________________________________________________________________________________
THE CHESAPEAKE GROWTH FUND
________________________________________________________________________________
a series of the Gardner Lewis Investment Trust
Annual Report 1999
FOR THE YEAR ENDED FEBRUARY 28
INVESTMENT ADVISOR
Gardner Lewis Asset Management
285 Wilmington-West Chester Pike
Chadds Ford, Pennsylvania 19317
THE CHESAPEAKE GROWTH FUND
107 North Washington Street
Post Office Drawer 4365
Rocky Mount, North Carolina 27803-0365
1-800-430-3863
<PAGE>
______________________________________
THE CHESAPEAKE FUNDS
______________________________________
April 1, 1999
Dear Shareholder:
The Chesapeake Growth Fund Institutional Class closed the first quarter
with a loss of 1.2%. This compares to a loss of 5.4% for the Russell 2000 and a
gain of 5.0% for the S&P 500. Despite their stock price performance, the factors
that should support demand for smaller and mid-capitalization companies are
strengthening, making this quarter's activity even more contradictory. It was
once again a quarter led by the largest of the large caps, and in our universe,
the highest PE stocks and the internet. (Without internet stocks the Russell
2000 would have been down an additional 3%.) Despite our understanding that this
is primarily due to an anomalistic market environment, disfavoring our types of
companies, we expect to do better.
There is no doubt that we have had great difficulty rationalizing an
environment in which valuation has been all but ignored. This is particularly
true since our strategy has historically allowed us to outstrip market returns,
not only because we have been able to ferret out inefficiencies, but also
because price has historically mattered.
The net result of the market's unprecedented larger capitalization run
is that smaller companies now sell at their lowest relative price earnings
ratios in history. We are being proactive in our efforts to capitalize on this
historic anomaly, one characterized by an investing environment hostile to
smaller companies. Most importantly, we are increasing our exposure to our best
names for little change in price. This process is tending to lower our portfolio
name count, is forcing a sharper selling discipline, and is allowing our most
senior people to more effectively direct the research process. We believe this
will enhance our performance, regardless of market environment, and just as
importantly, is positioning us to best capitalize on the inevitable market turn.
History leaves little question that market environments cycle and that
ultimately there is a regression to the mean. Trying to understand when this
regression will occur is what is difficult. Suffice it to say, it is most likely
to occur when it is least expected. For example, in December, headlines
suggested that neither Japan nor the emerging markets would ever revive. This
quarter both Japan and the emerging markets were up more than 12%, surpassing
the returns of all major markets. Thus recent press suggesting that the current
domestic market trend will last forever, and that the leadership will not
change, is in fact a positive sign.
Many are not aware that in 1998 the S&P 500's advance was due solely to
price earnings ratio expansion. In fact, last year S&P 500 earnings were
actually down from 1997. Its multiple expansion was primarily due to three
things. The first was the demand for big cap liquidity and stability as
potential shelter from the global economic difficulty primarily impacting the
developing economies and Japan. (This occurred despite the fact that most of
these companies relied on the world's developing economies and in part Japan for
their expected growth in profits.) The second was a declining interest rate
environment. And, the third was the money flow momentum initiated by the first
two, and furthered as the performance of these stocks caused others to `pile
on'.
<PAGE>
Smaller companies are expected to grow their earnings next year at more
than two times the rate of the S&P 500. In addition to this, a stabilizing
global economic platform is putting upward pressure on the domestic economy,
impeding further rate reduction and thus multiple expansion. This should make
earnings growth the driver for stock price appreciation.
We believe that the money flow into larger company funds, which has
been the fuel for their advances, is chasing yesterday's returns. So too do many
large pension plans, whose assets as a whole still dominate the market. In fact,
despite most investors believing the contrary, large pension plans, due to
concerns over valuation and portfolio diversification, have been decreasing
their exposure to S&P 500 index funds, completely offsetting continuing inflows
from retail investors. Both Vanguard and Standard & Poor's have confirmed this
in recent press. This does not say that the market cannot do well; it does say
that the S&P is not as likely to maintain its performance pace. Since the
fundamentals are in place for a turn, it now boils down to money flow. And,
additional evidence of a potential shift in money flow can be found in the fact
that among the large institutions, over the next several quarters, there is a
significant amount of smaller cap manager search activity planned, suggesting
that the direction of money flow into these stocks could soon turn positive.
This would obviously benefit our portfolio greatly, but so too should the steps
we have employed to position ourselves in this environment.
Sincerely,
/S/ Whit /s/ John
W. Whitfield Gardner John L. Lewis, IV
<PAGE>
Relative Valuations
This graph shows the P/E ratio of the Salomon Smith Barney Emerging Growth Index
relative to that of the S&P 500. It clearly illustrates that relative valuations
of small and mid cap companies have reached historic lows.
[Graph Included Here]
<PAGE>
_______________________________________________
THE CHESAPEAKE GROWTH FUND
_______________________________________________
March 31, 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.
Ten Largest Industry Groups
- ---------------------------
[pie chart here]
Apparel - 4.6%
Business Services - 5.6%
Computer Software - 10.1%
Computers & Peripherals - 13.3%
Energy Services - 7.0%
Environmental Services - 4.6%
Financial Services - 5.1%
Pharmaceuticals - 6.3%
Retail Sales & Distribution - 9.8%
Telecommunications - 11.4%
All Others - 22.4%
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 $3 billion in growth equities for both
institutions and individuals including some of the top foundations, endowments,
and pension plans in the U.S. Gardner Lewis was founded in 1990 and employs a
staff of 29. The research team is comprised of 15.
For More complete information regarding the Fund including charges
and expenses, obtain a prospectus by calling the Fund directly at (800)430-3863
or Gardner Lewis Asset Management, the Investment Advisor at (610)558-2800.
<PAGE>
Ten Largest Holdings
- --------------------
1. EMC Corporation 8.0%
2. MCI Worldcom Inc. 5.6%
3. Jones Apparel Group, Inc. 3.7%
4. Checkfree Holdings Corp. 2.9%
5. MidAmerican Energy Holdings 2.3%
6. Diamond Offshore Drilling 2.3%
7. LSI Logic Corp. 2.3%
8. United States Filter 2.0%
9. Allmerica Financial Corp. 1.9%
10. Forest Laboratories 1.9%
Portfolio Characteristics
- -------------------------
Overall Assets ($MM) 219
Number of Companies 68
5 Yr. Historical Earnings Growth 24%
Earnings Growth - net year 28%
P/E Ratio - next year 21
(Gardner Lewis earnings estimates)
Performance Summary
- ------------------- Annualized
- --------------------------------------------------------------------------------
Quarter Since
End 1 Year 3 Year Inception
- --------------------------------------------------------------------------------
The Chesapeake Growth Fund
Institutional Shares -1.2% -1.9% 12.3% 15.7%
- --------------------------------------------------------------------------------
Historical performance for The Chesapeake Growth Fund Institutional Series has
been calculated by using the performance of an original class of The Fund (known
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.
Must be accompanied or preceded by a prospectus.
Capital Investment Group, Inc., Distributor
Raleigh, NC (800)525-3863
<PAGE>
<TABLE>
<S> <C> <C> <C>
_______________________________________________
THE CHESAPEAKE GROWTH FUND
_______________________________________________
PORTFOLIO OF INVESTMENTS
(unaudited)
March 31, 1999
============================================================ ===========================================================
Quantity Security Market Value Quantity Security Market Value
============================================================ ===========================================================
67,900 ADC Telecommunications, Inc. 3,237,981 156,300 LSI Logic Corp. 4,874,606
65,000 AES Corporation 2,421,250 26,700 Lexmark Holdings, Inc. 2,987,062
31,100 Abercrombie & Fitch Co. 2,868,975 135,600 MCI Worldcom Inc. 12,009,075
117,500 Adaptec, Inc. 2,680,469 6,700 Mattel, Inc. 167,081
43,300 Airborne Freight Corp. 1,342,300 44,000 Maytag 2,656,500
128,800 Allied Waste 1,859,550 181,400 MidAmerican Energy Holdings 5,079,200
76,400 Allmerica Financial Corp. 4,206,775 102,500 Mohawk Industries, Inc. 3,075,000
84,400 Amerisource Health Corp. 2,885,425 147,300 Mylan Laboratories, Inc. 4,041,544
79,500 BE Aerospace, Inc. 1,172,625 67,500 NCR Corporation 3,375,000
92,700 BMC Software, Inc. 3,435,694 41,600 Networks Associates, Inc. 1,276,600
67,400 Best Buy Company, Inc. 3,504,800 66,100 Nova Corporation 1,735,125
47,500 Biomet, Inc. 1,992,031 108,100 Parametric Technology Corp. 2,134,975
64,700 Cadence Design Systems 1,666,025 671,700 PharMerica, Inc. 3,358,500
148,400 Checkfree Holdings Corp. 6,316,275 50,500 Plantronics Inc. 3,159,406
33,900 Circuit City Stores, Inc. 2,597,587 108,200 Platinum Technology Int'l, Inc. 2,759,100
103,650 Comair Holdings, Inc. 2,448,731 61,500 Saks, Inc. 1,599,000
80,900 Concord EFS, Inc. 2,229,806 70,700 Scientific-Atlanta, Inc. 1,926,575
92,500 Conexant Systems, Inc. 2,561,094 73,000 Snyder Communications 2,034,875
121,200 Consolidated Stores Corp. 3,673,875 32,000 Sun Microsystems, Inc. 4,002,000
89,700 Cooper Cameron Corp. 3,038,587 135,900 Symantec Corp. 2,301,806
144,900 DSP Communications, Inc. 2,300,287 43,600 Synopsys 2,343,500
155,900 Diamond Offshore Drilling 4,930,337 286,200 System Software Associates, Inc. 643,950
70,300 E C I Telecom, Ltd. 2,460,500 31,500 Tellabs, Inc. 3,079,125
135,600 EMC Corporation 17,322,900 34,200 Teradyne, Inc. 1,866,037
68,500 Federal-Mogul Corp. 2,928,375 58,900 Toronto-Dominion Bank 2,705,719
73,600 Forest Laboratories, Inc. 4,149,200 48,500 U.S.Foodservice 2,255,250
49,000 Gulfstream Aerospace Corp. 2,125,375 77,800 Unisys Corp. 2,154,087
105,500 Heller Financial 2,479,250 72,500 United Healthcare Corp. 3,815,312
58,700 Home Depot, Inc. 3,654,075 144,700 United States Filter 4,431,437
73,400 Houghton Mifflin Company 3,440,625 67,600 Universal Health Services, Inc. 2,923,700
31,300 Intimate Brands,Inc. 1,506,312 83,500 Waste Management, Inc. 3,705,312
285,400 Jones Apparel Group, Inc. 7,973,362 14,700 Wellpoint Health Networks Inc. 1,114,444
78,100 Jones Pharma Inc. 2,713,975 74,500 Westpoint Stevens, Inc. 2,062,719
112,000 K Mart Corp. 1,883,000 66,200 Young & Rubicam Inc. 2,697,650
TOTAL EQUITY 216,358,706
CASH EQUIVALENT 3,325,612
TOTAL ASSETS 219,684,319
</TABLE>
<PAGE>
______________________________________
THE CHESAPEAKE FUNDS
______________________________________
April 1, 1999
Dear Shareholder:
The Chesapeake Growth Fund Series C closed the first quarter with a loss
of 1.7%. This compares to a loss of 5.4% for the Russell 2000 and a gain of 5.0%
for the S&P 500. Despite their stock price performance, the factors that should
support demand for smaller and mid-capitalization companies are strengthening,
making this quarter's activity even more contradictory. It was once again a
quarter led by the largest of the large caps, and in our universe, the highest
PE stocks and the internet. (Without internet stocks the Russell 2000 would have
been down an additional 3%.) Despite our understanding that this is primarily
due to an anomalistic market environment, disfavoring our types of companies, we
expect to do better.
There is no doubt that we have had great difficulty rationalizing an
environment in which valuation has been all but ignored. This is particularly
true since our strategy has historically allowed us to outstrip market returns,
not only because we have been able to ferret out inefficiencies, but also
because price has historically mattered.
The net result of the market's unprecedented larger capitalization run
is that smaller companies now sell at their lowest relative price earnings
ratios in history. We are being proactive in our efforts to capitalize on this
historic anomaly, one characterized by an investing environment hostile to
smaller companies. Most importantly, we are increasing our exposure to our best
names for little change in price. This process is tending to lower our portfolio
name count, is forcing a sharper selling discipline, and is allowing our most
senior people to more effectively direct the research process. We believe this
will enhance our performance, regardless of market environment, and just as
importantly, is positioning us to best capitalize on the inevitable market turn.
History leaves little question that market environments cycle and that
ultimately there is a regression to the mean. Trying to understand when this
regression will occur is what is difficult. Suffice it to say, it is most likely
to occur when it is least expected. For example, in December, headlines
suggested that neither Japan nor the emerging markets would ever revive. This
quarter both Japan and the emerging markets were up more than 12%, surpassing
the returns of all major markets. Thus recent press suggesting that the current
domestic market trend will last forever, and that the leadership will not
change, is in fact a positive sign.
Many are not aware that in 1998 the S&P 500's advance was due solely to
price earnings ratio expansion. In fact, last year S&P 500 earnings were
actually down from 1997. Its multiple expansion was primarily due to three
things. The first was the demand for big cap liquidity and stability as
potential shelter from the global economic difficulty primarily impacting the
developing economies and Japan. (This occurred despite the fact that most of
these companies relied on the world's developing economies and in part Japan for
their expected growth in profits.) The second was a declining interest rate
environment. And, the third was the money flow momentum initiated by the first
two, and furthered as the performance of these stocks caused others to `pile
on'.
<PAGE>
Smaller companies are expected to grow their earnings next year at more
than two times the rate of the S&P 500. In addition to this, a stabilizing
global economic platform is putting upward pressure on the domestic economy,
impeding further rate reduction and thus multiple expansion. This should make
earnings growth the driver for stock price appreciation.
We believe that the money flow into larger company funds, which has
been the fuel for their advances, is chasing yesterday's returns. So too do many
large pension plans, whose assets as a whole still dominate the market. In fact,
despite most investors believing the contrary, large pension plans, due to
concerns over valuation and portfolio diversification, have been decreasing
their exposure to S&P 500 index funds, completely offsetting continuing inflows
from retail investors. Both Vanguard and Standard & Poor's have confirmed this
in recent press. This does not say that the market cannot do well; it does say
that the S&P is not as likely to maintain its performance pace. Since the
fundamentals are in place for a turn, it now boils down to money flow. And,
additional evidence of a potential shift in money flow can be found in the fact
that among the large institutions, over the next several quarters, there is a
significant amount of smaller cap manager search activity planned, suggesting
that the direction of money flow into these stocks could soon turn positive.
This would obviously benefit our portfolio greatly, but so too should the steps
we have employed to position ourselves in this environment.
Sincerely,
/S/ Whit /s/ John
W. Whitfield Gardner John L. Lewis, IV
<PAGE>
Relative Valuations
This graph shows the P/E ratio of the Salomon Smith Barney Emerging Growth Index
relative to that of the S&P 500. It clearly illustrates that relative valuations
of small and mid cap companies have reached historic lows.
[Graph Included Here]
<PAGE>
_______________________________________________
THE CHESAPEAKE GROWTH FUND
_______________________________________________
March 31, 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.
Ten Largest Industry Groups
- ---------------------------
[pie chart here]
Apparel - 4.6%
Business Services - 5.6%
Computer Software - 10.1%
Computers & Peripherals - 13.3%
Energy Services - 7.0%
Environmental Services - 4.6%
Financial Services - 5.1%
Pharmaceuticals - 6.3%
Retail Sales & Distribution - 9.8%
Telecommunications - 11.4%
All Others - 22.4%
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 $3 billion in growth equities for both
institutions and individuals including some of the top foundations, endowments,
and pension plans in the U.S. Gardner Lewis was founded in 1990 and employs a
staff of 29. The research team is comprised of 15.
