As filed with the Securities and Exchange Commission on June 30, 2000
Securities Act File No. 33-53800
Investment Company Act File No. 811-07324
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. ____ [ ]
Post-Effective Amendment No. 21 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 22 [X]
(Check appropriate box or boxes.)
GARDNER LEWIS INVESTMENT TRUST
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(Exact Name of Registrant as Specified in Charter)
285 Wilmington-West Chester Pike, Chadds Ford, Pennsylvania 19317
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (252) 972-9922
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C. Frank Watson, III
105 North Washington Street, Post Office Box 69, Rocky Mount, NC 27802-0069
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(Name and Address of Agent for Service)
With Copies to:
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Jane A. Kanter
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, DC 20006-2401
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this filing.
---------------------------------
It is proposed that this filing will become effective: (check appropriate box)
[X] immediately upon filing pursuant to paragraph (b);
[ ] on ______ (date) pursuant to paragraph (b);
[ ] 60 days after filing pursuant to paragraph (a)(1);
[ ] on ______ (date) pursuant to paragraph (a)(1);
[ ] 75 days after filing pursuant to paragraph (a)(2); or
[ ] on ______ (date) pursuant to paragraph (a)(2) of rule 485.
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GARDNER LEWIS INVESTMENT TRUST
Contents of Registration Statement
This registration statement consists of the following papers and documents:
Cover Sheet
Contents of Registration Statement
The Chesapeake Growth Fund
-Part A - Institutional Shares Prospectus
-Part A - Super-Institutional Shares Prospectus
-Part A - Class A Investor Shares Prospectus
-Part B - Statement of Additional Information
The Chesapeake Core Growth Fund
-Part A - Prospectus
-Part B - Statement of Additional Information
Part C - Other Information and Signature Page
Exhibits
<PAGE>
PART A
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Cusip Number 36559B401 NASDAQ Symbol CHESX
________________________________________________________________________________
THE CHESAPEAKE GROWTH FUND
A series of the
Gardner Lewis Investment Trust
INSTITUTIONAL SHARES
________________________________________________________________________________
PROSPECTUS
June 30, 2000
The Chesapeake Growth Fund ("Fund") seeks capital appreciation. In seeking to
achieve its objective, the Fund will invest primarily in equity securities of
medium and large capitalization companies. This Fund also offers
Super-Institutional Shares and Class A Investor Shares, which are offered by
other prospectuses.
Investment Advisor
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Gardner Lewis Asset Management
285 Wilmington-West Chester Pike
Chadds Ford, Pennsylvania 19317
1-800-430-3863
The Securities and Exchange Commission has not approved the securities being
offered by this prospectus or determined whether this prospectus is accurate and
complete. It is unlawful for anyone to make any representation to the contrary.
<PAGE>
TABLE OF CONTENTS
Page
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THE FUND .....................................................................2
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Investment Objective....................................................2
Principal Investment Strategies.........................................2
Principal Risks of Investing in the Fund................................3
Bar Chart and Performance Table.........................................4
Fees and Expenses of the Fund...........................................5
MANAGEMENT OF THE FUND .......................................................6
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The Investment Advisor..................................................6
The Administrator.......................................................6
The Transfer Agent......................................................6
The Distributor.........................................................7
INVESTING IN THE FUND.........................................................7
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Minimum Investment......................................................7
Purchase and Redemption Price...........................................7
Purchasing Shares.......................................................8
Redeeming Your Shares...................................................9
OTHER IMPORTANT INVESTMENT INFORMATION.......................................11
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Dividends, Distributions, and Taxes....................................11
Financial Highlights ..................................................12
Additional Information.........................................Back Cover
<PAGE>
THE FUND
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INVESTMENT OBJECTIVE
The Chesapeake Growth Fund seeks capital appreciation. In seeking to achieve its
objective, the Fund will invest primarily in equity securities of medium and
large capitalization companies.
PRINCIPAL INVESTMENT STRATEGIES
The Fund, which is a diversified separate investment portfolio of the Gardner
Lewis Investment Trust ("Trust"), seeks capital appreciation by investing
primarily in equity securities of medium and large capitalization companies. The
Fund considers a medium capitalization company to be one that has a market
capitalization, measured at the time that the Fund purchases the security,
between $1 billion and $10 billion. The Fund considers a large capitalization
company to be one that has a market capitalization, measured at the time that
the Fund purchases the security, of at least $10 billion. The Fund's investments
in these medium and large capitalization companies will be primarily in equity
securities, such as common and preferred stocks and securities convertible into
common stocks.
In making investment decisions for the Fund, Gardner Lewis Asset Management
("Advisor") will base those decisions on its analysis of companies that show
superior prospects for growth. By developing and maintaining contacts with
management, customers, competitors and suppliers of current and potential
portfolio companies, the Advisor attempts to invest in those companies
undergoing positive changes that have not yet been recognized by "Wall Street"
analysts and the financial press. These changes often include:
o new product introductions,
o new distribution strategies,
o new manufacturing technology, and/or
o new management team or management philosophy.
Lack of recognition of these changes often causes securities to be less
efficiently priced. The Advisor believes these companies offer unique and
potentially superior investment opportunities.
Additionally, companies in which the Fund invests typically will show strong
earnings growth when compared to the previous year's comparable period. The
Advisor also favors portfolio investments in companies whose price when
purchased is not yet fully reflective of their growth rates. In selecting these
portfolio companies, the Advisor includes analysis of the following:
o growth rate of earnings,
o financial performance,
o management strengths and weaknesses,
o current market valuation in relation to earnings growth,
o historic and comparable company valuations,
o level and nature of the company's debt, cash flow, working capital, and
o quality of the company's assets.
Under normal market conditions, the Fund will invest at least 90% of the Fund's
total assets in equity securities, of which no more than 25% of the Fund's total
assets will be invested in the securities of any one industry. Up to 10% of the
Fund's total assets may consist of foreign securities and sponsored ADRs.
However, all securities will be traded on domestic and foreign securities
exchanges or on the over-the-counter markets. While portfolio securities are
generally acquired for the long term, they may be sold under any of the
following circumstances:
2
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o the anticipated price appreciation has been achieved or is no longer
probable;
o the company's fundamentals appear, in the analysis of the Advisor, to be
deteriorating;
o general market expectations regarding the company's future performance exceed
those expectations held by the Advisor; or
o alternative investments offer, in the view of the Advisor, superior potential
for appreciation.
PRINCIPAL RISKS OF INVESTING IN THE FUND
An investment in the Fund is subject to investment risks, including the possible
loss of the principal amount invested and there can be no assurance that the
Fund will be successful in meeting its objective. The following sections
describe some of the risks involved with portfolio investments of the Fund.
Equity Securities: To the extent that the majority of the Fund's portfolio
consists of common stocks, it is expected that the Fund's net asset value will
be subject to greater price fluctuation than a portfolio containing mostly fixed
income securities.
Market Risk: Market risk refers to the risk related to investments in securities
in general and the daily fluctuations in the securities markets. The Fund's
performance will change daily based on many factors, including fluctuation in
interest rates, the quality of the instruments in the Fund's investment
portfolio, national and international economic conditions and general market
conditions.
Internal Change: Investing in companies which are undergoing internal change,
such as implementing new strategies or introducing new technologies, as
described above, may involve greater than average risk due to their unproven
nature.
Medium Capitalization Companies: As noted above, the Fund may invest a
significant portion of its assets in the equity securities of medium
capitalization companies. To the extent the Fund's assets are invested in medium
capitalization companies, the Fund may exhibit more volatility than if it were
invested exclusively in large capitalization companies because of the fact that
the fact that the securities of mid-cap companies usually have more limited
marketability and, therefore, may be more volatile than securities of larger,
more established companies or the market averages in general. Because mid-cap
companies normally have fewer shares outstanding than larger companies, it may
be more difficult to buy or sell significant amounts of such shares without an
unfavorable impact on prevailing prices. Another risk factor is that mid-cap
companies often have limited product lines, markets, or financial resources and
may lack management depth. Additionally, mid-cap companies are typically subject
to greater changes in earnings and business prospects than are larger, more
established companies, and there typically is less publicly available
information concerning mid-cap companies than for larger, more established
companies.
Although investing in securities of medium-sized companies offers potential
above-average returns if the companies are successful, the risk exists that the
companies will not succeed, and the prices of the companies' shares could
significantly decline in value. Therefore, an investment in the Fund may involve
a greater degree of risk than an investment in other mutual funds that seek
capital growth by investing in more established, larger companies.
Portfolio Turnover: The Fund may sell portfolio securities without regard to the
length of time they have been held in order to take advantage of new investment
opportunities or changing market conditions. Since portfolio turnover may
involve paying brokerage commissions and other transaction costs, there could be
additional expenses for the Fund. The degree of portfolio activity may also have
an effect on the tax consequences of capital gain distributions. See "Financial
Highlights" for the Fund's portfolio turnover rate for prior periods.
3
<PAGE>
Short-Term Investments: As a temporary defensive measure, the Advisor may
determine that market conditions warrant investing in investment-grade bonds,
U.S. Government Securities, repurchase agreements, money market instruments, and
to the extent permitted by applicable law and the Fund's investment
restrictions, shares of other investment companies. Under such circumstances,
the Advisor may invest up to 100% of the Fund's assets in these investments.
Since investment companies investing in other investment companies pay
management fees and other expenses relating to those investment companies,
shareholders of the Fund would indirectly pay both the Fund's expenses and the
expenses relating to those other investment companies with respect to the Fund's
assets invested in such investment companies. To the extent the Fund is invested
in short-term investments, it will not be pursuing and may not achieve its
investment objective. Under normal circumstances, however, the Fund will also
hold money market or repurchase agreement instruments for funds awaiting
investment, to accumulate cash for anticipated purchases of portfolio
securities, to allow for shareholder redemptions, and to provide for Fund
operating expenses.
BAR CHART AND PERFORMANCE TABLE
The bar chart and table shown below provide an indication of the risks of
investing in the Chesapeake Growth Fund Institutional Shares by showing (on a
calendar year basis) changes in the Fund's average annual total returns from
year to year for the Fund's Institutional Shares and by showing (on a calendar
year basis) how the Fund's Institutional Shares average annual returns for one
year, five years, and since inception compare to those of broad-based securities
market indexes. How the Fund has performed in the past is not necessarily an
indication of how the Fund will perform in the future.
Year to Year Total Returns (as of December 31)
[BAR GRAPH HERE]:
1995 27.05%
1996 16.76%
1997 15.40%
1998 12.50%
1999 51.95%
o During the 5-year period shown in the bar chart above, the highest return for
a calendar quarter was 43.15% (quarter ended December 31, 1999).
o During the 5-year period shown in the bar chart above, the lowest return for
a calendar quarter was -22.31% (quarter ended September 30, 1998).
o The year-to-date return of the Institutional Shares as of the most recent
calendar quarter was 22.82% (quarter ended March 31, 2000).
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Average Annual Total Returns Past 1 Past 5 Since
Period ended December 31, 1999 Year Years Inception *
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The Chesapeake Growth Fund
Institutional Shares 51.95% 23.94% 22.28%
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Russell 2000 Index** 22.10% 16.71% 14.09%
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S&P 500 Total Return Index *** 21.04% 28.54% 25.47%
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* April 6, 1994 (inception date of the Fund's Institutional Shares)
** The Russell 2000 Index is a widely recognized, unmanaged index of small
capitalization stocks. In the prior year's prospectus, the NASDAQ
Industrials Index was used for comparison purposes. However, the Advisor
feels that the Russell 2000 Index is a more accurate comparison to the
Fund's investment strategy than the NASDAQ Industrials Index. The NASDAQ
Industrials Index is a capitalization-weighted, unmanaged index of all
NASDAQ stocks in the industrial sector.
*** The S&P 500 Total Return Index is the Standard & Poor's Composite Index of
500 stocks and is a widely recognized, unmanaged index of common stock
prices.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
Institutional Shares of the Fund:
Shareholder Fees for Institutional Shares
(fees paid directly from your investment)
-----------------------------------------
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price) .........................None
Redemption fee ..................................................None
Annual Fund Operating Expenses for Institutional Shares
(expenses that are deducted from Fund assets)
---------------------------------------------
Management Fees.................................................1.00%
Distribution and/or Service (12b-1) Fees.........................None
Other Expenses..................................................0.21%
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Total Annual Fund Operating Expenses............................1.21%*
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* "Total Annual Fund Operating Expenses" are based upon actual expenses
incurred by the Institutional Shares of the Fund for the fiscal year
ended February 29, 2000. The Fund has entered into brokerage/service
arrangements with specific brokers who have agreed to pay certain
expenses of the Fund. As a result of these arrangements, for the fiscal
year ended February 29, 2000, the Total Annual Fund Operating Expenses
of the Institutional Shares of the Fund were 1.17% of the average daily
net assets of the Institutional Shares of the Fund. There can be no
assurance that the Fund's brokerage/service arrangements will continue
in the future. See the "Brokerage/Service Arrangements" section below.
Example. This Example shows you the expenses you may pay over time by investing
in the Fund. Since all funds use the same hypothetical conditions, it should
help you compare the costs of investing in the Fund versus other funds. The
Example assumes the following conditions:
(1) You invest $10,000 in the Fund for the periods shown;
(2) You reinvest all dividends and distributions;
(3) You redeem all of your shares at the end of those periods;
(4) You earn a 5% total return; and
(5) The Fund's expenses remain the same.
Although your actual costs may be higher or lower, the following table shows you
what your costs may be under the conditions listed above.
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Period Invested 1 Year 3 Years 5 Years 10 Years
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Your Costs $123 $384 $665 $1,466
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5
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MANAGEMENT OF THE FUND
----------------------
THE INVESTMENT ADVISOR
The Fund's Advisor, Gardner Lewis Asset Management, established as a Delaware
corporation in 1990 and converted to a Pennsylvania limited partnership in 1994,
is controlled by W. Whitfield Gardner. Mr. Gardner and John L. Lewis, IV are
principals of the Advisor and executive officers of the Trust. They have been
responsible for day-to-day management of the Fund's portfolio since its
inception in 1993. They have been with the Advisor since its inception on April
2, 1990. The Advisor has approximately $3.5 billion in assets under management
and provides investment advice to corporations, trusts, pension and profit
sharing plans, other business and institutional accounts, individuals, as well
as other investment companies. The Advisor's address is 285 Wilmington-West
Chester Pike, Chadds Ford, Pennsylvania 19317. Subject to the authority of the
Trustees, the Advisor provides guidance and policy direction in connection with
its daily management of the Fund's assets. The Advisor manages the investment
and reinvestment of the Fund's assets. The Advisor is also responsible for the
selection of broker-dealers through which the Fund executes portfolio
transactions, subject to the brokerage policies established by the Trustees, and
it provides certain executive personnel to the Fund.
The Advisor's Compensation. As full compensation for the investment advisory
services provided to the Fund, the Fund pays the Advisor monthly compensation
based on the Fund's daily average net assets at the annual rate of 1.00%.
Brokerage/Service Arrangements. The Fund has entered into brokerage/service
arrangements with certain brokers who paid a portion of the Fund's expenses for
the fiscal year ended February 29, 2000. This program has been reviewed by the
Board of Trustees, subject to the provisions and guidelines as clearly outlined
in the securities laws and legal precedent of the United States. There can be no
assurance that the Fund's brokerage/service arrangements will continue in the
future.
Brokerage Practices. In selecting brokers and dealers to execute portfolio
transactions, the Advisor may consider research and brokerage services furnished
to the Advisor or its affiliates. Subject to seeking the most favorable net
price and execution available, the Advisor may also consider sales of shares of
the Fund as a factor in the selection of brokers and dealers.
THE ADMINISTRATOR
The Nottingham Company, Inc. ("Administrator") assists the Trust in the
performance of its administrative responsibilities to the Fund, coordinates the
services of each vendor of services to the Fund, and provides the Fund with
other necessary administrative, fund accounting and compliance services. In
addition, the Administrator makes available the office space, equipment,
personnel and facilities required to provide such services to the Fund.
THE TRANSFER AGENT
NC Shareholder Services, LLC ("NCSS") serves as the transfer agent and dividend
disbursing agent of the Fund. As indicated later in the section of this
Prospectus, "Investing in the Fund," NCSS will handle your orders to purchase
and redeem shares of the Fund, and will disburse dividends paid by the Fund.
THE DISTRIBUTOR
Capital Investment Group, Inc. ("Distributor") is the principal underwriter and
distributor of the Fund's shares and serves as the Fund's exclusive agent for
the distribution of Fund shares. Capital Investment Group, Inc. may sell the
Fund's shares to or through qualified securities dealers or others.
6
<PAGE>
Other Expenses. In addition to the management fees and the 12b-1 fees for the
Class A Investor Shares, the Fund pays all expenses not assumed by the Fund's
Advisor, including, without limitation: the fees and expenses of its independent
auditors and of its legal counsel; the costs of printing and mailing to
shareholders annual and semi-annual reports, proxy statements, prospectuses,
statements of additional information and supplements thereto; the costs of
printing registration statements; bank transaction charges and custodian's fees;
any proxy solicitors' fees and expenses; filing fees; any federal, state or
local income or other taxes; any interest; any membership fees of the Investment
Company Institute and similar organizations; fidelity bond and Trustees'
liability insurance premiums; and any extraordinary expenses, such as
indemnification payments or damages awarded in litigation or settlements made.
All general Trust expenses are allocated among and charged to the assets of each
separate series of the Trust, such as the Fund, on a basis that the Trustees
deem fair and equitable, which may be on the basis of relative net assets of
each series or the nature of the services performed and relative applicability
to each series.
INVESTING IN THE FUND
---------------------
MINIMUM INVESTMENT
Institutional Shares of the Fund are sold and redeemed at net asset value.
Shares may be purchased by any account managed by the Advisor and any other
institutional investor or any broker-dealer authorized to sell shares of the
Fund. The minimum initial investment is $1,000,000 and the minimum additional
investment is $5,000 ($100 for those participating in the automatic investment
plan.) The Fund may, in the Advisor's sole discretion, accept certain accounts
with less than the minimum investment.
PURCHASE AND REDEMPTION PRICE
Determining the Fund's Net Asset Value. The price at which you purchase or
redeem shares is based on the next calculation of net asset value after an order
is received in good form. An order is considered to be in good form if it
includes a complete and accurate application and payment in full of the purchase
amount. The Fund's net asset value per share is calculated by dividing the value
of the Fund's total assets, less liabilities (including Fund expenses, which are
accrued daily), by the total number of outstanding shares of that Fund. The net
asset value per share of the Fund is normally determined at the time regular
trading closes on the New York Stock Exchange (currently 4:00 p.m. Eastern time,
Monday through Friday), except on business holidays when the New York Stock
Exchange is closed.
Other Matters. All redemption requests will be processed and payment with
respect thereto will normally be made within seven days after tenders. The Fund
may suspend redemption, if permitted by the 1940 Act, for any period during
which the New York Stock Exchange is closed or during which trading is
restricted by the Securities Exchange Commission ("SEC") or if the SEC declares
that an emergency exists. Redemptions may also be suspended during other periods
permitted by the SEC for the protection of the Fund's shareholders.
Additionally, during drastic economic and market changes, telephone redemption
privileges may be difficult to implement. Also, if the Trustees determine that
it would be detrimental to the best interest of the Fund's remaining
shareholders to make payment in cash, the Fund may pay redemption proceeds in
whole or in part by a distribution-in-kind of readily marketable securities.
7
<PAGE>
PURCHASING SHARES
Regular Mail Orders. Payment for shares must be made by check or money order
from a U.S. bank and payable in U.S. dollars. If checks are returned due to
insufficient funds or other reasons, the Fund will charge a $20 fee or may
redeem shares of the Fund already owned by the purchaser to recover any such
loss. For regular mail orders, please complete the attached Fund Shares
Application and mail it, along with your check made payable to "The Chesapeake
Growth Fund," to:
The Chesapeake Growth Fund
Institutional Shares
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Please remember to add a reference to "Institutional Shares" to your check to
ensure proper credit to your account. The application must contain your Social
Security Number ("SSN") or Taxpayer Identification Number ("TIN"). If you have
applied for a SSN or TIN at the time of completing your account application but
you have not received your number, please indicate this on the application.
Taxes are not withheld from distributions to U.S. investors if certain IRS
requirements regarding the TIN are met.
Bank Wire Orders. Purchases may also be made through bank wire orders. To
establish a new account or add to an existing account by wire, please call the
Fund at 1-800-430-3863, before wiring funds, to advise the Fund of the
investment, dollar amount, and the account identification number. Additionally,
please have your bank use the following wire instructions:
First Union National Bank of North Carolina
Charlotte, North Carolina
ABA # 053000219
For: The Chesapeake Growth Fund - Institutional Shares
Acct. # 2000000862068
For further credit to (shareholder's name and SSN or TIN)
Additional Investments. You may also add to your account by mail or wire at any
time by purchasing shares at the then current public offering price. The minimum
additional investment is $5,000. Before adding funds by bank wire, please call
the Fund at 1-800-430-3863 and follow the above directions for wire purchases.
Mail orders should include, if possible, the "Invest by Mail" stub that is
attached to your Fund confirmation statement. Otherwise, please identify your
account in a letter accompanying your purchase payment.
Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investment in shares through automatic charges
to their checking account. With shareholder authorization and bank approval, the
Fund will automatically charge the checking account for the amount specified
($100 minimum), which will be automatically invested in shares at the public
offering price on or about the 21st day of the month. The shareholder may change
the amount of the investment or discontinue the plan at any time by writing to
the Fund.
Exchange Feature. You may exchange shares of the Fund for shares any other
series of the Trust advised by the Advisor and offered for sale in the state in
which you reside. Shares may be exchanged for shares of any other series of the
Trust at the net asset value plus the percentage difference between that series'
sales charge and any sales charge, previously paid by you in connection with the
shares being exchanged. Prior to making an investment decision or giving us your
instructions to exchange shares, please read the prospectus for the series in
which you wish to invest.
8
<PAGE>
A pattern of frequent purchase and redemption transactions is considered by the
Advisor to not be in the best interest of the shareholders of the Fund. Such a
pattern may, at the discretion of the Advisor, be limited by the Fund's refusal
to accept further purchase and/or exchange orders from an investor, after
providing the investor with 60-days' prior notice.
The Board of Trustees reserves the right to suspend, terminate, or amend the
terms of the exchange privilege upon 60-days' written notice to the
shareholders.
An investor may direct the Fund to exchange his shares by writing to the Fund at
its principal office. The request must be signed exactly as the investor's name
appears on the account, and it must also provide the account number, number of
shares to be exchanged, the name of the series to which the exchange will take
place and a statement as to whether the exchange is a full or partial redemption
of existing shares. Notwithstanding the foregoing, exchanges of shares may only
be within the same class or type of class of shares involved. For example,
Investor Shares may not be exchanged for Institutional or Super-Institutional
Shares, and Investor Shares may not be exchanged among the various Classes of
Investor Shares (i.e., Class C Shares may not be exchanged for Class A or Class
D Shares and Class D Shares may not be exchanged for Class A Shares).
Notwithstanding the foregoing, unless otherwise determined by the Fund, an
investor may not exchange shares of the Fund for shares of The Chesapeake
Aggressive Growth Fund, another series of the Trust affiliated with the Advisor,
unless such investor has an existing account with such Fund.
Stock Certificates. You do not have the option of receiving stock certificates
for your shares. Evidence of ownership will be given by issuance of periodic
account statements that will show the number of shares owned.
REDEEMING YOUR SHARES
Regular Mail Redemptions.Regular mail redemption request should be addressed to:
The Chesapeake Growth Fund
Institutional Shares
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Regular mail redemption request should include:
(1) Your letter of instruction specifying the account number and number of
shares, or the dollar amount, to be redeemed. This request must be
signed by all registered shareholders in the exact names in which they
are registered;
(2) Any required signature guarantees (see "Signature Guarantees" below);
and
(3) Other supporting legal documents, if required in the case of estates,
trusts, guardianships, custodianships, corporations, partnerships,
pension or profit sharing plans, and other organizations.
Your redemption proceeds normally will be sent to you within 7 days after
receipt of your redemption request. However, the Fund may delay forwarding a
redemption check for recently purchased shares while it determines whether the
purchase payment will be honored. Such delay (which may take up to 15 days from
the date of purchase) may be reduced or avoided if the purchase is made by
certified check or wire transfer. In all cases, the net asset value next
determined after receipt of the request for redemption will be used in
processing the redemption request.
9
<PAGE>
Telephone and Bank Wire Redemptions. You may also redeem shares by telephone and
bank wire under certain limited conditions. The Fund will redeem shares in this
manner when so requested by the shareholder only if the shareholder confirms
redemption instructions in writing.
The Fund may rely upon confirmation of redemption requests transmitted via
facsimile (FAX# 252-972-1908). The confirmation instructions must include:
(1) The name of the Fund and class of shares,
(2) Shareholder name and account number,
(3) Number of shares or dollar amount to be redeemed,
(4) Instructions for transmittal of redemption funds to the shareholder,
and
(5) Shareholder signature as it appears on the application then on file
with the Fund.
Redemption proceeds will not be distributed until written confirmation of the
redemption request is received, per the instructions above. You can choose to
have redemption proceeds mailed to you at your address of record, your bank, or
to any other authorized person, or you can have the proceeds sent by bank wire
to your bank ($5,000 minimum). Redemption proceeds can not be wired on days in
which your bank is not open for business. You can change your redemption
instructions anytime you wish by filing a letter including your new redemption
instructions with the Fund. See "Signature Guarantees" below.
The Fund in its discretion may choose to pass through to redeeming shareholders
any charges imposed by the Custodian for wire redemptions. The Custodian
currently charges the Fund $10.00 per transaction for wiring redemption
proceeds. If this cost is passed through to redeeming shareholders by the Fund,
the charge will be deducted automatically from your account by redemption of
shares in your account. Your bank or brokerage firm may also impose a charge for
processing the wire. If wire transfer of funds is impossible or impractical, the
redemption proceeds will be sent by mail to the designated account.
You may redeem shares, subject to the procedures outlined above, by calling the
Fund at 1-800-430-3863. Redemption proceeds will only be sent to the bank
account or person named in your Fund Shares Application currently on file with
the Fund. Telephone redemption privileges authorize the Fund to act on telephone
instructions from any person representing himself or herself to be the investor
and reasonably believed by the Fund to be genuine. The Fund will employ
reasonable procedures, such as requiring a form of personal identification, to
confirm that instructions are genuine, and if it does not follow such
procedures, the Fund will be liable for any losses due to fraudulent or
unauthorized instructions. The Fund will not be liable for following telephone
instructions reasonably believed to be genuine.
Small Accounts. The Board of Trustees reserves the right to redeem involuntarily
any account having a net asset value of less than $1,000,000 (due to
redemptions, exchanges, or transfers, and not due to market action) upon
60-days' written notice. If the shareholder brings his account net asset value
up to at least $1,000,000 during the notice period, the account will not be
redeemed. Redemptions from retirement plans may be subject to federal income tax
withholding.
Systematic Withdrawal Plan. A shareholder who owns shares of the Fund valued at
$1,000,000 or more at the current offering price may establish a Systematic
Withdrawal Plan to receive a monthly or quarterly check in a stated amount not
less than $100. Each month or quarter, as specified, the Fund will automatically
redeem sufficient shares from your account to meet the specified withdrawal
amount. The shareholder may establish this service whether dividends and
distributions are reinvested in shares of the Fund or paid in cash. Call or
write the Fund for an application form.
Signature Guarantees. To protect your account and the Fund from fraud, signature
guarantees are required to be sure that you are the person who has authorized a
change in registration or standing instructions for your account. Signature
guarantees are required for (1) change of registration requests, (2) requests to
establish or to change exchange privileges or telephone and bank wire redemption
service other than through your initial account application, and (3) redemption
requests in excess of $50,000. Signature guarantees are acceptable from a member
bank of the Federal Reserve System, a savings and loan institution, credit union
(if authorized under state law), registered broker-dealer, securities exchange,
or association clearing agency and must appear on the written request for change
of registration, establishment or change in exchange privileges, or redemption
request.
10
<PAGE>
Redemptions in Kind. The Fund does not intend, under normal circumstances, to
redeem its securities by payment in kind. It is possible, however, that
conditions may arise in the future which would, in the opinion of the Trustees,
make it undesirable for the Fund to pay for all redemptions in cash. In such
case, the Board of Trustees may authorize payment to be made in readily
marketable portfolio securities of the Fund. Securities delivered in payment of
redemptions would be valued at the same value assigned to them in computing the
net asset value per share. Shareholders receiving them would incur brokerage
costs when these securities are sold. An irrevocable election has been filed
under Rule 18f-1 of the 1940 Act, wherein the Fund committed itself to pay
redemptions in cash, rather than in kind, to any shareholder of record of the
Fund who redeems during any ninety-day period, the lesser of (a) $250,000 or (b)
one percent (1%) of the Fund's net asset value at the beginning of such period.
OTHER IMPORTANT INVESTMENT INFORMATION
--------------------------------------
DIVIDENDS, DISTRIBUTIONS, AND TAXES
The following information is meant as a general summary for U.S. taxpayers.
Additional tax information appears in the Statement of Additional Information
("SAI"). Shareholders should rely their own tax advisers for advice about the
particular federal, state and local tax consequences to them of investing in the
Fund.
The Fund will distribute most of its income and gains to its shareholders every
year. Income dividends, if any, will be paid quarterly and capital gains
distributions, if any, will be made at least annually. Although the Fund will
not be taxed on amounts it distributes, shareholders will generally be taxed,
regardless of whether distributions are received in cash or are reinvested in
additional Fund shares. A particular distribution generally will be taxable as
either ordinary income or long-term capital gains. If a Fund designates a
distribution as a capital gain distribution, it will be taxable to shareholders
as long-term capital gains, regardless of how long they have held their Fund
shares.
If the Fund declares a dividend in October, November or December but pays it in
January, it may be taxable to shareholders as if they received it in the year it
was declared. Each year each shareholder will receive a statement detailing the
tax status of any Fund distributions for that year.
Distributions may be subject to state and local taxes, as well as federal taxes.
Shareholders who hold Fund shares in a tax-deferred account, such as a
retirement plan, generally will not have to pay tax on Fund distributions until
they receive distributions from the account.
A shareholder who sells or redeems shares will generally realize a capital gain
or loss, which will be long-term or short-term, generally depending upon the
shareholder's holding period for the Fund shares. An exchange of shares may be
treated as a sale.
As with all mutual funds, the Fund may be required to withhold U.S. federal
income tax at the rate of 31% of all taxable distributions payable to
shareholders who fail to provide the Fund with their correct taxpayer
identification numbers or to make required certifications, or who have been
notified by the IRS that they are subject to backup withholding. Backup
withholding is not an additional tax; rather, it is a way in which the IRS
ensures it will collect taxes otherwise due. Any amounts withheld may be
credited against a shareholder's U.S. federal income tax liability.
11
<PAGE>
FINANCIAL HIGHLIGHTS
The financial data included in the table below have been derived from audited
financial statements of the Fund. The financial data for the fiscal years ended
February 29, 2000, February 28, 1999, 1998, and 1997, have been audited by
Deloitte & Touche LLP, independent auditors, whose report covering such periods
is incorporated by reference into the SAI. The financial data for the prior
fiscal year were audited by other independent auditors. This information should
be read in conjunction with the Fund's latest audited annual financial
statements and notes thereto, which are also incorporated by reference into the
SAI, a copy of which may be obtained at no charge by calling the Fund. Further
information about the performance of the Fund is contained in the Annual Report
of the Fund, a copy of which may be obtained at no charge by calling the Fund at
1-800-430-3863.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Institutional Shares
(For a Share Outstanding Throughout the Year)
------------------------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended Year ended
February 28, February 28, February 28, February 29, February 29,
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year $16.60 $17.86 $16.26 $14.45 $11.31
Income (loss) from investment operations
Net investment loss (0.21) (0.17) (0.15) (0.13) (0.05)
Net realized and unrealized gain (loss) on investments 17.92 (0.63) 4.22 1.94 3.38
-------- --------- --------- --------- ----------
Total from investment operations 17.71 (0.80) 4.07 1.81 3.33
-------- --------- --------- --------- ----------
Distributions to shareholders from
Net investment income (0.00) 0.00 0.00 0.00 (0.11)
Tax return of capital 0.00 0.00 (0.53) 0.00 0.00
Distribution in excess of net realized gains 0.00 (0.03) 0.00 0.00 0.00
Net realized gain from investment transactions (1.23) (0.43) (1.94) 0.00 (0.08)
-------- --------- --------- --------- ----------
Total distributions (1.23) (0.46) (2.47) 0.00 (0.19)
-------- --------- --------- --------- ----------
Net asset value, end of year $33.08 $16.60 $17.86 $16.26 $14.45
======== ========= ========= ========= ==========
Total return (a) 110.91 % (4.51)% 25.25 % 12.53 % 29.66 %
======== ========= ========= ========= ==========
Ratios/supplemental data
Net assets, end of year (000's) $120,416 $63,426 $92,858 $77,858 $80,252
======== ========= ========= ========= ==========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 1.21 % 1.22 % 1.19 % 1.23 % 1.65 %
After expense reimbursements and waived fees 1.17 % 1.15 % 1.16 % 1.22 % 1.49 %
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees (1.03)% (0.87)% (0.90)% (0.85)% (0.98)%
After expense reimbursements and waived fees (1.00)% (0.80)% (0.88)% (0.84)% (0.82)%
Portfolio turnover rate 165.92 % 121.48 % 105.60 % 126.44 % 99.33 %
</TABLE>
<PAGE>
ADDITIONAL INFORMATION
________________________________________________________________________________
THE CHESAPEAKE GROWTH FUND
INSTITUTIONAL SHARES
________________________________________________________________________________
Additional information about the Fund is available in the Fund's SAI. Additional
information about the Fund's investments is also available in the Fund's Annual
and Semi-annual Reports to shareholders. The Fund's Annual Report includes a
discussion of market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year.
