500. This year-to- date gain comes on the back of a
third quarter loss of 3.3%, versus a loss of 6.3% in the Russell 2000, and a
loss of 6.2% in the S&P. Our relative success through the past two quarters
reinforces our belief that the environment has truly improved for our
methodology of investing.
Economic growth throughout the world has stabilized or is improving,
though attention is now focused on the potential inflationary ramifications of
resurgent growth. Labor markets are tight; crude oil prices rose 20% this
quarter; the dollar declined steadily against the yen since mid-July; and gold
prices spiked 20% this past week. Yet productivity gains continue to absorb
these pressures, and so inflation has not materialized to the extent feared. As
a result, interest rates were little changed this quarter, after rising steadily
through the first half of the year. Nevertheless, despite a healthy business
environment and robust corporate earnings, present concerns about interest rate
policy will most likely dominate investor sentiment until the Fed meets on
October 5th.
The resulting trepidation on the part of investors generated a broad
sell-off in stocks this quarter that spanned most economic sectors and all
market capitalizations. For the first time in years, investors did not seek
refuge in the largest capitalization names during a time of market uncertainty.
Consequently, losses in smaller and midcap stocks were in line with losses in
the larger cap universe.
In an environment characterized by interest rate concerns, it should
come as no surprise that larger cap stocks, with slower earnings growth and
higher valuations, would experience compression. Much of their appreciation over
the past several years has been dependent upon price/earnings multiple expansion
driven by falling interest rates. In an environment of stable or rising rates,
investors will turn to stocks with more reasonable valuations and with the
ability to grow their earnings rapidly enough to outpace inflation. This
phenomenon was largely responsible for the long period of outperformance in the
small cap universe through the late 70's and early 80's.
Our focus on company specific research continues to lead us to
businesses where earnings growth is strongest. And this focus on strong
fundamentals at the company level often leads us to discover strong fundamentals
at the industry level. Thus our recent outperformance was both a result of
picking good stocks and of being led by those stock picks to good industries.
<PAGE>
Our fundamental analysis at the company level led us to invest in a
number of broadband communication enabling companies that are benefiting from
the demands of the continued evolution of information and internet technology.
These investments proved quite profitable through the quarter, and we now have
begun to pare back our exposure here, making room for investment in other areas,
including retail and healthcare, where we think business prospects for some
companies are stronger than currently perceived.
As is often the case, many companies with excellent fundamentals and
growth prospects have been oversold with their respective industry groups. When
investors retreated from the retail sector because of environmental concerns,
for example, few individual companies were spared. Because our discipline
focuses on those companies with relatively less macroeconomic exposure, we often
find excellent investment opportunities in these situations. We seek companies
whose prospects are underpinned by proprietary products and defensible market
positions, and whose growth is typically much faster than that of their
industries. We believe these companies are better able to sustain earnings
growth through changes in their business environments, and are also better
positioned to generate real earnings growth through inflationary periods.
We are encouraged after this period of broad selling, by the current
opportunity to find mispriced stocks with superior growth prospects. And we are
comforted by the wide disparity in valuations between the largest capitalization
stocks and those smaller. The past two quarters were completely different market
environments, but both evidence that ultra-cap dominance may finally be coming
to an end. As investors extend their search down the capitalization spectrum for
more compelling growth and valuation, we are poised to benefit from both the
quality of our earnings growth and the potential expansion of valuation
multiples in our universe.
Have a pleasant autumn.
Sincerely,
/S/ William D. Zantzinger, Jr. /S/ John L. Lewis, IV
William D. Zantzinger, Jr. John L. Lewis, IV
[Whit Gardner was less involved in this quarter's letter than is typically the
case. He has taken a few days to spend time with his family due to the passing
of his mother. wdz]
<PAGE>
___________________________________________________
THE CHESAPEAKE GROWTH FUND
___________________________________________________
September 30, 1999
Investment Strategy
- -------------------
The Chesapeake Growth Fund seeks capital appreciation through investments in
small, medium, and large growth equities. The cornerstone of the fund's
intensive in-house fundamental analysis is in constant contact with the
management, customers, competitors, and suppliers of both current and potential
investments.
Investment Guidelines
- ---------------------
The Fund seeks companies that:
o are experiencing a rapid growth rate - companies in our portfolio are
forecasted to grow their profits in excess of 15% annually;
o are selling at a stock price not yet fully reflective of their growth rate;
o are undergoing a positive change created by new products, managements,
distribution strategies or manufacturing technologies;
o have a strong balance sheet
o are less susceptible to macroeconomic change.
The Largest Industry Groups
- ---------------------------
[Pie Chart Here]
Apparel 7.0%
Business Services 9.7%
Computer Software 9.8%
Computers & Peripherals 16.5%
Electronics/Instruments 5.6%
Energy Services 8.6%
Pharmaceuticals 4.3%
Retail Sales & Distribution 6.2%
Semiconductors & Related 10.0%
Telecommunications 10.5%
All Others 11.9%
About The Investment Advisor
- ----------------------------
Gardner Lewis Asset management serves as investment advisor to the Chesapeake
Family of Funds. Overall, through the funds and separately managed accounts,
Gardner Lewis invests approximately $3 billion in growth equities for both
institutions and individuals including some of the top foundations, endowments,
and pension plans in the U.S. Gardner Lewis was founded in 1990 and employs a
staff of 28. The research team is comprised of 15.
<PAGE>
Ten Largest Holdings
- --------------------
1. EMC Corporation 6.2%
2. MCI Worldcom Inc. 4.1%
3. LSI Logic Corp. 3.5%
4. Jones Apparel Group, Inc. 3.7%
5. Sun Microsystems, Inc. 3.2%
6. BMC Software, Inc. 2.8%
7. Adaptec, Inc. 2.7%
8. Scientific-Atlanta, Inc. 2.6%
9. Atmel Corp. 2.6%
10. AES Corporation 2.4%
Portfolio Characteristics
- -------------------------
Overall Assets ($MM) 218
Number of Companies 65
5 Yr. Historical Earnings Growth 24%
Earnings Growth - net year 35%
P/E Ratio - next year 22
(Gardner Lewis earnings estimates)
Performance Summary
- -------------------
Annualized
- --------------------------------------------------------------------------------
Quarter 1 Year Since
End Inception
- --------------------------------------------------------------------------------
The Chesapeake
Growth Fund Series C -3.3% 32.9% 13.3%
- --------------------------------------------------------------------------------
The inception date of the Series C of the Fund was April 7, 1995. The
performance quoted represents past performance and is not a guarantee of future
results. Share price and investment return will vary, so you may have a gain or
loss when you sell shares.
For More complete information regarding the Fund including charges and expenses,
obtain a prospectus by calling the Fund directly at (800)430-3863 or Gardner
Lewis Asset Management, the Investment Advisor at (610)558-2800.
Must be accompanied or preceded by a prospectus.
Capital Investment Group, Inc., Distributor
Raleigh, NC (800)525-3863
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
___________________________________________________
THE CHESAPEAKE GROWTH FUND
___________________________________________________
PORTFOLIO OF INVESTMENTS
(unaudited)
September 30, 1999
====================================================== ======================================================
Quantity Security Market Value Quantity Security Market Value
====================================================== ======================================================
87,300 AES Corporation 5,150,700 84,200 Harrah's Entertainment 2,336,550
77,200 Abercrombie & Fitch Co. 2,629,625 48,100 Heller Financial 1,082,250
203,400 Acxiom Corp. 3,998,081 117,000 IMS Health Inc. 2,669,062
149,500 Adaptec, Inc. 5,933,281 50,200 Insight Communications, Inc. 1,436,975
84,700 American Eagle Outfitters 4,102,656 21,600 JDS Uniphase, Inc. 2,458,350
170,300 American Power Conversion 3,235,700 260,100 Jones Apparel Group, Inc. 7,477,875
155,800 Amerisource Health Corp. 3,690,512 42,200 KLA-Tencor Corp. 2,743,000
146,300 Ames Department Stores 4,663,312 146,700 LSI Logic Corp. 7,628,400
111,400 Amkor Technology Inc. 1,796,325 125,900 MCI Worldcom Inc. 9,049,062
168,200 Atmel Corp. 5,687,262 54,200 Mercury Interactive Corp. 3,499,287
96,200 BEA Systems, Inc. 3,397,062 129,600 MidAmerican Energy Holdings Co 3,823,200
95,400 BJ Services 3,034,912 78,700 Mohawk Industries, Inc. 1,569,081
86,100 BMC Software, Inc. 6,161,531 42,200 Navigant Consulting Co. 1,957,025
120,600 BioChem Pharma, Inc. 2,886,862 133,700 Nova Corporation 3,342,500
44,400 Biomet, Inc. 1,168,275 56,000 Papa Johns Intl Inc Com 2,310,000
119,800 Checkfree Holdings Corp. 4,926,775 246,600 Republic Services, Inc. 2,681,775
62,400 Ciena Corp. 2,277,600 90,200 Research In Motion Ltd. 2,790,562
56,600 Circuit City Stores, Inc. 2,387,812 51,700 Sanmina Corp. 4,000,287
63,500 Citrix Systems, Inc. 3,933,031 116,300 Scientific-Atlanta, Inc. 5,764,119
106,300 Columbia/HCA Healthcare Corp. 2,252,231 41,700 Shared Medical Systems 1,949,475
93,050 Comair Holdings, Inc. 1,552,772 74,600 Sun Microsystems, Inc. 6,937,800
183,800 Comdisco, Inc. 3,549,637 99,200 Symantec Corp. 3,568,100
130,150 Concord EFS, Inc. 2,684,344 53,550 System Software Associates, In 103,753
52,900 Conexant Systems, Inc. 3,843,516 71,600 Tandy Corp. 3,700,825
75,700 DSP Communications, Inc. 1,438,300 100,600 Tenet Healthcare Corp. 1,766,787
62,700 EG&G Inc. 2,492,325 66,800 Tommy Hilfiger Corp 1,882,925
189,400 EMC Corporation 13,518,425 120,100 Transocean Offshore, Inc. 3,678,062
26,800 Exodus Communications, Inc. 1,931,275 10,200 U.S.Foodservice 183,600
60,600 Federal-Mogul Corp. 1,670,287 75,000 Unisys Corp. 3,384,375
68,300 Forest Laboratories, Inc. 2,877,137 103,300 United Healthcare Corp. 5,029,419
9,882 Gartner Group Inc. Class B 164,906 93,600 Weatherford International, Inc 2,995,200
50,100 Gateway Inc. 2,204,400 74,800 Westpoint Stevens, Inc. 1,767,150
43,600 Young & Rubicam Inc. 1,918,400
TOTAL EQUITY 218,726,109
CASH EQUIVALENT** (972,297)
TOTAL ASSETS 217,753,812
**Pending securities settlement
</TABLE>
<PAGE>
______________________________
THE CHESAPEAKE FUNDS
______________________________
October 1, 1999
Dear Shareholder:
The Chesapeake Growth Fund Series D closed the third quarter with a
year-to-date gain of 5.4%. This gain compares to gains of 2.4% for the Russell
2000 and 5.4% for the S&P 500. This year-to- date gain comes on the back of a
third quarter loss of 3.0%, versus a loss of 6.3% in the Russell 2000, and a
loss of 6.2% in the S&P. Our relative success through the past two quarters
reinforces our belief that the environment has truly improved for our
methodology of investing.