For More complete information regarding the Fund including charges
and expenses, obtain a prospectus by calling the Fund directly at (800)430-3863
or Gardner Lewis Asset Management, the Investment Advisor at (610)558-2800.
<PAGE>
Ten Largest Holdings
- --------------------
1. EMC Corporation 8.0%
2. MCI Worldcom Inc. 5.6%
3. Jones Apparel Group, Inc. 3.7%
4. Checkfree Holdings Corp. 2.9%
5. MidAmerican Energy Holdings 2.3%
6. Diamond Offshore Drilling 2.3%
7. LSI Logic Corp. 2.3%
8. United States Filter 2.0%
9. Allmerica Financial Corp. 1.9%
10. Forest Laboratories 1.9%
Portfolio Characteristics
- -------------------------
Overall Assets ($MM) 219
Number of Companies 68
5 Yr. Historical Earnings Growth 24%
Earnings Growth - net year 28%
P/E Ratio - next year 21
(Gardner Lewis earnings estimates)
Performance Summary
- ------------------- Annualized
- --------------------------------------------------------------------------------
Quarter Since
End 1 Year 3 Year Inception
- --------------------------------------------------------------------------------
The Chesapeake
Growth Fund Series C -1.7% -4.1% 10.3% 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.
Must be accompanied or preceded by a prospectus.
Capital Investment Group, Inc., Distributor
Raleigh, NC (800)525-3863
<PAGE>
<TABLE>
<S> <C> <C> <C>
_______________________________________________
THE CHESAPEAKE GROWTH FUND
_______________________________________________
PORTFOLIO OF INVESTMENTS
(unaudited)
March 31, 1999
============================================================ ===========================================================
Quantity Security Market Value Quantity Security Market Value
============================================================ ===========================================================
67,900 ADC Telecommunications, Inc. 3,237,981 156,300 LSI Logic Corp. 4,874,606
65,000 AES Corporation 2,421,250 26,700 Lexmark Holdings, Inc. 2,987,062
31,100 Abercrombie & Fitch Co. 2,868,975 135,600 MCI Worldcom Inc. 12,009,075
117,500 Adaptec, Inc. 2,680,469 6,700 Mattel, Inc. 167,081
43,300 Airborne Freight Corp. 1,342,300 44,000 Maytag 2,656,500
128,800 Allied Waste 1,859,550 181,400 MidAmerican Energy Holdings 5,079,200
76,400 Allmerica Financial Corp. 4,206,775 102,500 Mohawk Industries, Inc. 3,075,000
84,400 Amerisource Health Corp. 2,885,425 147,300 Mylan Laboratories, Inc. 4,041,544
79,500 BE Aerospace, Inc. 1,172,625 67,500 NCR Corporation 3,375,000
92,700 BMC Software, Inc. 3,435,694 41,600 Networks Associates, Inc. 1,276,600
67,400 Best Buy Company, Inc. 3,504,800 66,100 Nova Corporation 1,735,125
47,500 Biomet, Inc. 1,992,031 108,100 Parametric Technology Corp. 2,134,975
64,700 Cadence Design Systems 1,666,025 671,700 PharMerica, Inc. 3,358,500
148,400 Checkfree Holdings Corp. 6,316,275 50,500 Plantronics Inc. 3,159,406
33,900 Circuit City Stores, Inc. 2,597,587 108,200 Platinum Technology Int'l, Inc. 2,759,100
103,650 Comair Holdings, Inc. 2,448,731 61,500 Saks, Inc. 1,599,000
80,900 Concord EFS, Inc. 2,229,806 70,700 Scientific-Atlanta, Inc. 1,926,575
92,500 Conexant Systems, Inc. 2,561,094 73,000 Snyder Communications 2,034,875
121,200 Consolidated Stores Corp. 3,673,875 32,000 Sun Microsystems, Inc. 4,002,000
89,700 Cooper Cameron Corp. 3,038,587 135,900 Symantec Corp. 2,301,806
144,900 DSP Communications, Inc. 2,300,287 43,600 Synopsys 2,343,500
155,900 Diamond Offshore Drilling 4,930,337 286,200 System Software Associates, Inc. 643,950
70,300 E C I Telecom, Ltd. 2,460,500 31,500 Tellabs, Inc. 3,079,125
135,600 EMC Corporation 17,322,900 34,200 Teradyne, Inc. 1,866,037
68,500 Federal-Mogul Corp. 2,928,375 58,900 Toronto-Dominion Bank 2,705,719
73,600 Forest Laboratories, Inc. 4,149,200 48,500 U.S.Foodservice 2,255,250
49,000 Gulfstream Aerospace Corp. 2,125,375 77,800 Unisys Corp. 2,154,087
105,500 Heller Financial 2,479,250 72,500 United Healthcare Corp. 3,815,312
58,700 Home Depot, Inc. 3,654,075 144,700 United States Filter 4,431,437
73,400 Houghton Mifflin Company 3,440,625 67,600 Universal Health Services, Inc. 2,923,700
31,300 Intimate Brands,Inc. 1,506,312 83,500 Waste Management, Inc. 3,705,312
285,400 Jones Apparel Group, Inc. 7,973,362 14,700 Wellpoint Health Networks Inc. 1,114,444
78,100 Jones Pharma Inc. 2,713,975 74,500 Westpoint Stevens, Inc. 2,062,719
112,000 K Mart Corp. 1,883,000 66,200 Young & Rubicam Inc. 2,697,650
TOTAL EQUITY 216,358,706
CASH EQUIVALENT 3,325,612
TOTAL ASSETS 219,684,319
</TABLE>
<PAGE>
______________________________________
THE CHESAPEAKE FUNDS
______________________________________
April 1, 1999
Dear Shareholder:
The Chesapeake Growth Fund Series A closed the first quarter with a
loss of 1.3%. This compares to a loss of 5.4% for the Russell 2000 and a gain of
5.0% for the S&P 500. Despite their stock price performance, the factors that
should support demand for smaller and mid-capitalization companies are
strengthening, making this quarter's activity even more contradictory. It was
once again a quarter led by the largest of the large caps, and in our universe,
the highest PE stocks and the internet. (Without internet stocks the Russell
2000 would have been down an additional 3%.) Despite our understanding that this
is primarily due to an anomalistic market environment, disfavoring our types of
companies, we expect to do better.
There is no doubt that we have had great difficulty rationalizing an
environment in which valuation has been all but ignored. This is particularly
true since our strategy has historically allowed us to outstrip market returns,
not only because we have been able to ferret out inefficiencies, but also
because price has historically mattered.
The net result of the market's unprecedented larger capitalization run
is that smaller companies now sell at their lowest relative price earnings
ratios in history. We are being proactive in our efforts to capitalize on this
historic anomaly, one characterized by an investing environment hostile to
smaller companies. Most importantly, we are increasing our exposure to our best
names for little change in price. This process is tending to lower our portfolio
name count, is forcing a sharper selling discipline, and is allowing our most
senior people to more effectively direct the research process. We believe this
will enhance our performance, regardless of market environment, and just as
importantly, is positioning us to best capitalize on the inevitable market turn.
History leaves little question that market environments cycle and that
ultimately there is a regression to the mean. Trying to understand when this
regression will occur is what is difficult. Suffice it to say, it is most likely
to occur when it is least expected. For example, in December, headlines
suggested that neither Japan nor the emerging markets would ever revive. This
quarter both Japan and the emerging markets were up more than 12%, surpassing
the returns of all major markets. Thus recent press suggesting that the current
domestic market trend will last forever, and that the leadership will not
change, is in fact a positive sign.
Many are not aware that in 1998 the S&P 500's advance was due solely to
price earnings ratio expansion. In fact, last year S&P 500 earnings were
actually down from 1997. Its multiple expansion was primarily due to three
things. The first was the demand for big cap liquidity and stability as
potential shelter from the global economic difficulty primarily impacting the
developing economies and Japan. (This occurred despite the fact that most of
these companies relied on the world's developing economies and in part Japan for
their expected growth in profits.) The second was a declining interest rate
environment. And, the third was the money flow momentum initiated by the first
two, and furthered as the performance of these stocks caused others to `pile
on'.
<PAGE>
Smaller companies are expected to grow their earnings next year at more
than two times the rate of the S&P 500. In addition to this, a stabilizing
global economic platform is putting upward pressure on the domestic economy,
impeding further rate reduction and thus multiple expansion. This should make
earnings growth the driver for stock price appreciation.
We believe that the money flow into larger company funds, which has
been the fuel for their advances, is chasing yesterday's returns. So too do many
large pension plans, whose assets as a whole still dominate the market. In fact,
despite most investors believing the contrary, large pension plans, due to
concerns over valuation and portfolio diversification, have been decreasing
their exposure to S&P 500 index funds, completely offsetting continuing inflows
from retail investors. Both Vanguard and Standard & Poor's have confirmed this
in recent press. This does not say that the market cannot do well; it does say
that the S&P is not as likely to maintain its performance pace. Since the
fundamentals are in place for a turn, it now boils down to money flow. And,
additional evidence of a potential shift in money flow can be found in the fact
that among the large institutions, over the next several quarters, there is a
significant amount of smaller cap manager search activity planned, suggesting
that the direction of money flow into these stocks could soon turn positive.
This would obviously benefit our portfolio greatly, but so too should the steps
we have employed to position ourselves in this environment.
Sincerely,
/S/ Whit /s/ John
W. Whitfield Gardner John L. Lewis, IV
<PAGE>
Relative Valuations
This graph shows the P/E ratio of the Salomon Smith Barney Emerging Growth Index
relative to that of the S&P 500. It clearly illustrates that relative valuations
of small and mid cap companies have reached historic lows.
[Graph Included Here]
<PAGE>
_______________________________________________
THE CHESAPEAKE GROWTH FUND
_______________________________________________
March 31, 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.
Ten Largest Industry Groups
- ---------------------------
[pie chart here]
Apparel - 4.6%
Business Services - 5.6%
Computer Software - 10.1%
Computers & Peripherals - 13.3%
Energy Services - 7.0%
Environmental Services - 4.6%
Financial Services - 5.1%
Pharmaceuticals - 6.3%
Retail Sales & Distribution - 9.8%
Telecommunications - 11.4%
All Others - 22.4%
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 $3 billion in growth equities for both
institutions and individuals including some of the top foundations, endowments,
and pension plans in the U.S. Gardner Lewis was founded in 1990 and employs a
staff of 29. The research team is comprised of 15.
For More complete information regarding the Fund including charges
and expenses, obtain a prospectus by calling the Fund directly at (800)430-3863
or Gardner Lewis Asset Management, the Investment Advisor at (610)558-2800.
<PAGE>
Ten Largest Holdings
- --------------------
1. EMC Corporation 8.0%
2. MCI Worldcom Inc. 5.6%
3. Jones Apparel Group, Inc. 3.7%
4. Checkfree Holdings Corp. 2.9%
5. MidAmerican Energy Holdings 2.3%
6. Diamond Offshore Drilling 2.3%
7. LSI Logic Corp. 2.3%
8. United States Filter 2.0%
9. Allmerica Financial Corp. 1.9%
10. Forest Laboratories 1.9%
Portfolio Characteristics
- -------------------------
Overall Assets ($MM) 219
Number of Companies 68
5 Yr. Historical Earnings Growth 24%
Earnings Growth - net year 28%
P/E Ratio - next year 21
(Gardner Lewis earnings estimates)
Performance Summary
- ------------------- Annualized
- --------------------------------------------------------------------------------
The Chesapeake Quarter Since
Growth Fund Series A End 1 Year 3 Year Inception
- --------------------------------------------------------------------------------
Without the sales load
deduction -1.3% -2.2% 12.0% 15.4%
- --------------------------------------------------------------------------------
Net of the maximum
sales load^1 -4.3% -5.2% 10.8% 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
the original class of The Fund now called the Institutional Shares) from
inception on April 6, 1994 until the date of issuance of the new Series A Shares
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.
Must be accompanied or preceded by a prospectus.
Capital Investment Group, Inc., Distributor
Raleigh, NC (800)525-3863
<PAGE>
<TABLE>
<S> <C> <C> <C>
_______________________________________________
THE CHESAPEAKE GROWTH FUND
_______________________________________________
PORTFOLIO OF INVESTMENTS
(unaudited)
March 31, 1999
============================================================ ===========================================================
Quantity Security Market Value Quantity Security Market Value
============================================================ ===========================================================
67,900 ADC Telecommunications, Inc. 3,237,981 156,300 LSI Logic Corp. 4,874,606
65,000 AES Corporation 2,421,250 26,700 Lexmark Holdings, Inc. 2,987,062
31,100 Abercrombie & Fitch Co. 2,868,975 135,600 MCI Worldcom Inc. 12,009,075
117,500 Adaptec, Inc. 2,680,469 6,700 Mattel, Inc. 167,081
43,300 Airborne Freight Corp. 1,342,300 44,000 Maytag 2,656,500
128,800 Allied Waste 1,859,550 181,400 MidAmerican Energy Holdings 5,079,200
76,400 Allmerica Financial Corp. 4,206,775 102,500 Mohawk Industries, Inc. 3,075,000
84,400 Amerisource Health Corp. 2,885,425 147,300 Mylan Laboratories, Inc. 4,041,544
79,500 BE Aerospace, Inc. 1,172,625 67,500 NCR Corporation 3,375,000
92,700 BMC Software, Inc. 3,435,694 41,600 Networks Associates, Inc. 1,276,600
67,400 Best Buy Company, Inc. 3,504,800 66,100 Nova Corporation 1,735,125
47,500 Biomet, Inc. 1,992,031 108,100 Parametric Technology Corp. 2,134,975
64,700 Cadence Design Systems 1,666,025 671,700 PharMerica, Inc. 3,358,500
148,400 Checkfree Holdings Corp. 6,316,275 50,500 Plantronics Inc. 3,159,406
33,900 Circuit City Stores, Inc. 2,597,587 108,200 Platinum Technology Int'l, Inc. 2,759,100
103,650 Comair Holdings, Inc. 2,448,731 61,500 Saks, Inc. 1,599,000
80,900 Concord EFS, Inc. 2,229,806 70,700 Scientific-Atlanta, Inc. 1,926,575
92,500 Conexant Systems, Inc. 2,561,094 73,000 Snyder Communications 2,034,875
121,200 Consolidated Stores Corp. 3,673,875 32,000 Sun Microsystems, Inc. 4,002,000
89,700 Cooper Cameron Corp. 3,038,587 135,900 Symantec Corp. 2,301,806
144,900 DSP Communications, Inc. 2,300,287 43,600 Synopsys 2,343,500
155,900 Diamond Offshore Drilling 4,930,337 286,200 System Software Associates, Inc. 643,950
70,300 E C I Telecom, Ltd. 2,460,500 31,500 Tellabs, Inc. 3,079,125
135,600 EMC Corporation 17,322,900 34,200 Teradyne, Inc. 1,866,037
68,500 Federal-Mogul Corp. 2,928,375 58,900 Toronto-Dominion Bank 2,705,719
73,600 Forest Laboratories, Inc. 4,149,200 48,500 U.S.Foodservice 2,255,250
49,000 Gulfstream Aerospace Corp. 2,125,375 77,800 Unisys Corp. 2,154,087
105,500 Heller Financial 2,479,250 72,500 United Healthcare Corp. 3,815,312
58,700 Home Depot, Inc. 3,654,075 144,700 United States Filter 4,431,437
73,400 Houghton Mifflin Company 3,440,625 67,600 Universal Health Services, Inc. 2,923,700
31,300 Intimate Brands,Inc. 1,506,312 83,500 Waste Management, Inc. 3,705,312
285,400 Jones Apparel Group, Inc. 7,973,362 14,700 Wellpoint Health Networks Inc. 1,114,444
78,100 Jones Pharma Inc. 2,713,975 74,500 Westpoint Stevens, Inc. 2,062,719
112,000 K Mart Corp. 1,883,000 66,200 Young & Rubicam Inc. 2,697,650
TOTAL EQUITY 216,358,706
CASH EQUIVALENT 3,325,612
TOTAL ASSETS 219,684,319
</TABLE>
<PAGE>
______________________________________
THE CHESAPEAKE FUNDS
______________________________________
April 1, 1999
Dear Shareholder:
The Chesapeake Growth Fund Series D closed the first quarter with a
loss of 1.5%. This compares to a loss of 5.4% for the Russell 2000 and a gain of
5.0% for the S&P 500. Despite their stock price performance, the factors that
should support demand for smaller and mid-capitalization companies are
strengthening, making this quarter's activity even more contradictory. It was
once again a quarter led by the largest of the large caps, and in our universe,
the highest PE stocks and the internet. (Without internet stocks the Russell
2000 would have been down an additional 3%.) Despite our understanding that this
is primarily due to an anomalistic market environment, disfavoring our types of
companies, we expect to do better.