The SAI and the Annual and Semi-annual Reports are available free of charge upon
request (you may also request other information about the Fund or make
shareholder inquiries) by contacting us:
--------------------------------------------------------------------
By telephone: 1-800-430-3863
By mail: The Chesapeake Growth Fund
Institutional Shares
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, NC 27803-0365
By e-mail: [email protected]
On the Internet: www.ncfunds.com
--------------------------------------------------------------------
Information about the Fund can also be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. Inquiries on the operations of the public
reference room may be made by calling the SEC at 1-202-942-8090. Reports and
other information about the Fund are available on the SEC's Internet site at
http://www.sec.gov, and copies of this information may be obtained, upon payment
of a duplicating fee, by electronic request at the following e-mail address:
[email protected], or by writing the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
Investment Company Act file number 811-07324
<PAGE>
Cusip Number 36559B609 NASDAQ Symbol CHSIX
________________________________________________________________________________
THE CHESAPEAKE GROWTH FUND
A series of the
Gardner Lewis Investment Trust
SUPER-INSTITUTIONAL SHARES
________________________________________________________________________________
PROSPECTUS
June 30, 2000
The Chesapeake Growth Fund ("Fund") seeks capital appreciation. In seeking to
achieve its objective, the Fund will invest primarily in equity securities of
medium and large capitalization companies. This Fund also offers Institutional
Shares and Class A Investor Shares, which are offered by other prospectuses.
Investment Advisor
------------------
Gardner Lewis Asset Management
285 Wilmington-West Chester Pike
Chadds Ford, Pennsylvania 19317
1-800-430-3863
The Securities and Exchange Commission has not approved the securities being
offered by this prospectus or determined whether this prospectus is accurate and
complete. It is unlawful for anyone to make any representation to the contrary.
<PAGE>
TABLE OF CONTENTS
Page
----
THE FUND.......................................................................2
--------
Investment Objective.....................................................2
Principal Investment Strategies..........................................2
Principal Risks of Investing in the Fund.................................3
Bar Chart and Performance Table..........................................4
Fees and Expenses of the Fund............................................5
MANAGEMENT OF THE FUND.........................................................6
----------------------
The Investment Advisor...................................................6
The Administrator........................................................6
The Transfer Agent.......................................................6
The Distributor..........................................................7
INVESTING IN THE FUND..........................................................7
---------------------
Minimum Investment.......................................................7
Purchase and Redemption Price............................................7
Purchasing Shares........................................................8
Redeeming Your Shares....................................................9
OTHER IMPORTANT INVESTMENT INFORMATION.........................................8
--------------------------------------
Dividends, Distributions, and Taxes.....................................11
Financial Highlights....................................................12
Additional Information..........................................Back Cover
<PAGE>
THE FUND
--------
INVESTMENT OBJECTIVE
The Chesapeake Growth Fund seeks capital appreciation. In seeking to achieve its
objective, the Fund will invest primarily in equity securities of medium and
large capitalization companies.
PRINCIPAL INVESTMENT STRATEGIES
The Fund, which is a diversified separate investment portfolio of the Gardner
Lewis Investment Trust ("Trust"), seeks capital appreciation by investing
primarily in equity securities of medium and large capitalization companies. The
Fund considers a medium capitalization company to be one that has a market
capitalization, measured at the time that the Fund purchases the security,
between $1 billion and $10 billion. The Fund considers a large capitalization
company to be one that has a market capitalization, measured at the time that
the Fund purchases the security, of at least $10 billion. The Fund's investments
in these medium and large capitalization companies will be primarily in equity
securities, such as common and preferred stocks and securities convertible into
common stocks.
In making investment decisions for the Fund, Gardner Lewis Asset Management
("Advisor") will base those decisions on its analysis of companies that show
superior prospects for growth. By developing and maintaining contacts with
management, customers, competitors and suppliers of current and potential
portfolio companies, the Advisor attempts to invest in those companies
undergoing positive changes that have not yet been recognized by "Wall Street"
analysts and the financial press. These changes often include:
o new product introductions,
o new distribution strategies,
o new manufacturing technology, and/or
o new management team or management philosophy.
Lack of recognition of these changes often causes securities to be less
efficiently priced. The Advisor believes these companies offer unique and
potentially superior investment opportunities.
Additionally, companies in which the Fund invests typically will show strong
earnings growth when compared to the previous year's comparable period. The
Advisor also favors portfolio investments in companies whose price when
purchased is not yet fully reflective of their growth rates. In selecting these
portfolio companies, the Advisor includes analysis of the following:
o growth rate of earnings,
o financial performance,
o management strengths and weaknesses,
o current market valuation in relation to earnings growth,
o historic and comparable company valuations,
o level and nature of the company's debt, cash flow, working
capital, and
o quality of the company's assets.
Under normal market conditions, the Fund will invest at least 90% of the Fund's
total assets in equity securities, of which no more than 25% of the Fund's total
assets will be invested in the securities of any one industry. Up to 10% of the
Fund's total assets may consist of foreign securities and sponsored ADRs.
However, all securities will be traded on domestic and foreign securities
exchanges or on the over-the-counter markets. While portfolio securities are
generally acquired for the long term, they may be sold under any of the
following circumstances:
2
<PAGE>
o the anticipated price appreciation has been achieved or is no longer
probable;
o the company's fundamentals appear, in the analysis of the Advisor, to be
deteriorating;
o general market expectations regarding the company's future performance exceed
those expectations held by the Advisor; or
o alternative investments offer, in the view of the Advisor, superior potential
for appreciation.
PRINCIPAL RISKS OF INVESTING IN THE FUND
An investment in the Fund is subject to investment risks, including the possible
loss of the principal amount invested and there can be no assurance that the
Fund will be successful in meeting its objective. The following sections
describe some of the risks involved with portfolio investments of the Fund.
Equity Securities: To the extent that the majority of the Fund's portfolio
consists of common stocks, it is expected that the Fund's net asset value will
be subject to greater price fluctuation than a portfolio containing mostly fixed
income securities.
Market Risk: Market risk refers to the risk related to investments in securities
in general and the daily fluctuations in the securities markets. The Fund's
performance will change daily based on many factors, including fluctuation in
interest rates, the quality of the instruments in the Fund's investment
portfolio, national and international economic conditions and general market
conditions.
Internal Change: Investing in companies which are undergoing internal change,
such as implementing new strategies or introducing new technologies, as
described above, may involve greater than average risk due to their unproven
nature.
Medium Capitalization Companies: As noted above, the Fund may invest a
significant portion of its assets in the equity securities of medium
capitalization companies. To the extent the Fund's assets are invested in medium
capitalization companies, the Fund may exhibit more volatility than if it were
invested exclusively in large capitalization companies because of the fact that
the fact that the securities of mid-cap companies usually have more limited
marketability and, therefore, may be more volatile than securities of larger,
more established companies or the market averages in general. Because mid-cap
companies normally have fewer shares outstanding than larger companies, it may
be more difficult to buy or sell significant amounts of such shares without an
unfavorable impact on prevailing prices. Another risk factor is that mid-cap
companies often have limited product lines, markets, or financial resources and
may lack management depth. Additionally, mid-cap companies are typically subject
to greater changes in earnings and business prospects than are larger, more
established companies, and there typically is less publicly available
information concerning mid-cap companies than for larger, more established
companies.
Although investing in securities of medium-sized companies offers potential
above-average returns if the companies are successful, the risk exists that the
companies will not succeed, and the prices of the companies' shares could
significantly decline in value. Therefore, an investment in the Fund may involve
a greater degree of risk than an investment in other mutual funds that seek
capital growth by investing in more established, larger companies.
Portfolio Turnover: The Fund may sell portfolio securities without regard to the
length of time they have been held in order to take advantage of new investment
opportunities or changing market conditions. Since portfolio turnover may
involve paying brokerage commissions and other transaction costs, there could be
additional expenses for the Fund. The degree of portfolio activity may also have
an effect on the tax consequences of capital gain distributions. See "Financial
Highlights" for the Fund's portfolio turnover rate for prior periods.
3
<PAGE>
Short-Term Investments: As a temporary defensive measure, the Advisor may
determine that market conditions warrant investing in investment-grade bonds,
U.S. Government Securities, repurchase agreements, money market instruments, and
to the extent permitted by applicable law and the Fund's investment
restrictions, shares of other investment companies. Under such circumstances,
the Advisor may invest up to 100% of the Fund's assets in these investments.
Since investment companies investing in other investment companies pay
management fees and other expenses relating to those investment companies,
shareholders of the Fund would indirectly pay both the Fund's expenses and the
expenses relating to those other investment companies with respect to the Fund's
assets invested in such investment companies. To the extent the Fund is invested
in short-term investments, it will not be pursuing and may not achieve its
investment objective. Under normal circumstances, however, the Fund will also
hold money market or repurchase agreement instruments for funds awaiting
investment, to accumulate cash for anticipated purchases of portfolio
securities, to allow for shareholder redemptions, and to provide for Fund
operating expenses.
BAR CHART AND PERFORMANCE TABLE
The bar chart and table shown below provide an indication of the risks of
investing in the Chesapeake Growth Fund's Super-Institutional Shares by showing
(on a calendar year basis) changes in the Fund's average annual total returns
from year to year for the Fund's Super-Institutional Shares and by showing (on a
calendar year basis) how the Super-Institutional Shares' average annual returns
for one year and since inception compare to those of broad-based securities
market indexes. How the Fund has performed in the past is not necessarily an
indication of how the Fund will perform in the future.
Year to Year Total Returns (as of December 31)
[BAR CHART HERE]:
1997 15.58%
1998 12.65%
1999 52.17%
o During the 3-year period shown in the bar chart above, the highest return for
a calendar quarter was 43.16% (quarter ended December 31, 1999).
o During the 3-year period shown in the bar chart above, the lowest return for
a calendar quarter was -22.28% (quarter ended September 30, 1998).
o The year-to-date return of the Super-Institutional Shares as of the most
recent calendar quarter was 22.88% (quarter ended March 31, 2000).
4
<PAGE>
------------------------------------- ------------- ------------- --------------
Average Annual Total Returns Past 1 Past 3 Since
Period ended December 31, 1999 Year Years Inception*
------------------------------------- ------------- ------------- --------------
The Chesapeake Growth Fund
Super-Institutional Shares 52.17% 25.59% 22.02%
------------------------------------- ------------- ------------- --------------
Russell 2000 Index** 22.10% 13.42% 11.77%
------------------------------------- ------------- ------------- --------------
S&P 500 Total Return Index*** 21.04% 27.56% 26.80%
------------------------------------- ------------- ------------- --------------
* June 12, 1996 (inception date of the Fund's Super-Institutional Shares)
** The Russell 2000 Index is a widely recognized, unmanaged index of small
capitalization stocks. In the prior year's prospectus, the NASDAQ Industrials
Index was used for comparison purposes. However, the Advisor feels that the
Russell 2000 Index is a more accurate comparison to the Fund's investment
strategy than the NASDAQ Industrials Index. The NASDAQ Industrials Index is a
capitalization-weighted, unmanaged index of all NASDAQ stocks in the
industrial sector.
***The S&P 500 Total Return Index is the Standard & Poor's Composite Index of
500 stocks and is a widely recognized, unmanaged index of common stock
prices.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
Super-Institutional Shares of the Fund:
Shareholder Fees for Super-Institutional Shares
(fees paid directly from your investment)
-----------------------------------------
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price) ............................None
Redemption fee ...................................................None
Annual Fund Operating Expenses for Super-Institutional Shares
(expenses that are deducted from Fund assets)
---------------------------------------------
Management Fees...................................................1.00%
Distribution and/or Service (12b-1) Fees..........................None
Other Expenses....................................................0.08%
----
Total Annual Fund Operating Expenses..............................1.08%*
====
* "Total Annual Fund Operating Expenses" are based upon actual
expenses incurred by the Super-Institutional Shares of the Fund
for the fiscal year ended February 29, 2000. The Fund has entered
into brokerage/service arrangements with specific brokers who have
agreed to pay certain expenses of the Fund. As a result of these
arrangements, for the fiscal year ended February 29, 2000, the
Total Annual Fund Operating Expenses of the Super-Institutional
Shares of the Fund were 1.04% of the average daily net assets of
the Super-Institutional Shares of the Fund. There can be no
assurance that the Fund's brokerage/service arrangements will
continue in the future. See the "Brokerage/Service Arrangements"
section below.
Example. This Example shows you the expenses you may pay over time by investing
in the Fund. Since all funds use the same hypothetical conditions, it should
help you compare the costs of investing in the Fund versus other funds. The
Example assumes the following conditions:
(1) You invest $10,000 in the Fund for the periods shown;
(2) You reinvest all dividends and distributions;
(3) You redeem all of your shares at the end of those periods;
(4) You earn a 5% total return; and
(5) The Fund's expenses remain the same.
Although your actual costs may be higher or lower, the following table shows you
what your costs may be under the conditions listed above.
--------------------------- ------------- ------------ ------------ ------------
Period Invested 1 Year 3 Years 5 Years 10 Years
--------------------------- ------------- ------------ ------------ ------------
Your Costs $110 $343 $595 $1,317
--------------------------- ------------- ------------ ------------ ------------
5
<PAGE>
MANAGEMENT OF THE FUND
----------------------
THE INVESTMENT ADVISOR
The Fund's Advisor, Gardner Lewis Asset Management, established as a Delaware
corporation in 1990 and converted to a Pennsylvania limited partnership in 1994,
is controlled by W. Whitfield Gardner. Mr. Gardner and John L. Lewis, IV are
principals of the Advisor and executive officers of the Trust. They have been
responsible for day-to-day management of the Fund's portfolio since its
inception in 1993. They have been with the Advisor since its inception on April
2, 1990. The Advisor has approximately $3.5 billion in assets under management
and provides investment advice to corporations, trusts, pension and profit
sharing plans, other business and institutional accounts, individuals, as well
as other investment companies. The Advisor's address is 285 Wilmington-West
Chester Pike, Chadds Ford, Pennsylvania 19317. Subject to the authority of the
Trustees, the Advisor provides guidance and policy direction in connection with
its daily management of the Fund's assets. The Advisor manages the investment
and reinvestment of the Fund's assets. The Advisor is also responsible for the
selection of broker-dealers through which the Fund executes portfolio
transactions, subject to the brokerage policies established by the Trustees, and
it provides certain executive personnel to the Fund.
The Advisor's Compensation. As full compensation for the investment advisory
services provided to the Fund, the Fund pays the Advisor monthly compensation
based on the Fund's daily average net assets at the annual rate of 1.00%.
Brokerage/Service Arrangements. The Fund has entered into brokerage/service
arrangements with certain brokers who paid a portion of the Fund's expenses for
the fiscal year ended February 29, 2000. This program has been reviewed by the
Board of Trustees, subject to the provisions and guidelines as clearly outlined
in the securities laws and legal precedent of the United States. There can be no
assurance that the Fund's brokerage/service arrangements will continue in the
future.
Brokerage Practices. In selecting brokers and dealers to execute portfolio
transactions, the Advisor may consider research and brokerage services furnished
to the Advisor or its affiliates. Subject to seeking the most favorable net
price and execution available, the Advisor may also consider sales of shares of
the Fund as a factor in the selection of brokers and dealers.
THE ADMINISTRATOR
The Nottingham Company, Inc. ("Administrator") assists the Trust in the
performance of its administrative responsibilities to the Fund, coordinates the
services of each vendor of services to the Fund, and provides the Fund with
other necessary administrative, fund accounting and compliance services. In
addition, the Administrator makes available the office space, equipment,
personnel and facilities required to provide such services to the Fund.
THE TRANSFER AGENT
NC Shareholder Services, LLC ("NCSS") serves as the transfer agent and dividend
disbursing agent of the Fund. As indicated later in the section of this
Prospectus, "Investing in the Fund," NCSS will handle your orders to purchase
and redeem shares of the Fund, and will disburse dividends paid by the Fund.
6
<PAGE>
THE DISTRIBUTOR
Capital Investment Group, Inc. ("Distributor") is the principal underwriter and
distributor of the Fund's shares and serves as the Fund's exclusive agent for
the distribution of Fund shares. Capital Investment Group, Inc. may sell the
Fund's shares to or through qualified securities dealers or others.
Other Expenses. In addition to the management fees and the 12b-1 fees for the
Class A Investor Shares, the Fund pays all expenses not assumed by the Fund's
Advisor, including, without limitation: the fees and expenses of its independent
auditors and of its legal counsel; the costs of printing and mailing to
shareholders annual and semi-annual reports, proxy statements, prospectuses,
statements of additional information and supplements thereto; the costs of
printing registration statements; bank transaction charges and custodian's fees;
any proxy solicitors' fees and expenses; filing fees; any federal, state or
local income or other taxes; any interest; any membership fees of the Investment
Company Institute and similar organizations; fidelity bond and Trustees'
liability insurance premiums; and any extraordinary expenses, such as
indemnification payments or damages awarded in litigation or settlements made.
All general Trust expenses are allocated among and charged to the assets of each
separate series of the Trust, such as the Fund, on a basis that the Trustees
deem fair and equitable, which may be on the basis of relative net assets of
each series or the nature of the services performed and relative applicability
to each series.
INVESTING IN THE FUND
---------------------
MINIMUM INVESTMENT
Super-Institutional Shares of the Fund are sold and redeemed at net asset value.
Shares may be purchased by any account managed by the Advisor and any other
institutional investor or any broker-dealer authorized to sell shares of the
Fund. The minimum initial investment is $50,000,000 and the minimum additional
investment is $100,000. The Fund may, in the Advisor's sole discretion, accept
certain accounts with less than the minimum investment.
PURCHASE AND REDEMPTION PRICE
Determining the Fund's Net Asset Value. The price at which you purchase or
redeem shares is based on the next calculation of net asset value after an order
is received in good form. An order is considered to be in good form if it
includes a complete and accurate application and payment in full of the purchase
amount. The Fund's net asset value per share is calculated by dividing the value
of the Fund's total assets, less liabilities (including Fund expenses, which are
accrued daily), by the total number of outstanding shares of that Fund. The net
asset value per share of the Fund is normally determined at the time regular
trading closes on the New York Stock Exchange (currently 4:00 p.m. Eastern time,
Monday through Friday), except on business holidays when the New York Stock
Exchange is closed.
Other Matters. All redemption requests will be processed and payment with
respect thereto will normally be made within seven days after tenders. The Fund
may suspend redemption, if permitted by the 1940 Act, for any period during
which the New York Stock Exchange is closed or during which trading is
restricted by the Securities Exchange Commission ("SEC") or if the SEC declares
that an emergency exists. Redemptions may also be suspended during other periods
permitted by the SEC for the protection of the Fund's shareholders.
Additionally, during drastic economic and market changes, telephone redemption
privileges may be difficult to implement. Also, if the Trustees determine that
it would be detrimental to the best interest of the Fund's remaining
shareholders to make payment in cash, the Fund may pay redemption proceeds in
whole or in part by a distribution-in-kind of readily marketable securities.
7
<PAGE>
PURCHASING SHARES
Regular Mail Orders. Payment for shares must be made by check or money order
from a U.S. bank and payable in U.S. dollars. If checks are returned due to
insufficient funds or other reasons, the Fund will charge a $20 fee or may
redeem shares of the Fund already owned by the purchaser to recover any such
loss. For regular mail orders, please complete the attached Fund Shares
Application and mail it, along with your check made payable to "The Chesapeake
Growth Fund," to:
The Chesapeake Growth Fund
Super-Institutional Shares
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Please remember to add a reference to "Super-Institutional Shares" to your check
to ensure proper credit to your account. The application must contain your
social security number ("SSN") or Taxpayer Identification Number ("TIN"). If you
have applied for a SSN or TIN at the time of completing your account application
but you have not received your number, please indicate this on the application.
Taxes are not withheld from distributions to U.S. investors if certain IRS
requirements regarding the TIN are met.
Bank Wire Orders. Purchases may also be made through bank wire orders. To
establish a new account or add to an existing account by wire, please call the
Fund at 1-800-430-3863, before wiring funds, to advise the Fund of the
investment, dollar amount, and the account identification number. Additionally,
please have your bank use the following wire instructions:
First Union National Bank of North Carolina
Charlotte, North Carolina
ABA # 053000219
For: The Chesapeake Growth Fund - Super-Institutional Shares
Acct. # 2000000862068
For further credit to (shareholder's name and SSN or TIN)
Additional Investments. You may also add to your account by mail or wire at any
time by purchasing shares at the then current public offering price. The minimum
additional investment is $100,000. Before adding funds by bank wire, please call
the Fund at 1-800-430-3863 and follow the above directions for wire purchases.
Mail orders should include, if possible, the "Invest by Mail" stub that is
attached to your Fund confirmation statement. Otherwise, please identify your
account in a letter accompanying your purchase payment.
Exchange Feature. You may exchange shares of the Fund for shares any other
series of the Trust advised by the Advisor and offered for sale in the state in
which you reside. Shares may be exchanged for shares of any other series of the
Trust at the net asset value plus the percentage difference between that series'
sales charge and any sales charge, previously paid by you in connection with the
shares being exchanged. Prior to making an investment decision or giving us your
instructions to exchange shares, please read the prospectus for the series in
which you wish to invest.
A pattern of frequent purchase and redemption transactions is considered by the
Advisor to not be in the best interest of the shareholders of the Fund. Such a
pattern may, at the discretion of the Advisor, be limited by the Fund's refusal
to accept further purchase and/or exchange orders from an investor, after
providing the investor with 60-days' prior notice.
The Board of Trustees reserves the right to suspend, terminate, or amend the
terms of the exchange privilege upon 60-days' written notice to the
shareholders.
8
<PAGE>
An investor may direct the Fund to exchange his shares by writing to the Fund at
its principal office. The request must be signed exactly as the investor's name
appears on the account, and it must also provide the account number, number of
shares to be exchanged, the name of the series to which the exchange will take
place and a statement as to whether the exchange is a full or partial redemption
of existing shares. Notwithstanding the foregoing, exchanges of shares may only
be within the same class or type of class of shares involved. For example,
Investor Shares may not be exchanged for Institutional or Super-Institutional
Shares, and Investor Shares may not be exchanged among the various Classes of
Investor Shares (i.e., Class C Shares may not be exchanged for Class A or Class
D Shares and Class D Shares may not be exchanged for Class A Shares).
Notwithstanding the foregoing, unless otherwise determined by the Fund, an
investor may not exchange shares of the Fund for shares of The Chesapeake
Aggressive Growth Fund, another series of the Trust affiliated with the Advisor,
unless such investor has an existing account with such Fund.
Stock Certificates. You do not have the option of receiving stock certificates
for your shares. Evidence of ownership will be given by issuance of periodic
account statements that will show the number of shares owned.
REDEEMING YOUR SHARES
Regular Mail Redemptions. Regular mail redemption request should be addressed
to:
The Chesapeake Growth Fund
Super-Institutional Shares
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Regular mail redemption request should include:
(1) Your letter of instruction specifying the account number and
number of shares, or the dollar amount, to be redeemed. This
request must be signed by all registered shareholders in the exact
names in which they are registered;
(2) Any required signature guarantees (see "Signature Guarantees"
below); and
(3) Other supporting legal documents, if required in the case of
estates, trusts, guardianships, custodianships, corporations,
partnerships, pension or profit sharing plans, and other
organizations.
Your redemption proceeds normally will be sent to you within 7 days after
receipt of your redemption request. However, the Fund may delay forwarding a
redemption check for recently purchased shares while it determines whether the
purchase payment will be honored. Such delay (which may take up to 15 days from
the date of purchase) may be reduced or avoided if the purchase is made by
certified check or wire transfer. In all cases, the net asset value next
determined after receipt of the request for redemption will be used in
processing the redemption request.
Telephone and Bank Wire Redemptions. You may also redeem shares by telephone and
bank wire under certain limited conditions. The Fund will redeem shares in this
manner when so requested by the shareholder only if the shareholder confirms
redemption instructions in writing.
9
<PAGE>
The Fund may rely upon confirmation of redemption requests transmitted via
facsimile (FAX# 252-972-1908). The confirmation instructions must include:
(1) The name of the Fund and class of shares,
(2) Shareholder name and account number,
(3) Number of shares or dollar amount to be redeemed,
(4) Instructions for transmittal of redemption funds to the shareholder, and
(5) Shareholder signature as it appears on the application then on file with
the Fund.
Redemption proceeds will not be distributed until written confirmation of the
redemption request is received, per the instructions above. You can choose to
have redemption proceeds mailed to you at your address of record, your bank, or
to any other authorized person, or you can have the proceeds sent by bank wire
to your bank ($5,000 minimum). Redemption proceeds can not be wired on days in
which your bank is not open for business. You can change your redemption
instructions anytime you wish by filing a letter including your new redemption
instructions with the Fund. See "Signature Guarantees" below.
The Fund in its discretion may choose to pass through to redeeming shareholders
any charges imposed by the Custodian for wire redemptions. The Custodian
currently charges the Fund $10.00 per transaction for wiring redemption
proceeds. If this cost is passed through to redeeming shareholders by the Fund,
the charge will be deducted automatically from your account by redemption of
shares in your account. Your bank or brokerage firm may also impose a charge for
processing the wire. If wire transfer of funds is impossible or impractical, the
redemption proceeds will be sent by mail to the designated account.
You may redeem shares, subject to the procedures outlined above, by calling the
Fund at 1-800-430-3863. Redemption proceeds will only be sent to the bank
account or person named in your Fund Shares Application currently on file with
the Fund. Telephone redemption privileges authorize the Fund to act on telephone
instructions from any person representing himself or herself to be the investor
and reasonably believed by the Fund to be genuine. The Fund will employ
reasonable procedures, such as requiring a form of personal identification, to
confirm that instructions are genuine, and if it does not follow such
procedures, the Fund will be liable for any losses due to fraudulent or
unauthorized instructions. The Fund will not be liable for following telephone
instructions reasonably believed to be genuine.
Small Accounts. The Board of Trustees reserves the right to redeem involuntarily
any account having a net asset value of less than $10,000,000 (due to
redemptions, exchanges, or transfers, but not due to market action) upon
30-days' written notice. If the shareholder brings his account net asset value
up to at least $10,000,000 during the notice period, the account will not be
redeemed. Redemptions from retirement plans may be subject to federal income tax
withholding.
Signature Guarantees. To protect your account and the Fund from fraud, signature
guarantees are required to be sure that you are the person who has authorized a
change in registration or standing instructions for your account. Signature
guarantees are required for (1) change of registration requests, (2) requests to
establish or to change exchange privileges or telephone and bank wire redemption
service other than through your initial account application, and (3) redemption
requests in excess of $50,000. Signature guarantees are acceptable from a member
bank of the Federal Reserve System, a savings and loan institution, credit union
(if authorized under state law), registered broker-dealer, securities exchange,
or association clearing agency and must appear on the written request for change
of registration, establishment or change in exchange privileges, or redemption
request.
Redemptions in Kind. The Fund does not intend, under normal circumstances, to
redeem its securities by payment in kind. It is possible, however, that
conditions may arise in the future which would, in the opinion of the Trustees,
make it undesirable for the Fund to pay for all redemptions in cash. In such
case, the Board of Trustees may authorize payment to be made in readily
marketable portfolio securities of the Fund. Securities delivered in payment of
redemptions would be valued at the same value assigned to them in computing the
net asset value per share. Shareholders receiving them would incur brokerage
costs when these securities are sold. An irrevocable election has been filed
under Rule 18f-1 of the 1940 Act, wherein the Fund committed itself to pay
redemptions in cash, rather than in kind, to any shareholder of record of the
Fund who redeems during any ninety-day period, the lesser of (a) $250,000 or (b)
one percent (1%) of the Fund's net asset value at the beginning of such period.
10
<PAGE>
OTHER IMPORTANT INVESTMENT INFORMATION
--------------------------------------
DIVIDENDS, DISTRIBUTIONS, AND TAXES
The following information is meant as a general summary for U.S. taxpayers.
Additional tax information appears in the Statement of Additional Information
("SAI"). Shareholders should rely their own tax advisers for advice about the
particular federal, state and local tax consequences to them of investing in the
Fund.
The Fund will distribute most of its income and gains to its shareholders every
year. Income dividends, if any, will be paid quarterly and capital gains
distributions, if any, will be made at least annually. Although the Fund will
not be taxed on amounts it distributes, shareholders will generally be taxed,
regardless of whether distributions are received in cash or are reinvested in
additional Fund shares. A particular distribution generally will be taxable as
either ordinary income or long-term capital gains. If a Fund designates a
distribution as a capital gain distribution, it will be taxable to shareholders
as long-term capital gains, regardless of how long they have held their Fund
shares.
If the Fund declares a dividend in October, November or December but pays it in
January, it may be taxable to shareholders as if they received it in the year it
was declared. Each year each shareholder will receive a statement detailing the
tax status of any Fund distributions for that year.
Distributions may be subject to state and local taxes, as well as federal taxes.
Shareholders who hold Fund shares in a tax-deferred account, such as a
retirement plan, generally will not have to pay tax on Fund distributions until
they receive distributions from the account.
A shareholder who sells or redeems shares will generally realize a capital gain
or loss, which will be long-term or short-term, generally depending upon the
shareholder's holding period for the Fund shares. An exchange of shares may be
treated as a sale.
As with all mutual funds, the Fund may be required to withhold U.S. federal
income tax at the rate of 31% of all taxable distributions payable to
shareholders who fail to provide the Fund with their correct taxpayer
identification numbers or to make required certifications, or who have been
notified by the IRS that they are subject to backup withholding. Backup
withholding is not an additional tax; rather, it is a way in which the IRS
ensures it will collect taxes otherwise due. Any amounts withheld may be
credited against a shareholder's U.S. federal income tax liability.
11
<PAGE>
FINANCIAL HIGHLIGHTS
The financial data included in the table below have been derived from audited
financial statements of the Fund. The financial data for the fiscal years ended
February 29, 2000, February 28, 1999, and 1998, and the period ended February
28, 1997, have been audited by Deloitte & Touche LLP, independent auditors,
whose report covering such periods is incorporated by reference into the SAI.
This information should be read in conjunction with the Fund's latest audited
annual financial statements and notes thereto, which are also incorporated by
reference into the SAI, a copy of which may be obtained at no charge by calling
the Fund. Further information about the performance of the Fund is contained in
the Annual Report of the Fund, a copy of which may also be obtained at no charge
by calling the Fund at 1-800-430-3863.
<TABLE>
<S> <C> <C> <C> <C> <C>
Super-Institutional Shares
(For a Share Outstanding Throughout the Period)
------------------------------------------------------------------------------------------------------------------------------------
For the
period from
June 12, 1996
(commencement
Year ended Year ended Year ended of operations)
February 29, February 28, February 28, February 29,
2000 1999 1998 1997
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $16.68 $17.92 $16.29 $15.53
Income (loss) from investment operations
Net investment loss (0.18) (0.11) (0.12) (0.07)
Net realized and unrealized gain (loss) on investments 18.03 (0.67) 4.22 0.83
--------- --------- ---------- ----------
Total from investment operations 17.85 (0.78) 4.10 0.76
--------- --------- ---------- ----------
Distributions to shareholders from
Net investment income (0.00) 0.00 0.00 0.00
Tax return of capital 0.00 0.00 (0.53) 0.00
Distribution in excess of net realized gains 0.00 (0.03) 0.00 0.00
Net realized gain from investment transactions (1.23) (0.43) (1.94) 0.00
--------- ---------- ---------- ----------
Total distributions (1.23) (0.46) (2.47) 0.00
--------- ---------- ---------- ----------
Net asset value, end of period $33.30 $16.68 $17.92 $16.29
========= ========== ========== ==========
Total return (a) 111.10 % (4.32)% 25.40 % 4.89%(b)
========= ========== ========== ==========
Ratios/supplemental data
Net assets, end of period (000's) $238,827 $113,148 $118,246 $94,340
========= ========== ========== ==========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 1.08 % 1.05 % 1.06 % 1.08 %(c)
After expense reimbursements and waived fees 1.04 % 0.99 % 1.04 % 1.04 %(c)
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees (0.91)% (0.71)% (0.77)% (0.75)%(c)
After expense reimbursements and waived fees (0.87)% (0.64)% (0.75)% (0.72)%(c)
Portfolio turnover rate 165.92 % 121.48 % 105.60 % 126.44 %
(a) Total return does not reflect payment of a sales charge.