Economic growth throughout the world has stabilized or is improving,
though attention is now focused on the potential inflationary ramifications of
resurgent growth. Labor markets are tight; crude oil prices rose 20% this
quarter; the dollar declined steadily against the yen since mid-July; and gold
prices spiked 20% this past week. Yet productivity gains continue to absorb
these pressures, and so inflation has not materialized to the extent feared. As
a result, interest rates were little changed this quarter, after rising steadily
through the first half of the year. Nevertheless, despite a healthy business
environment and robust corporate earnings, present concerns about interest rate
policy will most likely dominate investor sentiment until the Fed meets on
October 5th.
The resulting trepidation on the part of investors generated a broad
sell-off in stocks this quarter that spanned most economic sectors and all
market capitalizations. For the first time in years, investors did not seek
refuge in the largest capitalization names during a time of market uncertainty.
Consequently, losses in smaller and midcap stocks were in line with losses in
the larger cap universe.
In an environment characterized by interest rate concerns, it should
come as no surprise that larger cap stocks, with slower earnings growth and
higher valuations, would experience compression. Much of their appreciation over
the past several years has been dependent upon price/earnings multiple expansion
driven by falling interest rates. In an environment of stable or rising rates,
investors will turn to stocks with more reasonable valuations and with the
ability to grow their earnings rapidly enough to outpace inflation. This
phenomenon was largely responsible for the long period of outperformance in the
small cap universe through the late 70's and early 80's.
Our focus on company specific research continues to lead us to
businesses where earnings growth is strongest. And this focus on strong
fundamentals at the company level often leads us to discover strong fundamentals
at the industry level. Thus our recent outperformance was both a result of
picking good stocks and of being led by those stock picks to good industries.
<PAGE>
Our fundamental analysis at the company level led us to invest in a
number of broadband communication enabling companies that are benefiting from
the demands of the continued evolution of information and internet technology.
These investments proved quite profitable through the quarter, and we now have
begun to pare back our exposure here, making room for investment in other areas,
including retail and healthcare, where we think business prospects for some
companies are stronger than currently perceived.
As is often the case, many companies with excellent fundamentals and
growth prospects have been oversold with their respective industry groups. When
investors retreated from the retail sector because of environmental concerns,
for example, few individual companies were spared. Because our discipline
focuses on those companies with relatively less macroeconomic exposure, we often
find excellent investment opportunities in these situations. We seek companies
whose prospects are underpinned by proprietary products and defensible market
positions, and whose growth is typically much faster than that of their
industries. We believe these companies are better able to sustain earnings
growth through changes in their business environments, and are also better
positioned to generate real earnings growth through inflationary periods.
We are encouraged after this period of broad selling, by the current
opportunity to find mispriced stocks with superior growth prospects. And we are
comforted by the wide disparity in valuations between the largest capitalization
stocks and those smaller. The past two quarters were completely different market
environments, but both evidence that ultra-cap dominance may finally be coming
to an end. As investors extend their search down the capitalization spectrum for
more compelling growth and valuation, we are poised to benefit from both the
quality of our earnings growth and the potential expansion of valuation
multiples in our universe.
Have a pleasant autumn.
Sincerely,
/S/ William D. Zantzinger, Jr. /S/ John L. Lewis, IV
William D. Zantzinger, Jr. John L. Lewis, IV
[Whit Gardner was less involved in this quarter's letter than is typically the
case. He has taken a few days to spend time with his family due to the passing
of his mother. wdz]
<PAGE>
___________________________________________________
THE CHESAPEAKE GROWTH FUND
___________________________________________________
September 30, 1999
Investment Strategy
- -------------------
The Chesapeake Growth Fund seeks capital appreciation through investments in
small, medium, and large growth equities. The cornerstone of the fund's
intensive in-house fundamental analysis is in constant contact with the
management, customers, competitors, and suppliers of both current and potential
investments.
Investment Guidelines
- ---------------------
The Fund seeks companies that:
o are experiencing a rapid growth rate - companies in our portfolio are
forecasted to grow their profits in excess of 15% annually;
o are selling at a stock price not yet fully reflective of their growth rate;
o are undergoing a positive change created by new products, managements,
distribution strategies or manufacturing technologies;
o have a strong balance sheet
o are less susceptible to macroeconomic change.
The Largest Industry Groups
- ---------------------------
[Pie Chart Here]
Apparel 7.0%
Business Services 9.7%
Computer Software 9.8%
Computers & Peripherals 16.5%
Electronics/Instruments 5.6%
Energy Services 8.6%
Pharmaceuticals 4.3%
Retail Sales & Distribution 6.2%
Semiconductors & Related 10.0%
Telecommunications 10.5%
All Others 11.9%
About The Investment Advisor
- ----------------------------
Gardner Lewis Asset management serves as investment advisor to the Chesapeake
Family of Funds. Overall, through the funds and separately managed accounts,
Gardner Lewis invests approximately $3 billion in growth equities for both
institutions and individuals including some of the top foundations, endowments,
and pension plans in the U.S. Gardner Lewis was founded in 1990 and employs a
staff of 28. The research team is comprised of 15.
<PAGE>
Ten Largest Holdings
- --------------------
1. EMC Corporation 6.2%
2. MCI Worldcom Inc. 4.1%
3. LSI Logic Corp. 3.5%
4. Jones Apparel Group, Inc. 3.7%
5. Sun Microsystems, Inc. 3.2%
6. BMC Software, Inc. 2.8%
7. Adaptec, Inc. 2.7%
8. Scientific-Atlanta, Inc. 2.6%
9. Atmel Corp. 2.6%
10. AES Corporation 2.4%
Portfolio Characteristics
- -------------------------
Overall Assets ($MM) 218
Number of Companies 65
5 Yr. Historical Earnings Growth 24%
Earnings Growth - net year 35%
P/E Ratio - next year 22
(Gardner Lewis earnings estimates)
Performance Summary
- -------------------
Annualized
- --------------------------------------------------------------------------------
The Chesapeake Quarter 1 Year 5 Year Since
Growth Fund Series D End Inception
- --------------------------------------------------------------------------------
Without the sales load
deduction -3.0% 34.5% 14.7% 14.9%
- --------------------------------------------------------------------------------
Net of the maximum
sales load^1 -4.4% 32.5% 14.3% 14.5%
- --------------------------------------------------------------------------------
1 The maximum sales load for the Fund is 1.5%. Historical performance for the
Chesapeake Growth Fund Series D has been calculated by using the performance
of an original class of The Fund (know as the B Shares) from inception on
April 6, 1994 until the conversion into the new Series D Shares on April 7,
1995, and combining such performance with the performance of the Series D
Shares since April 7, 1995. The performance quoted represents past
performance and is not a guarantee of future results. Share price and
investment return will vary, so you may have a gain or loss when you sell
shares.
For More complete information regarding the Fund including charges and expenses,
obtain a prospectus by calling the Fund directly at (800)430-3863 or Gardner
Lewis Asset Management, the Investment Advisor at (610)558-2800.
Must be accompanied or preceded by a prospectus.