There is no doubt that we have had great difficulty rationalizing an
environment in which valuation has been all but ignored. This is particularly
true since our strategy has historically allowed us to outstrip market returns,
not only because we have been able to ferret out inefficiencies, but also
because price has historically mattered.
The net result of the market's unprecedented larger capitalization run
is that smaller companies now sell at their lowest relative price earnings
ratios in history. We are being proactive in our efforts to capitalize on this
historic anomaly, one characterized by an investing environment hostile to
smaller companies. Most importantly, we are increasing our exposure to our best
names for little change in price. This process is tending to lower our portfolio
name count, is forcing a sharper selling discipline, and is allowing our most
senior people to more effectively direct the research process. We believe this
will enhance our performance, regardless of market environment, and just as
importantly, is positioning us to best capitalize on the inevitable market turn.
History leaves little question that market environments cycle and that
ultimately there is a regression to the mean. Trying to understand when this
regression will occur is what is difficult. Suffice it to say, it is most likely
to occur when it is least expected. For example, in December, headlines
suggested that neither Japan nor the emerging markets would ever revive. This
quarter both Japan and the emerging markets were up more than 12%, surpassing
the returns of all major markets. Thus recent press suggesting that the current
domestic market trend will last forever, and that the leadership will not
change, is in fact a positive sign.
Many are not aware that in 1998 the S&P 500's advance was due solely to
price earnings ratio expansion. In fact, last year S&P 500 earnings were
actually down from 1997. Its multiple expansion was primarily due to three
things. The first was the demand for big cap liquidity and stability as
potential shelter from the global economic difficulty primarily impacting the
developing economies and Japan. (This occurred despite the fact that most of
these companies relied on the world's developing economies and in part Japan for
their expected growth in profits.) The second was a declining interest rate
environment. And, the third was the money flow momentum initiated by the first
two, and furthered as the performance of these stocks caused others to `pile
on'.
<PAGE>
Smaller companies are expected to grow their earnings next year at more
than two times the rate of the S&P 500. In addition to this, a stabilizing
global economic platform is putting upward pressure on the domestic economy,
impeding further rate reduction and thus multiple expansion. This should make
earnings growth the driver for stock price appreciation.
We believe that the money flow into larger company funds, which has
been the fuel for their advances, is chasing yesterday's returns. So too do many
large pension plans, whose assets as a whole still dominate the market. In fact,
despite most investors believing the contrary, large pension plans, due to
concerns over valuation and portfolio diversification, have been decreasing
their exposure to S&P 500 index funds, completely offsetting continuing inflows
from retail investors. Both Vanguard and Standard & Poor's have confirmed this
in recent press. This does not say that the market cannot do well; it does say
that the S&P is not as likely to maintain its performance pace. Since the
fundamentals are in place for a turn, it now boils down to money flow. And,
additional evidence of a potential shift in money flow can be found in the fact
that among the large institutions, over the next several quarters, there is a
significant amount of smaller cap manager search activity planned, suggesting
that the direction of money flow into these stocks could soon turn positive.
This would obviously benefit our portfolio greatly, but so too should the steps
we have employed to position ourselves in this environment.
Sincerely,
/S/ Whit /s/ John
W. Whitfield Gardner John L. Lewis, IV
<PAGE>
Relative Valuations
This graph shows the P/E ratio of the Salomon Smith Barney Emerging Growth Index
relative to that of the S&P 500. It clearly illustrates that relative valuations
of small and mid cap companies have reached historic lows.
[Graph Included Here]
<PAGE>
_______________________________________________
THE CHESAPEAKE GROWTH FUND
_______________________________________________
March 31, 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.
Ten Largest Industry Groups
- ---------------------------
[pie chart here]
Apparel - 4.6%
Business Services - 5.6%
Computer Software - 10.1%
Computers & Peripherals - 13.3%
Energy Services - 7.0%
Environmental Services - 4.6%
Financial Services - 5.1%
Pharmaceuticals - 6.3%
Retail Sales & Distribution - 9.8%
Telecommunications - 11.4%
All Others - 22.4%
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 $3 billion in growth equities for both
institutions and individuals including some of the top foundations, endowments,
and pension plans in the U.S. Gardner Lewis was founded in 1990 and employs a
staff of 29. The research team is comprised of 15.
For More complete information regarding the Fund including charges
and expenses, obtain a prospectus by calling the Fund directly at (800)430-3863
or Gardner Lewis Asset Management, the Investment Advisor at (610)558-2800.
<PAGE>
Ten Largest Holdings
- --------------------
1. EMC Corporation 8.0%
2. MCI Worldcom Inc. 5.6%
3. Jones Apparel Group, Inc. 3.7%
4. Checkfree Holdings Corp. 2.9%
5. MidAmerican Energy Holdings 2.3%
6. Diamond Offshore Drilling 2.3%
7. LSI Logic Corp. 2.3%
8. United States Filter 2.0%
9. Allmerica Financial Corp. 1.9%
10. Forest Laboratories 1.9%
Portfolio Characteristics
- -------------------------
Overall Assets ($MM) 219
Number of Companies 68
5 Yr. Historical Earnings Growth 24%
Earnings Growth - net year 28%
P/E Ratio - next year 21
(Gardner Lewis earnings estimates)
Performance Summary
- ------------------- Annualized
- --------------------------------------------------------------------------------
The Chesapeake Quarter Since
Growth Fund Series D End 1 Year 3 Year Inception
- --------------------------------------------------------------------------------
Without the sales load
deduction -1.5% -2.9% 11.3% 14.9%
- --------------------------------------------------------------------------------
Net of the maximum
sales load^1 -2.9% -4.3% 10.7% 14.6%
- --------------------------------------------------------------------------------
________
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
the original class of The Fund (known 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.
Must be accompanied or preceded by a prospectus.
Capital Investment Group, Inc., Distributor
Raleigh, NC (800)525-3863
<PAGE>
<TABLE>
<S> <C> <C> <C>
_______________________________________________
THE CHESAPEAKE GROWTH FUND
_______________________________________________
PORTFOLIO OF INVESTMENTS
(unaudited)
March 31, 1999
============================================================ ===========================================================
Quantity Security Market Value Quantity Security Market Value
============================================================ ===========================================================
67,900 ADC Telecommunications, Inc. 3,237,981 156,300 LSI Logic Corp. 4,874,606
65,000 AES Corporation 2,421,250 26,700 Lexmark Holdings, Inc. 2,987,062
31,100 Abercrombie & Fitch Co. 2,868,975 135,600 MCI Worldcom Inc. 12,009,075
117,500 Adaptec, Inc. 2,680,469 6,700 Mattel, Inc. 167,081
43,300 Airborne Freight Corp. 1,342,300 44,000 Maytag 2,656,500
128,800 Allied Waste 1,859,550 181,400 MidAmerican Energy Holdings 5,079,200
76,400 Allmerica Financial Corp. 4,206,775 102,500 Mohawk Industries, Inc. 3,075,000
84,400 Amerisource Health Corp. 2,885,425 147,300 Mylan Laboratories, Inc. 4,041,544
79,500 BE Aerospace, Inc. 1,172,625 67,500 NCR Corporation 3,375,000
92,700 BMC Software, Inc. 3,435,694 41,600 Networks Associates, Inc. 1,276,600
67,400 Best Buy Company, Inc. 3,504,800 66,100 Nova Corporation 1,735,125
47,500 Biomet, Inc. 1,992,031 108,100 Parametric Technology Corp. 2,134,975
64,700 Cadence Design Systems 1,666,025 671,700 PharMerica, Inc. 3,358,500
148,400 Checkfree Holdings Corp. 6,316,275 50,500 Plantronics Inc. 3,159,406
33,900 Circuit City Stores, Inc. 2,597,587 108,200 Platinum Technology Int'l, Inc. 2,759,100
103,650 Comair Holdings, Inc. 2,448,731 61,500 Saks, Inc. 1,599,000
80,900 Concord EFS, Inc. 2,229,806 70,700 Scientific-Atlanta, Inc. 1,926,575
92,500 Conexant Systems, Inc. 2,561,094 73,000 Snyder Communications 2,034,875
121,200 Consolidated Stores Corp. 3,673,875 32,000 Sun Microsystems, Inc. 4,002,000
89,700 Cooper Cameron Corp. 3,038,587 135,900 Symantec Corp. 2,301,806
144,900 DSP Communications, Inc. 2,300,287 43,600 Synopsys 2,343,500
155,900 Diamond Offshore Drilling 4,930,337 286,200 System Software Associates, Inc. 643,950
70,300 E C I Telecom, Ltd. 2,460,500 31,500 Tellabs, Inc. 3,079,125
135,600 EMC Corporation 17,322,900 34,200 Teradyne, Inc. 1,866,037
68,500 Federal-Mogul Corp. 2,928,375 58,900 Toronto-Dominion Bank 2,705,719
73,600 Forest Laboratories, Inc. 4,149,200 48,500 U.S.Foodservice 2,255,250
49,000 Gulfstream Aerospace Corp. 2,125,375 77,800 Unisys Corp. 2,154,087
105,500 Heller Financial 2,479,250 72,500 United Healthcare Corp. 3,815,312
58,700 Home Depot, Inc. 3,654,075 144,700 United States Filter 4,431,437
73,400 Houghton Mifflin Company 3,440,625 67,600 Universal Health Services, Inc. 2,923,700
31,300 Intimate Brands,Inc. 1,506,312 83,500 Waste Management, Inc. 3,705,312
285,400 Jones Apparel Group, Inc. 7,973,362 14,700 Wellpoint Health Networks Inc. 1,114,444
78,100 Jones Pharma Inc. 2,713,975 74,500 Westpoint Stevens, Inc. 2,062,719
112,000 K Mart Corp. 1,883,000 66,200 Young & Rubicam Inc. 2,697,650
TOTAL EQUITY 216,358,706
CASH EQUIVALENT 3,325,612
TOTAL ASSETS 219,684,319
</TABLE>
<PAGE>
THE CHESAPEAKE GROWTH FUND
Super-Institutional Shares
Performance Update - $50,000,000 Investment
For the period from June 12, 1996 (commencement of
operations) to February 28, 1999
Super- NASDAQ
Institutional S&P 500 Industrials
Shares Index Index
6/12/96 $50,000,000 $50,000,000 $50,000,000
8/31/96 44,816,484 48,940,746 45,188,818
11/30/96 51,513,200 56,981,759 48,033,613
2/28/97 52,446,877 59,969,752 47,256,720
5/31/97 55,730,844 64,648,986 48,958,651
8/31/97 64,713,458 68,834,821 55,463,315
11/30/97 62,649,033 73,428,371 54,059,331
2/28/98 65,766,812 80,962,184 56,725,008
5/31/98 65,620,093 84,486,705 57,655,355
8/31/98 48,160,527 74,406,542 42,016,157
11/30/98 60,264,848 90,802,549 52,740,221
2/28/99 62,923,801 96,941,275 56,635,298
This graph depicts the performance of The Chesapeake Growth Fund
Super-Institutional Shares versus the NASDAQ Industrials Index and the S&P 500
Total Return Index. It is important to note that The Chesapeake Growth Fund is a
professionally managed mutual fund while the indexes are not available for
investment and are unmanaged. The comparison is shown for illustrative purposes
only
Average Annual Total Return
- ---------------------------------------------------
Since Inception One Year
- ---------------------------------------------------
8.85% (4.32)%
- ---------------------------------------------------
The graph assumes an initial $50,000,000 investment at June 12, 1996. All
dividends and distributions are reinvested.
At February 28, 1999, the Super-Institutional Shares of The Chesapeake Growth
Fund would have grown to $62,923,801 - total investment return of 25.85% since
June 12, 1996.
At February 28, 1999, a similar investment in the NASDAQ Industrials Index would
have been worth $56,635,298 - total investment return of 13.27%; while a similar
investment in the S&P 500 Total Return Index would have grown to $96,941,275 -
total investment return of 93.88% since June 12, 1996.
Past performance is not a guarantee of future results. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost. Average annual returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming
reinvestments of dividends.
<PAGE>
THE CHESAPEAKE GROWTH FUND
Institutional Shares
Performance Update - $1,000,000 Investment
For the period from April 6,1994 (commencement of
operations) to February 28, 1999
NASDAQ
Institutional S&P 500 Industrials
Shares Index Index
4/6/94 $1,000,000 $1,000,000 $1,000,000
5/31/94 1,013,000 1,023,703 947,950
8/31/94 1,058,200 1,073,692 979,838
11/30/94 1,081,100 1,031,962 961,061
2/28/95 1,128,600 1,116,296 988,000
5/31/95 1,247,000 1,230,372 1,053,310
8/31/95 1,535,000 1,303,973 1,226,306
11/30/95 1,467,366 1,413,574 1,240,874
2/29/96 1,463,316 1,503,656 1,287,605
5/31/96 1,571,672 1,580,241 1,516,725
8/31/96 1,408,631 1,548,170 1,347,959
11/30/96 1,618,255 1,802,536 1,432,818
2/28/97 1,646,610 1,897,057 1,409,644
5/31/97 1,748,890 2,045,077 1,460,158
8/31/97 2,030,414 2,177,490 1,654,155
11/30/97 1,965,454 2,322,801 1,612,282
2/28/98 2,062,399 2,561,122 1,691,784
5/31/98 2,057,783 2,672,615 1,719,531
8/31/98 1,509,579 2,353,744 1,253,103
11/30/98 1,888,128 2,872,408 1,572,941
2/28/99 1,969,483 3,066,598 1,689,109
This graph depicts the performance of The Chesapeake Growth Fund Institutional
Shares versus the NASDAQ Industrials Index and the S&P 500 Total Return Index.
It is important to note that The Chesapeake Growth Fund is a professionally
managed mutual fund while the indexes are not available for investment and are
unmanaged. The comparison is shown for illustrative purposes only.
Average Annual Total Return
- -------------------------------------------------------
Since Inception One Year Three Years
- -------------------------------------------------------
14.83% (4.51)% 10.40%
- -------------------------------------------------------
The graph assumes an initial $1,000,000 investment at April 6, 1994. All
dividends and distributions are reinvested.
At February 28, 1999, the Institutional Shares of The Chesapeake Growth Fund
would have grown to $1,969,483 - total investment return of 96.95% since April
6, 1994.
At February 28, 1999, a similar investment in the NASDAQ Industrials Index would
have grown to $1,689,109 - total investment return of 68.91%; while a similar
investment in the S&P 500 Total Return Index would have grown to $3,066,598 -
total investment return of 206.66% since April 6, 1994.
Past performance is not a guarantee of future results. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost. Average annual returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming
reinvestments of dividends.