(b) Aggregate return. Not annualized.
(c) Annualized.
</TABLE>
12
<PAGE>
ADDITIONAL INFORMATION
________________________________________________________________________________
THE CHESAPEAKE GROWTH FUND
SUPER-INSTITUTIONAL SHARES
________________________________________________________________________________
Additional information about the Fund is available in the Fund's SAI. Additional
information about the Fund's investments is also available in the Fund's Annual
and Semi-annual Reports to shareholders. The Fund's Annual Report includes a
discussion of market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year.
The SAI and the Annual and Semi-annual Reports are available free of charge upon
request (you may also request other information about the Fund or make
shareholder inquiries) by contacting us:
----------------------------------------------------------------------
By telephone: 1-800-430-3863
By mail: The Chesapeake Core Growth Fund
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, NC 27803-0365
By e-mail: [email protected]
On the Internet: www.ncfunds.com
----------------------------------------------------------------------
Information about the Fund can also be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. Inquiries on the operations of the public
reference room may be made by calling the SEC at 1-202-942-8090. Reports and
other information about the Fund are available on the SEC's Internet site at
http://www.sec.gov, and copies of this information may be obtained, upon payment
of a duplicating fee, by electronic request at the following e-mail address:
[email protected], or by writing the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
Investment Company Act file number 811-07324
<PAGE>
Cusip Number 36559B203 NASDAQ Symbol CHEAX
________________________________________________________________________________
THE CHESAPEAKE GROWTH FUND
A series of the
Gardner Lewis Investment Trust
CLASS A INVESTOR SHARES
________________________________________________________________________________
PROSPECTUS
June 30, 2000
The Chesapeake Growth Fund ("Fund") seeks capital appreciation. In seeking to
achieve its objective, the Fund will invest primarily in equity securities of
medium and large capitalization companies. This Fund also offers
Super-Institutional Shares and Institutional Shares, which are offered by other
prospectuses.
Investment Advisor
------------------
Gardner Lewis Asset Management
285 Wilmington-West Chester Pike
Chadds Ford, Pennsylvania 19317
1-800-430-3863
The Securities and Exchange Commission has not approved the securities being
offered by this prospectus or determined whether this prospectus is accurate and
complete. It is unlawful for anyone to make any representation to the contrary.
<PAGE>
TABLE OF CONTENTS
Page
----
THE FUND.......................................................................2
--------
Investment Objective.....................................................2
Principal Investment Strategies..........................................2
Principal Risks of Investing in the Fund.................................3
Bar Chart and Performance Table..........................................4
Fees and Expenses of the Fund............................................5
MANAGEMENT OF THE FUND.........................................................6
----------------------
The Investment Advisor...................................................6
The Administrator........................................................6
The Transfer Agent.......................................................6
The Distributor..........................................................7
INVESTING IN THE FUND..........................................................8
---------------------
Minimum Investment.......................................................8
Purchase and Redemption Price............................................8
Purchasing Shares........................................................9
Redeeming Your Shares...................................................11
OTHER IMPORTANT INVESTMENT INFORMATION........................................13
--------------------------------------
Dividends, Distributions, and Taxes.....................................13
Financial Highlights ...................................................14
Additional Information..........................................Back Cover
<PAGE>
THE FUND
--------
INVESTMENT OBJECTIVE
The Chesapeake Growth Fund seeks capital appreciation. In seeking to achieve its
objective, the Fund will invest primarily in equity securities of medium and
large capitalization companies.
PRINCIPAL INVESTMENT STRATEGIES
The Fund, which is a diversified separate investment portfolio of the Gardner
Lewis Investment Trust ("Trust"), seeks capital appreciation by investing
primarily in equity securities of medium and large capitalization companies. The
Fund considers a medium capitalization company to be one that has a market
capitalization, measured at the time that the Fund purchases the security,
between $1 billion and $10 billion. The Fund considers a large capitalization
company to be one that has a market capitalization, measured at the time that
the Fund purchases the security, of at least $10 billion. The Fund's investments
in these medium and large capitalization companies will be primarily in equity
securities, such as common and preferred stocks and securities convertible into
common stocks.
In making investment decisions for the Fund, Gardner Lewis Asset Management
("Advisor") will base those decisions on its analysis of companies that show
superior prospects for growth. By developing and maintaining contacts with
management, customers, competitors and suppliers of current and potential
portfolio companies, the Advisor attempts to invest in those companies
undergoing positive changes that have not yet been recognized by "Wall Street"
analysts and the financial press. These changes often include:
o new product introductions,
o new distribution strategies,
o new manufacturing technology, and/or
o new management team or management philosophy.
Lack of recognition of these changes often causes securities to be less
efficiently priced. The Advisor believes these companies offer unique and
potentially superior investment opportunities.
Additionally, companies in which the Fund invests typically will show strong
earnings growth when compared to the previous year's comparable period. The
Advisor also favors portfolio investments in companies whose price when
purchased is not yet fully reflective of their growth rates. In selecting these
portfolio companies, the Advisor includes analysis of the following:
o growth rate of earnings,
o financial performance,
o management strengths and weaknesses,
o current market valuation in relation to earnings growth,
o historic and comparable company valuations,
o level and nature of the company's debt, cash flow, working capital, and
o quality of the company's assets.
Under normal market conditions, the Fund will invest at least 90% of the Fund's
total assets in equity securities, of which no more than 25% of the Fund's total
assets will be invested in the securities of any one industry. Up to 10% of the
Fund's total assets may consist of foreign securities and sponsored ADRs.
However, all securities will be traded on domestic and foreign securities
exchanges or on the over-the-counter markets. While portfolio securities are
generally acquired for the long term, they may be sold under any of the
following circumstances:
2
<PAGE>
o the anticipated price appreciation has been achieved or is no longer
probable;
o the company's fundamentals appear, in the analysis of the Advisor, to be
deteriorating;
o general market expectations regarding the company's future performance exceed
those expectations held by the Advisor; or
o alternative investments offer, in the view of the Advisor, superior potential
for appreciation.
PRINCIPAL RISKS OF INVESTING IN THE FUND
An investment in the Fund is subject to investment risks, including the possible
loss of the principal amount invested and there can be no assurance that the
Fund will be successful in meeting its objective. The following sections
describe some of the risks involved with portfolio investments of the Fund.
Equity Securities: To the extent that the majority of the Fund's portfolio
consists of common stocks, it is expected that the Fund's net asset value will
be subject to greater price fluctuation than a portfolio containing mostly fixed
income securities.
Market Risk: Market risk refers to the risk related to investments in securities
in general and the daily fluctuations in the securities markets. The Fund's
performance will change daily based on many factors, including fluctuation in
interest rates, the quality of the instruments in the Fund's investment
portfolio, national and international economic conditions and general market
conditions.
Internal Change: Investing in companies which are undergoing internal change,
such as implementing new strategies or introducing new technologies, as
described above, may involve greater than average risk due to their unproven
nature.
Medium Capitalization Companies: As noted above, the Fund may invest a
significant portion of its assets in the equity securities of medium
capitalization companies. To the extent the Fund's assets are invested in medium
capitalization companies, the Fund may exhibit more volatility than if it were
invested exclusively in large capitalization companies because of the fact that
the fact that the securities of mid-cap companies usually have more limited
marketability and, therefore, may be more volatile than securities of larger,
more established companies or the market averages in general. Because mid-cap
companies normally have fewer shares outstanding than larger companies, it may
be more difficult to buy or sell significant amounts of such shares without an
unfavorable impact on prevailing prices. Another risk factor is that mid-cap
companies often have limited product lines, markets, or financial resources and
may lack management depth. Additionally, mid-cap companies are typically subject
to greater changes in earnings and business prospects than are larger, more
established companies, and there typically is less publicly available
information concerning mid-cap companies than for larger, more established
companies.
Although investing in securities of medium-sized companies offers potential
above-average returns if the companies are successful, the risk exists that the
companies will not succeed, and the prices of the companies' shares could
significantly decline in value. Therefore, an investment in the Fund may involve
a greater degree of risk than an investment in other mutual funds that seek
capital growth by investing in more established, larger companies.
Portfolio Turnover: The Fund may sell portfolio securities without regard to the
length of time they have been held in order to take advantage of new investment
opportunities or changing market conditions. Since portfolio turnover may
involve paying brokerage commissions and other transaction costs, there could be
additional expenses for the Fund. The degree of portfolio activity may also have
an effect on the tax consequences of capital gain distributions. See "Financial
Highlights" for the Fund's portfolio turnover rate for prior periods.
3
<PAGE>
Short-Term Investments: As a temporary defensive measure, the Advisor may
determine that market conditions warrant investing in investment-grade bonds,
U.S. Government Securities, repurchase agreements, money market instruments, and
to the extent permitted by applicable law and the Fund's investment
restrictions, shares of other investment companies. Under such circumstances,
the Advisor may invest up to 100% of the Fund's assets in these investments.
Since investment companies investing in other investment companies pay
management fees and other expenses relating to those investment companies,
shareholders of the Fund would indirectly pay both the Fund's expenses and the
expenses relating to those other investment companies with respect to the Fund's
assets invested in such investment companies. To the extent the Fund is invested
in short-term investments, it will not be pursuing and may not achieve its
investment objective. Under normal circumstances, however, the Fund will also
hold money market or repurchase agreement instruments for funds awaiting
investment, to accumulate cash for anticipated purchases of portfolio
securities, to allow for shareholder redemptions, and to provide for Fund
operating expenses.
BAR CHART AND PERFORMANCE TABLE
The bar chart and performance table shown below provide an indication of the
risks of investing in the Fund's Class A Investor Shares by showing (on a
calendar year basis) changes in the Fund's average annual total returns from
year to year for the Fund's Class A Investor Shares and by showing (on a
calendar year basis) how the Fund's Class A Investor Shares' average annual
returns for one year, three years, and since inception compare to those of
broad-based securities market indexes. How the Fund has performed in the past is
not necessarily an indication of how the Fund will perform in the future.
[BAR CHART HERE]:
Year to Year Total Returns (as of December 31)
1996 16.42%
1997 14.95%
1998 12.12%
1999 51.37%
o During the 4-year period shown in the bar chart above, the highest return for
a calendar quarter was 42.95% (quarter ended December 31, 1999).
o During the 4-year period shown in the bar chart above, the lowest return for
a calendar quarter was -22.43% (quarter ended September 30, 1998).
o The year-to-date return of the Class A Investor Shares as of the most recent
calendar quarter was 22.75% (quarter ended March 31, 2000).
o Sales loads are not reflected in the chart above. If these amounts were
reflected, returns would be less than those shown.
4
<PAGE>
--------------------------------------------------------------------------------
Average Annual Total Returns Past 1 Past 3 Since
Period ended December 31, 1999 Year Years Inception**
--------------------------------------------------------------------------------
The Chesapeake Growth Fund
Class A Investor Shares* 46.83% 23.69% 22.05%
--------------------------------------------------------------------------------
Russell 2000 Index *** 22.10% 13.42% 16.79%
--------------------------------------------------------------------------------
S&P 500 Total Return Index **** 21.04% 27.56% 27.50%
--------------------------------------------------------------------------------
* Maximum sales loads are reflected in the table above for the Class A
Investor Shares.
** April 7, 1995 (inception date of the Fund's Class A Investor Shares)
*** The Russell 2000 Index is a widely recognized, unmanaged index of
small capitalization stocks. In the prior year's prospectus, the
NASDAQ Industrials Index was used for comparison purposes. However,
the Advisor feels that the Russell 2000 Index is a more accurate
comparison to the Fund's investment strategy than the NASDAQ
Industrials Index. The NASDAQ Industrials Index is a
capitalization-weighted, unmanaged index of all NASDAQ stocks in the
industrial sector.
**** The S&P 500 Total Return Index is the Standard & Poor's Composite
Index of 500 stocks and is a widely recognized, unmanaged index of
common stock prices.
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
Class A Investor Shares of the Fund:
Shareholder Fees
(fees paid directly from your investment)
-----------------------------------------
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price) .......................... 3.00%
Redemption fee ................................................. None
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
---------------------------------------------
Management Fees................................................. 1.00%
Distribution and/or Service (12b-1) Fees ....................... 0.25%
Other Expenses.................................................. 0.34%
----
Total Annual Fund Operating Expenses............................ 1.59%*
====
* "Total Annual Fund Operating Expenses" are based upon actual expenses
incurred by the Class A Investor Shares of the Fund for the fiscal year
ended February 29, 2000. The Fund has entered into brokerage/service
arrangements with specific brokers who have agreed to pay certain expenses
of the Fund. As a result of these arrangements, for the fiscal year ended
February 29, 2000, the Total Annual Fund Operating Expenses of the Class A
Investor Shares of the Fund were 1.56% of the average daily net assets of
the Class A Investor Shares of the Fund. There can be no assurance that the
Fund's brokerage/service arrangements will continue in the future. See the
"Brokerage/Service Arrangements" section below.
Example. This Example shows you the expenses you may pay over time by investing
in the Fund. Since all funds use the same hypothetical conditions, it should
help you compare the costs of investing in the Fund versus other funds. The
Example assumes the following conditions:
(1) You invest $10,000 in the Fund for the periods shown;
(2) You reinvest all dividends and distributions;
(3) You redeem all of your shares at the end of those periods;
(4) You earn a 5% total return; and
(5) The Fund's expenses remain the same.
Although your actual costs may be higher or lower, the following table shows you
what your costs may be under the conditions listed above.
--------------------------------------------------------------------------------
Period Invested 1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------------
Class A Investor Shares $457 $787 $1,140 $2,133
--------------------------------------------------------------------------------
5
<PAGE>
MANAGEMENT OF THE FUND
----------------------
THE INVESTMENT ADVISOR
The Fund's Advisor, Gardner Lewis Asset Management, established as a Delaware
corporation in 1990 and converted to a Pennsylvania limited partnership in 1994,
is controlled by W. Whitfield Gardner. Mr. Gardner and John L. Lewis, IV are
principals of the Advisor and executive officers of the Trust. They have been
responsible for day-to-day management of the Fund's portfolio since its
inception in 1993. They have been with the Advisor since its inception on April
2, 1990. The Advisor has approximately $3.5 billion in assets under management
and provides investment advice to corporations, trusts, pension and profit
sharing plans, other business and institutional accounts, individuals, as well
as other investment companies. The Advisor's address is 285 Wilmington-West
Chester Pike, Chadds Ford, Pennsylvania 19317. Subject to the authority of the
Trustees, the Advisor provides guidance and policy direction in connection with
its daily management of the Fund's assets. The Advisor manages the investment
and reinvestment of the Fund's assets. The Advisor is also responsible for the
selection of broker-dealers through which the Fund executes portfolio
transactions, subject to the brokerage policies established by the Trustees, and
it provides certain executive personnel to the Fund.
The Advisor's Compensation. As full compensation for the investment advisory
services provided to the Fund, the Fund pays the Advisor monthly compensation
based on the Fund's daily average net assets at the annual rate of 1.00%.
Brokerage/Service Arrangements. The Fund has entered into brokerage/service
arrangements with certain brokers who paid a portion of the Fund's expenses for
the fiscal year ended February 29, 2000. This program has been reviewed by the
Board of Trustees, subject to the provisions and guidelines as clearly outlined
in the securities laws and legal precedent of the United States. There can be no
assurance that the Fund's brokerage/service arrangements will continue in the
future.
Brokerage Practices. In selecting brokers and dealers to execute portfolio
transactions, the Advisor may consider research and brokerage services furnished
to the Advisor or its affiliates. Subject to seeking the most favorable net
price and execution available, the Advisor may also consider sales of shares of
the Fund as a factor in the selection of brokers and dealers.
THE ADMINISTRATOR
The Nottingham Company, Inc. ("Administrator") assists the Trust in the
performance of its administrative responsibilities to the Fund, coordinates the
services of each vendor of services to the Fund, and provides the Fund with
other necessary administrative, fund accounting, and compliance services. In
addition, the Administrator makes available the office space, equipment,
personnel, and facilities required to provide such services to the Fund.
THE TRANSFER AGENT
NC Shareholder Services, LLC ("NCSS") serves as the transfer agent and dividend
disbursing agent of the Fund. As indicated later in the section of this
Prospectus, "Investing in the Fund," NCSS will handle your orders to purchase
and redeem shares of the Fund and will disburse dividends paid by the Fund.
6
<PAGE>
THE DISTRIBUTOR
Capital Investment Group, Inc. ("Distributor") is the principal underwriter and
distributor of the Fund's shares and serves as the Fund's exclusive agent for
the distribution of Fund shares. The Distributor may sell the Fund's shares to
or through qualified securities dealers or others.
Distribution of the Fund's Shares. For the Class A Investor Shares of the Fund,
the Fund has adopted a Distribution Plan in accordance with Rule 12b-1 (the
"Distribution Plan") under the 1940 Act. Pursuant to the Distribution Plan, the
Fund compensates its distributor, Capital Investment Group, Inc., for services
rendered and expenses borne in connection with activities primarily intended to
result in the sale of the Fund's Class A Investor Shares (this compensation is
commonly referred to as "12b-1 fees").
The Distribution Plan provides that the Fund will pay from the Class A Investor
Shares annually 0.25% of the average daily net assets of the Fund's Class A
Investor Shares for activities primarily intended to result in the sale of those
shares, including reimbursement to entities for providing distribution and
shareholder servicing with respect to the Fund's Class A Investor Shares.
Because the 12b-1 fees are paid out of the Fund's assets on an on-going basis,
these fees, over time, will increase the cost of your investment and may cost
you more than paying other types of sales loads.
Other Expenses. In addition to the management and 12b-1 fees for the Class A
Investor Shares, the Fund pays all expenses not assumed by the Fund's Advisor,
including, without limitation: the fees and expenses of its independent auditors
and of its legal counsel; the costs of printing and mailing to shareholders
annual and semi-annual reports, proxy statements, prospectuses, statements of
additional information, and supplements thereto; the costs of printing
registration statements; bank transaction charges and custodian's fees; any
proxy solicitors' fees and expenses; filing fees; any federal, state, local
income, or other taxes; any interest; any membership fees of the Investment
Company Institute and similar organizations; fidelity bond and Trustees'
liability insurance premiums; and any extraordinary expenses, such as
indemnification payments or damages awarded in litigation or settlements made.
All general Trust expenses are allocated among and charged to the assets of each
separate series of the Trust, such as the Fund, on a basis that the Trustees
deem fair and equitable, which may be on the basis of relative net assets of
each series or the nature of the services performed and relative applicability
to each series.
7
<PAGE>
INVESTING IN THE FUND
---------------------
MINIMUM INVESTMENT
The Class A Investor Shares are sold at subject to a maximum sales charge of
3.00%, so that the term "offering price" includes the front-end sales load. All
shares are redeemed at Net Asset Value. Shares may be purchased by any account
managed by the Advisor and any other institutional investor or any broker-dealer
authorized to sell shares of the Fund. The minimum initial investment is $25,000
and the minimum additional investment is $500 ($100 for those participating in
the automatic investment plan.) The Fund may, in the Advisor's sole discretion,
accept certain accounts with less than the minimum investment.
PURCAHSE AND REDEMPTION PRICE
Sales Charges. The public offering price of the Class A Investor Shares of the
Fund equals net asset value plus a sales charge. The Distributor receives this
sales charge and may reallow it in the form of dealer discounts and brokerage
commissions as follows:
<TABLE>
<S> <C> <C> <C> <C>
Sales Sales
Charge As Charge As Dealers Discounts
% of Net % of Public and Brokerage
Amount of Transaction Amount Offering Commissions as % of
At Public Offering Price Invested Price Public Offering Price
------------------------ -------- ----- ---------------------
Less than $250,000............................. 3.09% 3.00% 2.80%
$250,000 but less than $500,000................ 2.04% 2.00% 1.80%
$500,000 or more............................... 1.01% 1.00% 0.90%
</TABLE>
From time to time dealers who receive dealer discounts and brokerage commissions
from the Distributor may reallow all or a portion of such dealer discounts and
brokerage commissions to other dealers or brokers. Pursuant to the terms of the
Distribution Agreement, the sales charge payable to the Distributor and the
dealer discounts may be suspended, terminated or amended. The Distributor, at
its expense, may, from time to time, provide additional promotional incentives
to dealers who sell Fund shares.
Determining the Fund's Net Asset Value. The price at which you purchase or
redeem shares is based on the next calculation of net asset value after an order
is received in good form. An order is considered to be in good form if it
includes a complete and accurate application and payment in full of the purchase
amount. The Fund's net asset value per share is calculated by dividing the value
of the Fund's total assets, less liabilities applicable to the particular class
of the Fund (including Fund expenses, which are accrued daily), by the total
number of outstanding shares of that Fund. The net asset value per share of the
Fund is normally determined at the time regular trading closes on the New York
Stock Exchange (currently 4:00 p.m. Eastern time, Monday through Friday), except
on business holidays when the New York Stock Exchange is closed.
Other Matters. All redemption requests will be processed and payment with
respect thereto will normally be made within seven days after tenders. The Fund
may suspend redemption, if permitted by the 1940 Act, for any period during
which the New York Stock Exchange is closed or during which trading is
restricted by the Securities Exchange Commission ("SEC") or if the SEC declares
that an emergency exists. Redemptions may also be suspended during other periods
permitted by the SEC for the protection of the Fund's shareholders.
Additionally, during drastic economic and market changes, telephone redemption
privileges may be difficult to implement. Also, if the Trustees determine that
it would be detrimental to the best interest of the Fund's remaining
shareholders to make payment in cash, the Fund may pay redemption proceeds in
whole or in part by a distribution-in-kind of readily marketable securities.
8
<PAGE>
PURCHASING SHARES
Regular Mail Orders. Payment for shares must be made by check or money order
from a U.S. bank and payable in U.S. dollars. If checks are returned due to
insufficient funds or other reasons, the Fund will charge a $20 fee or may
redeem shares of the Fund already owned by the purchaser to recover any such
loss. For regular mail orders, please complete the attached Fund Shares
Application and mail it, along with your check made payable to "The Chesapeake
Growth Fund," to:
The Chesapeake Growth Fund
Class A Investor Shares
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Please remember to add a reference to "Class A Investor Shares" to your check to
ensure proper credit to your account. The application must contain your Social
Security Number ("SSN") or Taxpayer Identification Number ("TIN"). If you have
applied for a SSN or TIN at the time of completing your account application but
you have not received your number, please indicate this on the application.
Taxes are not withheld from distributions to U.S. investors if certain IRS
requirements regarding the TIN are met.
Bank Wire Orders. Purchases may also be made through bank wire orders. To
establish a new account or add to an existing account by wire, please call the
Fund at 1-800-430-3863, before wiring funds, to advise the Fund of the
investment, dollar amount, and the account identification number. Additionally,
please have your bank use the following wire instructions:
First Union National Bank of North Carolina
Charlotte, North Carolina
ABA # 053000219
For: The Chesapeake Growth Fund - Class A Investor Shares
Acct. # 2000000862068
For further credit to (shareholder's name and SSN or TIN)
Additional Investments. You may also add to your account by mail or wire at any
time by purchasing shares at the then current public offering price. The minimum
additional investment is $500. Before adding funds by bank wire, please call the
Fund at 1-800-430-3863 and follow the above directions for wire purchases. Mail
orders should include, if possible, the "Invest by Mail" stub that is attached
to your Fund confirmation statement. Otherwise, please identify your account in
a letter accompanying your purchase payment.
Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investment in shares through automatic charges
to their checking account. With shareholder authorization and bank approval, the
Fund will automatically charge the checking account for the amount specified
($100 minimum), which will be automatically invested in shares at the public
offering price on or about the 21st day of the month. The shareholder may change
the amount of the investment or discontinue the plan at any time by writing to
the Fund.
Exchange Feature. You may exchange shares of the Fund for shares any other
series of the Trust advised by the Advisor and offered for sale in the state in
which you reside. Shares may be exchanged for shares of any other series of the
Trust at the net asset value plus the percentage difference between that series'
sales charge and any sales charge, previously paid by you in connection with the
shares being exchanged. Prior to making an investment decision or giving us your
instructions to exchange shares, please read the prospectus for the series in
which you wish to invest.
9
<PAGE>
A pattern of frequent purchase and redemption transactions is considered by the
Advisor to not be in the best interest of the shareholders of the Fund. Such a
pattern may, at the discretion of the Advisor, be limited by the Fund's refusal
to accept further purchase and/or exchange orders from an investor, after
providing the investor with 60-days' prior notice.
The Board of Trustees reserves the right to suspend, terminate, or amend the
terms of the exchange privilege upon 60-days' written notice to the
shareholders.
An investor may direct the Fund to exchange his shares by writing to the Fund at
its principal office. The request must be signed exactly as the investor's name
appears on the account, and it must also provide the account number, number of
shares to be exchanged, the name of the series to which the exchange will take
place and a statement as to whether the exchange is a full or partial redemption
of existing shares. Notwithstanding the foregoing, exchanges of shares may only
be within the same class or type of class of shares involved. For example, Class
A Investor Shares may not be exchanged for Institutional or Super-Institutional
Shares. Notwithstanding the foregoing, unless otherwise determined by the Fund,
an investor may not exchange shares of the Fund for shares of The Chesapeake
Aggressive Growth Fund, another series of the Trust affiliated with the Advisor,
unless such investor has an existing account with such Fund.
Stock Certificates. You do not have the option of receiving stock certificates
for your shares. Evidence of ownership will be given by issuance of periodic
account statements that will show the number of shares owned.
Reduced Sales Charges
Concurrent Purchases. For purposes of qualifying for a lower sales charge for
Class A Investor Shares, investors have the privilege of combining concurrent
purchases of the Fund and any other series of the Trust affiliated with the
Advisor and sold with a sales charge. For example, if a shareholder concurrently
purchases shares in another series of the Trust affiliated with the Advisor and
sold with a sales charge at the total public offering price of $250,000, and
Class A Investor Shares in the Fund at the total public offering price of
$250,000, the sales charge would be that applicable to a $500,000 purchase as
shown in the appropriate table above. This privilege may be modified or
eliminated at any time or from time to time by the Trust without notice thereof.
Rights of Accumulation. The sales charge applicable to a current purchase of
shares of the Fund by a person listed above is determined by adding the purchase
price of shares to be purchased to the aggregate value (at current offering
price) of shares of the Fund previously purchased and then owned, provided the
Distributor is notified by such person or his or her broker-dealer each time a
purchase is made which would so qualify. For example, a person who is purchasing
Class A Investor Shares with an aggregate value of $50,000 and who currently
owns shares of the Fund with a value of $200,000 would pay a sales charge of
2.00% of the offering price on the new investment.
Letter of Intent. Sales charges may also be reduced through an agreement to
purchase a specified quantity of shares over a designated thirteen-month period
by completing the "Letter of Intent" section of the Account Application.
Information about the "Letter of Intent" procedure, including its terms, is
contained on the Account Application.
Group Plans. Shares of the Fund may be sold at a reduced or eliminated sales
charge to certain Group Plans under which a sponsoring organization makes
recommendations to, permits group solicitation of, or otherwise facilitates
purchases by, its employees, members or participants. Information about such
arrangements is available from the Distributor.
10
<PAGE>
REDEEMING YOUR SHARES
Regular Mail Redemptions. Regular mail redemption request should be addressed
to:
The Chesapeake Growth Fund
Class A Investor Shares
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Regular mail redemption request should include:
(1) Your letter of instruction specifying the account number and number of
shares, or the dollar amount, to be redeemed. This request must be
signed by all registered shareholders in the exact names in which they
are registered;
(2) Any required signature guarantees (see "Signature Guarantees" below);
and
(3) Other supporting legal documents, if required in the case of estates,
trusts, guardianships, custodianships, corporations, partnerships,
pension or profit sharing plans, and other organizations.
Your redemption proceeds normally will be sent to you within 7 days after
receipt of your redemption request. However, the Fund may delay forwarding a
redemption check for recently purchased shares while it determines whether the
purchase payment will be honored. Such delay (which may take up to 15 days from
the date of purchase) may be reduced or avoided if the purchase is made by
certified check or wire transfer. In all cases, the net asset value next
determined after receipt of the request for redemption will be used in
processing the redemption request.
Telephone and Bank Wire Redemptions. You may also redeem shares by telephone and
bank wire under certain limited conditions. The Fund will redeem shares in this
manner when so requested by the shareholder only if the shareholder confirms
redemption instructions in writing.
The Fund may rely upon confirmation of redemption requests transmitted via
facsimile (FAX# 252-972-1908). The confirmation instructions must include:
(1) The name of the Fund and class of shares,
(2) Shareholder name and account number,
(3) Number of shares or dollar amount to be redeemed,
(4) Instructions for transmittal of redemption funds to the shareholder, and
(5) Shareholder signature as it appears on the application then on file with
the Fund.
Redemption proceeds will not be distributed until written confirmation of the
redemption request is received, per the instructions above. You can choose to
have redemption proceeds mailed to you at your address of record, your bank, or
to any other authorized person, or you can have the proceeds sent by bank wire
to your bank ($5,000 minimum). Redemption proceeds can not be wired on days in
which your bank is not open for business. You can change your redemption
instructions anytime you wish by filing a letter including your new redemption
instructions with the Fund. See "Signature Guarantees" below.
The Fund in its discretion may choose to pass through to redeeming shareholders
any charges imposed by the Custodian for wire redemptions. The Custodian
currently charges the Fund $10.00 per transaction for wiring redemption
proceeds. If this cost is passed through to redeeming shareholders by the Fund,
the charge will be deducted automatically from your account by redemption of
shares in your account. Your bank or brokerage firm may also impose a charge for
processing the wire. If wire transfer of funds is impossible or impractical, the
redemption proceeds will be sent by mail to the designated account.
11
<PAGE>
You may redeem shares, subject to the procedures outlined above, by calling the
Fund at 1-800-430-3863. Redemption proceeds will only be sent to the bank
account or person named in your Fund Shares Application currently on file with
the Fund. Telephone redemption privileges authorize the Fund to act on telephone
instructions from any person representing himself or herself to be the investor
and reasonably believed by the Fund to be genuine. The Fund will employ
reasonable procedures, such as requiring a form of personal identification, to
confirm that instructions are genuine, and if it does not follow such
procedures, the Fund will be liable for any losses due to fraudulent or
unauthorized instructions. The Fund will not be liable for following telephone
instructions reasonably believed to be genuine.
Small Accounts. The Board of Trustees reserves the right to redeem involuntarily
any account having a net asset value of less than $25,000 (due to redemptions,
exchanges, or transfers, but not due to market action) upon 30-days' written
notice. If the shareholder brings his account net asset value up to at least
$25,000 during the notice period, the account will not be redeemed. Redemptions
from retirement plans may be subject to federal income tax withholding.
Systematic Withdrawal Plan. A shareholder who owns shares of the Fund valued at
$10,000 or more at the current offering price may establish a Systematic
Withdrawal Plan to receive a monthly or quarterly check in a stated amount not
less than $100. Each month or quarter, as specified, the Fund will automatically
redeem sufficient shares from your account to meet the specified withdrawal
amount. The shareholder may establish this service whether dividends and
distributions are reinvested in shares of the Fund or paid in cash. Call or
write the Fund for an application form.
Signature Guarantees. To protect your account and the Fund from fraud, signature
guarantees are required to be sure that you are the person who has authorized a
change in registration or standing instructions for your account. Signature
guarantees are required for (1) change of registration requests, (2) requests to
establish or to change exchange privileges or telephone and bank wire redemption
service other than through your initial account application, and (3) redemption
requests in excess of $50,000. Signature guarantees are acceptable from a member
bank of the Federal Reserve System, a savings and loan institution, credit union
(if authorized under state law), registered broker-dealer, securities exchange,
or association clearing agency and must appear on the written request for change
of registration, establishment or change in exchange privileges, or redemption
request.
Redemptions in Kind. The Fund does not intend, under normal circumstances, to
redeem its securities by payment in kind. It is possible, however, that
conditions may arise in the future which would, in the opinion of the Trustees,
make it undesirable for the Fund to pay for all redemptions in cash. In such
case, the Board of Trustees may authorize payment to be made in readily
marketable portfolio securities of the Fund. Securities delivered in payment of
redemptions would be valued at the same value assigned to them in computing the
net asset value per share. Shareholders receiving them would incur brokerage
costs when these securities are sold. An irrevocable election has been filed
under Rule 18f-1 of the 1940 Act, wherein the Fund committed itself to pay
redemptions in cash, rather than in kind, to any shareholder of record of the
Fund who redeems during any ninety-day period, the lesser of (a) $250,000 or (b)
one percent (1%) of the Fund's net asset value at the beginning of such period.