Capital Investment Group, Inc., Distributor
Raleigh, NC (800)525-3863
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
___________________________________________________
THE CHESAPEAKE GROWTH FUND
___________________________________________________
PORTFOLIO OF INVESTMENTS
(unaudited)
September 30, 1999
====================================================== ======================================================
Quantity Security Market Value Quantity Security Market Value
====================================================== ======================================================
87,300 AES Corporation 5,150,700 84,200 Harrah's Entertainment 2,336,550
77,200 Abercrombie & Fitch Co. 2,629,625 48,100 Heller Financial 1,082,250
203,400 Acxiom Corp. 3,998,081 117,000 IMS Health Inc. 2,669,062
149,500 Adaptec, Inc. 5,933,281 50,200 Insight Communications, Inc. 1,436,975
84,700 American Eagle Outfitters 4,102,656 21,600 JDS Uniphase, Inc. 2,458,350
170,300 American Power Conversion 3,235,700 260,100 Jones Apparel Group, Inc. 7,477,875
155,800 Amerisource Health Corp. 3,690,512 42,200 KLA-Tencor Corp. 2,743,000
146,300 Ames Department Stores 4,663,312 146,700 LSI Logic Corp. 7,628,400
111,400 Amkor Technology Inc. 1,796,325 125,900 MCI Worldcom Inc. 9,049,062
168,200 Atmel Corp. 5,687,262 54,200 Mercury Interactive Corp. 3,499,287
96,200 BEA Systems, Inc. 3,397,062 129,600 MidAmerican Energy Holdings Co 3,823,200
95,400 BJ Services 3,034,912 78,700 Mohawk Industries, Inc. 1,569,081
86,100 BMC Software, Inc. 6,161,531 42,200 Navigant Consulting Co. 1,957,025
120,600 BioChem Pharma, Inc. 2,886,862 133,700 Nova Corporation 3,342,500
44,400 Biomet, Inc. 1,168,275 56,000 Papa Johns Intl Inc Com 2,310,000
119,800 Checkfree Holdings Corp. 4,926,775 246,600 Republic Services, Inc. 2,681,775
62,400 Ciena Corp. 2,277,600 90,200 Research In Motion Ltd. 2,790,562
56,600 Circuit City Stores, Inc. 2,387,812 51,700 Sanmina Corp. 4,000,287
63,500 Citrix Systems, Inc. 3,933,031 116,300 Scientific-Atlanta, Inc. 5,764,119
106,300 Columbia/HCA Healthcare Corp. 2,252,231 41,700 Shared Medical Systems 1,949,475
93,050 Comair Holdings, Inc. 1,552,772 74,600 Sun Microsystems, Inc. 6,937,800
183,800 Comdisco, Inc. 3,549,637 99,200 Symantec Corp. 3,568,100
130,150 Concord EFS, Inc. 2,684,344 53,550 System Software Associates, In 103,753
52,900 Conexant Systems, Inc. 3,843,516 71,600 Tandy Corp. 3,700,825
75,700 DSP Communications, Inc. 1,438,300 100,600 Tenet Healthcare Corp. 1,766,787
62,700 EG&G Inc. 2,492,325 66,800 Tommy Hilfiger Corp 1,882,925
189,400 EMC Corporation 13,518,425 120,100 Transocean Offshore, Inc. 3,678,062
26,800 Exodus Communications, Inc. 1,931,275 10,200 U.S.Foodservice 183,600
60,600 Federal-Mogul Corp. 1,670,287 75,000 Unisys Corp. 3,384,375
68,300 Forest Laboratories, Inc. 2,877,137 103,300 United Healthcare Corp. 5,029,419
9,882 Gartner Group Inc. Class B 164,906 93,600 Weatherford International, Inc 2,995,200
50,100 Gateway Inc. 2,204,400 74,800 Westpoint Stevens, Inc. 1,767,150
43,600 Young & Rubicam Inc. 1,918,400
TOTAL EQUITY 218,726,109
CASH EQUIVALENT** (972,297)
TOTAL ASSETS 217,753,812
**Pending securities settlement
</TABLE>
<PAGE>
________________________________________________________________________________
THE CHESAPEAKE GROWTH FUND
________________________________________________________________________________
a series of the Gardner Lewis Investment Trust
Semi-Annual Report 1999
FOR THE PERIOD ENDED AUGUST 31,
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>
<TABLE>
<S> <C> <C> <C> <C>
THE CHESAPEAKE GROWTH FUND
PORTFOLIO OF INVESTMENTS
August 31, 1999
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 96.61%
Advertising - 1.01%
Young & Rubicam Inc. ......................................... 51,000 $ 2,275,875
------------
Aerospace & Defense - 0.57%
(a)BE Aerospace, Inc. ........................................... 74,100 1,282,856
------------
Apparel Manufacturing - 4.07%
(a)Jones Apparel Group .......................................... 264,300 6,855,281
(a)Tommy Hilfiger Corporation ................................... 66,800 2,267,025
------------
9,122,306
------------
Auto Parts - Replacement Equipment - 1.25%
Federal-Mogul Corporation .................................... 61,600 2,810,500
------------
Auto/Rental Leasing - 0.28%
Hertz Corporation ............................................ 15,300 616,781
------------
Commercial Services - 6.71%
(a)Comdisco, Inc. ............................................... 229,900 4,842,269
(a)Concord EFS, Inc. ............................................ 108,500 4,028,062
(a)Gartner Group, Inc. .......................................... 9,882 202,581
(a)Navigant Consulting, Inc. .................................... 54,900 2,408,738
(a)NOVA Corporation ............................................. 136,500 3,549,000
------------
15,030,650
------------
Computers - 12.41%
(a)Adaptec, Inc. ................................................ 112,300 4,379,700
(a)Apple Computer, Inc. ......................................... 46,300 3,021,075
(a)EMC Corporation .............................................. 191,000 11,460,000
(a)Lexmark International Corportation ........................... 37,700 2,968,875
(a)Sun Microsystems, Inc. ....................................... 75,600 6,010,200
------------
27,839,850
------------
Computer Software & Services - 16.46%
(a)Acxiom Corporation ........................................... 138,400 2,430,650
(a)BEA Systems, Inc. ............................................ 99,100 2,390,787
(a)BMC Software, Inc. ........................................... 87,500 4,708,594
(a)CheckFree Holdings Corporation ............................... 121,400 3,550,950
(a)Citrix Systems, Inc. ......................................... 64,900 3,699,300
(a)Exodus Communications, Inc. .................................. 26,800 2,154,050
IMS Health Incorporated ...................................... 120,000 3,315,000
(a)Mercury Interactive Corporation .............................. 55,000 2,626,250
(Continued)
</TABLE>
<PAGE>
<TABLE>
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THE CHESAPEAKE GROWTH FUND
PORTFOLIO OF INVESTMENTS
August 31, 1999
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Computer Software & Services - (Continued)
Shared Medical Systems ....................................... 42,600 $ 2,393,587
(a)Symantec Corporation ......................................... 168,400 5,052,000
(a)System Software Associates, Inc. ............................. 262,200 286,794
(a)Unisys Corporation ........................................... 75,000 3,225,000
(a)Verio Inc. ................................................... 29,200 1,085,875
------------
36,918,837
------------
Electrical Equipment - 1.76%
Samina Corporation ........................................... 52,600 3,945,000
------------
Electronics - Semiconductor - 12.01%
(a)Amkor Technology ............................................. 127,600 2,248,950
(a)Atmel Corporation ............................................ 170,600 6,706,712
(a)Conexant Systems, Inc. ....................................... 86,100 6,188,438
(a)LSI Logic Corporation ........................................ 148,400 8,421,700
(a)Teradyne, Inc. ............................................... 49,400 3,362,288
------------
26,928,088
----------
Entertainment - 0.62%
(a)Insight Communications Company ............................... 51,000 1,389,750
------------
Environmental Control - 1.22%
(a)Republic Services, Inc. ...................................... 251,600 2,736,150
------------
Financial Services - 0.50%
Heller Financial, Inc. ....................................... 49,200 1,125,450
------------
Food - Wholesale - 0.99%
(a)U.S. Foodservice ............................................. 106,700 2,220,694
------------
Medical - Biotechnology - 2.40%
Bergen Brunswig Corporation .................................. 140,617 2,170,775
(a)Bio-Chem Pharma, Inc. ........................................ 123,300 3,196,170
------------
5,366,945
------------
Medical - Hospital Management & Services - 1.99%
Columbia/HCA Healthcare Corporation .......................... 108,000 2,659,500
(a)Tenet Healthcare Corporation ................................. 103,800 1,810,013
------------
4,469,513
------------
Medical Supplies - 0.72%
Biomet, Inc. ................................................. 45,200 1,615,900
------------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
THE CHESAPEAKE GROWTH FUND
PORTFOLIO OF INVESTMENTS
August 31, 1999
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Oil & Gas - Equipment & Services - 2.88%
Transocean Offshore Inc. ..................................... 122,200 $ 4,154,800
(a)Weatherford International, Inc. .............................. 64,700 2,304,937
------------
6,459,737
------------
Pharmaceuticals - 3.44%
(a)AmeriSource Health Corporation ............................... 77,900 2,010,794
(a)Forest Laboratories, Inc. .................................... 69,300 3,361,050
(a)Watson Pharmaceuticals ....................................... 65,300 2,342,637
------------
7,714,481
------------
Publishing - Printing - 1.48%
Houghton Mifflin Company ..................................... 69,300 3,309,075
------------
Restaurants & Food Services - 1.02%
(a)Papa John's International, Inc. .............................. 57,600 2,289,600
------------
Retail - Apparel - 2.45%
(a)Abercrombie & Fitch Co. ...................................... 60,200 2,099,475
American Eagle Outfitters, Inc. .............................. 86,600 3,399,050
------------
5,498,525
---------
Retail - Department Stores - 1.71%
(a)Ames Department Stores, Inc. ................................. 119,100 3,498,563
(a)Saks Incorporated ............................................ 20,200 340,875
------------
3,839,438
------------
Retail - Specialty Line - 1.58%
Circuit City Stores-Circuit City Group ....................... 22,600 971,800
Tandy Corporation ............................................ 54,300 2,565,675
------------
3,537,475
------------
Telecommunications - 2.41%
(a)DSP Communications, Inc. ..................................... 76,800 1,804,800
(a)EchoStar Communications Corporation .......................... 15,700 1,312,913
(a)JDS Uniphase Corporation ..................................... 21,600 2,290,950
------------
5,408,663
------------
Telecommunications Equipment - 3.76%
(a)Plantronics, Inc. ............................................ 47,000 2,379,375
Scientific Atlanta, Inc. ..................................... 118,000 6,047,500
------------
8,426,875
------------
(Continued)
</TABLE>
<PAGE>
<TABLE>
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THE CHESAPEAKE GROWTH FUND
PORTFOLIO OF INVESTMENTS
August 31, 1999
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Textiles - 1.95%
(a)Mohawk Industries, Inc. ...................................... 113,000 $ 2,556,625
WestPoint Stevens, Inc. ...................................... 76,100 1,826,400
------------
4,383,025
------------
Transportation - Air - 0.89%
COMAIR Holdings, Inc. ........................................ 94,450 1,995,256
------------
Utilities - Electric - 3.82%
(a)MidAmerican Energy Holdings Company .......................... 132,200 3,784,225
The AES Corporation .......................................... 78,900 4,788,244
------------
8,572,469
------------
Utilities - Telecommunications - 4.25%
(a)MCI WorldCom, Inc. ........................................... 125,900 9,536,925
------------
Total Common Stocks (Cost $167,978,377) ...................... 216,666,689
------------
INVESTMENT COMPANY - 3.02%
Evergreen Money Market Treasury Institutional Money
Market Fund Institutional Service Shares ..................... 6,771,615 6,771,615
(Cost $6,771,615) ------------
Total Value of Investments (Cost $174,749,99% (b)) ......................................... 99.63 % $223,438,304
Other Assets Less Liabilities .............................................................. 0.37 % 835,378
------ ------------
Net Assets .......................................................................... 100.00 % $224,273,682
====== ============
(a) Non-income producing investment.