<PAGE>
THE CHESAPEAKE GROWTH FUND
Series C Investor Shares
Performance Update - $25,000 Investment
For the period from April 7,1995 (commencement of
operations) to February 28, 1999
NASDAQ
Series C Industrials S&P 500
Shares Index Index
4/7/95 $25,000 $25,000 $25,000
5/31/95 26,421 25,834 26,443
8/31/95 32,528 30,077 28,025
11/30/95 30,966 30,434 32,020
2/29/96 30,794 31,580 33,109
5/31/96 33,028 37,200 33,963
8/31/96 29,506 33,061 33,274
11/30/96 33,779 35,142 38,741
2/28/97 34,273 34,574 40,772
5/31/97 36,292 35,813 43,983
8/31/97 41,983 40,571 46,799
11/30/97 40,368 39,544 49,922
2/28/98 42,138 41,494 55,044
5/31/98 41,818 42,174 57,440
8/31/98 30,485 30,734 50,587
11/30/98 37,885 38,579 61,734
2/28/99 39,323 41,428 65,908
This graph depicts the performance of The Chesapeake Growth Fund Series C
Investor Shares versus the NASDAQ Industrials Index and the S&P 500 Total Return
Index. It is important to note that The Chesapeake Growth Fund is a
professionally managed mutual fund while the indexes are not available for
investment and are unmanaged. The comparison is shown for illustrative purposes
only.
Average Annual Total Return
- -------------------------------------------------------
Since Inception One Year Three Years
- -------------------------------------------------------
12.32% (6.68)% 8.49%
- -------------------------------------------------------
The graph assumes an initial $25,000 investment at April 7, 1995. All dividends
and distributions are reinvested.
At February 28, 1999, the Series C Investor Shares of The Chesapeake Growth Fund
would have grown to $39,323 - total investment return of 57.29% since April 7,
1995.
At February 28, 1999, a similar investment in the NASDAQ Industrials Index would
have grown to $41,428 - total investment return of 65.71%; while a similar
investment in the S&P 500 Total Return Index would have grown to $65,908 - total
investment return of 163.63% since April 7, 1995.
Past performance is not a guarantee of future results. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost. Average annual returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming
reinvestments of dividends.
<PAGE>
THE CHESAPEAKE GROWTH FUND
Series A Investor Shares
Performance Update - $25,000 Investment
For the period from April 7,1995 (commencement of
operations) to February 28, 1999
NASDAQ
Series A Industrials S&P 500
Shares Index Index
4/7/95 $24,250 $25,000 $25,000
5/31/95 25,628 25,834 26,443
8/31/95 31,572 30,077 28,025
11/30/95 30,140 30,434 32,020
2/29/96 30,036 31,580 33,109
5/31/96 32,244 37,200 33,963
8/31/96 28,890 33,061 33,274
11/30/96 33,139 35,142 38,741
2/28/97 33,702 34,574 40,772
5/31/97 35,785 35,813 43,983
8/31/97 41,492 40,571 46,799
11/30/97 40,136 39,544 49,922
2/28/98 42,061 41,494 55,044
5/31/98 41,942 42,174 57,440
8/31/98 30,726 30,734 50,587
11/30/98 38,402 38,579 61,734
2/28/99 40,029 41,428 65,908
This graph depicts the performance of The Chesapeake Growth Fund Series A
Investor Shares versus the NASDAQ Industrials Index and the S&P 500 Total Return
Index. It is important to note that The Chesapeake Growth Fund is a
professionally managed mutual fund while the indexes are not available for
investment and are unmanaged. The comparison is shown for illustrative purposes
only.
Average Annual Total Return
- ------------------------------------------------------------------
Since Inception One Year Three Years
- ------------------------------------------------------------------
No Sales Load 13.72% (4.83)% 10.05%
- ------------------------------------------------------------------
With 3.00% Sales Load 12.83% (7.69)% 8.94%
- ------------------------------------------------------------------
The graph assumes an initial $25,000 investment at April 7, 1995 ($24,250 after
maximum sales load of 3.00%). All dividends and distributions are reinvested.
At February 28, 1999, the Series A Investor Shares of The Chesapeake Growth Fund
would have grown to $40,029 - total investment return of 60.12% since April 7,
1995. Without the deduction of the 3.00% maximum sales load, the Series A
Investor Shares of The Chesapeake Growth Fund would have grown to $41,267 -
total investment return of 65.07% since April 7, 1995. The sales load may be
reduced or eliminated for larger purchases.
At February 28, 1999, a similar investment in the NASDAQ Industrials Index would
have grown to $41,428 - total investment return of 65.71%; while a similar
investment in the S&P 500 Total Return Index would have grown to $65,908 - total
investment return of 163.63% since April 7, 1995.
Past performance is not a guarantee of future results. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost. Average annual returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming
reinvestments of dividends.
<PAGE>
THE CHESAPEAKE GROWTH FUND
Series D Investor Shares
Performance Update - $25,000 Investment
For the period from April 7,1995 (commencement of
operations) to February 28, 1999
NASDAQ
Series D Industrials S&P 500
Shares Index Index
4/7/95 $24,625 $25,000 $25,000
5/31/95 26,045 25,834 26,443
8/31/95 32,040 30,077 28,025
11/30/95 30,606 30,434 32,020
2/29/96 30,479 31,580 33,109
5/31/96 32,700 37,200 33,963
8/31/96 29,231 33,061 33,274
11/30/96 33,504 35,142 38,741
2/28/97 34,012 34,574 40,772
5/31/97 36,084 35,813 43,983
8/31/97 41,795 40,571 46,799
11/30/97 40,310 39,544 49,922
2/28/98 42,196 41,494 55,044
5/31/98 42,002 42,174 57,440
8/31/98 30,740 30,734 50,587
11/30/98 38,353 38,579 61,734
2/28/99 39,912 41,428 65,908
This graph depicts the performance of The Chesapeake Growth Fund Series D
Investor Shares versus the NASDAQ Industrials Index and the S&P 500 Total Return
Index. It is important to note that The Chesapeake Growth Fund is a
professionally managed mutual fund while the indexes are not available for
investment and are unmanaged. The comparison is shown for illustrative purposes
only.
Average Annual Total Return
- ------------------------------------------------------------------
Since Inception One Year Three Years
- ------------------------------------------------------------------
No Sales Load 13.19% (5.41)% 9.40%
- ------------------------------------------------------------------
With 1.50% Sales Load 12.75% (6.83)% 8.85%
- ------------------------------------------------------------------
The graph assumes an initial $25,000 investment at April 7, 1995 ($24,625 after
maximum sales load of 1.50%). All dividends and distributions are reinvested.
At February 28, 1999, the Series D Investor Shares of The Chesapeake Growth Fund
would have grown to $39,912 - total investment return of 59.65% since April 7,
1995. Without the deduction of the 1.50% maximum sales load, the Series D
Investor Shares of The Chesapeake Growth Fund would have grown to $40,519 -
total investment return of 62.08% since April 7, 1995. The sales load may be
reduced or eliminated for larger purchases.
At February 28, 1999, a similar investment in the NASDAQ Industrials Index would
have grown to $41,428 - total investment return of 65.71%; while a similar
investment in the S&P 500 Total Return Index would have grown to $65,908 - total
investment return of 163.63% since April 7, 1995.
Past performance is not a guarantee of future results. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost. Average annual returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming
reinvestments of dividends.
<PAGE>
<TABLE>
<S> <C> <C>
THE CHESAPEAKE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 28, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 99.34%
Advertising - 2.41%
(a)Young & Rubicam Inc. ..................................................... 136,100 $ 5,137,775
------------
Aerospace & Defense - 1.58%
(a)BE Aerospace, Inc. ....................................................... 79,500 1,172,625
(a)Gulfstream Aerospace Corporation ......................................... 49,000 2,192,750
------------
3,365,375
------------
Apparel Manufacturing - 3.74%
(a)Jones Apparel Group, Inc. ................................................ 285,400 7,973,362
------------
Auto Parts - Replacement Equipment - 1.58%
Federal-Mogul Corporation ................................................ 68,500 3,369,344
------------
Commercial Services - 1.99%
(a)Concord EFS, Inc. ........................................................ 80,900 2,583,744
(a)NOVA Corporation ......................................................... 66,100 1,652,500
------------
4,236,244
------------
Computers - 12.69%
(a)Adaptec, Inc. ............................................................ 117,500 2,342,656
(a)Apple Computer, Inc. ..................................................... 71,500 2,489,094
(a)EMC Corporation .......................................................... 135,600 13,882,050
(a)Gateway 2000, Inc. ....................................................... 33,800 2,456,838
(a)NCR Corporation .......................................................... 67,500 2,763,281
(a)Sun Microsystems, Inc. ................................................... 32,000 3,114,000
------------
27,047,919
------------
Computer Software & Services - 9.29%
(a)BMC Software, Inc. ....................................................... 68,900 2,816,287
(a)Cadence Design Systems, Inc. ............................................. 64,700 1,556,844
Ceridian Corporation ..................................................... 20,300 1,453,987
(a)CheckFree Holdings Corporation ........................................... 148,400 5,082,700
(a)Network Associates, Inc. ................................................. 43,400 2,039,800
(a)PLATINUM technology International, inc ................................... 108,200 1,433,650
(a)Symantec Corporation ..................................................... 135,900 2,454,694
(a)Synopsys, Inc. ........................................................... 43,600 2,016,500
System Software Associates, Inc. ......................................... 286,200 948,038
------------
19,802,500
------------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
THE CHESAPEAKE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 28, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Electronics - 3.13%
(a)Rambus Inc. .............................................................. 38,000 $ 2,762,125
(a)SCI Systems, Inc. ........................................................ 73,400 2,270,813
(a)Teradyne, Inc. ........................................................... 34,200 1,641,600
------------
6,674,538
------------
Electronics - Semiconductor - 3.41%
(a)Conexant Systems, Inc. ................................................... 61,300 1,042,100
(a)LSI Logic Corporation .................................................... 42,500 1,099,688
Micron Technology, Inc. .................................................. 88,800 5,117,100
------------
7,258,888
------------
Environmental Control - 1.91%
Waste Management, Inc. ................................................... 83,500 4,081,062
------------
Financial Services - 1.20%
Heller Financial, Inc. ................................................... 105,500 2,551,781
------------
Financial - Banks, Commercial - 1.14%
Toronto - Dominion Bank .................................................. 58,900 2,429,625
------------
Foreign Securities - 1.37%
ECI Telecom Limited ...................................................... 79,300 2,914,275
------------
Household Products & Housewares - 1.16%
Maytag Corporation ....................................................... 44,000 2,466,750
------------
Human Resources - 1.05%
(a)Modis Professional Services, Inc. ........................................ 164,000 2,244,750
------------
Industrial Materials - 0.38%
(a)Cable Design Technologies Corporation .................................... 63,050 815,709
------------
Insurance - Multiline - 1.91%
Allmerica Financial Corporation .......................................... 76,400 4,077,850
------------
Lodging - 0.79%
(a)Fairfield Communities, Inc. .............................................. 44,500 1,329,737
(a)Sunterra Corporation ..................................................... 108,550 364,344
------------
1,694,081
------------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
THE CHESAPEAKE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 28, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Medical - Services - 2.96%
United HealthCare Corporation ............................................ 72,500 $ 3,575,156
Universal Health Services, Inc. .......................................... 67,600 2,746,250
------------
6,321,406
----------
Medical Supplies - 1.87%
Biomet, Inc. ............................................................. 81,700 2,997,369
Medtronic, Inc. .......................................................... 13,887 980,769
------------
3,978,138
------------
Miscellaneous - Manufacturing - 1.71%
(a)American Power Conversion Corporation .................................... 25,000 896,875
Pall Corporation ......................................................... 130,000 2,754,375
------------
3,651,250
------------
Oil & Gas - Equipment & Services - 1.29%
(a)Cooper Cameron Corporation ............................................... 89,700 2,107,950
(a)Global Industries, Ltd. .................................................. 126,800 641,925
------------
2,749,875
------------
Pharmaceuticals - 7.87%
(a)AmeriSource Health Corporation ........................................... 42,200 3,149,175
(a)Forest Laboratories, Inc. ................................................ 73,600 3,638,600
Jones Pharma Incorporated ................................................ 78,100 2,196,563
Mylan Laboratories Inc. .................................................. 147,300 4,023,131
(a)PharMerica, Inc. ......................................................... 671,700 3,778,312
------------
16,785,781
------------
Publishing - Printing - 1.14%
Houghton Mifflin Company ................................................. 56,600 2,433,800
------------
Restaurants & Food Services - 1.16%
CKE Restaurants, Inc. .................................................... 93,097 2,472,889
------------
Retail - Apparel - 1.69%
(a)Abercrombie & Fitch Co. .................................................. 31,100 2,363,600
Intimate Brands, Inc. .................................................... 31,300 1,230,481
------------
3,594,081
------------
Retail - Department Stores - 1.04%
(a)Saks Incorporated ........................................................ 61,500 2,210,156
------------
Retail - Drug Stores - 1.93%
Rite Aid Corporation ..................................................... 99,200 4,104,400
------------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
THE CHESAPEAKE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 28, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Retail - General Merchandise - 0.92%
(a)Kmart Corporation ........................................................ 112,000 $ 1,960,000
------------
Retail - Specialty Line - 4.63%
(a)Best Buy Co., Inc. ....................................................... 33,700 3,125,675
Circuit City Stores ...................................................... 59,600 3,233,300
The Home Depot, Inc. ..................................................... 58,700 3,503,656
------------
9,862,631
------------
Textiles - 1.56%
(a)Mohawk Industries, Inc. .................................................. 102,500 3,331,250
------------
Telecommunications Equipment - 4.93%
(a)ADC Telecommunications, Inc. ............................................. 67,900 2,749,950
(a)DSP Communications, Inc. ................................................. 144,900 2,173,500
(a)Plantronics, Inc. ........................................................ 50,500 3,061,563
(a)Tellabs, Inc. ............................................................ 31,500 2,521,969
------------
10,506,982
------------
Toys - 1.59%
Mattel, Inc. ............................................................. 128,600 3,391,825
------------
Transportation - Air - 2.01%
Airborne Freight Corporation ............................................. 43,300 1,688,700
COMAIR Holdings, Inc. .................................................... 69,100 2,599,888
------------
4,288,588
------------
Utilities - Electric - 3.50%
(a)CalEnergy Company, Inc. .................................................. 179,800 5,045,638
The AES Corporation ...................................................... 65,000 2,417,187
------------
7,462,825
------------
Utilities - Telecommunications - 5.25%
(a)MCI WorldCom, Inc. ....................................................... 135,600 11,187,000
------------
Utilities - Water - 1.56%
(a)United States Filter Corporation ......................................... 135,100 3,318,394
------------
Total Common Stocks (Cost $172,887,286) .................................. 211,753,099
------------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 28, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
INVESTMENT COMPANY - 0.86%
Evergreen Money Market Treasury Institutional Money
Market Fund Institutional Service Shares ................................. 1,841,153 $ 1,841,153
(Cost $1,841,153) -------------
Total Value of Investments (Cost $174,728,43% (b)) .................................................... 100.20 % $213,594,252
Liabilities In Excess of Other Assets ................................................................. (0.20)% (423,330)
------ ------------
Net Assets ..................................................................................... 100.00 % $213,170,922
====== ============
(a) Non-income producing investment.