12
<PAGE>
OTHER IMPORTANT INVESTMENT INFORMATION
--------------------------------------
DIVIDENDS, DISTRIBUTIONS, AND TAXES
The following information is meant as a general summary for U.S. taxpayers.
Additional tax information appears in the Statement of Additional Information
("SAI"). Shareholders should rely their own tax advisers for advice about the
particular federal, state, and local tax consequences to them of investing in
the Fund.
The Fund will distribute most of its income and gains to its shareholders every
year. Income dividends, if any, will be paid quarterly and capital gains
distributions, if any, will be made at least annually. Although the Fund will
not be taxed on amounts it distributes, shareholders will generally be taxed,
regardless of whether distributions are received in cash or are reinvested in
additional Fund shares. A particular distribution generally will be taxable as
either ordinary income or long-term capital gains. If a Fund designates a
distribution as a capital gain distribution, it will be taxable to shareholders
as long-term capital gains, regardless of how long they have held their Fund
shares.
If the Fund declares a dividend in October, November or December but pays it in
January, it may be taxable to shareholders as if they received it in the year it
was declared. Each year each shareholder will receive a statement detailing the
tax status of any Fund distributions for that year.
Distributions may be subject to state and local taxes, as well as federal taxes.
Shareholders who hold Fund shares in a tax-deferred account, such as a
retirement plan, generally will not have to pay tax on Fund distributions until
they receive distributions from the account.
A shareholder who sells or redeems shares will generally realize a capital gain
or loss, which will be long-term or short-term, generally depending upon the
shareholder's holding period for the Fund shares. An exchange of shares may be
treated as a sale.
As with all mutual funds, the Fund may be required to withhold U.S. federal
income tax at the rate of 31% of all taxable distributions payable to
shareholders who fail to provide the Fund with their correct taxpayer
identification numbers or to make required certifications, or who have been
notified by the IRS that they are subject to backup withholding. Backup
withholding is not an additional tax; rather, it is a way in which the IRS
ensures it will collect taxes otherwise due. Any amounts withheld may be
credited against a shareholder's U.S. federal income tax liability.
13
<PAGE>
FINANCIAL HIGHLIGHTS
The financial data included in the table below have been derived from audited
financial statements of the Fund. The financial data for the fiscal years ended
February 29, 2000 and February 28, 1999, 1998, and 1997, have been audited by
Deloitte & Touche LLP, independent auditors, whose report covering such periods
is incorporated by reference into the SAI. The financial data for the fiscal
period ended February 29, 1996 was audited by other independent auditors. This
information should be read in conjunction with the Fund's latest audited annual
financial statements and notes thereto, which are also incorporated by reference
into the SAI, a copy of which may be obtained at no charge by calling the Fund.
Further information about the performance of the Fund is contained in the Annual
Report of the Fund, a copy of which may also be obtained at no charge by calling
the Fund at 1-800-430-3863.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Series A Investor Shares
(For a Share Outstanding Throughout the Period)
------------------------------------------------------------------------------------------------------------------------------------
For the
period from
April 7, 1995
(commencement
Year ended Year ended Year ended Year ended of operations)to
February 29, February 28, February 28, February 28, February 29,
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $16.37 $17.69 $16.18 $14.42 $11.79
Income (loss) from investment operations
Net investment income loss (0.33) (0.24) (0.21) (0.18) (0.06)
Net realized and unrealized gain (loss) on investments 17.66 (0.62) 4.19 1.94 2.88
--------- --------- --------- ---------- -----------
Total from investment operations 17.33 (0.86) 3.98 1.76 2.82
--------- --------- --------- ---------- -----------
Distributions to shareholders from
Net investment income (0.00) 0.00 0.00 0.00 (0.11)
Tax return of capital 0.00 0.00 (0.53) 0.00 0.00
Distribution in excess of net realized gains 0.00 (0.03) 0.00 0.00 0.00
Net realized gain from investment transactions (1.23) (0.43) (1.94) 0.00 (0.08)
--------- --------- --------- ---------- -----------
Total distributions (1.23) (0.46) (2.47) 0.00 (0.19)
--------- --------- --------- ---------- -----------
Net asset value, end of period $32.47 $16.37 $17.69 $16.18 $14.42
========= ========= ========= ========== ===========
Total return (a) 110.07 % (4.83)% 24.80 % 12.21 % 23.86 %(b)
========= ========= ========= ========== ===========
Ratios/supplemental data
Net assets, end of period (000's) $33,200 $25,797 $40,924 $39,376 $32,549
========= ========= ========= ========== ===========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 1.59 % 1.60 % 1.55 % 1.54 % 1.88 %(c)
After expense reimbursements and waived fees 1.56 % 1.53 % 1.52 % 1.53 % 1.71 %(c)
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees (1.41)% (1.26)% (1.27)% (1.16)% (1.20)%(c)
After expense reimbursements and waived fees (1.38)% (1.18)% (1.24)% (1.15)% (1.04)%(c)
Portfolio turnover rate 165.92 % 121.48 % 105.60 % 126.44 % 99.33 %
(a) Total return does not reflect payment of a sales charge.
(b) Aggregate return. Not annualized.
(c) Annualized.
</TABLE>
14
<PAGE>
ADDITIONAL INFORMATION
________________________________________________________________________________
THE CHESAPEAKE GROWTH FUND
CLASS A INVESTOR SHARES
________________________________________________________________________________
Additional information about the Fund is available in the Fund's SAI. Additional
information about the Fund's investments is also available in the Fund's Annual
and Semi-annual Reports to shareholders. The Fund's Annual Report includes a
discussion of market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year.
The SAI and the Annual and Semi-annual Reports are available free of charge upon
request (you may also request other information about the Fund or make
shareholder inquiries) by contacting us:
----------------------------------------------------------------------
By telephone: 1-800-430-3863
By mail: The Chesapeake Growth Fund
Class A Investor Shares
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, NC 27803-0365
By e-mail: [email protected]
On the Internet: www.ncfunds.com
----------------------------------------------------------------------
Information about the Fund can also be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. Inquiries on the operations of the public
reference room may be made by calling the SEC at 1-202-942-8090. Reports and
other information about the Fund are available on the SEC's Internet site at
http://www.sec.gov, and copies of this information may be obtained, upon payment
of a duplicating fee, by electronic request at the following e-mail address:
[email protected], or by writing the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
Investment Company Act file number 811-07324
<PAGE>
Cusip Number 36559B708 NASDAQ Symbol CHCGX
________________________________________________________________________________
THE CHESAPEAKE CORE GROWTH FUND
A series of the
Gardner Lewis Investment Trust
A No Load Fund
________________________________________________________________________________
PROSPECTUS
June 30, 2000
The Chesapeake Core Growth Fund ("Fund") seeks capital appreciation. In seeking
to achieve its objective, the Fund will invest primarily in equity securities of
the largest 1000 companies, based on market capitalization, domiciled in the
United States.
Investment Advisor
------------------
Gardner Lewis Asset Management
285 Wilmington-West Chester Pike
Chadds Ford, Pennsylvania 19317
1-800-430-3863
The Securities and Exchange Commission has not approved the securities being
offered by this prospectus or determined whether this prospectus is accurate and
complete. It is unlawful for anyone to make any representation to the contrary.
<PAGE>
TABLE OF CONTENTS
Page
----
THE FUND...................................................................... 2
--------
Investment Objective.....................................................2
Principal Investment Strategies..........................................2
Principal Risks of Investing in the Fund.................................3
Bar Chart and Performance Table..........................................4
Fees and Expenses of the Fund............................................5
MANAGEMENT OF THE FUND.........................................................6
----------------------
The Investment Advisor...................................................6
The Administrator........................................................7
The Transfer Agent.......................................................7
The Distributor..........................................................7
INVESTING IN THE FUND..........................................................7
---------------------
Minimum Investment.......................................................7
Purchase and Redemption Price............................................7
Purchasing Shares........................................................8
Redeeming Your Shares....................................................9
OTHER IMPORTANT INVESTMENT INFORMATION........................................11
--------------------------------------
Dividends, Distributions, and Taxes.....................................11
Financial Highlights ...................................................12
Additional Information..........................................Back Cover
<PAGE>
THE FUND
--------
INVESTMENT OBJECTIVE
The Chesapeake Core Growth Fund seeks capital appreciation. In seeking to
achieve its objective, the Fund will invest primarily in equity securities of
the largest 1000 companies, based on market capitalization, domiciled in the
United States.
PRINCIPAL INVESTMENT STRATEGIES
The Fund, which is a diversified separate investment portfolio of the Gardner
Lewis Investment Trust ("Trust"), seeks capital appreciation by investing
primarily in equity securities of the largest 1000 companies based on market
capitalization. The Fund's investments in these companies will be primarily in
equity securities of such companies, such as common and preferred stocks and
securities convertible into common stocks. Realization of current income will
not be a significant investment consideration and any such income should be
considered incidental to the Fund's objectives.
In making investment decisions for the Fund, Gardner Lewis Asset Management
("Advisor") will focus on companies that show superior prospects for earnings
growth. By developing and maintaining contacts with management, customers,
competitors and suppliers of current and potential portfolio companies, the
Advisor attempts to invest in those companies undergoing positive changes that
have not yet been recognized by "Wall Street" analysts and the financial press.
The Advisor believes these companies offer unique and potentially superior
investment opportunities.
Additionally, companies in which the Fund invests typically will show strong
earnings growth when compared to the previous year's comparable period.
Companies that the Advisor determines to have excessive levels of debt are
generally avoided. The Advisor also favors portfolio investments in companies
whose price-to-earnings ratio when purchased is less than that company's
projected growth rate for the coming year. In selecting these portfolio
companies, the Advisor includes analysis of the following:
o growth rate of earnings,
o financial performance,
o management strengths and weaknesses,
o current market valuation in relation to earnings growth,
o historic and comparable company valuations,
o level and nature of the company's debt, cash flow, working capital, and
o quality of the company's assets.
Under normal market conditions, the Fund will invest at least 90% of the Fund's
total assets in equity securities and 80% to 90% of the portfolio will be
invested in the 1000 largest companies described above. Generally, all the
securities in which the Fund may invest will traded on domestic securities
exchanges or on the over-the-counter markets. The Fund may also invest in
foreign securities. However, all foreign securities that the Fund may acquire
will be traded on domestic U.S. exchanges. While portfolio securities are
generally acquired for the long term, they may be sold under any of the
following circumstances:
o the anticipated price appreciation has been achieved or is no longer
probable;
o the company's fundamentals appear, in the analysis of the Advisor, to be
deteriorating;
o general market expectations regarding the company's future performance exceed
those expectations held by the Advisor; or
o alternative investments offer, in the view of the Advisor, superior potential
for appreciation.
2
<PAGE>
PRINCIPAL RISKS OF INVESTING IN THE FUND
An investment in the Fund is subject to investment risks, including the possible
loss of the principal amount invested and there can be no assurance that the
Fund will be successful in meeting its objective. The following sections
describe some of the risks involved with portfolio investments of the Fund.
Equity Securities: To the extent that the majority of the Fund's portfolio
consists of common stocks, it is expected that the Fund's net asset value will
be subject to greater price fluctuation than a portfolio containing mostly fixed
income securities.
Market Risk: Market risk refers to the risk related to investments in securities
in general and the daily fluctuations in the securities markets. The Fund's
performance per share will change daily based on many factors, including
fluctuation in interest rates, the quality of the instruments in the Fund's
investment portfolio, national and international economic conditions, and
general market conditions.
Portfolio Turnover: The Fund may sell portfolio securities without regard to the
length of time they have been held in order to take advantage of new investment
opportunities or changing market conditions. Since portfolio turnover may
involve paying brokerage commissions and other transaction costs, there could be
additional expenses for the Fund. The degree of portfolio activity may also have
an effect on the tax consequences of capital gain distributions. See "Financial
Highlights" for the Fund's portfolio turnover rate for prior periods.
Short-Term Investments: As a temporary defensive measure, the Advisor may
determine that market conditions warrant investing in investment-grade bonds,
U.S. Government Securities, repurchase agreements, money market instruments, and
to the extent permitted by applicable law and the Fund's investment
restrictions, shares of other investment companies. Under such circumstances,
the Advisor may invest up to 100% of the Fund's assets in these investments.
Since investment companies investing in other investment companies pay
management fees and other expenses relating to those investment companies,
shareholders of the Fund would indirectly pay both the Fund's expenses and the
expenses relating to those other investment companies with respect to the Fund's
assets invested in such investment companies. To the extent the Fund is invested
in short-term investments, it will not be pursuing and may not achieve its
investment objective. Under normal circumstances, however, the Fund will also
hold money market or repurchase agreement instruments for funds awaiting
investment, to accumulate cash for anticipated purchases of portfolio
securities, to allow for shareholder redemptions, and to provide for Fund
operating expenses.
3
<PAGE>
BAR CHART AND PERFORMANCE TABLE
The bar chart and table shown below provide an indication of the risks of
investing in The Chesapeake Core Growth Fund by showing (on a calendar year
basis) changes in the Fund's average annual total returns from the previous year
and by showing (on a calendar year basis) how the Fund's average annual returns
for one year and since inception compare to those of a broad-based securities
market index. How the Fund has performed in the past is not necessarily an
indication of how the Fund will perform in the future.
[BAR CHART HERE]:
1998 27.32%
1999 47.60%
o During the 2-year period shown in the bar chart above, the highest return for
a calendar quarter was 36.08% (quarter ended December 31, 1999).
o During the 2-year period shown in the bar chart above, the lowest return for
a calendar quarter was -12.18% (quarter ended September 30, 1998).
o The year-to-date total return of the Fund as of the most recent calendar
quarter was 13.14% (quarter ended March 31, 2000).
-------------------------------------- -------------------- --------------------
Average Annual Total Returns Past 1 Since
Period ended December 31, 1999 Year Inception*
-------------------------------------- -------------------- --------------------
The Chesapeake Core Growth Fund 47.60% 31.92%
-------------------------------------- -------------------- --------------------
S&P 500 Total Return Index** 21.04% 22.86%
-------------------------------------- -------------------- --------------------
* September 29, 1997 (inception date of the Fund)
** The S&P 500 Total Return Index is the Standard & Poor's composite index of
500 stocks and is a widely recognized, unmanaged index of common stock
prices.
4
<PAGE>
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund:
Shareholder Fees for the Fund
(fees paid directly from your investment)
-----------------------------------------
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price) .........................None
Redemption fee ...................................................None
Annual Fund Operating Expenses for the Fund
(expenses that are deducted from Fund assets)
---------------------------------------------
Management Fees...........................................1.00%
Distribution and/or Service (12b-1) Fees..................None
Other Expenses............................................1.25%
----
Total Annual Fund Operating Expenses........................2.25%*
Fee Waivers and/or Expense Reimbursements..................(1.03%)
----
Net Expenses................................................1.22%
====
* "Total Annual Fund Operating Expenses" are based upon actual
expenses incurred by the Fund for the fiscal year ended
February 29, 2000. The Advisor has entered into a
contractual agreement with the Trust under which it has
agreed to waive or reduce its fees and to assume other
expenses of the Fund, if necessary, in an amount that limits
Total Annual Fund Operating Expenses (exclusive of interest,
taxes, brokerage fees and commissions, extraordinary
expenses, and payments, if any, under a Rule 12b-1 Plan) to
not more than 1.35% of the average daily net assets of the
Fund for the fiscal year to end February 28, 2001. It is
expected that the contractual agreement will continue from
year-to-year provided such continuance is approved by the
Board of Trustees. In addition, the Fund has entered into
brokerage/service arrangements in which several brokers have
agreed to pay certain expenses of the Fund. For the fiscal
year ended February 29, 2000, the amount of expenses paid by
these brokers totaled 0.07% of the average daily net assets
of the Fund. There can be no assurance that the Fund's
brokerage/service arrangements will continue in the future.
As a result of these arrangements, for the fiscal year ended
February 29, 2000, the Total Annual Fund Operating Expenses
of the Fund were 1.15% of the average daily net assets of
the Fund. See "Expense Limitation Agreement" and
"Brokerage/Service Arrangements" sections below for more
detailed information.
Example. This Example shows you the expenses you may pay over time by investing
in the Fund. Since all funds use the same hypothetical conditions, it should
help you compare the costs of investing in the Fund versus other funds. The
Example assumes the following conditions:
(1) You invest $10,000 in the Fund for the periods shown;
(2) You reinvest all dividends and distributions;
(3) You redeem all of your shares at the end of those periods;
(4) You earn a 5% total return; and
(5) The Fund's expenses remain the same.
Although your actual costs may be higher or lower, the following table shows you
what your costs may be under the conditions listed above.
------------------------- ------------ ------------ ------------- --------------
Period Invested 1 Year 3 Years 5 Years 10 Years
------------------------- ------------ ------------ ------------- --------------
Your Costs $137 $520 $823 $1,659
------------------------- ------------ ------------ ------------- --------------
5
<PAGE>
MANAGEMENT OF THE FUND
----------------------
THE INVESTMENT ADVISOR
The Fund's Advisor, Gardner Lewis Asset Management, established as a Delaware
corporation in 1990 and converted to a Pennsylvania limited partnership in 1994,
is controlled by W. Whitfield Gardner. Mr. Gardner and John L. Lewis, IV are
principals of the Advisor and executive officers of the Trust. They have been
responsible for day-to-day management of the Fund's portfolio since its
inception in 1997. Both have been with the Advisor since its inception on April
2, 1990. The Advisor has approximately $3.5 billion in assets under management
and provides investment advice to corporations, trusts, pension and profit
sharing plans, other business and institutional accounts, individuals, as well
as other investment companies. The Advisor's address is 285 Wilmington-West
Chester Pike, Chadds Ford, Pennsylvania 19317. Subject to the authority of the
Trustees, the Advisor provides guidance and policy direction in connection with
its daily management of the Fund's assets. The Advisor manages the investment
and reinvestment of the Fund's assets. The Advisor is also responsible for the
selection of broker-dealers through which the Fund executes portfolio
transactions, subject to the brokerage policies established by the Trustees, and
it provides certain executive personnel to the Fund.
The Advisor's Compensation. As full compensation for the investment advisory
services provided to the Fund, the Fund pays the Advisor monthly compensation
based on the Fund's daily average net assets. During the most recent fiscal year
ended February 29, 2000, the Advisor waived a portion of its fee in the amount
of $69,737. As a result, the advisory fee paid to the Advisor by the Fund as a
percentage of average net assets for the fiscal year ending February 29, 2000
was 0.14%.
Expense Limitation Agreement. In the interest of limiting expenses of the Fund,
the Advisor has entered into an expense limitation agreement with the Trust,
with respect to the Fund ("Expense Limitation Agreement"), pursuant to which the
Advisor has agreed to waive or limit its fees and to assume other expenses so
that the total annual operating expenses of the Fund (other than interest,
taxes, brokerage commissions, other expenditures which are capitalized in
accordance with generally accepted accounting principles, and other
extraordinary expenses not incurred in the ordinary course of each Fund's
business, and amounts, if any, payable pursuant to a Rule 12b-1 Plan) are
limited to 1.35% of the average daily net assets of the Fund for the fiscal year
to end February 28, 2001. The Expense Limitation Agreement shall continue from
year-to-year provided such continuance is specifically approved by a majority of
the Trustees of the Trust who (i) are not "interested persons" of the Trust or
any other party to this Agreement, as defined in the Investment Company Act of
1940, as amended ("1940 Act"), and (ii) have no direct or indirect financial
interest in the operation of this Expense Limitation Agreement.
The Fund may, at a later date, reimburse the Advisor the management fees waived
or limited and other expenses assumed and paid by the Advisor pursuant to the
Expense Limitation Agreement during any of the previous five (5) fiscal years,
provided that the Fund has reached a sufficient asset size to permit such
reimbursement to be made without causing the total annual expense ratio of the
particular Fund to exceed the percentage limits stated above. Consequently, no
reimbursement by Fund will be made unless: (i) the Fund's assets exceed $20
million; (ii) the particular Fund's total annual expense ratio is less than the
percentage stated above; and (iii) the payment of such reimbursement has been
approved by the Trust's Board of Trustees on a quarterly basis.
Brokerage/Service Arrangements. The Fund has entered into brokerage/service
arrangements with certain brokers who paid a portion of the Fund's expenses for
the fiscal year ended February 29, 2000. This program has been reviewed by the
Board of Trustees, subject to the provisions and guidelines as clearly outlined
in the securities laws and legal precedent of the United States. There can be no
assurance that the Fund's brokerage/service arrangements will continue in the
future.
Brokerage Practices. In selecting brokers and dealers to execute portfolio
transactions, the Advisor may consider research and brokerage services furnished
to the Advisor or its affiliates. Subject to seeking the most favorable net
price and execution available, the Advisor may also consider sales of shares of
the Fund as a factor in the selection of brokers and dealers.
6
<PAGE>
THE ADMINISTRATOR
The Nottingham Company, Inc. ("Administrator") assists the Trust in the
performance of its administrative responsibilities to the Fund, coordinates the
services of each vendor of services to the Fund, and provides the Fund with
other necessary administrative, fund accounting and compliance services. In
addition, the Administrator makes available the office space, equipment,
personnel and facilities required to provide such services to the Fund.
THE TRANSFER AGENT
NC Shareholder Services, LLC ("NCSS") serves as the transfer agent and dividend
disbursing agent of the Fund. As indicated later in the section of this
Prospectus, "Investing in the Fund," NCSS will handle your orders to purchase
and redeem shares of the Fund and will disburse dividends paid by the Fund.
THE DISTRIBUTOR
Capital Investment Group, Inc. ("Distributor") is the principal underwriter and
distributor of the Fund's shares and serves as the Fund's exclusive agent for
the distribution of Fund shares. Capital Investment Group, Inc. may sell the
Fund's shares to or through qualified securities dealers or others.
Other Expenses. In addition to the management fees, the Fund pays all expenses
not assumed by the Fund's Advisor, including, without limitation: the fees and
expenses of its independent auditors and of its legal counsel; the costs of
printing and mailing to shareholders annual and semi-annual reports, proxy
statements, prospectuses, statements of additional information and supplements
thereto; the costs of printing registration statements; bank transaction charges
and custodian's fees; any proxy solicitors' fees and expenses; filing fees; any
federal, state or local income or other taxes; any interest; any membership fees
of the Investment Company Institute and similar organizations; fidelity bond and
Trustees' liability insurance premiums; and any extraordinary expenses, such as
indemnification payments or damages awarded in litigation or settlements made.
All general Trust expenses are allocated among and charged to the assets of each
separate series of the Trust, such as the Fund, on a basis that the Trustees
deem fair and equitable, which may be on the basis of relative net assets of
each series or the nature of the services performed and relative applicability
to each series.
INVESTING IN THE FUND
---------------------
MINIMUM INVESTMENT
Shares of the Fund are sold and redeemed at net asset value. Shares may be
purchased by any account managed by the Advisor and any other institutional
investor or any broker-dealer authorized to sell shares of the Fund. The minimum
initial investment is $25,000 and the minimum additional investment is $500
($100 for those participating in the automatic investment plan.) The Fund may,
in the Advisor's sole discretion, accept certain accounts with less than the
minimum investment.
PURCHASE AND REDEMPTION PRICE
Determining the Fund's Net Asset Value. The price at which you purchase or
redeem shares is based on the next calculation of net asset value after an order
is received in good form. An order is in good form if it includes providing a
complete and accurate application and payment in full of the purchase amount.
The Fund's net asset value per share is calculated by dividing the value of the
Fund's total assets, less liabilities (including Fund expenses, which are
accrued daily), by the total number of outstanding shares of that Fund. The net
asset value per share of the Fund is normally determined at the time regular
trading closes on the New York Stock Exchange (currently 4:00 p.m. Eastern time,
Monday through Friday), except on business holidays when the New York Stock
Exchange is closed.
7
<PAGE>
Other Matters. All redemption requests will be processed and payment with
respect thereto will normally be made within seven days after tenders. The Fund
may suspend redemption, if permitted by the 1940 Act, for any period during
which the New York Stock Exchange is closed or during which trading is
restricted by the Securities and Exchange Commission ("SEC") or if the SEC
declares that an emergency exists. Redemptions may also be suspended during
other periods permitted by the SEC for the protection of the Fund's
shareholders. Additionally, during drastic economic and market changes,
telephone redemption privileges may be difficult to implement. Also, if the
Trustees determine that it would be detrimental to the best interest of the
Fund's remaining shareholders to make payment in cash, the Fund may pay
redemption proceeds in whole or in part by a distribution-in-kind of readily
marketable securities.
PURCHASING SHARES
Regular Mail Orders. Payment for shares must be made by check or money order
from a U.S. bank and payable in U.S. dollars. If checks are returned due to
insufficient funds or other reasons, the Fund will charge a $20 fee or may
redeem shares of the Fund already owned by the purchaser to recover any such
loss. For regular mail orders, please complete the attached Fund Shares
Application and mail it, along with your check made payable to "The Chesapeake
Core Growth Fund," to:
The Chesapeake Core Growth Fund
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
The application must contain your Social Security Number ("SSN") or Taxpayer
Identification Number ("TIN"). If you have applied for a SSN or TIN at the time
of completing your account application but you have not received your number,
please indicate this on the application. Taxes are not withheld from
distributions to U.S. investors if certain IRS requirements regarding the TIN
are met.
Bank Wire Orders. Purchases may also be made through bank wire orders. To
establish a new account or add to an existing account by wire, please call the
Fund at 1-800-430-3863, before wiring funds, to advise the Fund of the
investment, dollar amount, and the account identification number. Additionally,
please have your bank use the following wire instructions:
First Union National Bank of North Carolina
Charlotte, North Carolina
ABA # 053000219
For: The Chesapeake Core Growth Fund
Acct. # 2000001067260
For further credit to (shareholder's name and SSN or TIN)
Additional Investments. You may also add to your account by mail or wire at any
time by purchasing shares at the then current public offering price. The minimum
additional investment is $500. Before adding funds by bank wire, please call the
Fund at 1-800-430-3863 and follow the above directions for wire purchases. Mail
orders should include, if possible, the "Invest by Mail" stub that is attached
to your Fund confirmation statement. Otherwise, please identify your account in
a letter accompanying your purchase payment.
8
<PAGE>
Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investment in shares through automatic charges
to their checking account. With shareholder authorization and bank approval, the
Fund will automatically charge the checking account for the amount specified
($100 minimum), which will be automatically invested in shares at the public
offering price on or about the 21st day of the month. The shareholder may change
the amount of the investment or discontinue the plan at any time by writing to
the Fund.
Exchange Feature. You may exchange shares of the Fund for shares of any other
series of the Trust advised by the Advisor and offered for sale in the state in
which you reside. Shares may be exchanged for shares of any other series of the
Trust at the net asset value plus the percentage difference between that series'
sales charge and any sales charge, previously paid by you in connection with the
shares being exchanged. Prior to making an investment decision or giving us your
instructions to exchange shares, please read the prospectus for the series in
which you wish to invest.
A pattern of frequent purchase and redemption transactions is considered by the
Advisor to not be in the best interest of the shareholders of the Fund. Such a
pattern may, at the discretion of the Advisor, be limited by the Fund's refusal
to accept further purchase and/or exchange orders from an investor, after
providing the investor with 60-days' prior notice.
The Board of Trustees reserves the right to suspend, terminate, or amend the
terms of the exchange privilege upon 60-days' written notice to the
shareholders.
Stock Certificates. You do not have the option of receiving stock certificates
for your shares. Evidence of ownership will be given by issuance of periodic
account statements that will show the number of shares owned.
REDEEMING YOUR SHARES
Regular Mail Redemptions. Regular mail redemption request should be addressed
to:
The Chesapeake Core Growth Fund
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Regular mail redemption request should include:
(1) Your letter of instruction specifying the account number and
number of shares, or the dollar amount, to be redeemed. This
request must be signed by all registered shareholders in the exact
names in which they are registered;
(2) Any required signature guarantees (see "Signature Guarantees"
below); and
(3) Other supporting legal documents, if required in the case of
estates, trusts, guardianships, custodianships, corporations,
partnerships, pension or profit sharing plans, and other
organizations.
Your redemption proceeds normally will be sent to you within 7 days after
receipt of your redemption request. However, the Fund may delay forwarding a
redemption check for recently purchased shares while it determines whether the
purchase payment will be honored. Such delay (which may take up to 15 days from
the date of purchase) may be reduced or avoided if the purchase is made by
certified check or wire transfer. In all cases, the net asset value next
determined after receipt of the request for redemption will be used in
processing the redemption request.
9
<PAGE>
Telephone and Bank Wire Redemptions. You may also redeem shares by telephone and
bank wire under certain limited conditions. The Fund will redeem shares in this
manner when so requested by the shareholder only if the shareholder confirms
redemption instructions in writing.
The Fund may rely upon confirmation of redemption requests transmitted via
facsimile (FAX# 252-972-1908). The confirmation instructions must include:
(1) The name of the Fund,
(2) Shareholder name and account number,
(3) Number of shares or dollar amount to be redeemed,
(4) Instructions for transmittal of redemption funds to the shareholder, and
(5) Shareholder signature as it appears on the application then on file with
the Fund.
Redemption proceeds will not be distributed until written confirmation of the
redemption request is received, per the instructions above. You can choose to
have redemption proceeds mailed to you at your address of record, your bank, or
to any other authorized person, or you can have the proceeds sent by bank wire
to your bank ($5,000 minimum). Redemption proceeds can not be wired on days in
which your bank is not open for business. You can change your redemption
instructions anytime you wish by filing a letter including your new redemption
instructions with the Fund. See "Signature Guarantees" below.
The Fund in its discretion may choose to pass through to redeeming shareholders
any charges imposed by the Custodian for wire redemptions. The Custodian
currently charges the Fund $10.00 per transaction for wiring redemption
proceeds. If this cost is passed through to redeeming shareholders by the Fund,
the charge will be deducted automatically from your account by redemption of
shares in your account. Your bank or brokerage firm may also impose a charge for
processing the wire. If wire transfer of funds is impossible or impractical, the
redemption proceeds will be sent by mail to the designated account.
You may redeem shares, subject to the procedures outlined above, by calling the
Fund at 1-800-430-3863. Redemption proceeds will only be sent to the bank
account or person named in your Fund Shares Application currently on file with
the Fund. Telephone redemption privileges authorize the Fund to act on telephone
instructions from any person representing himself or herself to be the investor
and reasonably believed by the Fund to be genuine. The Fund will employ
reasonable procedures, such as requiring a form of personal identification, to
confirm that instructions are genuine, and if it does not follow such
procedures, the Fund will be liable for any losses due to fraudulent or
unauthorized instructions. The Fund will not be liable for following telephone
instructions reasonably believed to be genuine.
Small Accounts. The Board of Trustees reserves the right to redeem involuntarily
any account having a net asset value of less than $25,000 (due to redemptions,
exchanges, or transfers, and not due to market action) upon 60-days' written
notice. If the shareholder brings his account net asset value up to at least
$25,000 during the notice period, the account will not be redeemed. Redemptions
from retirement plans may be subject to federal income tax withholding.
Systematic Withdrawal Plan. A shareholder who owns shares of the Fund valued at
$25,000 or more at the current offering price may establish a Systematic
Withdrawal Plan to receive a monthly or quarterly check in a stated amount not
less than $250. Each month or quarter, as specified, the Fund will automatically
redeem sufficient shares from your account to meet the specified withdrawal
amount. The shareholder may establish this service whether dividends and
distributions are reinvested in shares of the Fund or paid in cash. Call or
write the Fund for an application form.
Signature Guarantees. To protect your account and the Fund from fraud, signature
guarantees are required to be sure that you are the person who has authorized a
change in registration or standing instructions for your account. Signature
guarantees are required for (1) change of registration requests, (2) requests to
establish or to change exchange privileges or telephone and bank wire redemption
service other than through your initial account application, and (3) redemption
requests in excess of $50,000. Signature guarantees are acceptable from a member
bank of the Federal Reserve System, a savings and loan institution, credit union
(if authorized under state law), registered broker-dealer, securities exchange,
or association clearing agency and must appear on the written request for change
of registration, establishment or change in exchange privileges, or redemption
request.