(b) Aggregate cost for federal income tax purposes is the $174,776,664. Unrealized appreciation
(depreciation) of investments for federal income tax purposes is as follows:
Unrealized appreciation ........................................................ $ 63,990,843
Unrealized depreciation ........................................................ (15,329,203)
------------
Net unrealized appreciation .................................... $ 48,661,640
============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
THE CHESAPEAKE GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1999
(Unaudited)
ASSETS
Investments, at value (cost $174,749,992) ....................................................... $223,438,304
Cash ............................................................................................ 4,598
Income receivable ............................................................................... 40,627
Receivable for investments sold ................................................................. 1,599,354
------------
Total assets ............................................................................... 225,082,883
------------
LIABILITIES
Accrued expenses ................................................................................ 49,281
Payable for investment purchases ................................................................ 729,590
Payable for fund shares redeemed ................................................................ 29,889
Other liabilities ............................................................................... 441
------------
Total liabilities .......................................................................... 809,201
------------
NET ASSETS ............................................................................................. $224,273,682
============
NET ASSETS CONSIST OF
Paid-in capital ................................................................................. $160,570,468
Accumulated net realized gain on investments .................................................... 15,014,902
Net unrealized appreciation on investments ...................................................... 48,688,312
------------
$224,273,682
============
INSTITUTIONAL SHARES
Net asset value, redemption and offering price per share
($67,997,524 / 3,648,298 shares outstanding) ............................................... $18.64
============
SERIES A INVESTOR SHARES
Net asset value, redemption and offering price per share
($21,218,440 / 1,156,346 shares outstanding) ............................................... $18.35
============
Maximum offering price per share (100 / 97 of $18.35) ........................................... $18.92
============
SERIES C INVESTOR SHARES
Net asset value, redemption and offering price per share
($2,103,317 / 121,936 shares outstanding) .................................................. $17.25
============
SERIES D INVESTOR SHARES
Net asset value, redemption and offering price per share
($5,823,872 / 324,823 shares outstanding) .................................................. $17.93
============
Maximum offering price per share (100 / 98.5 of $17.93) ......................................... $18.20
============
SUPER-INSTITUTIONAL SHARES
Net asset value, redemption and offering price per share
($127,130,529 / 6,782,886 shares outstanding) .............................................. $18.74
============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
THE CHESAPEAKE GROWTH FUND
STATEMENT OF OPERATIONS
Period ended August 31, 1999
(Unaudited)
INVESTMENT LOSS
Income
Dividends ................................................................................... $ 248,074
------------
Expenses
Investment advisory fees (note 2) ........................................................... 1,144,570
Fund administration fees (note 2) ........................................................... 48,061
Distribution fees - Series A (note 3) ....................................................... 31,622
Distribution fees - Series C (note 3) ....................................................... 9,739
Distribution fees - Series D (note 3) ....................................................... 17,805
Custody fees ................................................................................ 8,066
Registration and filing administration fees (note 2) ........................................ 11,533
Fund accounting fees (note 2) ............................................................... 42,000
Audit fees .................................................................................. 8,754
Legal fees .................................................................................. 7,000
Securities pricing fees ..................................................................... 2,455
Shareholder recordkeeping fees .............................................................. 18,000
Other accounting fees (note 2) .............................................................. 25,000
Shareholder servicing expenses .............................................................. 7,401
Registration and filing expenses ............................................................ 14,791
Printing expenses ........................................................................... 8,570
Trustee fees and meeting expenses ........................................................... 4,946
Other fees .................................................................................. 11,493
------------
Total expenses ........................................................................ 1,421,806
------------
Less:
Expense reimbursements (note 2) .................................................. (57,852)
Fund administration fees waived (note 2) ......................................... (12,500)
------------
Net expenses .......................................................................... 1,351,454
------------
Net investment loss .............................................................. (1,103,380)
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investment transactions ................................................... 16,987,879
Increase in unrealized appreciation on investments ............................................... 9,822,499
------------
Net realized and unrealized gain on investments ............................................. 26,810,378
------------
Net increase in net assets resulting from operations .................................. $ 25,706,998
============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Period ended Year ended
August 31, February 28,
1999 1999
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment loss ................................................... $ (1,103,380) $ (2,000,912)
Net realized gain (loss) from investment transactions ................. 16,987,879 (496,959)
Increase (decrease) in unrealized appreciation on investments ......... 9,822,499 (13,218,336)
------------ ------------
Net increase (decrease) in net assets resulting from operations ... 25,706,998 (15,716,207)
------------ ------------
Distributions to shareholders from
Distribution in excess of net realized gains .......................... 0 (372,638)
Net realized gain from investment transactions ........................ 0 (5,445,095)
------------ ------------
Decrease in net assets resulting from distributions ............... 0 (5,817,733)
------------ ------------
Capital share transactions
Decrease in net assets resulting from capital share transactions (a) .. (14,604,238) (33,312,063)
------------ ------------
Total increase (decrease) in net assets ...................... 11,102,760 (54,846,003)
NET ASSETS
Beginning of period ........................................................ 213,170,922 268,016,925
------------ ------------
End of period .............................................................. $224,273,682 $213,170,922
============ ============
(a) A summary of capital share activity follows:
----------------------------------------------------------------------
Period ended Year ended
August 31, 1999 February 28, 1999
Shares Value Shares Value
----------------------------------------------------------------------
- -----------------------------------------------------------
Institutional Shares
- -----------------------------------------------------------
Shares sold ............................................ 123,172 $ 2,294,900 793,937 $ 13,750,824
Shares issued for reinvestment of distributions ........ 0 0 98,122 1,628,824
Shares redeemed ........................................ (296,107) (5,295,566) (2,269,992) (35,712,491)
------------ ------------ ------------ ------------
Net decrease ...................................... (172,935) $ (3,000,666) (1,377,933) $(20,332,843)
============ ============ ============ ============
- -----------------------------------------------------------
Series A Shares
- -----------------------------------------------------------
Shares sold ............................................ 17,535 $ 315,819 115,434 $ 1,960,607
Shares issued for reinvestment of distributions ........ 0 0 42,837 701,668
Shares redeemed ........................................ (436,792) (7,916,179) (896,110) (14,772,539)
------------ ------------ ------------ ------------
Net decrease ...................................... (419,257) $ (7,600,360) (737,839) $(12,110,264)
============ ============ ============ ============
- -----------------------------------------------------------