(b) Aggregate cost for federal income tax purposes is the $174,931,312. Unrealized appreciation (depreciation) of
investments for and federal income tax purposes is as follows:
Unrealized appreciation $52,256,056
Unrealized depreciation (13,593,116)
-----------
Net unrealized appreciation $38,662,940
===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C>
THE CHESAPEAKE GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1999
ASSETS
Investments, at value (cost $174,728,439) ..................................................... $ 213,594,252
Cash .......................................................................................... 6,425
Income receivable ............................................................................. 25,085
Receivable for investments sold ............................................................... 768,329
Receivable for fund shares sold ............................................................... 12,791
Other assets .................................................................................. 15,687
-------------
Total assets ............................................................................. 214,422,569
-------------
LIABILITIES
Accrued expenses .............................................................................. 72,215
Payable for investment purchases .............................................................. 1,176,398
Payable for fund shares redeemed .............................................................. 2,593
Other liabilities ............................................................................. 441
-------------
Total liabilities ........................................................................ 1,251,647
-------------
NET ASSETS ........................................................................................... $ 213,170,922
=============
NET ASSETS CONSIST OF
Paid-in capital ............................................................................... $ 175,174,706
Distribution in excess of net realized gains .................................................. (372,638)
Accumulated net realized loss on investments .................................................. (496,959)
Net unrealized appreciation on investments .................................................... 38,865,813
-------------
$ 213,170,922
=============
INSTITUTIONAL SHARES
Net asset value, redemption and offering price per share
($63,425,554 / 3,821,233 shares outstanding) ............................................. $ 16.60
=======
SERIES A INVESTOR SHARES
Net asset value, redemption and offering price per share
($25,796,850/ 1,575,602 shares outstanding) .............................................. $ 16.37
=======
Maximum offering price per share (100 / 97 of $16.37) ......................................... $ 16.88
=======
SERIES C INVESTOR SHARES
Net asset value, redemption and offering price per share
($2,739,700/ 176,486 shares outstanding) ................................................. $ 15.52
=======
SERIES D INVESTOR SHARES
Net asset value, redemption and offering price per share
($8,060,215 / 502,383 shares outstanding) ................................................ $ 16.04
=======
Maximum offering price per share (100 / 98.5 of $16.04) ....................................... $ 16.29
=======
SUPER-INSTITUTIONAL SHARES
Net asset value, redemption and offering price per share
($113,148,603 / 6,782,886 shares outstanding) ............................................ $ 16.68
=======
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C>
THE CHESAPEAKE GROWTH FUND
STATEMENT OF OPERATIONS
Year ended February 28, 1999
INVESTMENT LOSS
Income
Dividends ................................................................................... $ 815,856
------------
Expenses
Investment advisory fees (note 2) ........................................................... 2,360,591
Fund administration fees (note 2) ........................................................... 140,800
Distribution fees - Series A (note 3) ....................................................... 78,847
Distribution fees - Series C (note 3) ....................................................... 25,517
Distribution fees - Series D (note 3) ....................................................... 47,913
Custody fees ................................................................................ 15,395
Registration and filing administration fees (note 2) ........................................ 23,374
Fund accounting fees (note 2) ............................................................... 84,000
Audit fees .................................................................................. 9,500
Legal fees .................................................................................. 38,401
Securities pricing fees ..................................................................... 4,384
Shareholder administration fees ............................................................. 50,000
Shareholder recordkeeping fees .............................................................. 36,002
Shareholder servicing expenses .............................................................. 17,382
Registration and filing expenses ............................................................ 35,064
Printing expenses ........................................................................... 17,421
Amortization of deferred organization expenses (note 3) ..................................... 8,636
Trustee fees and meeting expenses ........................................................... 9,017
Other operating expenses .................................................................... 9,706
------------
Total expenses ........................................................................ 3,011,950
------------
Less:
Expense reimbursements ........................................................... (169,241)
Distribution fees waived - Series A (note 3) ..................................... (498)
Distribution fees waived - Series C (note 3) ..................................... (163)
Distribution fees waived - Series D (note 3) ..................................... (280)
Shareholder administration fees waived (note 2) .................................. (25,000)
------------
Net expenses .......................................................................... 2,816,768
------------
Net investment loss .............................................................. (2,000,912)
------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss from investment transactions ................................................... (496,959)
Decrease in unrealized appreciation on investments ............................................... (13,218,336)
------------
Net realized and unrealized loss on investments ............................................. (13,715,295)
------------
Net decrease in net assets resulting from operations .................................. $(15,716,207)
============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
THE CHESAPEAKE GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
Year ended Year ended
February 28, February 28,
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
(DECREASE) INCREASE IN NET ASSETS
Operations
Net investment loss .................................................................... $ (2,000,912) $ (2,437,229)
Net realized (loss) gain from investment transactions .................................. (496,959) 34,915,833
(Decrease) increase in unrealized appreciation on investments .......................... (13,218,336) 22,557,525
------------ ------------
Net (decrease) increase in net assets resulting from operations .................... (15,716,207) 55,036,129
------------ ------------
Distributions to shareholders from
Tax return of capital .................................................................. 0 (7,366,935)
Distribution in excess of net realized gains ........................................... (372,638) 0
Net realized gain from investment transactions ......................................... (5,445,095) (26,747,385)
------------ ------------
Decrease in net assets resulting from distributions ................................ (5,817,733) (34,114,320)
------------ ------------
Capital share transactions
(Decrease) increase in net assets resulting from capital share transactions (a) (33,312,063) 15,554,185
------------ ------------
Total (decrease) increase in net assets ....................................... (54,846,003) 36,475,994
NET ASSETS
Beginning of year ........................................................................... 268,016,925 231,540,931
------------ ------------
End of year ................................................................................. $213,170,922 $268,016,925
============ ============
(a) A summary of capital share activity follows:
----------------------------------------------------------------------------
Year ended Year ended
February 28, 1999 February 28, 1998
Shares Value Shares Value
----------------------------------------------------------------------------
- -----------------------------------------
Institutional Shares
- -----------------------------------------
Shares sold ......................................... 793,937 $ 13,750,824 1,051,514 $ 19,879,652
Shares issued for reinvestment of distributions ..... 98,122 1,628,824 700,580 12,393,286
Shares redeemed ..................................... (2,269,992) (35,712,491) (1,340,894) (23,569,381)
------------ ------------ ------------ ------------
Net (decrease) increase ........................ (1,377,933) $(20,332,843) 411,200 $ 8,703,557
============ ============ ============ ============
- -----------------------------------------
Series A Shares
- -----------------------------------------
Shares sold ......................................... 115,434 $ 1,960,607 530,549 $ 9,940,125
Shares issued for reinvestment of distributions ..... 42,837 701,668 285,571 5,008,907
Shares redeemed ..................................... (896,110) (14,772,539) (936,063) (17,142,515)
------------ ------------ ------------ ------------
Net decrease ................................... (737,839) $(12,110,264) (119,943) $ (2,193,483)
============ ============ ============ ============
- -----------------------------------------
Series C Shares
- -----------------------------------------
Shares sold ......................................... 4,837 $ 62,950 51,400 $ 892,071
Shares issued for reinvestment of distributions ..... 4,820 74,850 30,187 514,986
Shares redeemed ..................................... (98,489) (1,609,034) (391,932) (6,437,614)
------------ ------------ ------------ ------------
Net decrease ................................... (88,832) $ (1,471,234) (310,345) $ (5,030,557)
============ ============ ============ ============
- -----------------------------------------
Series D Shares
- -----------------------------------------
Shares sold ......................................... 9,442 $ 168,590 21,553 $ 358,036
Shares issued for reinvestment of distributions ..... 14,142 226,988 81,859 1,418,612
Shares redeemed ..................................... (177,343) (2,861,271) (116,844) (2,013,186)
------------ ------------ ------------ ------------
Net decrease .................................. (153,759) $ (2,465,693) (13,432) $ (236,538)
============ ============ ============ ============
- -----------------------------------------
Super-Institutional Shares
- -----------------------------------------
Shares sold ......................................... 0 $ 0 0 $ 0
Shares issued for reinvestment of distributions ..... 183,821 3,067,971 806,720 14,311,206
Shares redeemed ..................................... 0 0 0 0
------------ ------------ ------------ ------------
Net increase ................................... 183,821 $ 3,067,971 806,720 $ 14,311,206
============ ============ ============ ============
- -----------------------------------------
Fund Summary
- -----------------------------------------
Shares sold ......................................... 923,650 $ 15,942,971 1,655,016 $ 31,069,884
Shares issued for reinvestment of distribution ...... 343,742 5,700,301 1,904,917 33,646,997
Shares redeemed ..................................... (3,441,934) (54,955,335) (2,785,733) (49,162,696)
------------ ------------ ------------ ------------
Net (decrease) increase ........................ (2,174,542) $(33,312,063) 774,200 $ 15,554,185
============ ============ ============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
THE CHESAPEAKE GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
Institutional Shares
- ------------------------------------------------------------------------------------------------------------------------------------
For the
period from
April 6, 1994
(commencement of
Year ended Year ended Year ended Year ended operations) to
February 28, February 28, February 28, February 29, February 28,
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ...................... $17.86 $16.26 $14.45 $11.31 $10.00
Income from investment operations
Net investment loss ............................... (0.17) (0.15) (0.13) (0.05) (0.04)
Net realized and unrealized (loss) gain on investments (0.63) 4.22 1.94 3.38 1.35
------- ------- ------- ------- -------
Total from investment operations ............... (0.80) 4.07 1.81 3.33 1.31
------- ------- ------- ------- -------
Distributions to shareholders from
Net investment income ............................. (0.00) 0.00 0.00 (0.11) 0.00
Tax return of capital ............................. 0.00 (0.53) 0.00 0.00 0.00
Distribution in excess of net realized gains ...... (0.03) 0.00 0.00 0.00 0.00
Net realized gain from investment transactions .... (0.43) (1.94) 0.00 (0.08) 0.00
------- ------- ------- ------- -------
Total distributions ............................ (0.46) (2.47) 0.00 (0.19) 0.00
------- ------- ------- ------- -------
Net asset value, end of period ............................ $16.60 $17.86 $16.26 $14.45 $11.31
======= ======= ======= ======= =======
Total return (a) .......................................... (4.51)% 25.25 % 12.53 % 29.66 % 13.12 % (c)
======= ======= ======= ======= =======
Ratios/supplemental data
Net assets, end of period (000's) .................... $63,426 $92,858 $77,858 $80,252 $15,088
======= ======= ======= ======= =======
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ..... 1.22 % 1.19 % 1.23 % 1.65 % 2.75 % (b)
After expense reimbursements and waived fees ...... 1.15 % 1.16 % 1.22 % 1.49 % 1.73 % (b)
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees ..... (0.87)% (0.90)% (0.85)% (0.98)% (1.80)% (b)
After expense reimbursements and waived fees ...... (0.80)% (0.88)% (0.84)% (0.82)% (0.78)% (b)
Portfolio turnover rate .............................. 121.48 % 105.60 % 126.44 % 99.33 % 64.92 %
(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>
THE CHESAPEAKE GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
Series A Investor Shares
- ------------------------------------------------------------------------------------------------------------------------------------
For the
period from
April 7, 1995
(commencement of
Year ended Year ended Year ended operations) to
February 28, February 28, February 28, February 29,
1999 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ......................... $17.69 $16.18 $14.42 $11.79
Income from investment operations
Net investment income loss ........................... (0.24) (0.21) (0.18) (0.06)
Net realized and unrealized (loss) gain on investments (0.62) 4.19 1.94 2.88
------- ------- ------- -------
Total from investment operations ................. (0.86) 3.98 1.76 2.82
------- ------- ------- -------
Distributions to shareholders from
Net investment income ................................ (0.00) 0.00 0.00 (0.11)
Tax return of capital ................................ 0.00 (0.53) 0.00 0.00
Distribution in excess of net realized gains ......... (0.03) 0.00 0.00 0.00
Net realized gain from investment transactions ....... (0.43) (1.94) 0.00 (0.08)
------- ------- ------- -------
Total distributions .............................. (0.46) (2.47) 0.00 (0.19)
------- ------- ------- -------
Net asset value, end of period ............................... $16.37 $17.69 $16.18 $14.42
======= ======= ======= =======
Total return (a) ............................................. (4.83)% 24.80 % 12.21 % 23.86 % (c)
======= ======= ======= =======
Ratios/supplemental data
Net assets, end of period (000's) ....................... $25,797 $40,924 $39,376 $32,549
======= ======= ======= =======
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ........ 1.60 % 1.55 % 1.54 % 1.88 % (b)
After expense reimbursements and waived fees ......... 1.53 % 1.52 % 1.53 % 1.71 % (b)
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees ........ (1.26)% (1.27)% (1.16)% (1.20)% (b)
After expense reimbursements and waived fees ......... (1.18)% (1.24)% (1.15)% (1.04)% (b)
Portfolio turnover rate ................................. 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>
THE CHESAPEAKE GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
Series C Investor Shares
- ------------------------------------------------------------------------------------------------------------------------------------
For the
period from
April 7, 1995
(commencement of
Year ended Year ended Year ended operations) to
February 28, February 28, February 28, February 29,
1999 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ................................ $17.12 $15.97 $14.34 $11.79
Income from investment operations
Net investment income loss .................................. (0.60) (0.52) (0.29) (0.12)
Net realized and unrealized (loss) gain on investments....... (0.54) 4.14 1.92 2.86
------ ------ ------ ------
Total from investment operations ........................ (1.14) 3.62 1.63 2.74
------ ------ ------ ------
Distributions to shareholders from
Net investment income ....................................... (0.00) 0.00 0.00 (0.11)
Tax return of capital ....................................... 0.00 (0.53) 0.00 0.00
Distribution in excess of net realized gains ................ (0.03) 0.00 0.00 0.00
Net realized gain from investment transactions .............. (0.43) (1.94) 0.00 (0.08)
------ ------ ------ ------
Total distributions ..................................... (0.46) (2.47) 0.00 (0.19)
------ ------ ------ ------
Net asset value, end of period ...................................... $15.52 $17.12 $15.97 $14.34
====== ====== ====== ======
Total return (a) .................................................... (6.68)% 22.95 % 11.30 % 23.18 % (c)
====== ====== ====== ======
Ratios/supplemental data
Net assets, end of period (000's) .............................. $2,740 $4,541 $9,192 $7,908
====== ====== ====== ======
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ............... 3.90 % 3.11 % 2.34 % 2.38 % (b)
After expense reimbursements and waived fees ................ 3.45 % 3.05 % 2.33 % 2.18 % (b)
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees ............... (3.55)% (2.84)% (1.97)% (1.77)% (b)
After expense reimbursements and waived fees ................ (3.11)% (2.78)% (1.96)% (1.57)% (b)
Portfolio turnover rate ........................................ 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>
THE CHESAPEAKE GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
Series D Investor Shares
- ------------------------------------------------------------------------------------------------------------------------------------
For the
period from
April 7, 1995
(commencement of
Year ended Year ended Year ended operations) to
February 28, February 28, February 28, February 29,
1999 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ......................... $17.45 $16.09 $14.41 $11.79
Income from investment operations
Net investment income loss ........................... (0.34) (0.32) (0.29) (0.11)
Net realized and unrealized (loss) gain on investments (0.61) 4.15 1.97 2.92
------- ------- ------- -------
Total from investment operations ................. (0.95) 3.83 1.68 2.81
------- ------- ------- -------
Distributions to shareholders from
Net investment income ................................ (0.00) 0.00 0.00 (0.11)
Tax return of capital ................................ 0.00 (0.53) 0.00 0.00
Distribution in excess of net realized gains ......... (0.03) 0.00 0.00 0.00
Net realized gain from investment transactions ....... (0.43) (1.94) 0.00 (0.08)
------- ------- ------- -------
Total distributions .............................. (0.46) (2.47) 0.00 (0.19)
------- ------- ------- -------
Net asset value, end of period ............................... $16.04 $17.45 $16.09 $14.41
======= ======= ======= =======
Total return (a) ............................................. (5.41)% 24.06 % 11.59 % 23.77 % (c)
======= ======= ======= =======
Ratios/supplemental data
Net assets, end of period (000's) ....................... $ 8,060 $11,448 $10,774 $11,929
======= ======= ======= =======
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ........ 2.34 % 2.22 % 2.02 % 2.13 % (b)
After expense reimbursements and waived fees ......... 2.14 % 2.18 % 2.01 % 1.73 % (b)
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees ........ (2.00)% (1.94)% (1.64)% (1.54)% (b)
After expense reimbursements and waived fees ......... (1.79)% (1.89)% (1.63)% (1.14)% (b)
Portfolio turnover rate ................................. 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>
THE CHESAPEAKE GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
Super-Institutional Shares
- ------------------------------------------------------------------------------------------------------------------------------------
For the
period from
June 12, 1996
(commencement of
Year ended Year ended operations) to
February 28, February 28, February 28,
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ................................. $17.92 $16.29 $15.53
Income from investment operations
Net investment loss ........................................... (0.11) (0.12) (0.07)
Net realized and unrealized (loss) gain on investments ........ (0.67) 4.22 0.83
-------- -------- --------
Total from investment operations ............................ (0.78) 4.10 0.76
-------- -------- --------
Distributions to shareholders from
Net investment income ......................................... (0.00) 0.00 0.00
Tax return of capital ......................................... 0.00 (0.53) 0.00
Distribution in excess of net realized gains .................. (0.03) 0.00 0.00
Net realized gain from investment transactions ................ (0.43) (1.94) 0.00
-------- -------- --------
Total distributions ......................................... (0.46) (2.47) 0.00
-------- -------- --------
Net asset value, end of period ....................................... $16.68 $17.92 $16.29
======== ======== ========
Total return (a) ..................................................... (4.32)% 25.40 % 4.89 % (c)
======== ======== ========
Ratios/supplemental data
Net assets, end of period (000's) ............................... $113,148 $118,246 $ 94,340
======== ======== ========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ................. 1.05 % 1.06 % 1.08 % (b)
After expense reimbursements and waived fees .................. 0.99 % 1.04 % 1.04 % (b)
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees ................. (0.71)% (0.77)% (0.75)% (b)
After expense reimbursements and waived fees .................. (0.64)% (0.75)% (0.72)% (b)
Portfolio turnover rate ......................................... 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
February 28, 1999
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
February 28, 1999
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 $2,000,912 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.