10
<PAGE>
Redemptions in Kind. The Fund does not intend, under normal circumstances, to
redeem its securities by payment in kind. It is possible, however, that
conditions may arise in the future which would, in the opinion of the Trustees,
make it undesirable for the Fund to pay for all redemptions in cash. In such
case, the Board of Trustees may authorize payment to be made in readily
marketable portfolio securities of the Fund. Securities delivered in payment of
redemptions would be valued at the same value assigned to them in computing the
net asset value per share. Shareholders receiving them would incur brokerage
costs when these securities are sold. An irrevocable election has been filed
under Rule 18f-1 of the 1940 Act, wherein the Fund committed itself to pay
redemptions in cash, rather than in kind, to any shareholder of record of the
Fund who redeems during any ninety-day period, the lesser of (a) $250,000 or (b)
one percent (1%) of the Fund's net asset value at the beginning of such period.
OTHER IMPORTANT INVESTMENT INFORMATION
--------------------------------------
DIVIDENDS, DISTRIBUTIONS, AND TAXES
The following information is meant as a general summary for U.S. taxpayers.
Additional tax information appears in the Statement of Additional Information
("SAI"). Shareholders should rely their own tax advisers for advice about the
particular federal, state and local tax consequences to them of investing in the
Fund.
The Fund will distribute most of its income and gains to its shareholders every
year. Income dividends, if any, will be paid quarterly and capital gains
distributions, if any, will be made at least annually. Although the Fund will
not be taxed on amounts it distributes, shareholders will generally be taxed,
regardless of whether distributions are received in cash or are reinvested in
additional Fund shares. A particular distribution generally will be taxable as
either ordinary income or long-term capital gains. If a Fund designates a
distribution as a capital gain distribution, it will be taxable to shareholders
as long-term capital gains, regardless of how long they have held their Fund
shares.
If the Fund declares a dividend in October, November or December but pays it in
January, it may be taxable to shareholders as if they received it in the year it
was declared. Each year each shareholder will receive a statement detailing the
tax status of any Fund distributions for that year.
Distributions may be subject to state and local taxes, as well as federal taxes.
Shareholders who hold Fund shares in a tax-deferred account, such as a
retirement plan, generally will not have to pay tax on Fund distributions until
they receive distributions from the account.
A shareholder who sells or redeems shares will generally realize a capital gain
or loss, which will be long-term or short-term, generally depending upon the
shareholder's holding period for the Fund shares. An exchange of shares may be
treated as a sale.
As with all mutual funds, the Fund may be required to withhold U.S. federal
income tax at the rate of 31% of all taxable distributions payable to
shareholders who fail to provide the Fund with their correct taxpayer
identification numbers or to make required certifications, or who have been
notified by the IRS that they are subject to backup withholding. Backup
withholding is not an additional tax; rather, it is a way in which the IRS
ensures it will collect taxes otherwise due. Any amounts withheld may be
credited against a shareholder's U.S. federal income tax liability.
11
<PAGE>
FINANCIAL HIGHLIGHTS
The financial data included in the table below have been derived from audited
financial statements of the Fund. The financial data for the fiscal years ended
February 29, 2000, February 28, 1999, and the period ended February 28, 1998,
have been audited by Deloitte & Touche LLP, independent auditors, whose report
covering such periods is incorporated by reference into the SAI. This
information should be read in conjunction with the Fund's latest audited annual
financial statements and notes thereto, which are also incorporated by reference
into the SAI, a copy of which may be obtained at no charge by calling the Fund.
Further information about the performance of the Fund is contained in the Annual
Report of the Fund, a copy of which may also be obtained at no charge by calling
the Fund at 1-800-430-3863.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
(For a Share Outstanding Throughout the Period)
------------------------------------------------------------------------------------------------------------------------------------
Year ended Year ended Period ended
February 29, February 28, February 28,
2000 1999 1998 (a)
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ............................. $12.68 $10.72 $10.00
Income from investment operations
Net investment loss ................................... (0.07) (0.07) (0.01)
Net realized and unrealized gain on investments ....... 8.18 2.03 0.75
----------- ----------- -----------
Total from investment operations ................. 8.11 1.96 0.74
----------- ----------- -----------
Distributions to shareholders from
Distribution in excess of net investment income ....... (0.00) 0.00 (0.02)
Net realized gain from investment transactions ........ (1.37) 0.00 0.00
----------- ----------- -----------
Total distributions .............................. (1.37) 0.00 (0.02)
----------- ----------- -----------
Net asset value, end of period ................................... $19.42 $12.68 $10.72
=========== =========== ===========
Total return ..................................................... 66.64 % 18.27 % 7.49 %
=========== =========== ===========
Ratios/supplemental data
Net assets, end of period .................................. $11,541,894 $ 6,049,513 $ 6,048,268
=========== =========== ===========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ......... 2.25 % 2.73 % 3.19 % (b)
After expense reimbursements and waived fees .......... 1.15 % 1.39 % 1.24 % (b)
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees ......... (1.59)% (1.89)% (2.19)% (b)
After expense reimbursements and waived fees .......... (0.49)% (0.55)% (0.24)% (b)
Portfolio turnover rate .................................... 130.44 % 174.44 % 29.83 %
(a) For the period from September 29, 1997 (Commencement of Operations) to February 28, 1998.
(b) Annualized.
</TABLE>
12
<PAGE>
ADDITIONAL INFORMATION
________________________________________________________________________________
THE CHESAPEAKE CORE GROWTH FUND
A No Load Fund
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Additional information about the Fund is available in the Fund's SAI. Additional
information about the Fund's investments is also available in the Fund's Annual
and Semi-annual Reports to shareholders. The Fund's Annual Report includes a
discussion of market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year.
The SAI and the Annual and Semi-annual Reports are available free of charge upon
request (you may also request other information about the Fund or make
shareholder inquiries) by contacting us:
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By telephone: 1-800-430-3863
By mail: The Chesapeake Core Growth Fund
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, NC 27803-0365
By e-mail: [email protected]
On the Internet: www.ncfunds.com
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Information about the Fund can also be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. Inquiries on the operations of the public
reference room may be made by calling the SEC at 1-202-942-8090. Reports and
other information about the Fund are available on the SEC's Internet site at
http://www.sec.gov, and copies of this information may be obtained, upon payment
of a duplicating fee, by electronic request at the following e-mail address:
[email protected], or by writing the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
Investment Company Act file number 811-07324
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PART B
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STATEMENT OF ADDITIONAL INFORMATION
THE CHESAPEAKE GROWTH FUND
June 30, 2000
A Series of the
GARDNER LEWIS INVESTMENT TRUST
107 North Washington Street, Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Telephone 1-800-430-3863
Table of Contents
Page
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OTHER INVESTMENT POLICIES.................................................... 2
INVESTMENT LIMITATIONS....................................................... 3
PORTFOLIO TRANSACTIONS....................................................... 5
NET ASSET VALUE.............................................................. 6
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION............................... 7
DESCRIPTION OF THE TRUST..................................................... 8
ADDITIONAL INFORMATION CONCERNING TAXES...................................... 9
MANAGEMENT OF THE FUND....................................................... 10
SPECIAL SHAREHOLDER SERVICES................................................. 14
ADDITIONAL INFORMATION ON PERFORMANCE........................................ 17
FINANCIAL STATEMENTS......................................................... 19
APPENDIX A - DESCRIPTION OF RATINGS.......................................... 20
This Statement of Additional Information ("SAI") is meant to be read in
conjunction with the Prospectuses for The Chesapeake Growth Fund's ("Fund")
Institutional Shares, Super-Institutional Shares, and the Class A Investor
Shares, each dated the same date as this SAI, and is incorporated by reference
in its entirety into each Prospectus. Because this SAI is not itself a
prospectus, no investment in shares of the Fund should be made solely upon the
information contained herein. Copies of the Fund's Prospectuses may be obtained
at no charge by writing or calling the Fund at the address and phone number
shown above. Capitalized terms used but not defined herein have the same
meanings as in each Prospectus.
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OTHER INVESTMENT POLICIES
The Fund was organized in 1994 as a diversified, open-end management company.
The following policies supplement the Fund's investment objective and policies
as set forth in the Prospectuses for each Class of Shares of the Fund. Attached
to this SAI is Appendix A, which contains descriptions of the rating symbols
used by Rating Agencies for securities in which the Fund may invest.
Repurchase Agreements. The Fund may acquire U.S. Government Securities or
corporate debt securities subject to repurchase agreements. A repurchase
transaction occurs when, at the time the Fund purchases a security (normally a
U.S. Treasury obligation), it also resells it to the vendor (normally a member
bank of the Federal Reserve or a registered Government Securities dealer) and
must deliver the security (and/or securities substituted for them under the
repurchase agreement) to the vendor on an agreed upon date in the future. The
repurchase price exceeds the purchase price by an amount which reflects an
agreed upon market interest rate effective for the period of time during which
the repurchase agreement is in effect. Delivery pursuant to the resale will
occur within one to seven days of the purchase.
Repurchase agreements are considered "loans" under the Investment Company Act of
1940, as amended (the "1940 Act"), collateralized by the underlying security.
The Trust will implement procedures to monitor on a continuous basis the value
of the collateral serving as security for repurchase obligations. Additionally,
the Advisor to the Fund will consider the creditworthiness of the vendor. If the
vendor fails to pay the agreed upon resale price on the delivery date, the Fund
will retain or attempt to dispose of the collateral. The Fund's risk is that
such default may include any decline in value of the collateral to an amount
which is less than 100% of the repurchase price, any costs of disposing of such
collateral, and any loss resulting from any delay in foreclosing on the
collateral. The Fund will not enter into any repurchase agreement that will
cause more than 10% of its net assets to be invested in repurchase agreements
that extend beyond seven days and other illiquid securities.
Description of Money Market Instruments. Money market instruments may include
U.S. Government Securities or corporate debt securities (including those subject
to repurchase agreements), provided that they mature in thirteen months or less
from the date of acquisition and are otherwise eligible for purchase by the
Fund. Money market instruments also may include Banker's Acceptances and
Certificates of Deposit of domestic branches of U.S. banks, Commercial Paper and
Variable Amount Demand Master Notes ("Master Notes"). Banker's Acceptances are
time drafts drawn on and "accepted" by a bank. When a bank "accepts" such a time
draft, it assumes liability for its payment. When the Fund acquires a Banker's
Acceptance the bank that "accepted" the time draft is liable for payment of
interest and principal when due. The Banker's Acceptance carries the full faith
and credit of such bank. A Certificate of Deposit ("CD") is an unsecured
interest-bearing debt obligation of a bank. Commercial Paper is an unsecured,
short-term debt obligation of a bank, corporation or other borrower. Commercial
Paper maturity generally ranges from two to 270 days and is usually sold on a
discounted basis rather than as an interest-bearing instrument. The Fund will
invest in Commercial Paper only if it is rated one of the top two rating
categories by Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's
Ratings Services ("S&P"), Fitch Investors Service, Inc. ("Fitch") or Duff &
Phelps ("D&P") or, if not rated, of equivalent quality in the Advisor's opinion.
Commercial Paper may include Master Notes of the same quality. Master Notes are
unsecured obligations which are redeemable upon demand of the holder and which
permit the investment of fluctuating amounts at varying rates of interest.
Master Notes are acquired by the Fund only through the Master Note program of
the Fund's custodian bank, acting as administrator thereof. The Advisor will
monitor, on a continuous basis, the earnings power, cash flow and other
liquidity ratios of the issuer of a Master Note held by the Fund.
Illiquid Investments. The Fund may invest up to 10% of its net assets in
illiquid securities, which are investments that cannot be sold or disposed of in
the ordinary course of business within seven days at approximately the prices at
which they are valued. Under the supervision of the Board of Trustees, the
Advisor determines the liquidity of the Fund's investments and, through reports
from the Advisor, the Board monitors investments in illiquid instruments. In
determining the liquidity of the Fund's investments, the Advisor may consider
various factors including (1) the frequency of trades and quotations, (2) the
number of dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including any
demand or tender features) and (5) the nature of the marketplace for trades
(including the ability to assign or offset the Fund's rights and obligations
relating to the investment). Investments currently considered by the Fund to be
illiquid include repurchase agreements not entitling the holder to payment of
principal and interest within seven days. If through a change in values, net
assets or other circumstances, the Fund were in a position where more than 10%
of its net assets were invested in illiquid securities, it would seek to take
appropriate steps to protect liquidity.
Foreign Securities. The Fund may invest up to 10% of its total assets in foreign
securities and sponsored ADRs. The same factors would be considered in selecting
foreign securities as with domestic securities. Foreign securities investment
presents special consideration not typically associated with investment in
domestic securities. Foreign taxes may reduce income. Currency exchange rates
and regulations may cause fluctuations in the value of foreign securities.
Foreign securities are subject to different regulatory environments than in the
United States and, compared to the United States, there may be a lack of uniform
accounting, auditing and financial reporting standards, less volume and
liquidity and more volatility, less public information, and less regulation of
foreign issuers. Countries have been known to expropriate or nationalize assets,
and foreign investments may be subject to political, financial, or social
instability, or adverse diplomatic developments. There may be difficulties in
obtaining service of process on foreign issuers and difficulties in enforcing
judgments with respect to claims under the U.S. securities laws against such
issuers. Favorable or unfavorable differences between U.S. and foreign economies
could affect foreign securities values. The U.S. Government has, in the past,
discouraged certain foreign investments by U.S. investors through taxation or
other restrictions and it is possible that such restrictions could be imposed
again.
Because of the inherent risk of foreign securities over domestic issues, the
Fund will generally limit foreign investments to those traded domestically as
sponsored American Depository Receipts ("ADRs"). ADRs are receipts issued by a
U.S. bank or trust company evidencing ownership of securities of a foreign
issuer. ADRs may be listed on a national securities exchange or may trade in the
over-the-counter market. The prices of ADRs are denominated in U.S. dollars
while the underlying security may be denominated in a foreign currency. To the
extent the Fund invests in other foreign securities, it will generally limit
such investments to foreign securities traded on foreign securities exchanges.
Investment Companies. In order to achieve its investment objective, the Fund may
invest up to 10% of the value of its total assets in securities of other
investment companies whose investment objectives are consistent with the Fund's
investment objective. The Fund will not acquire securities of any one investment
company if, immediately thereafter, the Fund would own more than 3% of such
company's total outstanding voting securities, securities issued by such company
would have an aggregate value in excess of 5% of the Fund's total assets, or
securities issued by such company and securities held by the Fund issued by
other investment companies would have an aggregate value in excess of 10% of the
Fund's total assets. To the extent the Fund invests in other investment
companies, the shareholders of the Fund would indirectly pay a portion of the
operating costs of the underlying investment companies. These costs include
management, brokerage, shareholder servicing and other operational expenses.
Shareholders of the Fund would then indirectly pay higher operational costs than
if they owned shares of the underlying investment companies directly.
Real Estate Securities. The Fund will not invest in real estate or real estate
mortgage loans (including limited partnership interests), but may invest in
readily marketable securities secured by real estate or interests therein or
issued by companies that invest in real estate or interests therein. The Fund
may also invest in readily marketable interests in real estate investment trusts
("REITs"). REITs are generally publicly traded on the national stock exchanges
and in the over-the-counter market and have varying degrees of liquidity.
Although the Fund is not limited in the amount of these types of real estate
securities it may acquire, it is not presently expected that within the next 12
months the Fund will have in excess of 5% of its total assets in real estate
securities.
Forward Commitments and When-Issued Securities. The Fund may purchase
when-issued securities and commit to purchase securities for a fixed price at a
future date beyond customary settlement time. The Fund is required to hold and
maintain in a segregated account until the settlement date, cash, U.S.
Government Securities or high-grade debt obligations in an amount sufficient to
meet the purchase price. Purchasing securities on a when-issued or forward
commitment basis involves a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in addition to
the risk of decline in value of the Fund's other assets. In addition, no income
accrues to the purchaser of when-issued securities during the period prior to
issuance. Although the Fund would generally purchase securities on a when-issued
or forward commitment basis with the intention of acquiring securities for its
portfolio, the Fund may dispose of a when-issued security or forward commitment
prior to settlement if the Advisor deems it appropriate to do so. The Fund may
realize short-term gains or losses upon such sales.
INVESTMENT LIMITATIONS
The Fund has adopted the following fundamental investment limitations, which
cannot be changed without approval by holders of a majority of the outstanding
voting shares of the Fund. A "majority" for this purpose, means the lesser of
(i) 67% of the Fund's outstanding shares represented in person or by proxy at a
meeting at which more than 50% of its outstanding shares are represented, or
(ii) more than 50% of its outstanding shares. Unless otherwise indicated,
percentage limitations apply at the time of purchase.
As a matter of fundamental policy, the Fund may not:
(1) Invest more than 5% of the value of its total assets in the securities
of any one issuer or purchase more than 10% of the outstanding voting
securities or of any class of securities of any one issuer (except that
securities of the U.S. Government, its agencies and instrumentalities
are not subject to these limitations);
(2) Invest 25% or more of the value of its total assets in any one industry
or group of industries (except that securities of the U.S. Government,
its agencies and instrumentalities are not subject to these
limitations);
(3) Invest more than 10% of the value of its total assets in foreign
securities or sponsored American Depository Receipts ("ADRs");
(4) Invest in the securities of any issuer if any of the officers or
Trustees of the Trust or its Investment Advisor who own beneficially
more than 1/2 of 1% of the outstanding securities of such issuer
together own more than 5% of the outstanding securities of such issuer;
(5) Invest for the purpose of exercising control or management of another
issuer;
(6) Invest in interests in real estate, real estate mortgage loans, real
estate limited partnerships, oil, gas or other mineral exploration
leases or development programs, except that the Fund may invest in the
securities of companies (other than those that are not readily
marketable) which own or deal in such things;
(7) Underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter under the federal securities laws,
in connection with the disposition of portfolio securities;
(8) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of transactions);
(9) Make short sales of securities or maintain a short position, except
short sales "against the box"; (A short sale is made by selling a
security the Fund does not own. A short sale is "against the box" to
the extent that the Fund contemporaneously owns or has the right to
obtain at no additional cost securities identical to those sold
short.);
(10) Participate on a joint or joint and several basis in any trading
account in securities;
(11) Make loans of money or securities, except that the Fund may invest in
repurchase agreements (but repurchase agreements having a maturity of
longer than seven days, together with other illiquid securities, are
limited to 10% of the Fund's net assets);
(12) Invest in securities of issuers which have a record of less than three
years' continuous operation (including predecessors and, in the case of
bonds, guarantors), if more than 5% of its total assets will be
invested in such securities;
(13) Issue senior securities, borrow money or pledge its assets;
(14) Write, purchase, or sell puts, calls, warrants, or combinations
thereof, or purchase or sell commodities, commodities contracts,
futures contracts, or related options; and
(15) Invest in restricted securities.
Percentage restrictions stated as an investment policy or investment limitation
apply at the time of investment; if a later increase or decrease in percentage
beyond the specified limits results from a change in securities values or total
assets, it will not be considered a violation.
PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Trust's Board of Trustees, the Advisor
is responsible for, makes decisions with respect to, and places orders for all
purchases and sales of portfolio securities for the Fund.
The annualized portfolio turnover rate for the Fund is calculated by dividing
the lesser of purchases or sales of portfolio securities for the reporting
period by the monthly average value of the portfolio securities owned during the
reporting period. The calculation excludes all securities whose maturities or
expiration dates at the time of acquisition are one year or less. Portfolio
turnover of the Fund may vary greatly from year to year as well as within a
particular year, and may be affected by cash requirements for redemption of
shares and by requirements that enable the Fund to receive favorable tax
treatment. Portfolio turnover will not be a limiting factor in making Fund
decisions, and the Fund may engage in short-term trading to achieve its
investment objectives.
Purchases of money market instruments by the Fund are made from dealers,
underwriters and issuers. The Fund currently does not expect to incur any
brokerage commission expense on such transactions because money market
instruments are generally traded on a "net" basis by a dealer acting as
principal for its own account without a stated commission. The price of the
security, however, usually includes a profit to the dealer. Securities purchased
in underwritten offerings include a fixed amount of compensation to the
underwriter, generally referred to as the underwriter's concession or discount.
When securities are purchased directly from or sold directly to an issuer, no
commissions or discounts are paid.
Transactions on U.S. stock exchanges involve the payment of negotiated brokerage
commissions. On exchanges on which commissions are negotiated, the cost of
transactions may vary among different brokers. Transactions in the
over-the-counter market are generally on a net basis (i.e., without commission)
through dealers, or otherwise involve transactions directly with the issuer of
an instrument. The Fund's fixed income portfolio transactions will normally be
principal transactions executed in over-the-counter markets and will be executed
on a "net" basis, which may include a dealer markup. With respect to securities
traded only in the over-the-counter market, orders will be executed on a
principal basis with primary market makers in such securities except where
better prices or executions may be obtained on an agency basis or by dealing
with other than a primary market maker.
The Fund may participate, if and when practicable, in bidding for the purchase
of Fund securities directly from an issuer in order to take advantage of the
lower purchase price available to members of a bidding group. The Fund will
engage in this practice, however, only when the Advisor, in its sole discretion,
believes such practice to be otherwise in the Fund's interest.
In executing Fund transactions and selecting brokers or dealers, the Advisor
will seek to obtain the best overall terms available for the Fund. In assessing
the best overall terms available for any transaction, the Advisor shall consider
factors it deems relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution capability of
the broker or dealer, and the reasonableness of the commission, if any, both for
the specific transaction and on a continuing basis. The sale of Fund shares may
be considered when determining the firms that are to execute brokerage
transactions for the Fund. In addition, the Advisor is authorized to cause the
Fund to pay a broker-dealer which furnishes brokerage and research services a
higher commission than that which might be charged by another broker-dealer for
effecting the same transaction, provided that the Advisor determines in good
faith that such commission is reasonable in relation to the value of the
brokerage and research services provided by such broker-dealer, viewed in terms
of either the particular transaction or the overall responsibilities of the
Advisor to the Fund. Such brokerage and research services might consist of
reports and statistics relating to specific companies or industries, general
summaries of groups of stocks or bonds and their comparative earnings and
yields, or broad overviews of the stock, bond and government securities markets
and the economy.
Supplementary research information so received is in addition to, and not in
lieu of, services required to be performed by the Advisor and does not reduce
the advisory fees payable by the Fund. The Trustees will periodically review any
commissions paid by the Fund to consider whether the commissions paid over
representative periods of time appear to be reasonable in relation to the
benefits inuring to the Fund. It is possible that certain of the supplementary
research or other services received will primarily benefit one or more other
investment companies or other accounts for which investment discretion is
exercised by the Advisor. Conversely, the Fund may be the primary beneficiary of
the research or services received as a result of securities transactions
affected for such other account or investment company.
The Fund may also enter into brokerage/service arrangements pursuant to which
selected brokers executing portfolio transactions for the Fund may pay a portion
of the Fund's operating expenses. For the fiscal year ended February 29, 2000,
the Fund participated in brokerage/service arrangements with Standard & Poors
Securities, Inc. and Instinet Corporation, both of New York, New York. During
such year the firms received $83,555 and $21,068, respectively, in brokerage
commissions from the Fund and paid $81,282 of the Fund's operating expenses.
There can be no assurance that such arrangements will continue in the future.
The Advisor may also utilize a brokerage firm affiliated with the Trust or the
Advisor if it believes it can obtain the best execution of transactions from
such broker, although the Advisor has not utilized such a broker during the last
three fiscal years. The Fund will not execute portfolio transactions through,
acquire securities issued by, make savings deposits in or enter into repurchase
agreements with the Advisor or an affiliated person of the Advisor (as such term
is defined in the 1940 Act) acting as principal, except to the extent permitted
by the Securities and Exchange Commission ("SEC"). In addition, the Fund will
not purchase securities during the existence of any underwriting or selling
group relating thereto of which the Advisor, or an affiliated person of the
Advisor, is a member, except to the extent permitted by the SEC. Under certain
circumstances, the Fund may be at a disadvantage because of these limitations in
comparison with other investment companies that have similar investment
objectives but are not subject to such limitations.
Investment decisions for the Fund will be made independently from those for any
other series of the Trust, if any, and for any other investment companies and
accounts advised or managed by the Advisor. Such other investment companies and
accounts may also invest in the same securities as the Fund. To the extent
permitted by law, the Advisor may aggregate the securities to be sold or
purchased for the Fund with those to be sold or purchased for other investment
companies or accounts in executing transactions. When a purchase or sale of the
same security is made at substantially the same time on behalf of the Fund and
another investment company or account, the transaction will be averaged as to
price and available investments allocated as to amount, in a manner which the
Advisor believes to be equitable to the Fund and such other investment company
or account. In some instances, this investment procedure may adversely affect
the price paid or received by the Fund or the size of the position obtained or
sold by the Fund.
For the fiscal years ended February 29, 2000, February 28, 1999, and 1998, the
Fund paid brokerage commissions of $781,153, $845,558, and $574,295,
respectively.
NET ASSET VALUE
The net asset value per share of each Class of the Fund is calculated separately
by adding the value of the Fund's securities and other assets belonging to the
Fund and attributable to that Class, subtracting the liabilities charged to the
Fund and to that Class, and dividing the result by the number of outstanding
shares of such Class. "Assets belonging to" the Fund consist of the
consideration received upon the issuance of shares of the Fund together with all
net investment income, realized gains/losses and proceeds derived from the
investment thereof, including any proceeds from the sale of such investments,
any funds or payments derived from any reinvestment of such proceeds, and a
portion of any general assets of the Trust not belonging to a particular
investment Fund. Income, realized and unrealized capital gains and losses, and
any expenses of the Fund not allocated to a particular Class of the Fund will be
allocated to each Class of the Fund on the basis of the net asset value of that
Class in relation to the net asset value of the Fund. Assets belonging to the
Fund are charged with the direct liabilities of the Fund and with a share of the
general liabilities of the Trust, which are normally allocated in proportion to
the number of or the relative net asset values of all of the Trust's series at
the time of allocation or in accordance with other allocation methods approved
by the Board of Trustees. Certain expenses attributable to a particular Class of
shares (such as the distribution and service fees attributable to Investor
Shares) will be charged against that Class of shares. Certain other expenses
attributable to a particular Class of shares (such as registration fees,
professional fees, and certain printing and postage expenses) may be charged
against that Class of shares if such expenses are actually incurred in a
different amount by that Class or if the Class receives services of a different
kind or to a different degree than other Classes, and the Board of Trustees
approves such allocation. Subject to the provisions of the Amended and Restated
Declaration of Trust, determinations by the Board of Trustees as to the direct
and allocable liabilities, and the allocable portion of any general assets, with
respect to the Fund and the Classes of the Fund are conclusive.
The net asset value per share of each Class of the Fund is determined at the
time normal trading closes on the New York Stock Exchange (currently 4:00 p.m.,
New York time, Monday through Friday), except on business holidays when the New
York Stock Exchange is closed. The New York Stock Exchange generally recognizes
the following holidays: New Year's Day, Martin Luther King, Jr. Day, President's
Day, Good Friday, Memorial Day, Fourth of July, Labor Day, Thanksgiving Day, and
Christmas Day. Any other holiday recognized by the New York Stock Exchange will
be considered a business holiday on which the Fund's net asset value will not be
determined.
The Fund has entered into brokerage/service arrangements with certain brokers
who paid a portion of the Fund's expenses for the fiscal year ended February 29,
2000. This program has been reviewed by the Board of Trustees, subject to the
provisions and guidelines as clearly outlined in the securities laws and legal
precedent of the United States. There can be no assurance that the Fund's
brokerage/service arrangements will continue in the future.
For the fiscal year ended February 29, 2000, the total expenses of the Fund
(after expense reductions of $81,282 paid by a broker pursuant to the
brokerage/service arrangement with the Fund and waiver of $25,000 of shareholder
administration fees) were $2,987,057 (1.04%, 1.17%, and 1.56% the average daily
net assets of the Fund's Super-Institutional Shares, Institutional Shares, and
Class A Investor Shares, respectively). For the fiscal year ended February 28,
1999, the total expenses of the Fund (after expense reductions of $169,241 paid
by a broker pursuant to the brokerage/services arrangement with the Fund, waiver
of $25,000 of shareholder administration fees, and waiver of $941 of
distribution fees) were $2,816,768 (0.99%, 1.15%, and 1.53% of the average daily
net assets of the Fund's Super-Institutional Shares, Institutional Shares, and
Class A Investor Shares, respectively). For the fiscal year ended February 28,
1998, the total expenses of the Fund (after expense reductions of $26,313 paid
by a broker pursuant to the brokerage/services arrangement with the Fund and
waiver of $25,000 of shareholder administration fees) were $3,164,112 (1.04%,
1.16%, and 1.52% of the average daily net assets of the Fund's
Super-Institutional Shares, Institutional Shares, and Class A Investor Shares,
respectively).
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Purchases. Shares of the Fund are offered and sold on a continuous basis and may
be purchased through authorized investment dealers or directly by contacting the
Distributor or the Fund. Selling dealers have the responsibility of transmitting
orders promptly to the Fund. The public offering price of shares of the Fund
equals net asset value, plus a sales charge generally for the Class A Investor
Shares. Capital Investment Group, Inc. (the "Distributor") receives this sales
charge as Distributor and may reallow it in the form of dealer discounts and
brokerage commissions. The current schedule of sales charges and related dealer
discounts and brokerage commissions is set forth in the Prospectus for the Class
A Investor Shares, along with the information on current purchases, rights of
accumulation, and letters of intent. See "Investing in the Fund" in the Class A
Investor Shares Prospectus.
Plan Under Rule 12b-1. The Trust has adopted a Plan of Distribution (the "Plan")
for the Class A Investor Shares of the Fund pursuant to Rule 12b-1 under the
1940 Act (see "Management of the Fund - Distribution of the Fund's Shares" in
the Class A Investor Shares Prospectus). Under the Plan, the Fund may expend a
percentage of the Class A Investor Shares' average net assets annually to
finance any activity which is primarily intended to result in the sale of shares
of the Class A Investor Shares of the Fund and the servicing of shareholder
accounts, provided the Trust's Board of Trustees has approved the category of
expenses for which payment is being made. The current fees paid under the Plan
is 0.25% of the average net assets of the Class A Investor Shares. Such
expenditures paid as service fees to any person who sells shares of the Fund may
not exceed 0.25% of the average annual net asset value of such shares. Potential
benefits of the Plan to the Fund include improved shareholder servicing, savings
to the Fund in transfer agency costs, benefits to the investment process from
growth and stability of assets and maintenance of a financially healthy
management organization.
All of the distribution expenses incurred by the Distributor and others, such as
broker-dealers, in excess of the amount paid by the Fund will be borne by such
persons without any reimbursement from the Fund. Subject to seeking best
execution, the Fund may, from time to time, buy or sell portfolio securities
from or to firms that receive payments under the Plan.
From time to time the Distributor may pay additional amounts from its own
resources to dealers for aid in distribution or for aid in providing
administrative services to shareholders.
The Plan and the Distribution Agreement with the Distributor have been approved
by the Board of Trustees of the Trust, including a majority of the Trustees who
are not "interested persons" (as defined in the 1940 Act) of the Trust and who
have no direct or indirect financial interest in the Plan or any related
agreements, by vote cast in person or at a meeting duly called for the purpose
of voting on the Plan and such Agreement. Continuation of the Plan and the
Distribution Agreement must be approved annually by the Board of Trustees in the
same manner as specified above.
Each year the Trustees must determine whether continuation of the Plan is in the
best interest of shareholders of the Fund and that there is a reasonable
likelihood of its providing a benefit to the Fund, and the Board of Trustees has
made such a determination for the current year of operations under the Plan. The
Plan, the Distribution Agreement and the Dealer Agreement with any
broker/dealers may be terminated at any time without penalty by a majority of
those trustees who are not "interested persons" or, with respect to the Class A
Investor Shares, by a majority vote of the Class A Investor Shares' outstanding
voting stock. Any amendment materially increasing the maximum percentage payable
under the Plan, with respect to the Class A Investor Shares, must likewise be
approved by a majority vote of the Class A Investor Shares' outstanding voting
stock, as well as by a majority vote of those trustees who are not "interested
persons." Also, any other material amendment to the Plan must be approved by a
majority vote of the trustees including a majority of the noninterested Trustees
of the Trust having no interest in the Plan. In addition, in order for the Plan
to remain effective, the selection and nomination of Trustees who are not
"interested persons" of the Trust must be effected by the Trustees who
themselves are not "interested persons" and who have no direct or indirect
financial interest in the Plan. Persons authorized to make payments under the
Plan must provide written reports at least quarterly to the Board of Trustees
for their review.
For the fiscal year ended February 29, 2000, the Fund incurred $60,943 for costs
incurred in connection with the Plan for the Class A Investor Shares. Prior to
April 26, 2000, the Fund also offered Class C and Class D Investor Shares that
were each subject to separate Rule 12b-1 plans of distribution. On April 26,
2000, all Class C and Class D Investor Shares were converted into Class A
Investor Shares. For the period March 1, 1999 through April 25, 2000, the Fund
incurred $19,314 and $41,616 for costs incurred in connection with the Rule
12b-1 plans of distribution for the Class C and D Investor Shares, respectively.