Series C Shares
- -----------------------------------------------------------
Shares sold ............................................ 5,390 $ 85,080 4,837 $ 62,950
Shares issued for reinvestment of distributions ........ 0 0 4,820 74,850
Shares redeemed ........................................ (59,939) (1,016,831) (98,489) (1,609,034)
------------ ------------ ------------ ------------
Net decrease ...................................... (54,549) $ (931,751) (88,832) $ (1,471,234)
============ ============ ============ ============
- -----------------------------------------------------------
Series D Shares
- -----------------------------------------------------------
Shares sold ............................................ 4,372 $ 75,357 9,442 $ 168,590
Shares issued for reinvestment of distributions ........ 0 0 14,142 226,988
Shares redeemed ........................................ (181,932) (3,146,818) (177,343) (2,861,271)
------------ ------------ ------------ ------------
Net decrease ..................................... (177,560) $ (3,071,461) (153,759) $ (2,465,693)
============ ============ ============ ============
- -----------------------------------------------------------
Super-Institutional Shares
- -----------------------------------------------------------
Shares sold ............................................ 0 $ 0 0 $ 0
Shares issued for reinvestment of distributions ........ 0 0 183,821 3,067,971
Shares redeemed ........................................ 0 0 0 0
------------ ------------ ------------ ------------
Net increase ...................................... 0 $ 0 183,821 $ 3,067,971
============ ============ ============ ============
- -----------------------------------------------------------
Fund Summary
- -----------------------------------------------------------
Shares sold ............................................ 150,469 $ 2,771,156 923,650 $ 15,942,971
Shares issued for reinvestment of distributions ........ 0 0 343,742 5,700,301
Shares redeemed ........................................ (974,770) (17,375,394) (3,441,934) (54,955,335)
------------ ------------ ------------ ------------
Net decrease ...................................... (824,301) $(14,604,238) (2,174,542) $(33,312,063)
============ ============ ============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
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THE CHESAPEAKE GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
Institutional Shares
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Period ended Year ended Year ended Year ended Year ended
August 31, February 28, February 28, February 28, February 29,
1999 1999 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ................... $16.60 $17.86 $16.26 $14.45 $11.31
Income from investment operations
Net investment loss ............................. (0.09) (0.17) (0.15) (0.13) (0.05)
Net realized and unrealized gain (loss) on investments 2.13 (0.63) 4.22 1.94 3.38
------- ------- ------- ------- -------
Total from investment operations .............. 2.04 (0.80) 4.07 1.81 3.33
------- ------- ------- ------- -------
Distributions to shareholders from
Net investment income ........................... (0.00) 0.00 0.00 0.00 (0.11)
Tax return of capital ........................... 0.00 0.00 (0.53) 0.00 0.00
Distribution in excess of net realized gains .... 0.00 (0.03) 0.00 0.00 0.00
Net realized gain from investment transactions .. 0.00 (0.43) (1.94) 0.00 (0.08)
------- ------- ------- ------- -------
Total distributions ........................... 0.00 (0.46) (2.47) 0.00 (0.19)
------- ------- ------- ------- -------
Net asset value, end of period ......................... $18.64 $16.60 $17.86 $16.26 $14.45
======= ======= ======= ======= =======
Total return (a) ....................................... 12.29 %(c) (4.51)% 25.25 % 12.53 % 29.66 %
======= ======= ======= ======= =======
Ratios/supplemental data
Net assets, end of period (000's) ................. $67,998 $63,426 $92,858 $77,858 $80,252
======= ======= ======= ======= =======
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ... 1.21 %(b) 1.22 % 1.19 % 1.23 % 1.65 %
After expense reimbursements and waived fees .... 1.16 %(b) 1.15 % 1.16 % 1.22 % 1.49 %
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees ... (0.99)%(b) (0.87)% (0.90)% (0.85)% (0.98)%
After expense reimbursements and waived fees .... (0.94)%(b) (0.80)% (0.88)% (0.84)% (0.82)%
Portfolio turnover rate ........................... 74.49 % 121.48 % 105.60 % 126.44 % 99.33 %
(a) Total return does not reflect payment of a sales charge.
(b) Annualized.
(c) Aggregate return. Not annualized.
See accompanying notes to financial statements (Continued)
</TABLE>
<PAGE>
<TABLE>
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THE CHESAPEAKE GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
Series A Investor Shares
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
For the
period from
April 7, 1995
(commencement of
Period ended Year ended Year ended Year ended operations) to
August 31, February 28, February 28, February 28, February 29,
1999 1999 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .................... $16.37 $17.69 $16.18 $14.42 $11.79
Income from investment operations
Net investment income loss ...................... (0.14) (0.24) (0.21) (0.18) (0.06)
Net realized and unrealized gain (loss)
on investments ................................ 2.12 (0.62) 4.19 1.94 2.88
------- ------- ------- ------- -------
Total from investment operations ............ 1.98 (0.86) 3.98 1.76 2.82
------- ------- ------- ------- -------
Distributions to shareholders from
Net investment income ........................... (0.00) 0.00 0.00 0.00 (0.11)
Tax return of capital ........................... 0.00 0.00 (0.53) 0.00 0.00
Distribution in excess of net realized gains .... 0.00 (0.03) 0.00 0.00 0.00
Net realized gain from investment transactions .. 0.00 (0.43) (1.94) 0.00 (0.08)
------- ------- ------- ------- -------
Total distributions ......................... (0.00) (0.46) (2.47) 0.00 (0.19)
------- ------- ------- ------- -------
Net asset value, end of period .......................... $18.35 $16.37 $17.69 $16.18 $14.42
======= ======= ======= ======= =======
Total return (a) ........................................ 12.03 %(c) (4.83)% 24.80 % 12.21 % 23.86 %(c)
======= ======= ======= ======= =======
Ratios/supplemental data
Net assets, end of period (000's) .................. $21,218 $25,797 $40,924 $39,376 $32,549
======= ======= ======= ======= =======
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ... 1.58 %(b) 1.60 % 1.55 % 1.54 % 1.88 %(b)
After expense reimbursements and waived fees .... 1.53 %(b) 1.53 % 1.52 % 1.53 % 1.71 %(b)
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees ... (1.36)%(b) (1.26)% (1.27)% (1.16)% (1.20)%(b)
After expense reimbursements and waived fees .... (1.31)%(b) (1.18)% (1.24)% (1.15)% (1.04)%(b)
Portfolio turnover rate ............................ 74.49 % 121.48 % 105.60 % 126.44 % 99.33 %
(a) Total return does not reflect payment of a sales charge.
(b) Annualized.
(c) Aggregate return. Not annualized.
See accompanying notes to financial statements (Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
Series C Investor Shares
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
For the
period from
April 7, 1995
(commencement of
Period ended Year ended Year ended Year ended operations) to
August 31, February 28, February 28, February 28, February 29,
1999 1999 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .................. $15.52 $17.12 $15.97 $14.34 $11.79
Income from investment operations
Net investment income loss .................... (0.32) (0.60) (0.52) (0.29) (0.12)
Net realized and unrealized gain (loss)
on investments .............................. 2.05 (0.54) 4.14 1.92 2.86
------ ------ ------ ------ ------
Total from investment operations .......... 1.73 (1.14) 3.62 1.63 2.74
------ ------ ------ ------ ------
Distributions to shareholders from
Net investment income ......................... (0.00) 0.00 0.00 0.00 (0.11)
Tax return of capital ......................... 0.00 0.00 (0.53) 0.00 0.00
Distribution in excess of net realized gains .. 0.00 (0.03) 0.00 0.00 0.00
Net realized gain from investment transactions 0.00 (0.43) (1.94) 0.00 (0.08)
------ ------ ------ ------ ------
Total distributions ....................... 0.00 (0.46) (2.47) 0.00 (0.19)
------ ------ ------ ------ ------
Net asset value, end of period ........................ $17.25 $15.52 $17.12 $15.97 $14.34
====== ====== ====== ====== ======
Total return (a) ...................................... 11.08 %(c) (6.68)% 22.95 % 11.30 % 23.18 %(c)
====== ====== ====== ====== ======
Ratios/supplemental data
Net assets, end of period (000's) ................ $2,103 $2,740 $4,541 $9,192 $7,908
====== ====== ====== ====== ======
Ratio of expenses to average net assets
Before expense reimbursements and waived fees.. 3.27 %(b) 3.90 % 3.11 % 2.34 % 2.38 %(b)
After expense reimbursements and waived fees... 3.22 %(b) 3.45 % 3.05 % 2.33 % 2.18 %(b)
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees.. (3.05)%(b) (3.55)% (2.84)% (1.97)% (1.77)%(b)
After expense reimbursements and waived fees... (3.00)%(b) (3.11)% (2.78)% (1.96)% (1.57)%(b)
Portfolio turnover rate .......................... 74.49 % 121.48 % 105.60 % 126.44 % 99.33 %
(a) Total return does not reflect payment of a sales charge.
(b) Annualized.
(c) Aggregate return. Not annualized.