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 contract with the
Administrator provides that the aggregate fees for the aforementioned
administration, accounting and recordkeeping services shall not be less
than $3,000 per month. The Administrator receives a fee 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 $25,000 for the
fiscal year ended February 28, 1999. There can be no assurance that the
foregoing voluntary fee waivers will continue.
(Continued)
<PAGE>
THE CHESAPEAKE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
February 28, 1999
NC Shareholder Services, LLC (the "Transfer Agent") has been retained
by the Administrator to serve as the Fund's transfer, dividend paying,
and shareholder servicing agent. The Transfer Agent maintains the
records of each shareholder's account, answers shareholder inquiries
concerning accounts, processes purchases and redemptions of Fund
shares, acts as dividend and distribution disbursing agent, and
performs other shareholder servicing functions.
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
fiscal year ended February 28, 1999, the Distributor retained sales
charges in the amount of $1,865.
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 $78,349, $25,054 and $47,633, 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 fiscal
year ended February 28, 1999.
NOTE 4 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments other than short-term investments
aggregated $280,786,409 and $318,040,067 respectively, for the fiscal
year ended February 28, 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 fiscal year ended
February 28, 1999, the Fund's expenses were reduced by $169,241 under
this arrangement.
NOTE 6 - 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 $.46
per share distributions for the year ended February 28, 1999, was
classified as long term 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 Growth Fund:
We have audited the accompanying statement of assets and liabilities of The
Chesapeake Growth Fund, including the schedule of investments, as of February
28, 1999, and the related statement of operations for the year then ended, the
statements of changes in net assets for the years ended February 28, 1999 and
1998, and financial highlights for the periods presented. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
February 28, 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 Growth Fund as of February 28, 1999, the results of its operations
for the year then ended, the changes in its net assets and the financial
highlights for the respective stated periods in conformity with generally
accepted accounting principles.
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
March 19, 1999
<PAGE>
- --------------------------------------------------------------------------------
THE CHESAPEAKE AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
a series of the Gardner Lewis Investment Trust
Semi-Annual Report 1999
FOR THE PERIOD ENDED FEBRUARY 28
INVESTMENT ADVISOR
Gardner Lewis Asset Management
285 Wilmington-West Chester Pike
Chadds Ford, Pennsylvania 19317
THE CHESAPEAKE GROWTH FUND
107 North Washington Street
Post Office Drawer 4365
Rocky Mount, North Carolina 27803-0365
1-800-430-3863
<PAGE>
<TABLE>
<S> <C> <C>
THE CHESAPEAKE AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 28, 1999
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 96.16%
Aerospace & Defense - 2.81%
(a)BE Aerospace, Inc. ..................................................... 169,300 $ 2,497,175
(a)Gulfstream Aerospace Corporation ....................................... 115,000 5,146,250
(a)Triumph Group, Inc. .................................................... 111,800 2,864,875
-----------
10,508,300
-----------
Apparel Manufacturing - 4.60%
(a)Jones Apparel Group, Inc. .............................................. 614,300 17,162,006
(a)Littlefield, Adams & Company ........................................... 4,663 18,069
-----------
17,180,075
-----------
Auto Parts - Original Equipment - 1.96%
Federal-Mogul Corporation .............................................. 148,700 7,314,181
-----------
Commercial Services - 2.39%
(a)Building One Services Corporation ...................................... 227,400 3,752,100
(a)NOVA Corporation ....................................................... 118,500 2,962,500
(a)Rent-Way, Inc. ......................................................... 97,700 2,210,463
-----------
8,925,063
-----------
Computers - 4.87%
(a)EMC Corporation ........................................................ 128,800 13,185,900
(a)NeoMagic Corporation ................................................... 192,300 2,091,262
(a)Quantum Corporation .................................................... 177,900 2,924,231
-----------
18,201,393
-----------
Computer Software & Services - 15.23%
(a)Apex PC Solutions, Inc. ................................................ 109,700 2,687,650
(a)Activision, Inc. ....................................................... 174,500 1,897,688
(a)Avant! Corporation ..................................................... 99,200 1,711,200
(a)Avid Technology, Inc. .................................................. 63,500 1,861,344
(a)BMC Software, Inc. ..................................................... 137,100 5,603,962
(a)Cadence Design Systems, Inc. ........................................... 125,400 3,017,438
(a)CheckFree Holdings Corporation ......................................... 289,400 9,911,950
(a)Cognizant Technology Solutions Corporation ............................. 50,000 2,150,000
(a)Cotelligent Group, Inc. ................................................ 167,400 2,218,050
(a)Informix Corporation ................................................... 440,000 3,850,000
(a)IMRglobal Corp. ........................................................ 162,700 2,948,937
(a)Keane, Inc. ............................................................ 176,900 5,472,844
(a)Pinnacle Systems, Inc. ................................................. 116,500 4,172,156
(a)QuadraMed Corporation .................................................. 159,700 2,475,350
(a)Sterling Commerce, Inc. ................................................ 149,900 3,906,769
(a)System Software Associates, Inc. ....................................... 911,350 3,018,847
-----------
56,904,185
-----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
THE CHESAPEAKE AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 28, 1999
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Electrical Equipment - 1.08%
(a)SLI, Inc. .......................................................... 179,700 $ 4,020,788
-----------
Electronics - 2.23%
(a)American Power Conversion Corporation .............................. 44,600 1,600,025
CTS Corporation .................................................... 81,100 3,968,831
(a)SCI Systems, Inc. .................................................. 88,700 2,744,156
-----------
8,313,012
-----------
Electronics - Semiconductor - 8.13%
(a)Adaptec, Inc. ...................................................... 233,100 4,647,431
(a)Aeroflex Incorporated .............................................. 215,200 2,891,750
(a)Amkor Technology, Inc. ............................................. 374,800 3,935,400
(a)DSP Communications, Inc. ........................................... 210,500 3,157,500
(a)LSI Logic Corporation .............................................. 225,100 5,824,463
(a)SDL, Inc. .......................................................... 91,600 4,992,200
(a)Teradyne, Inc. ..................................................... 67,000 3,216,000
(a)TriQuint Semiconductor, Inc. ....................................... 103,100 1,707,594
-----------
30,372,338
-----------
Engineering & Construction - 0.50%
(a)American Buildings Company ......................................... 92,700 1,877,175
-----------
Environmental Control - 2.12%
(a)Superior Services, Inc. ............................................ 59,000 1,185,534
Waste Management, Inc. ............................................. 138,000 6,744,750
-----------
7,930,284
-----------
Financial - Consumer Credit - 1.66%
(a)AmeriCredit Corp. .................................................. 557,900 6,206,638
-----------
Financial Services - 4.02%
American Capital Strategies, Ltd. .................................. 169,800 2,950,275
(a)HealthCare Financial Partners, Inc. ................................ 69,900 1,826,137
SEI Investments Company ............................................ 80,600 7,979,400
(a)Sirrom Capital Corporation ......................................... 319,900 2,279,288
-----------
15,035,100
-----------
Food - Wholesale - 1.69%
Richfood Holdings, Inc. ............................................ 102,500 2,434,375
(a)U.S. Foodservice ................................................... 83,300 3,868,244
-----------
6,302,619
-----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
THE CHESAPEAKE AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 28, 1999
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Foreign - 1.40%
ECI Telecom Limited ........................................................ 142,700 $ 5,244,225
-----------
Human Resources - 3.74%
(a)Labor Ready, Inc. .......................................................... 164,100 4,625,569
(a)Metamor Worldwide, Inc. .................................................... 155,900 2,942,612
(a)Modis Professional Services, Inc. .......................................... 205,100 2,807,306
(a)Personnel Group of America, Inc. ........................................... 271,300 3,577,769
-----------
13,953,256
-----------
Leisure Time - 1.36%
(a)Bally Total Fitness Holding Corporation .................................... 226,100 5,073,119
-----------
Lodging - 0.45%
(a)Fairfield Communities, Inc. ................................................ 205,400 1,681,712
-----------
Machine - Construction & Mining - 1.07%
(a)Terex Corporation .......................................................... 156,200 4,002,625
-----------
Machine - Diversified - 0.52%
(a)FSI International, Inc. .................................................... 201,000 1,959,750
-----------
Medical - Services - 3.77%
(a)Envoy Corporation .......................................................... 44,500 2,158,250
(a)Orthodontic Centers of America, Inc. ....................................... 177,800 2,689,225
(a)Renal Care Group, Inc. ..................................................... 107,100 2,121,919
(a)Trigon Healthcare, Inc. .................................................... 152,800 5,357,550
(a)Universal Health Services, Inc. ............................................ 43,100 1,750,937
-----------
14,077,881
-----------
Medical Supplies - 4.06%
(a)Biomatrix, Inc. ............................................................ 106,400 7,401,450
(a)Biomet, Inc. ............................................................... 149,200 5,473,775
(a)PSS World Medical, Inc. .................................................... 200,100 2,276,138
-----------
15,151,363
-----------
Miscellaneous - Manufacturing - 0.00%
(a)Advanced Materials Group, Inc. ............................................. 3,478 4,782
(a)Wilshire Technologies,Warrants, expires 11/28/2002 ........................ 11,956 0
-----------
4,782
-----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
THE CHESAPEAKE AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 28, 1999
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Pharmaceuticals - 1.61%
Jones Pharma Incorporated .......................................... 123,100 $ 3,462,187
(a)Roberts Pharmaceutical Corporation ................................. 113,000 2,556,625
-----------
6,018,812
-----------
Restaurants & Food Service - 0.70%
Applebee's International, Inc. ..................................... 25,000 648,437
Avado Brands, Inc. ................................................. 290,100 1,976,306
-----------
2,624,743
-----------
Retail - Department Stores - 1.42%
(a)Saks Incorporated .................................................. 147,800 5,311,563
-----------
Retail - General - 0.75%
(a)Ames Department Stores, Inc. ....................................... 93,000 2,790,000
-----------
Retail - Speciality Line - 3.23%
Cash America International, Inc. ................................... 272,800 3,444,100
(a)Hollywood Entertainment Corporation ................................ 182,700 5,012,831
(a)iMall, Inc. ........................................................ 147,400 2,413,675
(a)Trans World Entertainment Corporation .............................. 85,500 1,180,969
-----------
12,051,575
-----------
Scientific & Technical Instruments - 0.52%
(a)Waters Corporation ................................................. 20,900 1,945,006
-----------
Telecommunications - 1.05%
(a)Amdocs Limited ..................................................... 160,800 3,919,500
-----------
Telecommunications Equipment - 5.60%
(a)ANTEC Corporation .................................................. 93,000 2,592,375
(a)CommScope, Inc. .................................................... 252,200 4,681,463
(a)Comverse Technology, Inc. .......................................... 106,740 7,658,595
Scientific-Atlanta, Inc. ........................................... 185,200 6,007,425
-----------
20,939,858
-----------
Textiles - 1.01%
(a)Mohawk Industries, Inc. ............................................ 116,000 3,770,000
-----------
Transportation - Air - 4.28%
Airborne Freight Corporation ....................................... 104,400 4,071,600
(a)Atlas Air, Inc. .................................................... 153,150 4,613,644
COMAIR Holdings, Inc. .............................................. 194,387 7,313,811
-----------
15,999,055
-----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
THE CHESAPEAKE AGGRESSIVE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 28, 1999
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Utilities - Electric - 2.53%
(a)CalEnergy Company, Inc. ................................................ 336,800 $ 9,451,450
-----------
Wholesale & Distribution - Specialty Line - 3.80%
(a)Brightpoint, Inc. ...................................................... 249,600 3,712,800
(a)CDW Computer Centers, Inc. ............................................. 74,600 5,194,025
(a)Insight Enterprises, Inc. .............................................. 227,250 5,283,563
-----------
14,190,388
-----------
Total Common Stocks (Cost $305,502,168) ................................ 359,251,814
-----------
INVESTMENT COMPANY - 2.95%
Evergreen Money Market Treasury Institutional Money
Market Fund Institutional Service Shares ............................... 11,039,757 11,039,757
-----------
(Cost $11,039,757)
Total Value of Investments (Cost $316,541,925 (b)) ................................ 99.11% $370,291,571
Other Assets Less Liabilities ..................................................... 0.89% 3,310,728
--------- ------------
Net Assets ................................................................. 100.00% $373,602,299
========= ============
(a) Non-income producing investment.
(b) Aggregate cost for federal income tax purposes is $316,620,293.