These costs incurred in connection with the Plan and the Rule 12b-1 plans of
distribution for Class A, Class C, and Class D Investor Shares were attributed
primarily to the compensation of sales personnel for the sale of Class A, Class
C and Class D Investor Shares and servicing of shareholder accounts of those
classes of shares, with a small portion spent on miscellaneous costs incurred in
connection with distribution of the Fund's shares.
For the fiscal year ended February 29, 2000, the Fund incurred $60,943 for costs
in connection with the Plan under Rule 12b-1, with respect to the Class A
Investor Shares. Such costs were spent primarily on compensation to sales
personnel for sale of Class A Investor Shares and servicing of shareholder
accounts for Class A Investor Shares, with a small portion spent on
miscellaneous costs incurred in connection with distribution of the Fund.
Redemptions. Under the 1940 Act, the Fund may suspend the right of redemption or
postpone the date of payment for shares during any period when (a) trading on
the New York Stock Exchange is restricted by applicable rules and regulations of
the SEC; (b) the Exchange is closed for other than customary weekend and holiday
closings; (c) the SEC has by order permitted such suspension; or (d) an
emergency exists as determined by the SEC. The Fund may also suspend or postpone
the recordation of the transfer of shares upon the occurrence of any of the
foregoing conditions.
In addition to the situations described in the Prospectus under "Investing in
the Fund - Redeeming Your Shares," the Fund may redeem shares involuntarily to
reimburse the Fund for any loss sustained by reason of the failure of a
shareholder to make full payment for shares purchased by the shareholder or to
collect any charge relating to a transaction effected for the benefit of a
shareholder which is applicable to Fund shares as provided in the Prospectus
from time to time.
DESCRIPTION OF THE TRUST
The Trust is an unincorporated business trust organized under Massachusetts law
on August 12, 1992. The Trust's Declaration of Trust authorizes the Board of
Trustees to divide shares into series, each series relating to a separate
portfolio of investments, and to classify and reclassify any unissued shares
into one or more classes of shares of each such series. The Amended and Restated
Declaration of Trust currently provides for the shares of three series, as
follows: the Fund, The Chesapeake Aggressive Growth Fund, and The Chesapeake
Core Growth Fund, all managed by the Advisor. The shares of The Chesapeake
Aggressive Growth Fund and the Chesapeake Core Growth Fund are all of one class;
the shares of the Fund are divided into three classes (Institutional Shares,
Super-Institutional Shares, and Class A Investor Shares). Prior to April 26,
2000, the Fund also offered Class C and Class D Investor Shares. On April 26,
2000, all Class C and Class D Investor Shares were converted into Class A
Investor Shares. The number of shares of each series shall be unlimited. The
Trust does not intend to issue share certificates.
In the event of a liquidation or dissolution of the Trust or an individual
series, such as the Fund, shareholders of a particular series would be entitled
to receive the assets available for distribution belonging to such series.
Shareholders of a series are entitled to participate equally in the net
distributable assets of the particular series involved on liquidation, based on
the number of shares of the series that are held by each shareholder. If there
are any assets, income, earnings, proceeds, funds or payments, that are not
readily identifiable as belonging to any particular series, the Trustees shall
allocate them among any one or more of the series as they, in their sole
discretion, deem fair and equitable.
Shareholders of all of the series of the Trust, including the Fund, will vote
together and not separately on a series-by-series or class-by-class basis,
except as otherwise required by law or when the Board of Trustees determines
that the matter to be voted upon affects only the interests of the shareholders
of a particular series or class. Rule 18f-2 under the 1940 Act provides that any
matter required to be submitted to the holders of the outstanding voting
securities of an investment company such as the Trust shall not be deemed to
have been effectively acted upon unless approved by the holders of a majority of
the outstanding shares of each series or class affected by the matter. A series
or class is affected by a matter unless it is clear that the interests of each
series or class in the matter are substantially identical or that the matter
does not affect any interest of the series or class. Under Rule 18f-2, the
approval of an investment advisory agreement or any change in a fundamental
investment policy would be effectively acted upon with respect to a series only
if approved by a majority of the outstanding shares of such series. However, the
Rule also provides that the ratification of the appointment of independent
accountants, the approval of principal underwriting contracts and the election
of Trustees may be effectively acted upon by shareholders of the Trust voting
together, without regard to a particular series or class.
When used in the Prospectus or this SAI, a "majority" of shareholders means the
vote of the lesser of (1) 67% of the shares of the Trust or the applicable
series or class present at a meeting if the holders of more than 50% of the
outstanding shares are present in person or by proxy, or (2) more than 50% of
the outstanding shares of the Trust or the applicable series or class.
When issued for payment as described in the Prospectus and this SAI, shares of
the Fund will be fully paid and non-assessable.
The Amended and Restated Declaration of Trust provides that the Trustees of the
Trust will not be liable in any event in connection with the affairs of the
Trust, except as such liability may arise from his or her own bad faith, willful
misfeasance, gross negligence, or reckless disregard of duties. It also provides
that all third parties shall look solely to the Trust property for satisfaction
of claims arising in connection with the affairs of the Trust. With the
exceptions stated, the Amended and Restated Declaration of Trust provides that a
Trustee or officer is entitled to be indemnified against all liability in
connection with the affairs of the Trust.
ADDITIONAL INFORMATION CONCERNING TAXES
The following summarizes certain additional tax considerations generally
affecting the Fund and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Fund or its shareholders, and the discussion here and in the
Prospectus is not intended as a substitute for careful tax planning and is based
on tax laws and regulations that are in effect on the date hereof; such laws and
regulations may be changed by legislative, judicial, or administrative action.
Investors are advised to consult their tax advisors with specific reference to
their own tax situations.
Each series of the Trust, including the Fund, will be treated as a separate
corporate entity under the Internal Revenue Code and intends to qualify or
remain qualified as a regulated investment company. In order to so qualify, each
series must elect to be a regulated investment company or have made such an
election for a previous year and must satisfy, in addition to the distribution
requirement described in the Prospectus, certain requirements with respect to
the source of its income for a taxable year. At least 90% of the gross income of
each series must be derived from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of stocks, securities
or foreign currencies, and other income derived with respect to the series'
business of investing in such stock, securities or currencies. Any income
derived by a series from a partnership or trust is treated as derived with
respect to the series' business of investing in stock, securities or currencies
only to the extent that such income is attributable to items of income that
would have been qualifying income if realized by the series in the same manner
as by the partnership or trust.
An investment company may not qualify as a regulated investment company for any
taxable year unless it satisfies certain requirements with respect to the
diversification of its investments at the close of each quarter of the taxable
year. In general, at least 50% of the value of its total assets must be
represented by cash, cash items, government securities, securities of other
regulated investment companies and other securities which, with respect to any
one issuer, do not represent more than 5% of the total assets of the investment
company nor more than 10% of the outstanding voting securities of such issuer.
In addition, not more than 25% of the value of the investment company's total
assets may be invested in the securities (other than government securities or
the securities of other regulated investment companies) of any one issuer. The
Fund intends to satisfy all requirements on an ongoing basis for continued
qualification as a regulated investment company.
Each series of the Trust, including the Fund, will designate any distribution of
long-term capital gains as a capital gain dividend in a written notice mailed to
shareholders within 60 days after the close of the series' taxable year.
Shareholders should note that, upon the sale or exchange of series shares, if
the shareholder has not held such shares for at least six months, any loss on
the sale or exchange of those shares will be treated as long-term capital loss
to the extent of the capital gain dividends received with respect to the shares.
A 4% nondeductible excise tax is imposed on regulated investment companies that
fail to currently distribute an amount equal to specified percentages of their
ordinary taxable income and capital gain net income (excess of capital gains
over capital losses). Each series of the Trust, including the Fund, intends to
make sufficient distributions or deemed distributions of its ordinary taxable
income and any capital gain net income prior to the end of each calendar year to
avoid liability for this excise tax.
If for any taxable year a series does not qualify for the special federal income
tax treatment afforded regulated investment companies, all of its taxable income
will be subject to federal income tax at regular corporate rates (without any
deduction for distributions to its shareholders). In such event, dividend
distributions (whether or not derived from interest on tax-exempt securities)
would be taxable as ordinary income to shareholders to the extent of the series'
current and accumulated earnings and profits, and would be eligible for the
dividends received deduction for corporations.
Each series of the Trust, including the Fund, will be required in certain cases
to withhold and remit to the U.S. Treasury 31% of taxable dividends or 31% of
gross proceeds realized upon sale paid to shareholders who have failed to
provide a correct tax identification number in the manner required, or who are
subject to withholding by the Internal Revenue Service for failure to properly
include on their return payments of taxable interest or dividends, or who have
failed to certify to the Fund that they are not subject to backup withholding
when required to do so or that they are "exempt recipients."
Dividends paid by the Fund derived from net investment income or net short-term
capital gains are taxable to shareholders as ordinary income, whether received
in cash or reinvested in additional shares. Long-term capital gains
distributions, if any, are taxable as long-term capital gains, whether received
in cash or reinvested in additional shares, regardless of how long Fund shares
have been held.
The Fund will send shareholders information each year on the tax status of
dividends and disbursements. A dividend or capital gains distribution paid
shortly after shares have been purchased, although in effect a return of
investment, is subject to federal income taxation. Dividends from net investment
income, along with capital gains, will be taxable to shareholders, whether
received in cash or shares and no matter how long you have held Fund shares,
even if they reduce the net asset value of shares below your cost and thus, in
effect, result in a return of a part of your investment.
MANAGEMENT OF THE FUND
The Board of Trustees of the Trust ("Trustees") is responsible for the
management and supervision of the Fund. The Trustees approve all significant
agreements between the Trust, on behalf of the Fund, and those companies that
furnish services to the Fund. This section of the SAI provides information about
the persons who serve as Trustees and Officers to the Trust and Fund,
respectively, as well as the entities that provide services to the Fund.
Trustees and Officers. The Trustees and executive officers of the Trust, their
addresses and ages, and their principal occupations for the last five years are
as follows:
===================================== ==========================================
Name, Age*, Position(s) Principal Occupation(s)
and Address During Past 5 Years
===================================== ==========================================
Jack E. Brinson, 68 President, Brinson Investment Co.
Trustee (personal investments)
1105 Panola Street President, Brinson Chevrolet, Inc.
Tarboro, North Carolina (auto dealership)
Tarboro, North Carolina
Independent Trustee, Nottingham Investment
Trust II, New Providence Investment Trust,
de Leon Funds Trust
Rocky Mount, North Carolina
------------------------------------ ------------------------------------------
W. Whitfield Gardner, 37 Chairman and Chief Executive Officer
Trustee** Gardner Lewis Asset Management
Chief Executive Officer (Advisor to the Chesapeake Funds)
The Chesapeake Funds Chadds Ford, Pennsylvania
285 Wilmington-West Chester Pike
Chadds Ford, Pennsylvania 19317
------------------------------------ ------------------------------------------
Stephen J. Kneeley, 37 Chief Operating Officer
Trustee Turner Investment Partners
1235 Westlakes Drive (investment manager)
Suite 350 Berwyn, Pennsylvania
Berwyn, Pennsylvania 19312
------------------------------------ ------------------------------------------
John L. Lewis, IV, 36 President
President Gardner Lewis Asset Management
The Chesapeake Funds (Advisor to the Chesapeake Funds)
285 Wilmington-West Chester Pike Chadds Ford, Pennsylvania
Chadds Ford, Pennsylvania 19317
------------------------------------ ------------------------------------------
William D. Zantzinger, 38 Director of Trading
Vice President Gardner Lewis Asset Management
The Chesapeake Funds (Advisor to the Chesapeake Funds)
285 Wilmington-West Chester Pike Chadds Ford, Pennsylvania
Chadds Ford, Pennsylvania 19317
------------------------------------ ------------------------------------------
C. Frank Watson, III, 29 President
Secretary and Assistant Treasurer The Nottingham Company
105 North Washington Street (Administrator to the Fund)
Rocky Mount, North Carolina 27802 Rocky Mount, North Carolina
------------------------------------ ------------------------------------------
Julian G. Winters, 31 Legal and Compliance Director
Treasurer and Assistant Secretary The Nottingham Company
105 North Washington Street (Administrator to the Fund)
Rocky Mount, North Carolina 27802 Rocky Mount, North Carolina since 1996;
previously, Operations Manager
Tar Heel Medical, Inc.
(pharmaceutical supplier)
Nashville, North Carolina
------------------------------------ ------------------------------------------
* As of June 30, 2000.
** Indicates that Trustee is an "interested person" of the Trust for
purposes of the 1940 Act.
Compensation. The officers of the Trust will not receive compensation from the
Trust for performing the duties of their offices. Each Trustee who is not an
"interested person" of the Trust receives a fee of $7,500 each year, plus $400
per series of the Trust per meeting attended in person or $150 per series of the
Trust per meeting attended by telephone. All Trustees are reimbursed for any
out-of-pocket expenses incurred in connection with attendance at meetings.
<TABLE>
<S> <C> <C> <C> <C>
Compensation Table*
Pension Total
Retirement Compensation
Aggregate Benefits Estimated from the
Compensation Accrued As Annual Trust
Name of Person, from the Part of Fund Benefits Upon Paid to
Position Fund Expenses Retirement Trustees**
-------- ---- -------- ---------- --------
Jack E. Brinson $3,450 None None $10,350
Trustee
W. Whitfield Gardner None None None None
Trustee
Stephen J. Kneeley $3,450 None None $10,350
Trustee
</TABLE>
* Figures are for the fiscal year ended February 29, 2000.
** Each of the Trustees serves as a Trustee to the three funds of the Trust,
including the Fund.
Principal Holders of Voting Securities. As of June 13, 2000, the Trustees and
Officers of the Trust as a group owned beneficially (i.e., had voting and/or
investment power) less than 1% of the then outstanding shares of each Class of
the Fund. On the same date the following shareholders owned of record more than
5% of the outstanding shares of beneficial interest of each Class of the Fund.
Except as provided below, no person is known by the Trust to be the beneficial
owner of more than 5% of the outstanding shares of a Class of the Fund as of
June 13, 2000.
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership* of Class
---------------- --------------------- --------
INSTITUTIONAL SHARES
Norwest Bank Minnesota, N.A., 353,789.704 Shares 11.419%
FBO COBANK ACB Retirement Plan
P. O. Box 1533
Minneapolis, Minnesota 55480
Strafe & Company FAO Blanchard 250,557.677 Shares 8.087%
Valley Health Association Plan
P.O. Box 160
Westerville, Ohio 43086-0160
Jacob and Hilda Blaustein 200,127.048 Shares 6.459%
Foundation, Inc.
c/o ATAPCO Financial Services
P. O. Box 238
Baltimore, Maryland 21203
Raymond Hickey 158,329.426 Shares 5.110%
c/o U.S. Bank National Assoc.
P. O. Box 64010
St. Paul, Minnesota 55164-0010
SUPER-INSTITUTIONAL SHARES
Ohio School 6,137,668.423 Shares 100.000%**
Employee Retirement System
45 North 4th Street
Columbus, Ohio 43214-3634
CLASS A INVESTOR SHARES
Charles Schwab & Company, Inc. 119,627.771 Shares 9.160%
Custody Account FBO Customers
101 Montgomery Street
San Francisco, CA 94104
* The shares indicated are believed by the Fund to be owned both of
record and beneficially, except as indicated above.
** Pursuant to applicable SEC regulations, this shareholder is deemed to
control the indicated Class of Shares of the Fund.
Investment Advisor. Information about Gardner Lewis Asset Management, Chadds
Ford, Pennsylvania and its duties and compensation as Advisor is contained in
the Prospectus for each class of shares of the Fund. The Advisor supervises the
Fund's investments pursuant to an Investment Advisory Agreement (the "Advisory
Agreement"). The Advisory Agreement is currently effective for a one-year period
and will be renewed thereafter only so long as such renewal and continuance is
specifically approved at least annually by the Board of Trustees or by vote of a
majority of the Fund's outstanding voting securities, provided the continuance
is also approved by a majority of the Trustees who are not parties to the
Advisory Agreement or interested persons of any such party. The Advisory
Agreement is terminable without penalty on 60-days' notice by the Board of
Trustees of the Trust or by vote of a majority of the outstanding voting
securities of the Fund. The Advisory Agreement provides that it will terminate
automatically in the event of its assignment.
The Advisor will receive a monthly management fee equal to an annual rate of
1.00% of the average daily net asset value of the Fund. For the fiscal years
ended February 29, 2000, February 28, 1999, and 1998, the Advisor received its
fee in the amount of $2,530,178, $2,360,591, and $2,532,147, respectively.
Under the Advisory Agreement, the Advisor is not liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the performance of such Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Advisor in the performance of its duties or from its reckless
disregard of its duties and obligations under the Agreement.
Administrator. The Trust has entered into a Fund Accounting and Compliance
Administration Agreement with The Nottingham Company, Inc. (the
"Administrator"), 105 North Washington Street, Post Office Drawer 69, Rocky
Mount, North Carolina 27802-0069, pursuant to which the Administrator receives
an annual administration fee of $12,500 per each Investor Class and
Institutional Class plus a fee at the annual rate of 0.075% of the average daily
net assets of each Class of Investor and Institutional Shares of the Fund and
0.015% of the average daily net assets of the Super-Institutional Shares of the
Fund for general administration services. In addition, the Administrator
currently receives a base monthly fund accounting fee of $1,750 for each Class
of Investor and Institutional Shares for fund accounting and recordkeeping
services for such classes of Shares of the Fund. The Administrator also charges
the Fund for certain costs involved with the daily valuation of investment
securities and is reimbursed for out-of-pocket expenses. For services to the
Fund for the fiscal years ended February 29, 2000, February 28, 1999, and 1998,
the Administrator received aggregate administration fees of $134,532 (waiving
$25,000 of administration fees), $201,802 (waiving $25,000 of administration
fees), and $183,081 (waiving $25,000 of shareholder administration fees),
respectively. For such fiscal years, the Administrator received $84,000 each
year for fund accounting and recordkeeping services.
The Administrator performs the following services for the Fund: (1) coordinate
with the Custodian and monitor the services it provides to the Fund; (2)
coordinate with and monitor any other third parties furnishing services to the
Fund; (3) provide the Fund with necessary office space, telephones and other
communications facilities and personnel competent to perform administrative and
clerical functions for the Fund; (4) supervise the maintenance by third parties
of such books and records of the Fund as may be required by applicable federal
or state law; (5) prepare or supervise the preparation by third parties of all
federal, state and local tax returns and reports of the Fund required by
applicable law; (6) prepare and, after approval by the Trust, file and arrange
for the distribution of proxy materials and periodic reports to shareholders of
the Fund as required by applicable law; (7) prepare and, after approval by the
Trust, arrange for the filing of such registration statements and other
documents with the SEC and other federal and state regulatory authorities as may
be required by applicable law; (8) review and submit to the officers of the
Trust for their approval invoices or other requests for payment of Fund expenses
and instruct the Custodian to issue checks in payment thereof; and (9) take such
other action with respect to the Fund as may be necessary in the opinion of the
Administrator to perform its duties under the agreement. The Administrator will
also provide certain accounting and pricing services for the Fund.
Transfer Agent. The Trust has also entered into a Dividend Disbursing and
Transfer Agent Agreement with NC Shareholder Services, LLC (the "Transfer
Agent"), a North Carolina limited liability company, 107 North Washington
Street, Post Office Box 4365, Rocky Mount, North Carolina 27803-0365 to serve as
transfer, dividend paying, and shareholder servicing agent for the Fund. For its
services, the Transfer Agent is compensated $15 per shareholder per year, with a
minimum fee of $750 per month per class. For the fiscal year ended February 29,
2000, the Transfer Agent received $12,796 in such shareholder servicing fees.
Prior to March 1, 1999, the Transfer Agent was compensated by the Administrator
for its services to the Fund.
Distributor. Capital Investment Group, Inc. (the "Distributor"), Post Office Box
32249, Raleigh, North Carolina 27622, acts as an underwriter and distributor of
the Fund's shares for the purpose of facilitating the registration of shares of
the Fund under state securities laws and to assist in sales of Fund shares
pursuant to a Distribution Agreement (the "Distribution Agreement") approved by
the Board of Trustees of the Trust.
In this regard, the Distributor has agreed at its own expense to qualify as a
broker-dealer under all applicable federal or state laws in those states which
the Fund shall from time to time identify to the Distributor as states in which
it wishes to offer its shares for sale, in order that state registrations may be
maintained for the Fund.
The Distributor is a broker-dealer registered with the SEC and a member in good
standing of the National Association of Securities Dealers, Inc.
The Distribution Agreement may be terminated by either party upon 60-days' prior
written notice to the other party.
For the fiscal year ended February 29, 2000, the aggregate dollar amount of
sales charges paid on the sales of Fund shares was $6,333, from which the
Distributor retained sales charges of $469. For the fiscal year ended February
28, 1999, the aggregate dollar amount of sales charges paid on the sales of Fund
shares was $25,067, from which the Distributor retained sales charges of $1,865.
For the fiscal year ended February 28, 1998, the aggregate dollar amount of
sales charges paid on the sale of Fund shares was $52,735, from which the
Distributor retained sales charges of $5,616.
Custodian. First Union National Bank (the "Custodian"), 123 South Broad Street,
Institutional Custody - PA4942, Philadelphia, Pennsylvania 19109, serves as
custodian for the Fund's assets. The Custodian acts as the depository for the
Fund, safekeeps its portfolio securities, collects all income and other payments
with respect to portfolio securities, disburses monies at the Fund's request and
maintains records in connection with its duties as Custodian. For its services
as Custodian, the Custodian is entitled to receive from the Fund an annual fee
based on the average net assets of the Fund held by the Custodian.
Independent Auditors. Deloitte & Touche LLP, Princeton Forrestal Village,
116-300 Village Boulevard, Princeton, New Jersey 08540, serves as independent
auditors for the Fund, audits the annual financial statements of the Fund,
prepares the Fund's federal and state tax returns, and consults with the Fund on
matters of accounting and federal and state income taxation. A copy of the most
recent annual report of the Fund will accompany this SAI whenever it is
requested by a shareholder or prospective investor.
Legal Counsel. Dechert Price & Rhoads serves as legal counsel to Gardner Lewis
Investment Trust and the Fund.
Code of Ethics. The Trust and the Advisor each have adopted a code of ethics, as
required by applicable law, which is designed to prevent affiliated persons of
the Trust and the Advisor from engaging in deceptive, manipulative, or
fraudulent activities in connection with securities held or to be acquired by
the Fund (which may also be held by persons subject to a code). There can be no
assurance that the codes will be effective in preventing such activities.
SPECIAL SHAREHOLDER SERVICES
The Fund offers the following shareholder services:
Regular Account. The regular account allows for voluntary investments to be made
at any time. Available to individuals, custodians, corporations, trusts,
estates, corporate retirement plans and others, investors are free to make
additions and withdrawals to or from their account as often as they wish. When
an investor makes an initial investment in the Fund, a shareholder account is
opened in accordance with the investor's registration instructions. Each time
there is a transaction in a shareholder account, such as an additional
investment or the reinvestment of a dividend or distribution, the shareholder
will receive a confirmation statement showing the current transaction and all
prior transactions in the shareholder account during the calendar year to date,
along with a summary of the status of the account as of the transaction date. As
stated in the Prospectus, share certificates are not issued.
Automatic Investment Plan (Institutional and Investor Shares Only). The
automatic investment plan enables shareholders to make regular monthly or
quarterly investment in shares through automatic charges to their checking
account. With shareholder authorization and bank approval, the Fund will
automatically charge the checking account for the amount specified ($100
minimum) which will be automatically invested in shares at the public offering
price on or about the 21st day of the month. The shareholder may change the
amount of the investment or discontinue the plan at any time by writing to the
Fund.
Systematic Withdrawal Plan (Institutional and Investor Shares Only).
Shareholders owning shares with a value of $10,000 or more ($1,000,000 or more
for holders of Institutional Shares) may establish a Systematic Withdrawal Plan.
A shareholder may receive monthly or quarterly payments, in amounts of not less
than $100 per payment, by authorizing the Fund to redeem the necessary number of
shares periodically (each month, or quarterly in the months of March, June,
September and December) in order to make the payments requested. The Fund has
the capacity of electronically depositing the proceeds of the systematic
withdrawal directly to the shareholder's personal bank account ($5,000 minimum
per bank wire). Instructions for establishing this service are included in the
Fund Shares Application, enclosed in the Prospectus, or available by calling the
Fund. If the shareholder prefers to receive his systematic withdrawal proceeds
in cash, or if such proceeds are less than the $5,000 minimum for a bank wire,
checks will be made payable to the designated recipient and mailed within 7 days
of the valuation date. If the designated recipient is other than the registered
shareholder, the signature of each shareholder must be guaranteed on the
application (see "Signature Guarantees" in the Prospectus). A corporation (or
partnership) must also submit a "Corporate Resolution" (or "Certification of
Partnership") indicating the names, titles and required number of signatures
authorized to act on its behalf. The application must be signed by a duly
authorized officer(s) and the corporate seal affixed. No redemption fees are
charged to shareholders under this plan. Costs in conjunction with the
administration of the plan are borne by the Fund. Shareholders should be aware
that such systematic withdrawals may deplete or use up entirely their initial
investment and may result in realized long-term or short-term capital gains or
losses. The Systematic Withdrawal Plan may be terminated at any time by the Fund
upon sixty days written notice or by a shareholder upon written notice to the
Fund. Applications and further details may be obtained by calling the Fund at
1-800-430-3863, or by writing to:
The Chesapeake Growth Fund
[Class A Investor Shares] or [Institutional Shares]
or [Super-Institutional Shares], please specify
c/o NC Shareholder Services
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Purchases in Kind. The Fund may accept securities in lieu of cash in payment for
the purchase of shares in the Fund. The acceptance of such securities is at the
sole discretion of the Advisor based upon the suitability of the securities
accepted for inclusion as a long-term investment of the Fund, the marketability
of such securities, and other factors that the Advisor may deem appropriate. If
accepted, the securities will be valued using the same criteria and methods as
described in "Determining the Fund's Net Asset Value" in the Prospectuses.
Redemptions in Kind. The Fund does not intend, under normal circumstances, to
redeem its securities by payment in kind. It is possible, however, that
conditions may arise in the future which would, in the opinion of the Trustees,
make it undesirable for the Fund to pay for all redemptions in cash. In such
case, the Board of Trustees may authorize payment to be made in readily
marketable portfolio securities of the Fund. Securities delivered in payment of
redemptions would be valued at the same value assigned to them in computing the
net asset value per share. Shareholders receiving them would incur brokerage
costs when these securities are sold. An irrevocable election has been filed
under Rule 18f-1 of the 1940 Act, wherein the Fund committed itself to pay
redemptions in cash, rather than in kind, to any shareholder of record of the
Fund who redeems during any ninety-day period, the lesser of (a) $250,000 or (b)
one percent (1%) of the Fund's net asset value at the beginning of such period.
Transfer of Registration. To transfer shares to another owner, send a written
request to the Fund at the address shown herein. Your request should include the
following: (1) the Fund name and existing account registration; (2) signature(s)
of the registered owner(s) exactly as the signature(s) appear(s) on the account
registration; (3) the new account registration, address, social security or
taxpayer identification number and how dividends and capital gains are to be
distributed; (4) signature guarantees (See the Prospectus under the heading
"Signature Guarantees"); and (5) any additional documents which are required for
transfer by corporations, administrators, executors, trustees, guardians, etc.
If you have any questions about transferring shares, call or write the Fund.
Reduced Sales Charges for Class A Investor Shares
Concurrent Purchases. For purposes of qualifying for a lower sales charge,
investors have the privilege of combining concurrent purchases of the Fund and
another series of the Trust advised by the Advisor and sold with a sales charge.
For example, if a shareholder concurrently purchases shares in another series of
the Trust affiliated with the Advisor and sold with a sales charge at the total
public offering price of $250,000, and shares in the Fund at the total public
offering price of $250,000, the sales charge would be that applicable to a
$500,000 purchase as shown in the appropriate table in the Prospectus. This
privilege may be modified or eliminated at any time or from time to time by the
Trust without notice thereof.
Rights of Accumulation. Pursuant to the right of accumulation, investors are
permitted to purchase shares at the public offering price applicable to the
total of (a) the total public offering price of the shares of the Fund then
being purchased plus (b) an amount equal to the then current net asset value of
the purchaser's combined holdings of the shares of all of the series of the
Trust advised by the Advisor and sold with a sales charge. To receive the
applicable public offering price pursuant to the right of accumulation,
investors must, at the time of purchase, provide sufficient information to
permit confirmation of qualification, and confirmation of the purchase is
subject to such verification. This right of accumulation may be modified or
eliminated at any time or from time to time by the Trust without notice.
Letters of Intent. Investors may qualify for a lower sales charge by executing a
letter of intent. A letter of intent allows an investor to purchase shares of
the Fund over a 13-month period at reduced sales charges based on the total
amount intended to be purchased plus an amount equal to the then current net
asset value of the purchaser's combined holdings of the shares of all of the
series of the Trust advised by the Advisor and sold with a sales charge. Thus, a
letter of intent permits an investor to establish a total investment goal to be
achieved by any number of purchases over a 13-month period. Each investment made
during the period receives the reduced sales charge applicable to the total
amount of the intended investment.
The letter of intent does not obligate the investor to purchase, or the Fund to
sell, the indicated amount. If such amount is not invested within the period,
the investor must pay the difference between the sales charge applicable to the
purchases made and the charges previously paid. If such difference is not paid
by the investor, the Distributor is authorized by the investor to liquidate a
sufficient number of shares held by the investor to pay the amount due. On the
initial purchase of shares, if required (or subsequent purchases, if necessary)
shares equal to at least five percent of the amount indicated in the letter of
intent will be held in escrow during the 13-month period (while remaining
registered in the name of the investor) for this purpose. The value of any
shares redeemed or otherwise disposed of by the investor prior to termination or
completion of the letter of intent will be deducted from the total purchases
made under such letter of intent.
A 90-day backdating period can be used to include earlier purchases at the
investor's cost (without a retroactive downward adjustment of the sales charge);
the 13-month period would then begin on the date of the first purchase during
the 90-day period. No retroactive adjustment will be made if purchases exceed
the amount indicated in the letter of intent. Investors must notify the
Administrator or the Distributor whenever a purchase is being made pursuant to a
letter of intent.
Investors electing to purchase shares pursuant to a letter of intent should
carefully read the letter of intent, which is included in the Fund Shares
Application accompanying this Prospectus or is otherwise available from the
Administrator or the Distributor. This letter of intent option may be modified
or eliminated at any time or from time to time by the Trust without notice.
Reinvestments. Investors may reinvest, without a sales charge, proceeds from a
redemption of shares of the Fund in shares of the Fund or in shares of another
series of the Trust advised by the Advisor and sold with a sales charge, within
90 days after the redemption. If the other series charges a sales charge higher
than the sales charge the investor paid in connection with the shares redeemed,
the investor must pay the difference. In addition, the shares of the series to
be acquired must be registered for sale in the investor's state of residence.
The amount that may be so reinvested may not exceed the amount of the redemption
proceeds, and a written order for the purchase of such shares must be received
by the Fund or the Distributor within 90 days after the effective date of the
redemption.
If an investor realizes a gain on the redemption, the reinvestment will not
affect the amount of any federal capital gains tax payable on the gain. If an
investor realizes a loss on the redemption, the reinvestment may cause some or
all of the loss to be disallowed as a tax deduction, depending on the number of
shares purchased by reinvestment and the period of time that has elapsed after
the redemption, although for tax purposes, the amount disallowed is added to the
cost of the shares acquired upon the reinvestment.
Purchases by Related Parties and Groups. Reductions in sales charges apply to
purchases by a single "person," including an individual, members of a family
unit, consisting of a husband, wife and children under the age of 21 purchasing
securities for their own account, or a trustee or other fiduciary purchasing for
a single fiduciary account or single trust estate.
Reductions in sales charges also apply to purchases by individual members of a
"qualified group." The reductions are based on the aggregate dollar value of
shares purchased by all members of the qualified group and still owned by the
group plus the shares currently being purchased. For purposes of this paragraph,
a qualified group consists of a "company," as defined in the 1940 Act, which has
been in existence for more than six months and which has a primary purpose other
than acquiring shares of the Fund at a reduced sales charge, and the "related
parties" of such company. For purposes of this paragraph, a "related party" of a
company is: (i) any individual or other company who directly or indirectly owns,
controls, or has the power to vote five percent or more of the outstanding
voting securities of such company; (ii) any other company of which such company
directly or indirectly owns, controls, or has the power to vote five percent of
more of its outstanding voting securities; (iii) any other company under common
control with such company; (iv) any executive officer, director or partner of
such company or of a related party; and (v) any partnership of which such
company is a partner.