See accompanying notes to financial statements (Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
Series D Investor Shares
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
For the
period from
April 7, 1995
(commencement of
Period ended Year ended Year ended Year ended operations) to
August 31, February 28, February 28, February 28, February 29,
1999 1999 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ................... $16.04 $17.45 $16.09 $14.41 $11.79
Income from investment operations
Net investment income loss ..................... (0.20) (0.34) (0.32) (0.29) (0.11)
Net realized and unrealized gain (loss)
on investments ............................... 2.09 (0.61) 4.15 1.97 2.92
------- ------- ------- ------- -------
Total from investment operations ........... 1.89 (0.95) 3.83 1.68 2.81
------- ------- ------- ------- -------
Distributions to shareholders from
Net investment income .......................... (0.00) 0.00 0.00 0.00 (0.11)
Tax return of capital .......................... 0.00 0.00 (0.53) 0.00 0.00
Distribution in excess of net realized gains ... 0.00 (0.03) 0.00 0.00 0.00
Net realized gain from investment transactions 0.00 (0.43) (1.94) 0.00 (0.08)
------- ------- ------- ------- -------
Total distributions ........................ (0.00) (0.46) (2.47) 0.00 (0.19)
------- ------- ------- ------- -------
Net asset value, end of period ......................... $17.93 $16.04 $17.45 $16.09 $14.41
======= ======= ======= ======= =======
Total return (a) ....................................... 11.71 %(c) (5.41)% 24.06 % 11.59 % 23.77 %(c)
======= ======= ======= ======= =======
Ratios/supplemental data
Net assets, end of period (000's) ................. $5,824 $8,060 $11,448 $10,774 $11,929
======= ======= ======= ======= =======
Ratio of expenses to average net assets
Before expense reimbursements and waived fees .. 2.14 %(b) 2.34 % 2.22 % 2.02 % 2.13 %(b)
After expense reimbursements and waived fees ... 2.09 %(b) 2.14 % 2.18 % 2.01 % 1.73 %(b)
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees .. (1.92)%(b) (2.00)% (1.94)% (1.64)% (1.54)%(b)
After expense reimbursements and waived fees ... (1.87)%(b) (1.79)% (1.89)% (1.63)% (1.14)%(b)
Portfolio turnover rate ........................... 74.49 % 121.48 % 105.60 % 126.44 % 99.33 %
(a) Total return does not reflect payment of a sales charge.
(b) Annualized.
(c) 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)
Super-Institutional Shares
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
For the
period from
June 12, 1996
(commencement of
Period ended Year ended Year ended operations) to
August 31, February 28, February 28, February 28,
1999 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ........................ $16.68 $17.92 $16.29 $15.53
Income from investment operations
Net investment loss .................................. (0.08) (0.11) (0.12) (0.07)
Net realized and unrealized gain (loss) on investments 2.14 (0.67) 4.22 0.83
-------- -------- -------- --------
Total from investment operations ................... 2.06 (0.78) 4.10 0.76
-------- -------- -------- --------
Distributions to shareholders from
Net investment income ................................ (0.00) 0.00 0.00 0.00
Tax return of capital ................................ 0.00 0.00 (0.53) 0.00
Distribution in excess of net realized gains ......... 0.00 (0.03) 0.00 0.00
Net realized gain from investment transactions ....... 0.00 (0.43) (1.94) 0.00
-------- -------- -------- --------
Total distributions ................................ 0.00 (0.46) (2.47) 0.00
-------- -------- -------- --------
Net asset value, end of period .............................. $18.74 $16.68 $17.92 $16.29
======== ======== ======== ========
Total return (a) ............................................ 12.34 %(c) (4.32)% 25.40 % 4.89 %(c)
======== ======== ======== ========
Ratios/supplemental data
Net assets, end of period (000's) ...................... $127,131 $113,148 $118,246 $ 94,340
======== ======== ======== ========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ........ 1.08 %(b) 1.05 % 1.06 % 1.08 %(b)
After expense reimbursements and waived fees ......... 1.03 %(b) 0.99 % 1.04 % 1.04 %(b)
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees ........ (0.86)%(b) (0.71)% (0.77)% (0.75)%(b)
After expense reimbursements and waived fees ......... (0.81)%(b) (0.64)% (0.75)% (0.72)%(b)
Portfolio turnover rate ................................ 74.49 % 121.48 % 105.60 % 126.44 %
(a) Total return does not reflect payment of a sales charge.
(b) Annualized.
(c) Aggregate return. Not annualized.
See accompanying notes to financial statements
</TABLE>
<PAGE>
THE CHESAPEAKE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1999
(Unaudited)
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
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. The Fund offer
five classes of shares- Super-Institutional, Institutional, Investor
Series A, Investor Series C, and Investor Series D. 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.
Distributions which exceed net investment income and net
realized gains for financial reporting purposes but not for
tax purposes, if any, are shown as distributions in excess of
net investment income and net realized gains in the
accompanying statements.
(Continued)
<PAGE>
THE CHESAPEAKE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1999
(Unaudited)
The Fund has a capital loss carryforward for federal income
tax purposes of $666,806 which expires in the year 2007. It is
the intention of the Board of Trustees of the Trust not to
distribute any realized gains until the carryforward has been
offset or expires.
As a result of the Fund's operating net investment loss, a
reclassification adjustment of $1,103,380 has been made on the
statement of assets and liabilities to decrease accumulated
net investment loss, bringing it to zero, and decrease net
realized gain on investments.
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 estimates.
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 a fund accounting and compliance 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 and receives a fee at the annual rate of 0.015% of the
average daily net assets for the Super-institutional 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. The Administrator
receives a fee of $12,500 per year for shareholder administration costs
for the Institutional Shares and for Series A, Series C, and Series D
Investor shares. The Administrator also charges the Fund for certain
expenses involved with the daily valuation of portfolio securities. The
Administrator voluntarily waived a portion of its fees amounting to
$12,500 for the period ended August 31, 1999. There can be no assurance
that the foregoing voluntary fee waivers will continue.
(Continued)
<PAGE>
THE CHESAPEAKE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1999
(Unaudited)
NC Shareholder Services, LLC (the "Transfer Agent") has been retained
by the Trust 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.
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. For the
period ended August 31, 1999, the Distributor retained sales charges in
the amount of $147.
Certain Trustees and officers of the Trust are also officers or
directors of the Advisor or the Administrator.
NOTE 3 - 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 $31,622, $9,739 and $17,805, net of waived fees, in
distribution and service fees under the Plan with respect to Series A,
Series C and Series D Investor Shares, respectively, for the period
ended August 31, 1999.
NOTE 4 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments other than short-term investments
aggregated $165,517,676 and $187,414,464 respectively, for the period
ended August 31, 1999.
NOTE 5 - EXPENSE REDUCTIONS
The Advisor has transacted certain portfolio trades with brokers who
paid a portion of the fund's expenses. For the period ended August 31,
1999, the Fund's expenses were reduced by $57,852 under this
arrangement.
<PAGE>
________________________________________________________________________________
THE CHESAPEAKE GROWTH FUND
________________________________________________________________________________
a series of the Gardner Lewis Investment Trust
This Report has been prepared for shareholders
and may be disributed to others only if preceded
or accompanied by a current prospectus.
<PAGE>
______________________________
THE CHESAPEAKE FUNDS
______________________________
October 1, 1999
Dear Shareholder:
The Chesapeake Core Growth Fund closes the third quarter with a
year-to-date gain of 8.5%, which compares to gains in the Russell 2000 and the
S&P 500 of 2.4% and 5.4%. The year-to-date gains come on the back of a third
quarter loss of 7.2%, versus a loss of 6.3% in the Russell and a loss of 6.2% in
the S&P. Despite a difficult quarter, our relative success this year reinforces
our belief that the environment has improved for our methodology of investing.
Economic growth throughout the world has stabilized or is improving,
though attention is now focused on the potential inflationary ramifications of
resurgent growth. Labor markets are tight; crude oil prices rose 20% this
quarter; the dollar declined steadily against the yen since mid-July; and gold
prices spiked 20% this past week. Yet productivity gains continue to absorb
these pressures, and so inflation has not materialized to the extent feared. As
a result, interest rates were little changed this quarter, after rising steadily
through the first half of the year. Nevertheless, despite a healthy business
environment and robust corporate earnings, present concerns about interest rate
policy will most likely dominate investor sentiment into the Fed meetings on
October 5th and November 16th.
The resulting trepidation on the part of investors generated a broad
sell-off in stocks this quarter that spanned most economic sectors and all
market capitalizations. For the first time in years, investors did not seek
refuge in the largest capitalization names during a time of market uncertainty.
In an environment characterized by interest rate concerns, it should come as no
surprise that larger cap stocks would compress along with the rest of the
market. In the ultra-cap arena (nifty fifty stocks), much of the appreciation
over the past several years has been dependent upon price/earnings multiple
expansion driven by falling interest rates. In an environment of stable or
rising rates, investors should turn to those larger company stocks with more
reasonable valuations and with the ability to grow earnings rapidly enough to
outpace inflation.
As is often the case in broad sell-offs, many companies with excellent
fundamentals and growth prospects have been oversold with their respective
industry groups. When investors retreated from the retail sector because of
environmental concerns, for example, few individual companies were spared. But
our discipline focuses on those companies with relatively less macroeconomic
exposure. We seek companies whose prospects are underpinned by proprietary
products and defensible market positions, and whose growth is typically much
faster than that of their industries. We believe these companies are better able
to sustain earnings growth through any changes in their business environments,
and are also better positioned to generate real earnings growth through
inflationary periods.