Unrealized appreciation (depreciation) of investments for federal
income tax purposes is as follows:
Unrealized appreciation ........................................................... $ 90,654,112
Unrealized depreciation ........................................................... (36,982,834)
------------
Net unrealized appreciation ...................................................... $ 53,671,278
============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C>
THE CHESAPEAKE AGGRESSIVE GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1999
(Unaudited)
ASSETS
Investments, at value (cost $316,541,925) ..................................................... $ 370,291,571
Cash .......................................................................................... 6,074
Income receivable ............................................................................. 33,847
Receivable for investments sold ............................................................... 3,357,960
Other assets .................................................................................. 18,578
-------------
Total assets ............................................................................. 373,708,030
-------------
LIABILITIES
Accrued expenses .............................................................................. 41,900
Payable for investment purchases .............................................................. 63,336
Payable for fund shares redeemed .............................................................. 204
Other liabilities ............................................................................. 291
-------------
Total liabilities ........................................................................ 105,731
-------------
NET ASSETS
(applicable to 25,267,126 shares outstanding; unlimited
shares of no par value beneficial interest authorized) ....................................... $ 373,602,299
=============
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($373,602,299 / 25,267,126 shares) ............................................................ $14.79
======
OFFERING PRICE PER SHARE
(100 / 97% of $14.79) ......................................................................... $15.25
======
NET ASSETS CONSIST OF
Paid-in capital ............................................................................... $ 352,755,891
Accumulated net realized loss on investments .................................................. (32,903,238)
Net unrealized appreciation on investments .................................................... 53,749,646
-------------
$ 373,602,299
=============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C>
THE CHESAPEAKE AGGRESSIVE GROWTH FUND
STATEMENT OF OPERATIONS
Period ended February 28, 1999
(Unaudited)
INVESTMENT LOSS
Income
Dividends .................................................................................. $ 535,666
-------------
Expenses
Investment advisory fees (note 2) .......................................................... 2,402,045
Fund administration fees (note 2) .......................................................... 175,116
Custody fees ............................................................................... 10,279
Registration and filing administration fees (note 2) ....................................... 3,341
Fund accounting fees (note 2) .............................................................. 10,500
Audit fees ................................................................................. 6,422
Legal fees ................................................................................. 11,777
Securities pricing fees .................................................................... 2,784
Shareholder recordkeeping fees ............................................................. 6,040
Shareholder administrative fees ............................................................ 25,000
Shareholder servicing expenses ............................................................. 34,927
Registration and filing expenses ........................................................... 1,123
Printing expenses .......................................................................... 7,772
Trustee fees and meeting expenses .......................................................... 5,388
Other operating expenses ................................................................... 20,882
-------------
Total expenses ....................................................................... 2,723,396
-------------
Less expense reimbursements (note 4) ................................................. (58,717)
-------------
Net expenses ......................................................................... 2,664,679
-------------
Net investment loss ............................................................. (2,129,013)
-------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss from investment transactions .................................................. (32,749,943)
Decrease in unrealized depreciation on investments .............................................. 105,359,216
-------------
Net realized and unrealized gain on investments ............................................ 72,609,273
-------------
Net increase in net assets resulting from operations ................................. $ 70,480,260
=============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
THE CHESAPEAKE AGGRESSIVE GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited)
Period ended Year ended
February 28, August 31,
1999 1998
------------- -------------
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment loss .................................................................... $(2,129,013) $(6,758,939)
Net realized (loss) gain from investment transactions .................................. (32,749,943) 38,364,114
Increase (decrease) in unrealized appreciation on investments .......................... 105,359,216 (211,160,640)
------------- -------------
Net increase (decrease) in net assets resulting from operations ................... 70,480,260 (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) ........ (39,869,755) 14,174,396
------------- -------------
Total increase (decrease) in net assets ...................................... 3,798,707 (243,685,310)
NET ASSETS
Beginning of period ........................................................................ 369,803,592 613,488,902
------------- -------------
End of period .............................................................................. $ 373,602,299 $ 369,803,592
============= =============
(a) A summary of capital share activity follows:
Period ended Year ended
February 28, 1999 August 31, 1998
Shares Value Shares Value
-------------- ------------- ------------- -------------
Shares sold ................................................. 1,626,238 $ 24,809,397 2,928,296 $ 59,641,139
Shares issued for reinvestment
of distributions ....................................... 1,782,993 26,370,458 3,755,172 74,389,963
------------- ------------- ------------- -------------
3,409,231 51,179,855 6,683,468 134,031,102
Shares redeemed ............................................. (5,937,972) (91,049,610) (6,228,186) (119,856,706)
------------- ------------- ------------- -------------
Net (decrease) increase ................................ (2,528,741) $(39,869,755) 455,282 $ 14,174,396
============= ============== ============= =============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
THE CHESAPEAKE AGGRESSIVE GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
Period ended Year ended Year ended Year ended Year ended
February 28, August 31, August 31, August 31, August 31,
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ..................... $ 13.30 $ 22.44 $ 16.88 $ 20.70 $ 13.58
Income (loss) from investment operations
Net investment loss ........................... (0.08) (0.24) (0.22) (0.18) (0.15)
Net realized and unrealized gain (loss)
on investments ........................... 2.71 (6.02) 6.84 (2.53) 7.27
------------ ------------ ------------ ------------ ------------
Total from investment operations .......... 2.63 (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 period ........................... $ 14.79 $ 13.30 $ 22.44 $ 16.88 $ 20.70
============ ============ ============ ============ ============
Total return (a) ......................................... 19.80% (32.12)% 41.14% (12.81)% 52.45%
============ ============ ============ ============ ============
Ratios/supplemental data
Net assets, end of period .......................... $373,602,299 $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 . 1.41%(b) 1.40% 1.42% 1.42% 1.43%
After expense reimbursements and waived fees .. 1.39%(b) 1.40% 1.42% 1.42% 1.43%
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees . (1.13)%(b) (1.15)% (1.17)% (1.05)% (1.07)%
After expense reimbursements and waived fees .. (1.11)%(b) (1.15)% (1.17)% (1.05)% (1.07)%
Portfolio turnover rate ............................ 60.24% 86.18% 115.51% 110.04 % 75.42%
(a) Total return does not reflect payment of sales charge.
(b) Annualized.
See accompanying notes to financial statements
</TABLE>
<PAGE>
THE CHESAPEAKE AGGRESSIVE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
February 28, 1999
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The Chesapeake Aggressive Growth Fund (the "Fund"), formerly known as
The Chesapeake Growth Fund prior to November 1, 1997, is a diversified
series of shares of beneficial interest of the Gardner Lewis Investment
Trust (the "Trust"). The Trust is an open-end investment company which
was organized in 1992 as a Massachusetts Business Trust and is
registered under the Investment Company Act of 1940, (the "Act") as
amended. The Fund began operations on January 4, 1993. The investment
objective of the Fund is to seek capital appreciation through
investments in equity securities, consisting primarily of common and
preferred stocks and securities convertible into common stocks. The
following is a summary of significant accounting policies followed by
the Fund:
A. Security Valuation - The Fund's investments in securities are
carried at value. Securities listed on an exchange or quoted on a
national market system are valued at the last sales price as of
4:00 p.m. New York time. Other securities traded in the
over-the-counter market and listed securities for which no sale
was reported on that date are valued at the most recent bid
price. Securities for which market quotations are not readily
available, if any, are valued by using an independent pricing
service or by following procedures approved by the Board of
Trustees. 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.
As a result of the Fund's operating net investment loss, a
reclassification adjustment of $2,129,013 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
February 28, 1999
(Unaudited)
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 period ended February 28, 1999, the Distributor retained sales
charges in the amount of $267.
Certain Trustees and officers of the Trust are also officers of the
Advisor or the Administrator.
(Continued)
<PAGE>
THE CHESAPEAKE AGGRESSIVE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
February 28, 1999
(Unaudited)
NOTE 3 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments other than short-term investments
aggregated $226,181,927 and $294,546,324, respectively, for the period
ended February 28, 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 period ended February
28, 1999, the Fund's expenses were reduced by $58,717 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 period ended February 28, 1999, was
classified as long term gain. Shareholders should consult a tax advisor
on how to report distributions for state and local income tax purposes.
<PAGE>
- --------------------------------------------------------------------------------
THE CHESAPEAKE CORE GROWTH FUND
- --------------------------------------------------------------------------------
a series of the Gardner Lewis Investment Trust
Annual Report 1999
FOR THE YEAR ENDED FEBRUARY 28
INVESTMENT ADVISOR
Gardner Lewis Asset Management
285 Wilmington-West Chester Pike
Chadds Ford, Pennsylvania 19317
THE CHESAPEAKE CORE GROWTH FUND
107 North Washington Street
Post Office Drawer 4365
Rocky Mount, North Carolina 27803-0365
1-800-430-3863
<PAGE>
April 1, 1999
Dear Shareholder:
The Chesapeake Core Growth Fund closed the first quarter with a gain of
4.2%. This gain compares to a gain of 5.0% for the S&P 500 and a loss of 5.4%
for the Russell 2000. Despite their stock price performance, the factors that
should support demand for smaller and mid-capitalization companies are
strengthening, making this quarter's activity even more contradictory. It was
once again a quarter led by the largest of the large caps, and in our universe,
the highest PE stocks and the internet. (Without internet stocks the Russell
2000 would have been down an additional 3%.) Despite our understanding that this
is primarily due to an anomalistic market environment, disfavoring our types of
companies, we expect to do better.
There is no doubt that we have had great difficulty rationalizing an
environment in which valuation has been all but ignored. This is particularly
true since our strategy has historically allowed us to outstrip market returns,
not only because we have been able to ferret out inefficiencies, but also
because price has historically mattered.
The net result of the market's unprecedented larger capitalization run
is that smaller companies now sell at their lowest relative price earnings
ratios in history. We are being proactive in our efforts to capitalize on this
historic anomaly, one characterized by an investing environment hostile to
smaller companies. Most importantly, we are increasing our exposure to our best
names for little change in price. This process is tending to lower our portfolio
name count, is forcing a sharper selling discipline, and is allowing our most
senior people to more effectively direct the research process. We believe this
will enhance our performance, regardless of market environment, and just as
importantly, is positioning us to best capitalize on the inevitable market turn.
History leaves little question that market environments cycle and that
ultimately there is a regression to the mean. Trying to understand when this
regression will occur is what is difficult. Suffice it to say, it is most likely
to occur when it is least expected. For example, in December, headlines
suggested that neither Japan nor the emerging markets would ever revive. This
quarter both Japan and the emerging markets were up more than 12%, surpassing
the returns of all major markets. Thus recent press suggesting that the current
domestic market trend will last forever, and that the leadership will not
change, is in fact a positive sign.
Many are not aware that in 1998 the S&P 500's advance was due solely to
price earnings ratio expansion. In fact, last year S&P 500 earnings were
actually down from 1997. Its multiple expansion was primarily due to three
things. The first was the demand for big cap liquidity and stability as
potential shelter from the global economic difficulty primarily impacting the
developing economies and Japan. (This occurred despite the fact that most of
these companies relied on the world's developing economies and in part Japan for
their expected growth in profits.) The second was a declining interest rate
environment. And, the third was the money flow momentum initiated by the first
two, and furthered as the performance of these stocks caused others to `pile
on'.
<PAGE>
Smaller companies are expected to grow their earnings next year at more
than two times the rate of the S&P 500. In addition to this, a stabilizing
global economic platform is putting upward pressure on the domestic economy,
impeding further rate reduction and thus multiple expansion. This should make
earnings growth the driver for stock price appreciation.
We believe that the money flow into larger company funds, which has
been the fuel for their advances, is chasing yesterday's returns. So too do many
large pension plans, whose assets as a whole still dominate the market. In fact,
despite most investors believing the contrary, large pension plans, due to
concerns over valuation and portfolio diversification, have been decreasing
their exposure to S&P 500 index funds, completely offsetting continuing inflows
from retail investors. Both Vanguard and Standard & Poor's have confirmed this
in recent press. This does not say that the market cannot do well; it does say
that the S&P is not as likely to maintain its performance pace. Since the
fundamentals are in place for a turn, it now boils down to money flow. And,
additional evidence of a potential shift in money flow can be found in the fact
that among the large institutions, over the next several quarters, there is a
significant amount of smaller cap manager search activity planned, suggesting
that the direction of money flow into these stocks could soon turn positive.
This would obviously benefit our portfolio greatly, but so too should the steps
we have employed to position ourselves in this environment.
Sincerely,
/s/ Whit /s/ John
W. Whitfield Gardner John L. Lewis, IV
<PAGE>
March 31, 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
Business Services 4.5%
Computers & Peripherals 8.5%
Energy Services 8.0%
Machinery, Construction & Manufacturing 17.3%
Networking 6.6%
Pharmaceuticals 3.1%
Retail Sales & Distribution 9.3%
Semiconductors & Related 9.5%
Telecommunications 3.3%
All Others 15.8%
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 $2.6 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 29. The research team is comprised of 15.
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.
<PAGE>
Ten Largest Holdings
1. MCI Worldcom Inc. 6.1%
2. Sprint PCS Group 3.2%
3. Cisco Systems 3.2%
4. EMC Corporation 3.1%
5. IMS Health Inc. 3.1%
6. Tyco Industries, Inc 3.0%
7. Tellabs, Inc. 2.7%
8. Warner Lambert & Co. 2.7%
9. MidAmerican Energy Holdings 2.6%
10. Monsanto Co. 2.5%
Portfolio Characteristics
Number of Companies 45
5 Yr. Historical Earnings Growth 21%
Earnings Growth - net year 23%
P/E Ratio - next year 27
(Gardner Lewis earnings estimates)
Performance Summary
Annualized
- --------------------------------------------------------------------------------
Quarter 1 Year Since
End Inception
- --------------------------------------------------------------------------------
The Chesapeake Core Growth 1.0% -4.1% 0.4%
================================================================================
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.
<PAGE>
<TABLE>
<S> <C> <C> <C>
PORTFOLIO OF INVESTMENTS
(unaudited)
March 31, 1999
============================================================ ========================================================
Quantity Security Market Value Quantity Security Market Value
============================================================ ========================================================
3,000 ADC Telecommunications, Inc. 143,063 7,700 K Mart Corp. 129,456
1,700 AES Corporation 63,325 4,248 MCI Worldcom Inc. 376,214
3,900 Allegheny Teledyne, Inc. 73,856 3,700 Mattel, Inc. 92,269
3,100 AlliedSignal, Inc. 152,481 2,100 Medtronic, Inc. 150,938
2,100 Allmerica Financial Corp. 115,631 1,400 Merck & Co., Inc. 112,175
2,000 Amgen 149,750 5,740 MidAmerican Energy Holdings 160,720
2,720 BMC Software, Inc. 100,810 3,400 Monsanto Co. 156,188
1,290 BankAmerica Corp 91,106 2,600 Networks Associates, Inc. 79,788
1,600 Bankers Trust Corp. 141,200 1,300 Pitney Bowes 82,875
2,800 Block, H & R, Inc. 132,650 3,500 Saks, Inc. 91,000
3,100 CVS Corporation 147,250 2,200 Schlumberger Ltd. 132,413
1,000 Chase Manhattan Bank 81,375 5,100 Southwest Airlines, Co. 154,275
1,800 Cisco Systems 197,213 4,500 Sprint PCS Group 199,406
2,100 Citigroup Inc. 134,138 1,070 Sun Microsystems, Inc. 133,817
1,520 EMC Corporation 194,180 1,700 Tellabs, Inc. 166,175
1,900 Electronic Data Systems 92,506 1,300 Texas Instruments 129,025
3,800 Halliburton Co 146,300 3,200 Toronto-Dominion Bank 147,000
2,200 Home Depot, Inc. 136,950 2,600 Tyco Industries, Inc. 186,550
2,800 Household International 127,750 2,800 United Healthcare Corp. 147,350
5,700 IMS Health Inc. 188,813 2,500 Warner Lambert & Co. 165,625
5,000 Infinity Broadcasting Corp. 128,750 2,800 Washington Mutual Inc. 114,450
660 Intel Corp. 78,458 3,150 Waste Management, Inc. 139,781
700 International Business Machines 124,075
TOTAL EQUITY 6,189,117
CASH EQUIVALENT 93,273
TOTAL ASSETS 6,282,390
</TABLE>
<PAGE>
THE CHESAPEAKE CORE GROWTH FUND
Performance Update - $25,000 Investment
For the period from September 29,1997
(commencement of operations) to February 28, 1999
THE CHESAPEAKE CORE GROWTH FUND
- ---------------------------------------------------------------------
The Chesapeake S&P 500 Total
Core Growth Fund Return Index
- ---------------------------------------------------------------------
9/29/97 25,000.00 25,000.00
10/31/97 24,450.00 24,011.52
11/30/97 24,825.00 25,122.97
12/31/97 24,843.76 25,554.45
1/31/98 24,793.97 25,974.31
2/28/98 26,872.33 27,700.61
3/31/98 27,849.05 29,119.18
4/30/98 28,274.80 29,412.15
5/31/98 27,648.70 28,906.50
6/30/98 28,575.33 30,080.71
7/31/98 28,400.02 29,760.40
8/31/98 23,391.20 25,457.64
9/30/98 25,094.20 27,088.51
10/31/98 26,321.36 29,291.93
11/30/98 28,675.51 31,067.41
12/31/98 31,630.71 32,857.65
1/31/99 33,358.76 34,231.57
2/28/99 31,780.98 33,167.73
This graph depicts the performance of The Chesapeake Core Growth Fund versus the
S&P 500 Total Return Index. It is important to note that The Chesapeake Core
Growth Fund is a professionally managed mutual fund while the index is not
available for investment and is unmanaged. The comparison is shown for
illustrative purposes only.