Sales at Net Asset Value. The Fund may sell shares at a purchase price equal to
the net asset value of such shares, without a sales charge, to Trustees,
officers, and employees of the Trust, the Fund, and the Advisor, and to
employees and principals of related organizations and their families and certain
parties related thereto, including clients and related accounts of the Advisor.
In addition, the Fund may sell shares at a purchase price equal to the net asset
value of such shares, without a sales charge, to investment advisors, financial
planners and their clients who are charged a management, consulting or other fee
for their services; and clients of such investment advisors or financial
planners who place trades for their own accounts if the accounts are linked to
the master account of such investment advisor or financial planner on the books
and records of the broker or agent. The public offering price of shares of the
Fund may also be reduced to net asset value per share in connection with the
acquisition of the assets of or merger or consolidation with a personal holding
company or a public or private investment company.
ADDITIONAL INFORMATION ON PERFORMANCE
From time to time, the total return of each Class of the Fund may be quoted in
advertisements, sales literature, shareholder reports or other communications to
shareholders. The Fund computes the "average annual total return" of each Class
of the Fund by determining the average annual compounded rates of return during
specified periods that equate the initial amount invested to the ending
redeemable value of such investment. This is done by determining the ending
redeemable value of a hypothetical $1,000 initial payment. This calculation is
as follows:
P(1+T)^n = ERV
Where: T = average annual total return.
ERV = ending redeemable value at the end of the period covered
by the computation of a hypothetical $1,000 payment made
at the beginning of the period.
P = hypothetical initial payment of $1,000 from which the
maximum sales load is deducted.
n = period covered by the computation, expressed in terms of
years.
The Fund may also compute the aggregate total return of each Class of the Fund,
which is calculated in a similar manner, except that the results are not
annualized.
The calculation of average annual total return and aggregate total return assume
that the maximum sales load is deducted from the initial $1,000 investment at
the time it is made and that there is a reinvestment of all dividends and
capital gain distributions on the reinvestment dates during the period. The
ending redeemable value is determined by assuming complete redemption of the
hypothetical investment and the deduction of all nonrecurring charges at the end
of the period covered by the computations. The Fund may also quote other total
return information that does not reflect the effects of the sales load.
The average annual total returns for the Institutional Shares of the Fund for
the year ended February 29, 2000, the five year period ended February 29, 2000,
and since inception (April 6, 1994) through February 29, 2000 were 110.91%,
29.74%, and 27.28%, respectively. The cumulative total return for the
Institutional Shares of the Fund since inception through February 29, 2000, was
315.38%.
The average annual total returns for the Super-Institutional Shares of the Fund
for the year ended February 29, 2000, the three year period ended February 29,
2000, and since inception (June 12, 1996) through February 29, 2000 were
111.10%, 36.27%, and 30.06%, respectively. The cumulative total return for the
Super-Institutional Shares of the Fund since inception through February 29, 2000
was 165.66%.
The average annual total returns for the Class A Investor Shares of the Fund for
the year ended February 29, 2000, the three year period ended February 29, 2000,
and since inception (April 7, 1995) through February 29, 2000 were 103.77%,
34.23%, and 28.08%, respectively. Without reflecting the effects of the maximum
sales load, the average annual total returns for the Class A Investor Shares of
the Fund for the year ended February 29, 2000, the three year period ended
February 29, 2000, and since inception (April 7, 1995) through February 29, 2000
were 110.07%, 35.59%, and 28.88%, respectively. The cumulative total returns for
the Class A Investor Shares of the Fund since inception through February 29,
2000, was 236.36%. Without reflecting the effects of the maximum sales load, the
cumulative total returns for the Class A Investor Shares of the Fund since
inception through February 29, 2000, was 246.76.
The Fund may also quote the performance of the Class A Investor Shares of the
Fund from the original inception of the Fund on April 6, 1994, as opposed to the
inception of the Class A Investor Shares on April 7, 1995. Under such
circumstances, historical performance of the Class A Investor Shares will be
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 class of Class A Investor Shares on April 7, 1995, and
combining such performance with the performance of the Class A Investor Shares
since April 7, 1995. Calculated in this manner, the average annual returns of
the Class A Investor Shares of the Fund since inception through February 29,
2000, with and without reflecting the effects of the maximum sales load, were
26.28% and 26.93%, respectively, and the cumulative total returns of the Class A
Shares of the Fund since inception through February 29, 2000, with and without
reflecting the effects of the maximum sales load, was 296.57% and 308.83%,
respectively.
These performance quotations should not be considered representative of the
Fund's performance for any specified period in the future.
The Fund's performance may be compared in advertisements, sales literature,
shareholder reports, and other communications to the performance of other mutual
funds having similar objectives or to standardized indices or other measures of
investment performance. In particular, the Fund may compare its performance to
the S&P 500 Total Return Index and the NASDAQ Industrials Index, which are
generally considered to be representative of the performance of unmanaged common
stocks that are publicly traded in the United States securities markets. The
Fund may also compare its performance to the Russell 2000 Index, which is
generally considered to be representative of the performance of unmanaged common
stocks of small capitalization companies that are publicly traded in the United
States securities markets. Comparative performance may also be expressed by
reference to a ranking prepared by a mutual fund monitoring service or by one or
more newspapers, newsletters or financial periodicals. The Fund may also
occasionally cite statistics to reflect its volatility and risk. The Fund may
also compare its performance to other published reports of the performance of
unmanaged portfolios of companies. The performance of such unmanaged portfolios
generally does not reflect the effects of dividends or dividend reinvestment. Of
course, there can be no assurance that the Fund will experience the same
results. Performance comparisons may be useful to investors who wish to compare
the Fund's past performance to that of other mutual funds and investment
products. Of course, past performance is not a guarantee of future results.
The Fund's performance fluctuates on a daily basis largely because net earnings
and net asset value per share fluctuate daily. Both net earnings and net asset
value per share are factors in the computation of total return as described
above.
As indicated, from time to time, the Fund may advertise its performance compared
to similar funds or portfolios using certain indices, reporting services, and
financial publications. These may include the following:
o Lipper Analytical Services, Inc. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and
takes into account any change in net asset value over a specific period of
time.
o Morningstar, Inc., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.
Investors may use such indices in addition to the Fund's Prospectus to obtain a
more complete view of the Fund's performance before investing. Of course, when
comparing the Fund's performance to any index, factors such as composition of
the index and prevailing market conditions should be considered in assessing the
significance of such comparisons. When comparing funds using reporting services,
or total return, investors should take into consideration any relevant
differences in funds such as permitted portfolio compositions and methods used
to value portfolio securities and compute offering price. Advertisements and
other sales literature for the Fund may quote total returns that are calculated
on non-standardized base periods. The total returns represent the historic
change in the value of an investment in the Fund based on monthly reinvestment
of dividends over a specified period of time.
From time to time the Fund may include in advertisements and other
communications information, charts, and illustrations relating to inflation and
the effects of inflation on the dollar, including the purchasing power of the
dollar at various rates of inflation. The Fund may also disclose from time to
time information about its portfolio allocation and holdings at a particular
date (including ratings of securities assigned by independent rating services
such as S&P and Moody's). The Fund may also depict the historical performance of
the securities in which the Fund may invest over periods reflecting a variety of
market or economic conditions either alone or in comparison with alternative
investments, performance indices of those investments, or economic indicators.
The Fund may also include in advertisements and in materials furnished to
present and prospective shareholders statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds that may be employed
to meet specific financial goals, such as saving for retirement, children's
education, or other future needs.
FINANCIAL STATEMENTS
The audited financial statements for the fiscal year ended February 29, 2000,
including the financial highlights appearing in the Annual Report to
shareholders, are incorporated by reference and made a part of this document.
<PAGE>
APPENDIX A
DESCRIPTION OF RATINGS
The Fund will normally be at least 90% invested in equities. As a temporary
defensive position, however, the Fund may invest up to 100% of its assets in
investment grade bonds, U.S. Government Securities, repurchase agreements, or
money market instruments ("Investment-Grade Debt Securities"). When the Fund
invests in Investment-Grade Debt Securities as a temporary defensive measure, it
is not pursuing its investment objective. Under normal circumstances, however,
the fund may invest in money market or repurchase agreement instruments as
described in the SAI. The various ratings used by the nationally recognized
securities rating services are described below.
A rating by a rating service represents the service's opinion as to the credit
quality of the security being rated. However, the ratings are general and are
not absolute standards of quality or guarantees as to the creditworthiness of an
issuer. Consequently, the Advisor believes that the quality of fixed income
securities in which the Fund may invest should be continuously reviewed and that
individual analysts give different weightings to the various factors involved in
credit analysis. A rating is not a recommendation to purchase, sell or hold a
security, because it does not take into account market value or suitability for
a particular investor. When a security has received a rating from more than one
service, each rating is evaluated independently. Ratings are based on current
information furnished by the issuer or obtained by the rating services from
other sources that they consider reliable. Ratings may be changed, suspended or
withdrawn as a result of changes in or unavailability of such information, or
for other reasons.
Standard & Poor's Ratings Services. The following summarizes the highest four
ratings used by Standard & Poor's Ratings Services ("S&P") for bonds which are
deemed to be Investment-Grade Debt Securities by the Advisor:
AAA - This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity of the obligor to meet its
financial commitment on the obligation.
AA - Debt rated AA differs from AAA issues only in a small degree. The
obligor's capacity to meet its financial commitment on the obligation is
very strong.
A - Debt rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in
higher-rated categories. However, the obligor's capacity to meet its
financial commitment on the obligation is still strong.
BBB - Debt rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
Bonds rated BB, B, CCC, CC and C are not considered by the Advisor to be
Investment-Grade Debt Securities and are regarded, on balance, as having
significant speculative characteristics with respect to the obligor's capacity
to meet its financial commitment on the obligation. BB indicates the lowest
degree of speculation and C the highest degree of speculation. While such bonds
may have some quality and protective characteristics, these may be outweighed by
large uncertainties or major risk exposures to adverse conditions.
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1.
The rating SP-1 is the highest rating assigned by S&P to short term notes and
indicates strong capacity to pay principal and interest. An issue determined to
possess a very strong capacity to pay debt service is given a plus (+)
designation. The rating SP-2 indicates a satisfactory capacity to pay principal
and interest, with some vulnerability to adverse financial and economic changes
over the term of the notes.
Moody's Investors Service, Inc. The following summarizes the highest four
ratings used by Moody's Investors Service, Inc. ("Moody's") for bonds which are
deemed to be Investment-Grade Debt Securities by the Advisor:
Aaa - Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A - Debt that is rated A possesses many favorable investment attributes
and is to be considered as an upper medium grade obligation. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa - Debt that is rated Baa is considered as a medium grade obligation,
i.e., it is neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such debt lacks outstanding
investment characteristics and in fact has speculative characteristics as
well.
Moody's applies numerical modifiers (l, 2 and 3) with respect to bonds rated Aa,
A and Baa. The modifier 1 indicates that the bond being rated ranks in the
higher end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the bond ranks in the lower end of
its generic rating category. Bonds which are rated Ba, B, Caa, Ca or C by
Moody's are not considered "Investment-Grade Debt Securities" by the Advisor.
Bonds rated Ba are judged to have speculative elements because their future
cannot be considered as well assured. Uncertainty of position characterizes
bonds in this class, because the protection of interest and principal payments
often may be very moderate and not well safeguarded.
Bonds that are rated B generally lack characteristics of a desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the security over any long period for time may be small. Bonds that are rated
Caa are of poor standing. Such securities may be in default or there may be
present elements of danger with respect to principal or interest. Bonds that are
rated Ca represent obligations that are speculative in a high degree. Such
issues are often in default or have other marked shortcomings. Bonds that are
rated C are the lowest rated class of bonds and issues so rated can be regarded
as having extremely poor prospects of ever attaining any real investment
standing.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or supporting institutions) are considered to have a
superior ability for repayment of short-term promissory obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structures with
moderate reliance on debt and ample asset protection; broad margins in earning
coverage of fixed financial charges and high internal cash generation; and well
established access to a range of financial markets and assured sources of
alternative liquidity. Issuers rated Prime-2 (or supporting institutions) are
considered to have a strong ability for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics of
issuers rated Prime-1 but to a lesser degree. Earnings' trends and coverage
ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriated may be more affected by external
conditions. Ample alternate liquidity is maintained.
The following summarizes the two highest ratings used by Moody's for short-term
notes and variable rate demand obligations:
MIG-l; VMIG-l - Obligations bearing these designations are of the best
quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
MIG-2; VMIG-2 - Obligations bearing these designations are of a high
quality with ample margins of protection.
Duff & Phelps Credit Rating Co. The following summarizes the highest four
ratings used by Duff & Phelps Credit Rating Co. ("D&P") for bonds which are
deemed to be Investment-Grade Debt Securities by the Advisor:
AAA - Bonds that are rated AAA are of the highest credit quality. The
risk factors are considered to be negligible, being only slightly more
than for risk-free U.S. Treasury debt.
AA - Bonds that are rated AA are of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to
time because of economic conditions.
A - Bonds rated A have average but adequate protection factors. The risk
factors are more variable and greater in periods of economic stress.
BBB - Bonds rated BBB have below-average protection factors but are still
considered sufficient for prudent investment. There is considerable
variability in risk during economic cycles.
Bonds rated BB, B and CCC by D&P are not considered Investment-Grade Debt
Securities and are regarded, on balance, as predominantly speculative with
respect to the issuer's ability to pay interest and make principal payments in
accordance with the terms of the obligations. BB indicates the lowest degree of
speculation and CCC the highest degree of speculation.
The rating Duff l is the highest rating assigned by D&P for short-term debt,
including commercial paper. D&P employs three designations, Duff l+, Duff 1 and
Duff 1- within the highest rating category. Duff l+ indicates highest certainty
of timely payment. Short-term liquidity, including internal operating factors
and/or access to alternative sources of funds, is judged to be "outstanding, and
safety is just below risk-free U.S. Treasury short-term obligations." Duff 1
indicates very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
considered to be minor. Duff 1- indicates high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are very small.
Fitch Investors Service, Inc. The following summarizes the highest four ratings
used by Fitch Investors Service, Inc. ("Fitch") for bonds which are deemed to be
Investment-Grade Debt Securities by the Advisor:
AAA - Bonds are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA - Bonds are considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated AAA. Because
bonds rated in the AAA and AA categories are not significantly vulnerable
to foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
A - Bonds that are rated A are considered to be investment grade and of
high credit quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more vulnerable to
adverse changes in economic conditions and circumstances than bonds with
higher ratings.
BBB - Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and
repay principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have adverse
impact on these bonds, and therefore impair timely payment. The
likelihood that the ratings of these bonds will fall below investment
grade is higher than for bonds with higher ratings.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within a rating category. A "ratings outlook" is used to describe the
most likely direction of any rating change over the intermediate term. It is
described as "Positive" or "Negative." The absence of a designation indicates a
stable outlook.
Bonds rated BB, B and CCC by Fitch are not considered Investment-Grade Debt
Securities and are regarded, on balance, as predominantly speculative with
respect to the issuer's ability to pay interest and make principal payments in
accordance with the terms of the obligations. BB indicates the lowest degree of
speculation and CCC the highest degree of speculation.
The following summarizes the two highest ratings used by Fitch for short-term
notes, municipal notes, variable rate demand instruments and commercial paper:
F-1+ - Instruments assigned this rating are regarded as having the
strongest degree of assurance for timely payment.
F-1 - Instruments assigned this rating reflect an assurance of timely
payment only slightly less in degree than issues rated F-1+.
The term symbol "LOC" indicates that the rating is based on a letter of credit
issued by a commercial bank.
Bonds rated BB, B and CCC by Fitch are not considered Investment-Grade Debt
Securities and are regarded, on balance, as predominantly speculative with
respect to the issuer's ability to pay interest and make principal payments in
accordance with the terms of the obligations. BB indicates the lowest degree of
speculation and CCC the highest degree of speculation.
The following summarizes the three highest ratings used by Fitch for short-term
notes, municipal notes, variable rate demand instruments and commercial paper:
F-1+ - Instruments assigned this rating are regarded as having the
strongest degree of assurance for timely payment.
F-1 - Instruments assigned this rating reflect an assurance of timely
payment only slightly less in degree than issues rated F-1+
F-2 - Instruments assigned this rating have satisfactory degree of
assurance for timely payment, but the margin of safety is not as great as
for issues assigned F-1+ and F-1 ratings.
<PAGE>
________________________________________________________________________________
THE CHESAPEAKE GROWTH FUND
________________________________________________________________________________
a series of the Gardner Lewis Investment Trust
Annual Report 2000
FOR THE YEAR ENDED FEBRUARY 29
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 3, 2000
Dear Shareholder:
The Chesapeake Growth Fund Institutional Class closed the first quarter
with a gain of 22.8%. This gain compares to gains of 2.3% for the S&P 500 and
7.1% for the Russell 2000. This quarterly letter, the 40th one we have written,
brings to close our firm's tenth year in business. Over this time we have made
tens of thousands of telephone calls to, and met with, thousands of companies.
The net result has been success across the market cap spectrum. Our Smaller Cap,
Growth (mid cap), Core Growth (large cap) disciplines have outperformed both the
S&P 500 and the Russell 2000 since their respective inceptions. This is despite
volatile environments and those environments from time to time favoring other
investment styles. Throughout our tenure, one thing has rung true perhaps more
than any other. Ultimately stock price will reflect underlying company
fundamentals.
This simple understanding is not only what drives us, but also what
grounds us when market volatility rears its head. We have been amazed in recent
months both by the intraday and the intraweek movements in market indices.
Reactive investors have been panicked to buy and panicked to sell based solely
on price action. All the while, fundamentals have been relatively constant.
This psychological tug of war has been centered around the desire to be
invested in or divested of either the "new economy" or the "old economy". Not
one of us here has been able to locate either one of these economies. The only
one we seem to be able to find is the one that we have been investing in for
years. The point is that no one need make an either-or decision.
We have visited with automotive parts suppliers whose factories would
be thought leading edge in Silicon Valley. And, we have visited with companies
whose involvement with the internet has brought them great investor notoriety,
but whose business models we thought doomed for failure from the beginning.
Whether supposed "new economy" or "old", for us it is always about the same
thing. How defensible is this company's position? What catalyst for positive
change exists? At what rate can this company grow? And, how is its stock
currently priced?
We believe that many of today's technological innovators, those with
evolutionary product or service and proprietary position will continue to
experience dramatic success. Those whose companies were formulated simply to
catch part of this amazing wave of available investment capital will not. We
missed the e-tailers' dramatic moves to the upside in 1998 because we could
neither grow comfortable with their business models nor their valuations. Given
that this group was responsible for the heaviest contribution to index results
by a wide margin in that year, our lack of ownership certainly hurt our
comparative returns. But now that many of these e-commerce companies are at the
point of bankruptcy and their stock prices reflect this, we feel somewhat
vindicated. We will attempt to avoid the hundreds of companies that in the next
couple of years will suffer the fate of the also-ran e-tailers. But, at the same
time, we will attempt to capitalize on the unprecedented technological changes
that are now shaping and reshaping our lives.
Fund Administration Investment Advisor
107 North Washington Street Gardner Lewis Asset Management
Post Office Drawer 4365 285 Wilmington - West Chester Pike
Rocky Mount, North Carolina 27803-0365 Chadds Ford, Pennsylvania 19317
(800) 430-3863 (610) 558-2800
<PAGE>
As to what are now being simplistically categorized as "old economy"
companies, similar statements can be made. Those that do not adapt to a more
fiercely competitive landscape simply will not succeed. Those that will succeed
are adapting already. In coming quarters this dichotomy will become more
apparent.
Many of the so-called "new economy" companies are evidencing extremely
strong fundamentals. Many of the so-called "old economy" companies are also
evidencing strong fundamentals, just not as strong. However, they are less
expensive. We own some of both because our bottom-up fundamental approach has
led us to them. But whether labeled "new" or "old" economy, we expect our
companies to exceed Wall Street's expectations. Our process attempts to avoid
the significant number that will not. For despite "new/old" distinctions,
minefields still exist and navigating them is important.
We dig every day in all sectors of the economy, and the opportunity in
a number of them is now very compelling. Our current positioning is intended to
best advantage us of the good news we expect forthcoming in our portfolio
companies. As in the past, these positions will change when we discover other
opportunities we think better.
In one final note, we would like to welcome Brett Nelson, John
Fraunces, and Joel Fishbein to our research staff and Sharon Hayden to our
settlements area. Have a pleasant Spring!
Sincerely,
/s/ W. Whitfield Gardner /s/ John L. Lewis, IV
W. Whitfield Gardner John L. Lewis, IV
<PAGE>
___________________________________
THE CHESAPEAKE GROWTH FUND
___________________________________
March 31, 2000
Investment Strategy
--------------------------------------------------------------------------------
The Chesapeake Growth Fund seeks capital appreciation through investments in
small, medium, and large growth equities. The cornerstone of the fund's
intensive in-house fundamental analysis is in constant contact with the
management, customers, competitors, and suppliers of both current and potential
investments.
Investment Guidelines
--------------------------------------------------------------------------------
The Fund seeks companies that:
o are experiencing a rapid growth rate - companies in our portfolio are
forecasted to grow their profits in excess of 15% annually;
o are selling at a stock price not yet fully reflective of their growth rate;
o are undergoing a positive change created by new products, managements,
distribution strategies or manufacturing technologies;
o have a strong balance sheet;
o are less susceptible to macroeconomic change.
The Largest Industry Groups
--------------------------------------------------------------------------------
[Pie Chart Here]:
Apparel 2.6%
Business Services 5.1%
Computer Software 13.4%
Computers & Peripherals 10.5%
Electronics/Instruments 8.3%
Energy Services 7.3%
Financial Services 2.2%
Pharmaceuticals 5.5%
Semiconductors & Related 20.4%
Telecommunications 15.9%
All Others 9.0%
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 $4 billion in growth equities for both
institutions and individuals including some of the top foundations, endowments,
and pension plans in the U.S. Gardner Lewis was founded in 1990 and employs a
staff of 29. The research team is comprised of 16.
<PAGE>
Ten Largest Holdings
----------------------------------------------------
1. Atmel Corp. 4.6%
2. EMC Corporation 4.4%
3. LSI Logic Corp. 4.2%
4. Jones Apparel Group, Inc. 2.6%
5. Sun Microsystems, Inc. 2.6%
6. JDS Uniphase, Inc. 2.5%
7. SDL, Inc. 2.4%
8. Scientific-Atlanta Inc. 2.4%
9. Amkor Technology Inc. 2.2%
10. AES Corporation 2.1%
Portfolio Characteristics
----------------------------------------------------
Overall Assets ($MM) 370
Number of Companies 79
5 Yr. Historical Earnings Growth 17%
Earnings Growth - net year 39%
P/E Ratio - next year 49
(Gardner Lewis earnings estimates)
Performance Summary
----------------------------------------------------
Annualized
---------------------------------------------------------------------------
Quarter Since
End 1 Year 5 Year Inception
---------------------------------------------------------------------------
The Chesapeake Growth
Fund Institutional Shares 22.8% 89.0% 27.1% 25.5%
---------------------------------------------------------------------------
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.
For more complete information regarding The Fund or to obtain an additional copy
of the prospectus please call (800)430-3863 or contact Gardner Lewis Asset
Management, the Investment Advisor at (610)558-2800.
Must be accompanied or preceded by a prospectus.
Capital Investment Group, Inc., Distributor
Raleigh, NC (800)525-3863
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
___________________________________
THE CHESAPEAKE GROWTH FUND
___________________________________
PORTFOLIO OF INVESTMENTS
(unaudited)
March 31, 2000
------------------------------------------------------------- -----------------------------------------------------------
Quantity Security Market Value Quantity Security Market Value
============================================================= ===========================================================
127,700 ADC Telecommunications, Inc. 6,879,837 58,000 Human Genome Sciences 4,817,625
97,700 AES Corporation 7,693,875 38,600 IBasis Inc. 1,585,012
229,000 Acxiom Corp. 7,614,250 56,300 Infineon Technologies ADS 3,237,250
149,500 Adaptec, Inc. 5,774,437 88,700 Infonet Services Corp. 2,006,837
36,400 Advanced Micro Devices, Inc. 2,077,075 25,900 Interwoven, Inc. 2,842,525
22,200 Aether Systems, Inc. 4,029,300 76,600 JDS Uniphase, Inc. 9,235,087
4,300 Affymetrix 638,281 299,200 Jones Apparel Group, Inc. 9,462,200
61,400 Agile Software Corp. 3,837,500 59,600 KLA-Tencor Corp. 5,021,300
168,200 Alza Corp. 6,318,012 25,900 Keynote Systems Inc. 2,648,275
153,900 Amkor Technology Inc. 8,166,319 210,300 LSI Logic Corp. 15,273,037
16,600 Applied Micro Circuits Corp. 2,491,037 146,500 MCI Worldcom Inc. 6,638,281
39,700 Aspect Development, Inc. 2,555,687 50,500 Nabors Industries, Inc. 1,960,031
322,200 Atmel Corp. 16,633,575 163,500 NextCard, Inc. 2,501,039
75,900 BEA Systems, Inc. 5,569,162 100,000 Nova Corporation 2,912,500
41,800 BMC Software, Inc. 2,063,875 95,300 Novellus Systems, Inc. 5,348,712
42,900 Biomet, Inc. 1,560,487 101,100 PerkinElmer, Inc. 6,723,150
146,100 Boston Scientific Corp. 3,113,756 28,000 Quest Software 3,157,000
43,600 Broadbased Software 3,477,100 279,600 R & B Falcon Corp. 5,504,625
43,900 CNet Networks, Inc. 2,225,181 49,900 Rare Medium Group, Inc. 2,201,837
215,700 Cadence Design Systems 4,448,812 241,600 Republic Services, Inc. 2,642,500
86,600 Checkfree Holdings Corp. 6,105,300 55,000 Research In Motion Ltd. 5,857,500
46,500 Ciena Corp. 5,864,812 41,600 SDL, Inc. 8,855,600
108,100 Circuit City Stores, Inc. 6,580,587 35,000 SPX Corp. 3,987,812
42,500 Citrix Systems, Inc. 2,815,625 35,000 Sandisk Corp. 4,287,500
103,300 Columbia/HCA Healthcare Corp. 2,614,781 137,800 Scientific-Atlanta, Inc. 8,715,850
38,700 Commscope, Inc. 1,768,106 57,700 Semtech Corp. 3,696,406
21,300 Comverse Technology, Inc. 4,025,700 77,800 St. Jude Medical, Inc. 2,008,212
99,800 Conexant Systems, Inc. 7,085,800 100,000 Sun Microsystems, Inc. 9,370,312
46,000 Diamond Technology Partners 3,024,500 60,500 Symbol Technologies 4,979,906
30,100 Digex, Inc. 3,339,219 38,750 System Software Associates, Inc. 58,125
36,200 Digital Island, Inc. 2,205,937 83,600 Tektronix, Inc. 4,681,600
6,100 E-Tek Dynamics, Inc. 1,435,025 39,000 Tellabs, Inc. 2,456,391
128,400 EMC Corporation 16,178,400 70,000 Transkaryotic Therapies 3,893,750
91,500 EchoStar Communications 7,228,500 74,300 Transocean Sedco Forex, Inc. 3,812,519
35,500 Efficient Networks, Inc. 5,529,125 67,200 US Internet Working 2,604,000
43,100 Extreme Networks, Inc. 3,404,900 15,800 Via Networks, Inc. 419,687
63,500 Forest Laboratories, Inc. 5,365,750 22,100 Vitria Technology 2,227,956
109,300 Global Marine, Inc. 2,773,487 87,000 Weatherford International, Inc 5,089,500
22,900 Harmonic Inc. 1,906,425 17,600 i2 Technologies, Inc. 2,149,400
110,400 Heller Financial 2,539,200
TOTAL EQUITY 363,829,598
CASH EQUIVALENT 6,430,408
TOTAL ASSETS 370,260,007
</TABLE>
<PAGE>
____________________________________
THE CHESAPEAKE FUNDS
____________________________________
April 3, 2000
Dear Shareholder:
The Chesapeake Growth Fund Series A closed the first quarter with a
gain of 22.8%. This gain compares to gains of 2.3% for the S&P 500 and 7.1% for
the Russell 2000. This quarterly letter, the 40th one we have written, brings to
close our firm's tenth year in business. Over this time we have made tens of
thousands of telephone calls to, and met with, thousands of companies. The net
result has been success across the market cap spectrum. Our Smaller Cap, Growth
(mid cap), Core Growth (large cap) disciplines have outperformed both the S&P
500 and the Russell 2000 since their respective inceptions. This is despite
volatile environments and those environments from time to time favoring other
investment styles. Throughout our tenure, one thing has rung true perhaps more
than any other. Ultimately stock price will reflect underlying company
fundamentals.
This simple understanding is not only what drives us, but also what
grounds us when market volatility rears its head. We have been amazed in recent
months both by the intraday and the intraweek movements in market indices.
Reactive investors have been panicked to buy and panicked to sell based solely
on price action. All the while, fundamentals have been relatively constant.
This psychological tug of war has been centered around the desire to be
invested in or divested of either the "new economy" or the "old economy". Not
one of us here has been able to locate either one of these economies. The only
one we seem to be able to find is the one that we have been investing in for
years. The point is that no one need make an either-or decision.
We have visited with automotive parts suppliers whose factories would
be thought leading edge in Silicon Valley. And, we have visited with companies
whose involvement with the internet has brought them great investor notoriety,
but whose business models we thought doomed for failure from the beginning.
Whether supposed "new economy" or "old", for us it is always about the same
thing. How defensible is this company's position? What catalyst for positive
change exists? At what rate can this company grow? And, how is its stock
currently priced?
We believe that many of today's technological innovators, those with
evolutionary product or service and proprietary position will continue to
experience dramatic success. Those whose companies were formulated simply to
catch part of this amazing wave of available investment capital will not. We
missed the e-tailers' dramatic moves to the upside in 1998 because we could
neither grow comfortable with their business models nor their valuations. Given
that this group was responsible for the heaviest contribution to index results
by a wide margin in that year, our lack of ownership certainly hurt our
comparative returns. But now that many of these e-commerce companies are at the
point of bankruptcy and their stock prices reflect this, we feel somewhat
vindicated. We will attempt to avoid the hundreds of companies that in the next
couple of years will suffer the fate of the also-ran e-tailers. But, at the same
time, we will attempt to capitalize on the unprecedented technological changes
that are now shaping and reshaping our lives.
Fund Administration Investment Advisor
107 North Washington Street Gardner Lewis Asset Management
Post Office Drawer 4365 285 Wilmington - West Chester Pike
Rocky Mount, North Carolina 27803-0365 Chadds Ford, Pennsylvania 19317
(800) 430-3863 (610) 558-2800
<PAGE>
As to what are now being simplistically categorized as "old economy"
companies, similar statements can be made. Those that do not adapt to a more
fiercely competitive landscape simply will not succeed. Those that will succeed
are adapting already. In coming quarters this dichotomy will become more
apparent.
Many of the so-called "new economy" companies are evidencing extremely
strong fundamentals. Many of the so-called "old economy" companies are also
evidencing strong fundamentals, just not as strong. However, they are less
expensive. We own some of both because our bottom-up fundamental approach has
led us to them. But whether labeled "new" or "old" economy, we expect our
companies to exceed Wall Street's expectations. Our process attempts to avoid
the significant number that will not. For despite "new/old" distinctions,
minefields still exist and navigating them is important.
We dig every day in all sectors of the economy, and the opportunity in
a number of them is now very compelling. Our current positioning is intended to
best advantage us of the good news we expect forthcoming in our portfolio
companies. As in the past, these positions will change when we discover other
opportunities we think better.
In one final note, we would like to welcome Brett Nelson, John
Fraunces, and Joel Fishbein to our research staff and Sharon Hayden to our
settlements area. Have a pleasant Spring!
Sincerely,
/s/ W. Whitfield Gardner /s/ John L. Lewis, IV
W. Whitfield Gardner John L. Lewis, IV
<PAGE>
___________________________________
THE CHESAPEAKE GROWTH FUND
___________________________________
March 31, 2000
Investment Strategy
--------------------------------------------------------------------------------
The Chesapeake Growth Fund seeks capital appreciation through investments in
small, medium, and large growth equities. The cornerstone of the fund's
intensive in-house fundamental analysis is in constant contact with the
management, customers, competitors, and suppliers of both current and potential
investments.
Investment Guidelines
--------------------------------------------------------------------------------
The Fund seeks companies that:
o are experiencing a rapid growth rate - companies in our portfolio are
forecasted to grow their profits in excess of 15% annually;
o are selling at a stock price not yet fully reflective of their growth rate;
o are undergoing a positive change created by new products, managements,
distribution strategies or manufacturing technologies;
o have a strong balance sheet;
o are less susceptible to macroeconomic change.