<PAGE>
We are encouraged after this period of broad selling, by the current
opportunity to find mispriced stocks with superior growth prospects. The past
two quarters were completely different market environments, but both evidence
that investors' narrow focus on a select handful of ultra-cap names may finally
be coming to an end. As investors continue to broaden their focus, seeking more
compelling growth and valuation, we are poised to benefit from both the quality
of our portfolio's earnings growth and the potential expansion of valuation
multiples.
Have a pleasant autumn.
Sincerely,
/s/ William D. Zantzinger Jr. /s/ John L. Lewis, IV
William D. Zantzinger Jr. John L. Lewis, IV
[Whit Gardner was less involved in this quarter's letter than is typically the
case. He has taken a few days to spend time with his family due to the passing
of his mother. wdz]
<PAGE>
___________________________________________
THE CHESAPEAKE CORE GROWTH FUND
___________________________________________
September 30, 1999
Investment Strategy
- -------------------
The Chesapeake Core Growth Fund seeks capital appreciation through investments
in large capitalization growth equities. The cornerstone of the fund's intensive
in-house fundamental analysis is constant contact with the management,
customers, competitors, and suppliers of both current and potential investments.
Investment Guidelines
- ---------------------
The Fund seeks companies that:
o are experiencing a rapid growth rate - companies in our portfolio are
forecasted to grow their profits in excess of 15% annually;
o are selling at a stock price not yet fully reflective of their growth rate;
o are undergoing a positive change created by new products, managements,
distribution strategies or manufacturing technologies;
o have a strong balance sheet
o are less susceptible to macroeconomic change.
The Largest Industry Groups
- ---------------------------
[Pie Chart Here]
Business Services 4.9%
Computer Software 7.4%
Computers & Peripherals 10.7%
Energy Services 8.0%
Financial Services 10.7%
Machinery, Construction & Manufacturing 7.0%
Networking 3.9%
Pharmaceuticals 9.2%
Retail Sales & Distribution 3.8%
Telecommunications 9.9%
All Others 9.9%
About The Investment Advisor
- ----------------------------
Gardner Lewis Asset management serves as investment advisor to the Chesapeake
Family of Funds. Overall, through the funds and separately managed accounts,
Gardner Lewis invests approximately $3 billion in growth equities for both
institutions and individuals including some of the top foundations, endowments,
and pension plans in the U.S. Gardner Lewis was founded in 1990 and employs a
staff of 28. The research team is comprised of 15.
<PAGE>
Ten Largest Holdings
- --------------------
1. BMC Corporation 4.8%
2. BMC Software, Inc. 4.6%
3. Tyco Industries 4.1%
4. MCI Worldcom, Inc. 4.0%
5. Cisco Systems 3.9%
6. Sun Microsystems, Inc. 3.2%
7. Citigroup Inc. 3.0%
8. AlliedSignal, Inc. 2.9%
9. Amgen 2.8%
10. Jones Apparel Group, Inc. 2.8%
Portfolio Characteristics
- -------------------------
Number of Companies 47
5 Yr. Historical Earnings Growth 19%
Earnings Growth - net year 24%
P/E Ratio - next year 23
(Gardner Lewis earnings estimates)
Performance Summary
- -------------------
Annualized
- --------------------------------------------------------------------------------
Quarter 1 Year Since
End Inception
- --------------------------------------------------------------------------------
The Chesapeake
Core Growth Fund -7.3% 36.7% 19.8%
- --------------------------------------------------------------------------------
The inception date of the Fund was September 29, 1997. The performance quoted
represents past performance and is not a guarantee of future results. Share
price and investment return will vary, so you may have a gain or loss when you
sell shares.
For more complete information regarding The Fund including charges and expenses,
obtain a prospectus by calling the Fund directly at (800)430-3863 or Gardner
Lewis Asset Management, the Investment Advisor at (610)558-2800.
Must be accompanied or preceded by a prospectus.
Capital Investment Group, Inc., Distributor
Raleigh, NC (800)525-3863
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
___________________________________________
THE CHESAPEAKE CORE GROWTH FUND
___________________________________________
PORTFOLIO OF INVESTMENTS
(unaudited)
September 30, 1999
============================================================ ==========================================================
Quantity Security Market Value Quantity Security Market Value
============================================================ ==========================================================
2,600 AES Corporation 153,400 3,200 Household International 128,400
2,850 AT&T 123,975 6,600 IMS Health Inc. 150,562
3,600 AlliedSignal, Inc. 215,775 1,020 Intel Corp. 75,799
775 America Online Inc. 80,648 1,700 International Business Machine 205,700
2,600 Amgen 211,900 1,500 JDS Uniphase, Inc. 170,719
4,820 BMC Software, Inc. 344,931 7,200 Jones Apparel Group, Inc. 207,000
4,800 Baker Hughes, Inc. 139,200 4,148 MCI Worldcom Inc. 298,137
5,300 Banc One Corp. 184,506 4,600 Masco Corporation 142,600
1,490 BankAmerica Corp 82,974 2,000 McDonald's Corp. 86,500
3,500 Boeing Co. 149,187 4,800 Medtronic, Inc. 170,700
3,600 CVS Corporation 146,925 4,640 MidAmerican Energy Holdings Co 136,880
2,500 Ciena Corp. 91,250 4,000 Monsanto Co. 142,750
4,200 Cisco Systems 287,962 2,800 Pharmacia & Upjohn Inc. 138,950
5,150 Citigroup Inc. 226,600 2,200 Schlumberger Ltd. 137,087
7,300 Columbia/HCA Healthcare Corp. 154,669 2,540 Sun Microsystems, Inc. 236,220
6,300 Concord EFS, Inc. 129,937 4,800 TJX Company, Inc. 134,700
5,040 EMC Corporation 359,730 3,100 TRICON Global Restaurants 126,906
2,200 Electronic Data Systems 116,462 1,400 Tellabs, Inc. 79,712
4,600 Enron Corporation Orgeon 188,887 3,500 Tenet Healthcare Corp. 61,469
4,800 Ericsson(LM) Tel-SP ADR 150,000 2,200 Texas Instruments 180,950
1,200 Exodus Communications, Inc. 86,475 3,000 Tyco Industries, Inc. 309,750
859 Gartner Group Inc. Class B 14,335 5,300 Walt Disney Co. 137,800
2,900 Goldman Sachs, Inc. 176,900 2,900 Warner Lambert & Co. 192,487
TOTAL EQUITY 7,468,411
CASH EQUIVALENT 8,306
TOTAL ASSETS 7,476,717
</TABLE>
<PAGE>
________________________________________________________________________________
THE CHESAPEAKE CORE GROWTH FUND
________________________________________________________________________________
a series of the Gardner Lewis Investment Trust
Semi-Annual Report 1999
FOR THE PERIOD ENDED AUGUST 31,
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>
<TABLE>
<S> <C> <C> <C> <C>
THE CHESAPEAKE CORE GROWTH FUND
PORTFOLIO OF INVESTMENTS
August 31, 1999
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 94.21%
Aerospace & Defense - 2.10%
The Boeing Company ..................................................... 3,500 $ 158,594
----------
Chemicals - 2.18%
Monsanto Company ....................................................... 4,000 164,500
----------
Commercial Services - 2.29%
(a)Concord EFS, Inc. ...................................................... 4,200 155,925
(a)Gartner Group, Inc. .................................................... 859 17,610
----------
173,535
----------
Computers - 13.25%
(a)Cisco Systems, Inc. .................................................... 4,200 284,813
(a)EMC Corporation ........................................................ 5,040 302,400
International Business Machines Corporation ............................ 1,700 211,756
(a)Sun Microsystems, Inc. ................................................. 2,540 201,930
----------
1,000,899
----------
Computer Software & Services - 9.69%
(a)America Online, Inc. ................................................... 775 71,009
(a)BMC Software, Inc. ..................................................... 4,820 259,376
Electronic Data Systems Corporation .................................... 2,200 123,475
(a)Exodus Communications, Inc. ............................................ 1,200 96,450
IMS Health Incorporated ................................................ 6,600 182,325
----------
732,635
----------
Electrical Equipment - 2.21%
(a)General Instrument Corporation ......................................... 3,400 167,237
----------
Electronics - Semiconductor - 3.50%
Intel Corporation ...................................................... 1,020 83,831
Texas Instruments Incorporated ......................................... 2,200 180,538
----------
264,369
----------
Entertainment - 1.94%
The Walt Disney Company ................................................ 5,300 147,075
----------
Financial - Banks, Commercial - 1.19%
Bank of America Corporation ............................................ 1,490 90,145
----------
Financial - Banks, Money Center - 5.06%
Banc One Corporation ................................................... 3,000 120,375
The Chase Manhattan Corporation ........................................ 1,200 100,425
Citigroup Inc. ......................................................... 3,650 162,197
----------
382,997
----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
THE CHESAPEAKE CORE GROWTH FUND
PORTFOLIO OF INVESTMENTS
August 31, 1999
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Financial - Securities Brokers - 2.29%
The Goldman Sachs Group, Inc. .......................................... 2,900 $ 173,456
----------
Financial Services - 1.60%
Household International, Inc. .......................................... 3,200 120,800
----------
Medical - Biotechnology - 2.53%
(a)Amgen Inc. ............................................................. 2,300 191,331
----------
Medical - Services - 3.18%
Columbia/HCA Healthcare Corporation .................................... 7,300 179,763
(a)Tenet Healthcare Corporation ........................................... 3,500 61,031
----------
240,794
----------
Medical Supplies - 2.48%
Medtronic, Inc. ........................................................ 2,400 187,800
----------
Miscellaneous - Manufacturing - 6.93%
AlliedSignal Inc. ...................................................... 3,600 220,500
Tyco International Ltd. ................................................ 3,000 303,937
----------
524,437
----------
Oil & Gas - Equipment & Services - 2.55%
Enron Corp. ............................................................ 4,600 192,625
----------
Pharmaceuticals - 4.48%
Pharmacia & Upjohn, Inc. ............................................... 2,800 146,300
Warner-Lambert Company ................................................. 2,900 192,125
----------
338,425
----------
Restaurants & Food Service - 2.76%
McDonald's Corporation ................................................. 2,000 82,750
(a)Tricon Global Restaurants, Inc. ........................................ 3,100 125,938
----------
208,688
----------
Retail - Apparel - 1.83%
The TJX Companies, Inc. ................................................ 4,800 138,600
----------
Retail - Drug Stores - 1.98%
CVS Corporation ........................................................ 3,600 150,075
----------
Telecommunications Equipment - 6.03%
(a)JDS Uniphase Corporation ............................................... 1,600 169,700
(a)QUALCOMM Incorporated .................................................. 1,100 211,406
(a)Tellabs, Inc. .......................................................... 1,250 74,453
----------
455,559
----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
THE CHESAPEAKE CORE GROWTH FUND
PORTFOLIO OF INVESTMENTS