Average Annual Total Return
- --------------------------------------
Since Inception One Year
- --------------------------------------
18.46% 18.27%
- --------------------------------------
The graph assumes an initial $25,000 investment at September 29, 1997. All
dividends and distributions are reinvested.
At February 28, 1999, The Chesapeake Core Growth Fund would have grown to
$31,781 - total investment return of 27.12% since September 29, 1997.
At February 28, 1999, a similar investment in the S&P 500 Total Return Index
would have grown to $33,168 - total investment return of 32.67% since September
29, 1997.
Past performance is not a guarantee of future results. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost. Average annual returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming
reinvestments of dividends.
<PAGE>
<TABLE>
<S> <C> <C>
THE CHESAPEAKE CORE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 28, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 100.07%
Aerospace & Defense - 2.12%
AlliedSignal Inc. ........................................................ 3,100 $128,263
--------
Broadcast - Radio & Television - 1.96%
(a)Infinity Broadcasting Corp. .............................................. 5,000 118,750
--------
Chemicals - 2.56%
Monsanto Company ......................................................... 3,400 154,913
--------
Commercial Services - 2.10%
H&R Block, Inc. .......................................................... 2,800 127,050
--------
Computers - 11.28%
(a)Cisco Systems, Inc. ...................................................... 2,300 224,969
Compaq Computer Corporation .............................................. 2,200 77,825
(a)EMC Corporation .......................................................... 1,520 155,610
International Business Machines Corporation .............................. 700 119,000
(a)Sun Microsystems, Inc. ................................................... 1,070 104,124
--------
681,528
--------
Computer Software & Services - 4.88%
(a)BMC Software, Inc. ....................................................... 2,420 98,918
Electronic Data Systems Corporation ...................................... 1,900 88,350
(a)Network Associates, Inc. ................................................. 2,300 108,100
--------
295,368
--------
Electronics - Semiconductor - 5.94%
Intel Corporation ........................................................ 660 79,159
(a)Micron Technology, Inc. .................................................. 2,700 155,588
Texas Instruments Incorporated ........................................... 1,400 124,863
--------
359,610
--------
Environmental Control - 2.54%
Waste Management, Inc. ................................................... 3,150 153,956
--------
Financial - Banks, Commercial - 3.57%
BankAmerica Corporation .................................................. 1,290 84,253
The Toronto-Dominion Bank ................................................ 3,200 132,000
--------
216,253
--------
Financial - Banks, Money Center - 5.66%
Bankers Trust Corporation ................................................ 1,600 139,200
The Chase Manhattan Corporation .......................................... 1,000 79,625
Citigroup Inc. ........................................................... 2,100 123,375
--------
342,200
--------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
THE CHESAPEAKE CORE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 28, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Financial Services - 3.73%
Household International, Inc. ........................................ 2,800 $113,750
Washington Mutual, Inc. .............................................. 2,800 112,000
--------
225,750
--------
Insurance - Multiline - 1.85%
Allmerica Financial Corporation ...................................... 2,100 112,087
--------
Medical - Biotechnology - 2.06%
(a)Amgen Inc. ........................................................... 1,000 124,875
--------
Medical - Services - 2.28%
United HealthCare Corporation ........................................ 2,800 138,075
--------
Medical Supplies - 1.75%
Medtronic, Inc. ...................................................... 1,500 105,937
--------
Metals - Diversified - 1.33%
Allegheny Teledyne Incorporated ...................................... 3,900 80,438
--------
Miscellaneous - Manufacturing - 3.20%
Tyco International Ltd. .............................................. 2,600 193,538
--------
Office & Business Equipment - 1.36%
Pitney-Bowes, Inc. ................................................... 1,300 82,144
--------
Oil & Gas - Equipment & Services - 1.78%
Halliburton Company .................................................. 3,800 107,588
--------
Pharmaceuticals - 7.45%
Bristol-Myers Squibb Company ......................................... 1,300 163,719
Merck & Co., Inc. .................................................... 1,400 114,450
Warner-Lambert Company ............................................... 2,500 172,655
--------
450,824
--------
Retail - Department Stores - 2.08%
(a)Saks Incorporated .................................................... 3,500 125,780
--------
Retail - Drug Stores - 4.63%
CVS Corporation ...................................................... 3,100 164,300
Rite Aid Corporation ................................................. 2,800 115,850
--------
280,150
--------
Retail - General Merchandise - 2.23%
(a)Kmart Corporation .................................................... 7,700 134,750
--------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
THE CHESAPEAKE CORE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 28, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Retail - Specialty - 2.17%
The Home Depot, Inc. .................................................. 2,200 $ 131,313
-----------
Telecommunications Equipment - 4.27%
(a)ADC Telecommuncations, Inc. ........................................... 3,000 121,500
(a)Tellabs, Inc. ......................................................... 1,700 136,106
-----------
257,606
-----------
Toys - 1.61%
Mattel, Inc. .......................................................... 3,700 97,588
-----------
Transportation - Air - 2.54%
Southwest Airlines Co. ................................................ 5,100 153,637
-----------
Utilities - Electric - 2.97%
(a)The AES Corporation ................................................... 1,700 63,219
(a)CalEnergy Company, Inc. ............................................... 4,140 116,178
-----------
179,397
-----------
Utilities - Telecommunications - 8.17%
(a)MCI WorldCom, Inc. .................................................... 4,248 350,460
(a)Sprint Corp (PCS Group) ............................................... 4,500 144,000
-----------
494,460
-----------
Total Common Stocks (Cost $5,037,255) ................................. 6,053,828
-----------
INVESTMENT COMPANY - 0.05%
Evergreen Money Market Treasury Institutional Money
Market Fund Institutional Service Shares .............................. 2,667 2,667
-----------
(Cost $2,667)
Total Value of Investments (Cost $5,039,922 (b)) .................................. 100.12 % $ 6,056,495
Liabilities In Excess of Other Assets ............................................. (0.12)% (6,982)
----------- -----------
Net Assets ................................................................. 100.00 % $ 6,049,513
=========== ===========
(a) Non-income producing investment.
(b) Aggregate cost for federal income tax purposes is $5,141,910.
Unrealized appreciation (depreciation) of investments for federal
income tax purposes is as follows:
Unrealized appreciation .................................................. $ 1,036,258
Unrealized depreciation .................................................. (121,673)
-----------
Net unrealized appreciation ........................................ $ 914,585
===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C>
THE CHESAPEAKE CORE GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1999
ASSETS
Investments, at value (cost $5,039,922) ......................................................... $ 6,056,495
Cash ............................................................................................ 110
Income receivable ............................................................................... 2,842
-----------
Total assets ............................................................................... 6,059,447
-----------
LIABILITIES
Accrued expenses ................................................................................ 9,934
-----------
NET ASSETS
(applicable to 476,904 shares outstanding; unlimited
shares of no par value beneficial interest authorized) ......................................... $ 6,049,513
===========
NET ASSET VALUE, REDEMPTION AND OFFERING PRICE PER SHARE
($6,049,513 / 476,904 shares) ................................................................... $ 12.68
===========
NET ASSETS CONSIST OF
Paid-in capital ................................................................................. $ 5,075,397
Accumulated net realized loss on investments .................................................... (42,457)
Net unrealized appreciation on investments ...................................................... 1,016,573
-----------
$ 6,049,513
===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C>
THE CHESAPEAKE CORE GROWTH FUND
STATEMENT OF OPERATIONS
Year ended February 28, 1999
INVESTMENT LOSS
Income
Dividends ..................................................................................... $ 51,849
---------
Expenses
Investment advisory fees (note 2) ............................................................. 61,632
Fund administration fees (note 2) ............................................................. 4,622
Custody fees .................................................................................. 4,950
Registration and filing administration fees (note 2) .......................................... 2,983
Fund accounting fees (note 2) ................................................................. 21,000
Audit fees .................................................................................... 7,878
Legal fees .................................................................................... 15,190
Securities pricing fees ....................................................................... 2,774
Shareholder administration fees ............................................................... 12,500
Shareholder recordkeeping fees ................................................................ 9,000
Shareholder servicing expenses ................................................................ 2,529
Registration and filing expenses .............................................................. 7,783
Printing expenses ............................................................................. 6,867
Trustee fees and meeting expenses ............................................................. 6,832
Other operating expenses ...................................................................... 1,511
---------
Total expenses .......................................................................... 168,051
---------
Less:
Expense reimbursements (note 4) .................................................... (3,595)
Investment advisory fees waived (note 2) ........................................... (61,632)
Fund administration fees waived (note 2) ........................................... (4,622)
Shareholder administration fees waived (note 2) .................................... (12,500)
---------
Net expenses ............................................................................ 85,702
---------
Net investment loss ................................................................ (33,853)
---------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investment transactions ..................................................... 175,957
Increase in unrealized appreciation on investments ................................................. 581,260
---------
Net realized and unrealized gain on investments ............................................... 757,217
---------
Net increase in net assets resulting from operations .................................... $ 723,364
=========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
THE CHESAPEAKE CORE GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
For the
period from
September 29, 1997
(commencement
Year ended of operations) to
February 28, February 28,
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net investment loss ................................................................ $ (33,853) $ (4,600)
Net realized gain (loss)from investment transactions ............................... 175,957 (218,414)
Increase in unrealized appreciation on investments ................................. 581,260 435,313
---------- ----------
Net increase in net assets resulting from operations .......................... 723,364 212,299
---------- ----------
Distribution to shareholders from
Distribution in excess of net investment income .................................... 0 (9,859)
---------- ----------
Capital share transactions
(Decrease) increase in net assets resulting from capital share transactions (a) .... (722,119) 5,845,828
---------- ----------
Total increase in net assets ............................................. 1,245 6,048,268
NET ASSETS
Beginning of period .................................................................... 6,048,268 0
---------- ----------
End of period .......................................................................... $6,049,513 $6,048,268
========== ==========
(a) A summary of capital share activity follows:
For the period from
September 29, 1997
Year ended (commencement of operations)
February 28, 1999 to February 28, 1998
Shares Value Shares Value
---------- ---------- ---------- ----------
Shares sold ......................................................... 200,589 $2,203,206 563,478 $5,837,694
Shares issued for reinvestment
of distributions ............................................... 0 0 830 8,231
---------- ---------- ---------- ----------
200,589 2,203,206 564,308 5,845,925
Shares redeemed ..................................................... (287,983) (2,925,325) (10) (97)
---------- ---------- ---------- ----------
Net (decrease) increase ........................................ (87,394) $ (722,119) 564,298 $5,845,828
========== ========== ========== ==========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
THE CHESAPEAKE CORE GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
- ------------------------------------------------------------------------------------------------------------------------------------
For the
period from
September 29,
1997 (commencement
Year ended of operations) to
February 28, February 28,
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period .................................. $10.72 $10.00
Income (loss) from investment operations
Net investment loss ........................................ (0.07) (0.01)
Net realized and unrealized gain on investments ............ 2.03 0.75
---------- ----------
Total from investment operations ...................... 1.96 0.74
---------- ----------
Distribution to shareholders from
Distribution in excess of net investment income ............ 0.00 (0.02)
---------- ----------
Net asset value, end of period ........................................ $12.68 $10.72
========== ==========
Total return .......................................................... 18.27 % 7.49 %
========== ==========
Ratios/supplemental data
Net assets, end of period ....................................... $6,049,513 $6,048,268
========== ==========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees .............. 2.73 % 3.19 % (a)
After expense reimbursements and waived fees ............... 1.39 % 1.24 % (a)
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees .............. (1.89)% (2.19)% (a)
After expense reimbursements and waived fees ............... (0.55)% (0.24)% (a)
Portfolio turnover rate ......................................... 174.44 % 29.83 %
(a) Annualized.
See accompanying notes to financial statements
</TABLE>
<PAGE>
THE CHESAPEAKE CORE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
February 28, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
The Chesapeake Core Growth Fund (the "Fund") is a diversified series of
shares of beneficial interest of the Gardner Lewis Investment Trust
(the "Trust"). The Trust is an open-end investment company which was
organized in 1992 as a Massachusetts Business Trust and is registered
under the Investment Company Act of 1940, (the "Act"), as amended. The
Fund began operations on September 29, 1997. The investment objective
of the Fund is to seek capital appreciation through investments in
equity securities, consisting primarily of common and preferred stocks
and securities convertible into common stocks. The following is a
summary of significant accounting policies followed by the Fund:
A. Security Valuation - The Fund's investments in securities are
carried at value. Securities listed on an exchange or quoted
on a national market system are valued at the last sales price
as of 4:00 p.m. New York time. Other securities traded in the
over-the-counter market and listed securities for which no
sale was reported on that date are valued at the most recent
bid price. Securities for which market quotations are not
readily available, if any, are valued by using an independent
pricing service or by following procedures approved by the
Board of Trustees. Short-term investments are valued at cost
which approximates value.
B. Federal Income Taxes - The Fund is considered a personal
holding company as defined under Section 542 of the Internal
Revenue Code since 50% of the value of the Fund's shares were
owned directly or indirectly by five or fewer individuals at
certain times during the last half of the year. As a personal
holding company, the Fund is subject to federal income taxes
on undistributed personal holding company income at the
maximum individual income tax rate. No provision has been made
for federal income taxes since the Fund intends to distribute
substantially all taxable income to shareholders. It is the
policy of the Fund to comply with the provisions of the
Internal Revenue Code applicable to regulated investment
companies and to make sufficient distributions of taxable
income to relieve it from all federal income taxes.
Net investment income (loss) and net realized gains (losses)
may differ for financial statement and income tax purposes
primarily because of losses incurred subsequent to October 31,
which are deferred for income tax purposes. The character of
distributions made during the year from net investment income
or net realized gains may differ from their ultimate
characterization for federal income tax purposes. Also, due to
the timing of dividend distributions, the fiscal year in which
amounts are distributed may differ from the year that the
income or realized gains were recorded by the Fund.
As a result of the Fund's operating net investment loss, a
reclassification adjustment of $33,853 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 CORE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
February 28, 1999
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.
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
$61,632 ($0.11 per share) for the fiscal year ended February 28, 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 $17,122 ($0.03 per share) for the fiscal year
ended February 28, 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 $10,208,772 and $10,764,431 respectively, for the fiscal
year ended February 28, 1999.
(Continued)
<PAGE>
THE CHESAPEAKE CORE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
February 28, 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 February
28, 1999, the Fund's expenses were reduced by $3,595 under this
agreement.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees of Gardner Lewis Investment Trust and Shareholders of
The Chesapeake Core Growth Fund:
We have audited the accompanying statement of assets and liabilities of The
Chesapeake Core Growth Fund, including the schedule of investments, as of
February 28, 1999, and the related statements of operations for the year then
ended, the statements of changes in net assets for the year ended February 28,
1999 and for the period ended February 28, 1998, and financial highlights for
the periods presented. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
February 28, 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 Core Growth Fund as of February 28, 1999, the results of its
operations for the year then ended, the changes in its net assets and the
financial highlights for the respective stated periods in conformity with
generally accepted accounting principles.
/S/ Deloitte & Touche LLP
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
March 19, 1999