August 31, 1999
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Textiles - 2.47%
(a)Jones Apparel Group, Inc. .............................................. 7,200 $ 186,750
----------
Utilities - Electric - 3.84%
(a)The AES Corporation .................................................... 2,600 157,788
(a)MidAmerican Energy Holdings Company .................................... 4,640 132,820
----------
290,608
----------
Utilities - Telecommunications - 5.85%
AT&T Corp. ............................................................. 2,850 128,250
(a)MCI WorldCom, Inc. ..................................................... 4,148 314,211
----------
442,461
----------
Total Common Stocks (Cost $5,933,291) .................................. 7,124,395
----------
INVESTMENT COMPANIES - 2.14%
Evergreen Money Market Treasury Institutional Money
Market Fund Institutional Service Shares ............................... 55,510 55,510
Evergreen Money Market Treasury Institutional Treasury Money
Market Fund Institutional Service Shares ............................... 106,616 106,616
----------
Total Investment Companies (Cost $162,126) ............................. 162,126
----------
Total Value of Investments (Cost $6,095,417 (b)) ..................................................... 96.35 % $7,286,521
Other Assets Less Liabilities ........................................................................ 3.65 % 275,993
------ ----------
Net Assets .................................................................................... 100.00 % $7,562,514
====== ==========
(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 ................................................................................. $1,420,131
Unrealized depreciation ................................................................................. (229,027)
----------
Net unrealized appreciation ............................................................. $1,191,104
==========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
THE CHESAPEAKE CORE GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1999
(Unaudited)
ASSETS
Investments, at value (cost $6,095,417) .......................................................... $7,286,521
Cash ............................................................................................. 283,088
Income receivable ................................................................................ 5,098
Prepaid expenses ................................................................................. 441
----------
Total assets ................................................................................ 7,575,148
----------
LIABILITIES
Accrued expenses ................................................................................. 12,634
----------
NET ASSETS
(applicable to 545,207 shares outstanding; unlimited
shares of no par value beneficial interest authorized) .......................................... $7,562,514
==========
NET ASSET VALUE, REDEMPTION AND OFFERING PRICE PER SHARE
($7,562,514 / 545,207 shares) .................................................................... $13.87
==========
NET ASSETS CONSIST OF
Paid-in capital .................................................................................. $6,066,205
Undistributed net realized gain on investments ................................................... 305,205
Net unrealized appreciation on investments ....................................................... 1,191,104
----------
$7,562,514
==========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
THE CHESAPEAKE CORE GROWTH FUND
STATEMENT OF OPERATIONS
Period ended August 31, 1999
(Unaudited)
INVESTMENT LOSS
Income
Dividends ..................................................................................... $ 24,301
--------
Expenses
Investment advisory fees (note 2) ............................................................. 35,333
Fund administration fees (note 2) ............................................................. 2,650
Custody fees .................................................................................. 2,347
Registration and filing administration fees (note 2) .......................................... 1,525
Fund accounting fees (note 2) ................................................................. 10,500
Audit fees .................................................................................... 6,455
Legal fees .................................................................................... 3,024
Securities pricing fees ....................................................................... 1,689
Shareholder administration fees (note 2) ...................................................... 6,250
Shareholder recordkeeping fees ................................................................ 4,500
Shareholder servicing expenses ................................................................ 1,260
Registration and filing expenses .............................................................. 3,921
Printing expenses ............................................................................. 2,520
Trustee fees and meeting expenses ............................................................. 3,529
Other operating expenses ...................................................................... 1,008
--------
Total expenses .......................................................................... 86,511
--------
Less:
Expense reimbursements (note 4) .................................................... (3,793)
Investment advisory fees waived (note 2) ........................................... (35,333)
Fund administration fees waived (note 2) ........................................... (2,650)
Shareholder administration fees waived (note 2) .................................... (6,250)
--------
Net expenses ............................................................................ 38,485
--------
Net investment loss ................................................................ (14,184)
--------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investment transactions ..................................................... 361,846
Increase in unrealized appreciation on investments ................................................. 174,531
--------
Net realized and unrealized gain on investments ............................................... 536,377
--------
Net increase in net assets resulting from operations .................................... $522,193
========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE CORE GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Period ended Year ended
August 31, February 28,
1999 1999
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net investment loss ................................................................ $ (14,184) $ (33,853)
Net realized gain from investment transactions ..................................... 361,846 175,957
Increase in unrealized appreciation on investments ................................. 174,531 581,260
---------- ----------
Net increase in net assets resulting from operations ........................... 522,193 723,364
---------- ----------
Capital share transactions
Increase (decrease) in net assets resulting from capital share transactions (a) .... 990,808 (722,119)
---------- ----------
Total increase in net assets .............................................. 1,513,001 1,245
NET ASSETS
Beginning of period ..................................................................... 6,049,513 6,048,268
---------- ----------
End of period ........................................................................... $7,562,514 $6,049,513
========== ==========
(a) A summary of capital share activity follows:
-----------------------------------------------------------------------
Period ended Year ended
August 31, 1999 February 28, 1999
Shares Value Shares Value
-----------------------------------------------------------------------
Shares sold .......................................... 70,720 $1,025,459 200,589 $2,203,206
Shares redeemed ...................................... (2,417) (34,651) (287,983) (2,925,325)
---------- ---------- ---------- ----------
Net increase (decrease) ......................... 68,303 $ 990,808 (87,394) $ (722,119)
========== ========== ========== ==========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE CORE GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
For the
period from
September 29, 1997
(commencement of
Period ended Year ended operations) to
August 31, February 28, February 28,
1999 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ...................... $12.68 $10.72 $10.00
Income from investment operations
Net investment loss ............................ (0.03) (0.07) (0.01)
Net realized and unrealized gain on investments 1.22 2.03 0.75
---------- ---------- ----------
Total from investment operations .......... 1.19 1.96 0.74
---------- ---------- ----------
Distribution to shareholders from
Distribution in excess of net investment income (0.00) 0.00 (0.02)
---------- ---------- ----------
Net asset value, end of period ............................ $13.87 $12.68 $10.72
========== ========== ==========
Total return .............................................. 9.30 % 18.27 % 7.49 %
========== ========== ==========
Ratios/supplemental data
Net assets, end of period ........................... $7,562,514 $6,049,513 $6,048,268
========== ========== ==========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees .. 2.45 %(a) 2.73 % 3.19 %(a)
After expense reimbursements and waived fees ... 1.09 %(a) 1.39 % 1.24 %(a)
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees .. (1.77)%(a) (1.89)% (2.19)%(a)
After expense reimbursements and waived fees ... (0.40)%(a) (0.55)% (0.24)%(a)
Portfolio turnover rate ............................. 65.89 % 174.44 % 29.83 %
(a) Annualized.
See accompanying notes to financial statements
</TABLE>
<PAGE>
THE CHESAPEAKE CORE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
August 31, 1999
(Unaudited)
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 - 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.
As a result of the Fund's operating net investment loss, a
reclassification adjustment of $14,184 has been made on the
statement of assets and liabilities to decrease accumulated
net investment loss, bringing it to zero, and decrease net
realized gain on investments.
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
August 31, 1999
(Unaudited)
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 estimates.
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.
There can be no assurance that the foregoing voluntary fee waiver will
continue. The Advisor has voluntarily waived its fee amounting to
$35,333 ($0.07 per share) for the period ended August 31, 1999.
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 a fund accounting and compliance 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. 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 $8,900 ($0.02 per share) for the period ended
August 31, 1999.
NC Shareholder Services, LLC (the "Transfer Agent") serves 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.
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 $4,984,074 and $4,449,884 respectively, for the period ended
August 31,1999.
NOTE 4 - EXPENSE REDUCTION
The Advisor has transacted certain portfolio trades with brokers who
paid a portion of the Fund's expenses. For the period ended August 31,
1999, the Fund's expenses were reduced by $3,793 under this agreement.