The Largest Industry Groups
--------------------------------------------------------------------------------
[Pie Chart Here]:
Apparel 2.6%
Business Services 5.1%
Computer Software 13.4%
Computers & Peripherals 10.5%
Electronics/Instruments 8.3%
Energy Services 7.3%
Financial Services 2.2%
Pharmaceuticals 5.5%
Semiconductors & Related 20.4%
Telecommunications 15.9%
All Others 9.0%
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 $4 billion in growth equities for both
institutions and individuals including some of the top foundations, endowments,
and pension plans in the U.S. Gardner Lewis was founded in 1990 and employs a
staff of 29. The research team is comprised of 16.
<PAGE>
Ten Largest Holdings
----------------------------------------------------
1. Atmel Corp. 4.6%
2. EMC Corporation 4.4%
3. LSI Logic Corp. 4.2%
4. Jones Apparel Group, Inc. 2.6%
5. Sun Microsystems, Inc. 2.6%
6. JDS Uniphase, Inc. 2.5%
7. SDL, Inc. 2.4%
8. Scientific-Atlanta Inc. 2.4%
9. Amkor Technology Inc. 2.2%
10. AES Corporation 2.1%
Portfolio Characteristics
----------------------------------------------------
Overall Assets ($MM) 370
Number of Companies 79
5 Yr. Historical Earnings Growth 17%
Earnings Growth - net year 39%
P/E Ratio - next year 49
(Gardner Lewis earnings estimates)
Performance Summary
----------------------------------------------------
Annualized
----------------------------------------------------------------------------
The Chesapeake Quarter Since
Growth Fund Series A End 1 Year 5 Year Inception
----------------------------------------------------------------------------
Without the sales load
deduction 22.8% 88.3% 26.7% 25.2%
----------------------------------------------------------------------------
Net of the maximum
sales load^1 19.1% 82.6% 25.9% 24.5%
----------------------------------------------------------------------------
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.
For more complete information regarding The Fund or to obtain an additional copy
of the prospectus please call (800)430-3863 or contact Gardner Lewis Asset
Management, the Investment Advisor at (610)558-2800.
Must be accompanied or preceded by a prospectus.
Capital Investment Group, Inc., Distributor
Raleigh, NC (800)525-3863
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
___________________________________
THE CHESAPEAKE GROWTH FUND
___________________________________
PORTFOLIO OF INVESTMENTS
(unaudited)
March 31, 2000
------------------------------------------------------------- -----------------------------------------------------------
Quantity Security Market Value Quantity Security Market Value
============================================================= ===========================================================
127,700 ADC Telecommunications, Inc. 6,879,837 58,000 Human Genome Sciences 4,817,625
97,700 AES Corporation 7,693,875 38,600 IBasis Inc. 1,585,012
229,000 Acxiom Corp. 7,614,250 56,300 Infineon Technologies ADS 3,237,250
149,500 Adaptec, Inc. 5,774,437 88,700 Infonet Services Corp. 2,006,837
36,400 Advanced Micro Devices, Inc. 2,077,075 25,900 Interwoven, Inc. 2,842,525
22,200 Aether Systems, Inc. 4,029,300 76,600 JDS Uniphase, Inc. 9,235,087
4,300 Affymetrix 638,281 299,200 Jones Apparel Group, Inc. 9,462,200
61,400 Agile Software Corp. 3,837,500 59,600 KLA-Tencor Corp. 5,021,300
168,200 Alza Corp. 6,318,012 25,900 Keynote Systems Inc. 2,648,275
153,900 Amkor Technology Inc. 8,166,319 210,300 LSI Logic Corp. 15,273,037
16,600 Applied Micro Circuits Corp. 2,491,037 146,500 MCI Worldcom Inc. 6,638,281
39,700 Aspect Development, Inc. 2,555,687 50,500 Nabors Industries, Inc. 1,960,031
322,200 Atmel Corp. 16,633,575 163,500 NextCard, Inc. 2,501,039
75,900 BEA Systems, Inc. 5,569,162 100,000 Nova Corporation 2,912,500
41,800 BMC Software, Inc. 2,063,875 95,300 Novellus Systems, Inc. 5,348,712
42,900 Biomet, Inc. 1,560,487 101,100 PerkinElmer, Inc. 6,723,150
146,100 Boston Scientific Corp. 3,113,756 28,000 Quest Software 3,157,000
43,600 Broadbased Software 3,477,100 279,600 R & B Falcon Corp. 5,504,625
43,900 CNet Networks, Inc. 2,225,181 49,900 Rare Medium Group, Inc. 2,201,837
215,700 Cadence Design Systems 4,448,812 241,600 Republic Services, Inc. 2,642,500
86,600 Checkfree Holdings Corp. 6,105,300 55,000 Research In Motion Ltd. 5,857,500
46,500 Ciena Corp. 5,864,812 41,600 SDL, Inc. 8,855,600
108,100 Circuit City Stores, Inc. 6,580,587 35,000 SPX Corp. 3,987,812
42,500 Citrix Systems, Inc. 2,815,625 35,000 Sandisk Corp. 4,287,500
103,300 Columbia/HCA Healthcare Corp. 2,614,781 137,800 Scientific-Atlanta, Inc. 8,715,850
38,700 Commscope, Inc. 1,768,106 57,700 Semtech Corp. 3,696,406
21,300 Comverse Technology, Inc. 4,025,700 77,800 St. Jude Medical, Inc. 2,008,212
99,800 Conexant Systems, Inc. 7,085,800 100,000 Sun Microsystems, Inc. 9,370,312
46,000 Diamond Technology Partners 3,024,500 60,500 Symbol Technologies 4,979,906
30,100 Digex, Inc. 3,339,219 38,750 System Software Associates, Inc. 58,125
36,200 Digital Island, Inc. 2,205,937 83,600 Tektronix, Inc. 4,681,600
6,100 E-Tek Dynamics, Inc. 1,435,025 39,000 Tellabs, Inc. 2,456,391
128,400 EMC Corporation 16,178,400 70,000 Transkaryotic Therapies 3,893,750
91,500 EchoStar Communications 7,228,500 74,300 Transocean Sedco Forex, Inc. 3,812,519
35,500 Efficient Networks, Inc. 5,529,125 67,200 US Internet Working 2,604,000
43,100 Extreme Networks, Inc. 3,404,900 15,800 Via Networks, Inc. 419,687
63,500 Forest Laboratories, Inc. 5,365,750 22,100 Vitria Technology 2,227,956
109,300 Global Marine, Inc. 2,773,487 87,000 Weatherford International, Inc 5,089,500
22,900 Harmonic Inc. 1,906,425 17,600 i2 Technologies, Inc. 2,149,400
110,400 Heller Financial 2,539,200
TOTAL EQUITY 363,829,598
CASH EQUIVALENT 6,430,408
TOTAL ASSETS 370,260,007
</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 29, 2000
[Line Graph]
--------------------------------------------------------------------------------
Super-
Institutional S&P 500 Total Russell 2000
Class Return Index Index
--------------------------------------------------------------------------------
06/12/1996 $50,000,000.00 $50,000,000.00 $50,000,000.00
08/31/1996 44,816,484.00 48,940,746.00 46,588,155.00
11/30/1996 51,513,200.00 56,981,759.00 49,609,065.00
02/28/1997 52,446,877.00 59,969,752.00 50,634,550.00
05/31/1997 55,730,844.00 64,648,985.60 53,774,671.00
08/31/1997 64,713,458.00 68,834,820.81 59,999,176.00
11/30/1997 62,649,033.00 73,428,370.98 61,099,149.00
02/28/1998 65,766,812.00 80,962,184.29 65,841,141.00
05/31/1998 65,620,093.00 84,486,705.00 65,283,708.00
08/31/1998 48,160,527.00 74,406,542.00 48,468,547.00
11/30/1998 60,264,848.00 90,802,549.00 57,231,032.00
02/28/1999 62,923,801.00 96,941,275.00 56,630,169.00
05/31/1999 69,483,862.00 102,250,771.00 63,575,685.00
08/31/1999 70,690,309.00 104,038,621.00 62,599,929.00
11/30/1999 86,866,184.00 109,776,533.00 66,696,132.00
02/29/2000 132,830,714.00 108,311,865.00 85,104,292.00
This graph depicts the performance of The Chesapeake Growth Fund
Super-Institutional Shares versus the Russell 2000 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 Returns
-----------------------------------------------------------------
One Year Three Years Since Inception
-----------------------------------------------------------------
111.10% 36.27% 30.06%
-----------------------------------------------------------------
The graph assumes an initial $50,000,000 investment at June 12, 1996. All
dividends and distributions are reinvested.
At February 29, 2000, the Super-Institutional Shares of The Chesapeake Growth
Fund would have grown to $132,830,714 - total investment return of 165.66% since
June 12, 1996.
At February 29, 2000, a similar investment in the Russell 2000 Index have been
worth $85,104,292 - total investment return of 70.21%; while a similar
investment in the S&P 500 Total Return Index would have grown to $108,311,865 -
total investment return of 116.62% since June 12, 1996. The Russell 2000 Index
is used in the graph above because the Investment Advisor feels that the Russell
2000 Index is a more accurate comparison to The Chesapeake Growth Fund's
investment strategy than the NASDAQ Industrials Index. The Russell 2000 Index
replaces the NASDAQ Industrials Index used for illustrative purposes in prior
annual reports. For the fiscal year ended February 29, 2000, the investment in
the Super-Institutional Shares of The Chesapeake Growth Fund would have
increased in value by $69,906,913; the similar investment in the Russell 2000
Index would have increased in value by $28,474,123; while the similar investment
in the NASDAQ Industrials Index would have increased in value by $57,660,500.
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 29, 2000
[LINE GRAPH]
--------------------------------------------------------------------------------
Institutional S&P 500 Total Russell 2000
Shares Return Index Index
--------------------------------------------------------------------------------
04/06/1994 $1,000,000.00 $1,000,000.00 $1,000,000.00
05/31/1994 1,013,000.00 1,023,703.00 979,374.00
08/31/1994 1,058,200.00 1,073,692.00 1,010,961.00
11/30/1994 1,081,100.00 1,031,962.00 959,612.00
02/28/1995 1,128,600.00 1,116,296.00 1,008,015.00
05/31/1995 1,247,000.00 1,230,372.00 1,062,881.00
08/31/1995 1,535,000.00 1,303,973.00 1,204,901.00
11/30/1995 1,467,366.00 1,413,574.18 1,222,232.00
02/29/1996 1,463,316.00 1,503,656.41 1,291,575.00
05/31/1996 1,571,672.00 1,580,240.85 1,443,742.00
08/31/1996 1,408,631.00 1,548,169.98 1,337,421.00
11/30/1996 1,618,255.00 1,802,535.84 1,424,143.00
02/28/1997 1,646,610.00 1,897,056.68 1,453,582.00
05/31/1997 1,748,889.93 2,045,077.49 1,543,727.00
08/31/1997 2,030,413.61 2,177,490.36 1,722,415.00
11/30/1997 1,965,453.51 2,322,800.70 1,753,993.00
02/28/1998 2,062,398.96 2,561,122.03 1,890,122.00
05/31/1998 2,057,783.00 2,672,615.00 1,874,120.00
08/31/1998 1,509,579.00 2,353,744.00 1,391,402.00
11/30/1998 1,888,128.00 2,872,408.00 1,642,949.00
02/28/1999 1,969,483.00 3,066,598.00 1,625,700.00
05/31/1999 2,174,736.00 3,234,556.00 1,825,087.00
08/31/1999 2,211,515.00 3,291,112.00 1,797,076.00
11/30/1999 2,716,943.00 3,472,622.00 1,914,667.00
02/29/2000 4,153,848.00 3,426,290.00 2,443,116.00
This graph depicts the performance of The Chesapeake Growth Fund Institutional
Shares versus the Russell 2000 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 Returns
-----------------------------------------------------------------
One Year Five Years Since Inception
-----------------------------------------------------------------
110.91% 29.74% 27.28%
-----------------------------------------------------------------
The graph assumes an initial $1,000,000 investment at April 6, 1994. All
dividends and distributions are reinvested.
At February 29, 2000, the Institutional Shares of The Chesapeake Growth Fund
would have grown to $4,153,848 - total investment return of 315.38% since April
6, 1994.
At February 29, 2000, a similar investment in the Russell 2000 Index would have
grown to $2,443,116 - total investment return of 144.31%; while a similar
investment in the S&P 500 Total Return Index would have grown to $3,426,290 -
total investment return of 242.63% since April 6, 1994. The Russell 2000 Index
is used in the graph above because the Investment Advisor feels that the Russell
2000 Index is a more accurate comparison to The Chesapeake Growth Fund's
investment strategy than the NASDAQ Industrials Index. The Russell 2000 Index
replaces the NASDAQ Industrials Index used for illustrative purposes in prior
annual reports. For the fiscal year ended February 29, 2000, the investment in
the Institutional Shares of The Chesapeake Growth Fund would have increased in
value by $2,184,365; the similar investment in the Russell 2000 Index would have
increased in value by $817,416; while the similar investment in the NASDAQ
Industrials Index would have increased in value by $1,719,684.
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 29, 2000
[LINE GRAPH]
--------------------------------------------------------------------------------
Class A Russell 2000 S&P 500 Total
Shares Index Return Index
--------------------------------------------------------------------------------
04/07/1995 $24,250.00 $25,000.00 $25,000.00
05/31/1995 25,628.00 26,011.00 26,443.00
08/31/1995 31,572.00 29,487.00 28,025.00
11/30/1995 30,140.00 29,911.00 32,020.00
02/29/1996 30,036.00 31,608.00 33,109.00
05/31/1996 32,244.00 35,331.00 33,963.00
08/31/1996 28,890.00 32,730.00 33,274.00
11/30/1996 33,139.00 34,852.00 38,741.00
02/28/1997 33,702.00 35,572.00 40,772.00
05/31/1997 35,784.79 37,778.00 43,983.30
08/31/1997 41,492.03 42,151.00 46,799.15
11/30/1997 40,136.35 42,924.00 49,922.20
02/28/1998 42,061.19 46,255.00 55,044.26
05/31/1998 41,942.00 45,864.00 57,440.00
08/31/1998 30,726.00 34,051.00 50,587.00
11/30/1998 38,402.00 40,207.00 61,734.00
02/28/1999 40,029.00 39,784.00 65,908.00
05/31/1999 44,159.00 44,664.00 69,518.00
08/31/1999 44,843.00 43,978.00 70,733.00
11/30/1999 55,034.00 46,856.00 74,634.00
02/29/2000 84,090.00 59,788.00 73,639.00
This graph depicts the performance of The Chesapeake Growth Fund Series A
Investor Shares versus the Russell 2000 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 Returns
-----------------------------------------------------------------------------
One Year Three Years Since Inception
-----------------------------------------------------------------------------
No Sales Load 110.07% 35.59% 28.88%
-----------------------------------------------------------------------------
With 3.00% Sales Load 103.77% 34.23% 28.08%
-----------------------------------------------------------------------------
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 29, 2000, the Series A Investor Shares of The Chesapeake Growth Fund
would have grown to $84,090 - total investment return of 236.36% 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 $86,691 -
total investment return of 246.76% since April 7, 1995. The sales load may be
reduced or eliminated for larger purchases.
At February 29, 2000, a similar investment in the Russell 2000 Index would have
grown to $59,788 - total investment return of 139.15%; while a similar
investment in the S&P 500 Total Return Index would have grown to $73,639 - total
investment return of 194.55% since April 7, 1995. The Russell 2000 Index is used
in the graph above because the Investment Advisor feels that the Russell 2000
Index is a more accurate comparison to The Chesapeake Growth Fund's investment
strategy than the NASDAQ Industrials Index. The Russell 2000 Index replaces the
NASDAQ Industrials Index used for illustrative purposes in prior annual reports.
For the fiscal year ended February 29, 2000, the investment in the Series A
Investor Shares of The Chesapeake Growth Fund would have increased in value by
$44,061; the similar investment in the Russell 2000 Index would have increased
in value by $20,004; while the similar investment in the NASDAQ Industrials
Index would have increased in value by $42,178.
Past performance is not a guarantee of future results. A mutual fund's share
price and investment return will vary with market conditions, and the principal
value of shares, when redeemed, may be worth more or less than the original
cost. Average annual returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming
reinvestments of dividends.
<PAGE>
<TABLE>
<S> <C> <C> <C>
THE CHESAPEAKE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 29, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 98.86%
Apparel Manufacturing - 1.48%
(a)Jones Apparel Group, Inc. .............................................. 265,300 $ 6,002,412
-----------
Commercial Services - 1.35%
(a)Diamond Technology Partners Incorporated ............................... 46,000 3,145,250
(a)NOVA Corporation ....................................................... 100,000 2,306,250
-----------
5,451,500
-----------
Computers - 9.07%
(a)Adaptec, Inc. .......................................................... 149,500 6,129,500
(a)Advanced Micro Devices, Inc. ........................................... 36,400 1,424,150
(a)EMC Corporation ........................................................ 131,400 15,636,600
(a)SanDisk Corporation .................................................... 44,200 3,933,800
(a)Sun Microsystems, Inc. ................................................. 100,000 9,525,000
-----------
36,649,050
-----------
Computer Software & Services - 20.34%
(a)Acxiom Corporation ..................................................... 194,500 5,616,187
(a)Aspect Development, Inc. ............................................... 32,400 4,823,550
(a)BEA Systems, Inc. ...................................................... 80,900 10,238,906
(a)BMC Software, Inc. ..................................................... 82,500 3,795,000
(a)Broadbase Software, Inc. ............................................... 31,600 4,785,425
(a)CNET, Inc. ............................................................. 43,900 2,935,812
(a)Cabeltron Systems, Inc. ................................................ 94,600 4,635,400
(a)Cadence Design Systems, Inc. ........................................... 215,700 4,300,519
(a)CheckFree Holdings Corporation ......................................... 86,600 7,615,387
(a)Citrix Systems, Inc. ................................................... 42,500 4,481,094
(a)Digex, Inc. ............................................................ 30,100 4,876,200
(a)i2 Technologies, Inc. .................................................. 33,800 5,526,300
(a)Interwoven, Inc. ....................................................... 30,500 4,559,750
(a)Keynote Systems, Inc. .................................................. 26,200 4,290,250
(a)Macromedia, Inc. ....................................................... 34,800 3,008,025
System Software Associates, Inc. ....................................... 38,750 48,438
(a)USinternetworking, Inc. ................................................ 45,300 3,023,775
(a)VA Linux Systems, Inc. ................................................. 5,100 538,688
(a)VIA NET.WORKS, Inc. .................................................... 17,700 1,168,200
(a)Vitria Technology, Inc. ................................................ 10,400 1,961,700
-----------
82,228,606
-----------
Electronics - 4.03%
(a)Novellus Systems, Inc. ................................................. 96,300 5,711,794
Symbol Technologies, Inc. .............................................. 60,500 5,755,063
Tektronix, Inc. ........................................................ 83,600 4,838,350
-----------
16,305,207
-----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
THE CHESAPEAKE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 29, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Electronics - Semiconductor - 15.84%
(a)Amkor Technology ....................................................... 153,900 $ 7,993,181
(a)Applied Micro Circuits Corporation ..................................... 8,300 2,283,019
(a)Atmel Corporation ...................................................... 326,000 16,137,000
(a)Conexant Systems, Inc. ................................................. 103,800 10,198,350
(a)KLA Tencor Corporation ................................................. 59,600 4,645,075
(a)LSI Logic Corporation .................................................. 214,400 13,721,600
(a)SDL, Inc. .............................................................. 22,100 9,061,000
-----------
64,039,225
-----------
Environmental Control - 0.65%
(a)Republic Services, Inc. ................................................ 244,600 2,629,450
-----------
Financial - Consumer Credit - 0.92%
(a)NextCard, Inc. ......................................................... 163,500 3,699,187
-----------
Financial Services - 0.34%
Heller Financial, Inc. ................................................. 72,700 1,367,669
-----------
Medical - Biotechnology - 5.85%
(a)Affymetrix, Inc. ....................................................... 25,700 7,443,363
(a)Human Genome Sciences, Inc. ............................................ 58,000 12,658,500
(a)Transkaryotic Therapies, Inc. .......................................... 70,600 3,538,825
-----------
23,640,688
-----------
Medical - Hospital Management & Services - 0.50%
Columbia/HCA Healthcare Corporation .................................... 105,300 2,040,187
-----------
Medical Supplies - 1.52%
Biomet, Inc. ........................................................... 44,000 1,452,000
(a)Boston Scientific Corporation .......................................... 146,100 2,666,325
(a)St. Jude Medical, Inc. ................................................. 77,800 2,037,388
-----------
6,155,713
-----------
Oil & Gas - Equipment & Services - 3.30%
(a)Global Marine Inc. ..................................................... 109,300 2,452,419
(a)R&B Falcon Corporation ................................................. 216,300 3,339,131
Transocean Sedco Forex Inc. ............................................ 74,300 2,930,206
(a)Weatherford International, Inc. ........................................ 103,100 4,639,500
-----------
13,361,256
-----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
THE CHESAPEAKE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 29, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Pharmaceuticals - 2.87%
(a)Alza Corporation ....................................................... 173,200 $ 6,354,275
(a)Forest Laboratories, Inc. .............................................. 67,500 4,606,875
(a)Gilead Sciences, Inc. .................................................. 8,600 657,900
-----------
11,619,050
-----------
Retail - Apparel - 0.15%
(a)American Eagle Outfitters, Inc. ........................................ 23,500 599,250
-----------
Retail - Department Stores - 0.49%
(a)Ames Department Stores, Inc. ........................................... 139,400 1,969,025
-----------
Retail - Specialty Line - 1.62%
Circuit City Stores-Circuit City Group ................................. 109,100 4,404,913
Tandy Corporation ...................................................... 56,500 2,147,000
-----------
6,551,913
-----------
Scientific & Technical Instruments - 1.37%
PerkinElmer, Inc. ...................................................... 62,200 4,019,675
(a)Waters Corporation ..................................................... 15,400 1,510,162
-----------
-----------
5,529,837
-----------
Telecommunications - 8.29%
(a)CIENA Corporation ...................................................... 47,000 7,511,188
(a)Digital Island ......................................................... 37,200 4,319,850
(a)E-Tek Dynamics, Inc. ................................................... 11,300 3,087,725
(a)Harmonic Inc. .......................................................... 22,900 3,135,869
(a)Infonet Services Corporation ........................................... 88,700 2,450,337
(a)JDS Uniphase ........................................................... 40,300 10,629,125
(a)Polycom, Inc. .......................................................... 20,300 2,361,144
-----------
33,495,238
-----------
Telecommunications Equipment - 15.16%
(a)ADC Telecommunications, Inc. ........................................... 132,700 5,954,912
(a)CommScope, Inc. ........................................................ 87,400 3,403,138
(a)Comverse Technology, Inc. .............................................. 21,300 4,193,438
(a)EchoStar Communications Corporation .................................... 46,000 5,244,000
(a)Efficient Networks, Inc. ............................................... 44,600 7,191,750
(a)Extreme Networks, Inc. ................................................. 45,600 5,073,000
(a)Research in Motion Limited ............................................. 127,100 17,190,275
Scientific-Atlanta, Inc. ............................................... 108,800 11,172,400
(a)Tellabs, Inc. .......................................................... 39,000 1,872,000
-----------
61,294,913
-----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
THE CHESAPEAKE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 29, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Utilities - Electric - 2.10%
(a)The AES Corporation ................................................... 101,200 $ 8,481,825
------------
Utilities - Telecommunications - 1.62%
(a)MCI WorldCom, Inc. .................................................... 146,500 6,537,562
------------
Total Common Stocks (Cost $217,726,396) ............................... 399,648,763
------------
INVESTMENT COMPANY - 0.11%
Evergreen Money Market Institutional Money
Market Fund Institutional Service Shares .............................. 434,134 434,134
(Cost $434,134) ------------
Total Value of Investments (Cost $218,160,530 (b)) ........................... 98.97% $400,082,897
Other Assets Less Liabilities ................................................ 1.03% 4,144,915
-------- ------------
Net Assets ................................................................. 100.00% $404,227,812
======== ============
(a) Non-income producing investment.
(b) Aggreagate cost for federal income tax purposes is $218,216,162. Unrealized appreciation (depreciation) of investments
for federal income tax purposes is as follows:
Unrealized appreciation ....................................................... $193,107,846
Unrealized depreciation ....................................................... (11,241,111)
------------
Net unrealized appreciation ........................................ $181,866,735
============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
CHESAPEAKE GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
February 29, 2000
ASSETS
Investments, at value (cost $218,160,530) ....................................................... $400,082,897
Income receivable ............................................................................... 13,987
Receivable for investments sold ................................................................. 14,616,621
Receivable for fund shares sold ................................................................. 6,617
------------
Total assets ............................................................................... 414,720,122
------------
LIABILITIES
Accrued expenses ................................................................................ 76,535
Payable for investment purchases ................................................................ 10,377,065
Disbursements in excess of cash on demand deposit ............................................... 38,710
------------
Total liabilities .......................................................................... 10,492,310
------------
NET ASSETS ............................................................................................. $404,227,812
============
NET ASSETS CONSIST OF
Paid-in capital ................................................................................. $165,838,612
Undistributed net realized gain on investments .................................................. 56,466,833
Net unrealized appreciation on investments ...................................................... 181,922,367
------------
$404,227,812
============
INSTITUTIONAL SHARES
Net asset value, redemption and offering price per share
($120,416,083 / 3,640,047 shares outstanding) .............................................. $ 33.08
============
SERIES A INVESTOR SHARES
Net asset value, redemption and offering price per share
($33,199,556 / 1,022,492 shares outstanding) ............................................... $ 32.47
============
Maximum offering price per share (100 / 97 of $32.47) ........................................... $ 33.47
============
SERIES C INVESTOR SHARES
Net asset value, redemption and offering price per share
($1,952,445 / 64,957 shares outstanding) ................................................... $ 30.06
============
SERIES D INVESTOR SHARES
Net asset value, redemption and offering price per share
($9,832,303 / 311,247 shares outstanding) .................................................. $ 31.59
============
Maximum offering price per share (100 / 98.5 of $31.59) ......................................... $ 32.07
============
SUPER-INSTITUTIONAL SHARES
Net asset value, redemption and offering price per share
($238,827,425 / 7,172,151 shares outstanding) .............................................. $ 33.30
============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
CHESAPEAKE GROWTH FUND
STATEMENT OF OPERATIONS
Year ended February 29, 2000
INVESTMENT LOSS
Income
Dividends ..................................................................................... $ 433,642
-------------
Expenses
Investment advisory fees (note 2) ............................................................. 2,530,178
Fund administration fees (note 2) ............................................................. 109,532
Distribution fees - Series A (note 3) ......................................................... 60,943
Distribution fees - Series C (note 3) ......................................................... 17,085
Distribution fees - Series D (note 3) ......................................................... 35,088
Custody fees .................................................................................. 14,971
Registration and filing administration fees (note 2) .......................................... 22,716
Fund accounting fees (note 2) ................................................................. 84,000
Audit fees .................................................................................... 17,280
Legal fees .................................................................................... 14,025
Securities pricing fees ....................................................................... 5,045
Shareholder administration fees (note 2) ...................................................... 50,000
Shareholder recordkeeping fees ................................................................ 36,000
Shareholder servicing expenses ................................................................ 12,796
Registration and filing expenses .............................................................. 22,679
Printing expenses ............................................................................. 17,030
Trustee fees and meeting expenses ............................................................. 8,174
Other operating expenses ...................................................................... 35,797
-------------
Total expenses .......................................................................... 3,093,339
-------------
Less:
Expense reimbursements (note 5) .................................................... (81,282)
Shareholder administration fees waived - Series C (note 2) ......................... (12,500)
Shareholder administration fees waived - Series D (note 2) ......................... (12,500)
-------------
Net expenses ............................................................................ 2,987,057
-------------
Net investment loss ................................................................ (2,553,415)
-------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investment transactions ..................................................... 74,143,440
Increase in unrealized appreciation on investments ................................................. 143,056,554
-------------
Net realized and unrealized gain on investments ............................................... 217,199,994
-------------
Net increase in net assets resulting from operations .................................... $ 214,646,579
=============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
CHESAPEAKE GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
------------------------------------------------------------------------------------------------------------------------------------
Year ended Year ended
February 29, February 28,
2000 1999
------------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment loss ....................................................... $(2,553,415) $(2,000,912)
Net realized gain (loss) from investment transactions ..................... 74,143,440 (496,959)
Increase (decrease) in unrealized appreciation on investments ............. 143,056,554 (13,218,336)
------------ -----------
Net increase (decrease) in net assets resulting from operations ...... 214,646,579 (15,716,207)
------------ -----------
Distributions to shareholders from
Distribution in excess of net realized gains .............................. 0 (372,638)
Net realized gain from investment transactions ............................ (14,253,595) (5,445,095)
------------ -----------
Decrease in net assets resulting from distributions .................. (14,253,595) (5,817,733)
------------ -----------
Capital share transactions
Decrease in net assets resulting from capital share transactions (a) ...... (9,336,094) (33,312,063)
------------ -----------
Total increase (decrease) in net assets ......................... 191,056,890 (54,846,003)
NET ASSETS
Beginning of year ............................................................. 213,170,922 268,016,925
------------ ------------
End of year ................................................................... $404,227,812 $213,170,922
============ ============
(a) A summary of capital share activity follows:
--------------------------------------------------------------
Year ended Year ended
February 29, 2000 February 28, 1999
Shares Value Shares Value
--------------------------------------------------------------
---------------------------------------------------------------------
Institutional Shares
---------------------------------------------------------------------
Shares sold 466,088 $ 10,224,819 793,937 $ 13,750,824
Shares issued for reinvestment of distributions 185,999 3,965,509 98,122 1,628,824
Shares redeemed (833,274) (16,268,434) (2,269,992) (35,712,491)
------------- ------------- ------------ -------------
Net decrease (181,187) $ (2,078,106) (1,377,933) $ (20,332,843)
============= ============= ============ =============
---------------------------------------------------------------------
Series A Shares
---------------------------------------------------------------------
Shares sold 45,720 $ 1,042,915 115,434 $ 1,960,607
Shares issued for reinvestment of distributions 57,159 1,197,474 42,837 701,668
Shares redeemed (655,988) (12,362,303) (896,110) (14,772,539)
------------- ------------- ------------ -------------
Net decrease (553,109) $ (10,121,914) (737,839) $ (12,110,264)
============= ============= ============ =============
---------------------------------------------------------------------
Series C Shares
---------------------------------------------------------------------
Shares sold 6,563 $ 113,580 4,837 $ 62,950
Shares issued for reinvestment of distributions 7,682 150,104 4,820 74,850
Shares redeemed (125,773) (2,408,595) (98,489) (1,609,034)
------------- ------------- ------------ -------------
Net decrease (111,528) $ (2,144,911) (88,832) $ (1,471,234)
============= ============= ============ =============
---------------------------------------------------------------------
Series D Shares
---------------------------------------------------------------------
Shares sold 4,386 $ 75,662 9,442 $ 168,590
Shares issued for reinvestment of distributions 18,187 371,374 14,142 226,988
Shares redeemed (213,709) (3,787,932) (177,343) (2,861,271)
------------- ------------- ------------ -------------
Net decrease (191,136) $ (3,340,896) (153,759) $ (2,465,693)
============= ============= ============ =============
---------------------------------------------------------------------
Super-Institutional Shares
---------------------------------------------------------------------
Shares sold 0 $ 0 0 $ 0
Shares issued for reinvestment of distributions 389,265 8,349,733 183,821 3,067,971
Shares redeemed 0 0 0 0
------------- ------------- ------------ -------------
Net increase 389,265 $ 8,349,733 183,821 $ 3,067,971
============= ============= ============ =============
---------------------------------------------------------------------
Fund Summary
---------------------------------------------------------------------
Shares sold 522,757 $ 11,456,976 923,650 $ 15,942,971
Shares issued for reinvestment of distributions 658,292 14,034,194 343,742 5,700,301
Shares redeemed (1,828,744) (34,827,264) (3,441,934) (54,955,335)
------------- ------------- ------------ -------------
Net decrease (647,695) $ (9,336,094) (2,174,542) $ (33,312,063)
============= ============= ============ =============
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Year)
Institutional Shares
------------------------------------------------------------------------------------------------------------------------------------
Year ended Year ended Year ended Year ended Year ended
February 28, February 28, February 28, February 29, February 29,
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year $16.60 $17.86 $16.26 $14.45 $11.31
Income (loss) from investment operations
Net investment loss (0.21) (0.17) (0.15) (0.13) (0.05)
Net realized and unrealized gain (loss) on investments 17.92 (0.63) 4.22 1.94 3.38
-------- --------- --------- --------- ----------
Total from investment operations 17.71 (0.80) 4.07 1.81 3.33
-------- --------- --------- --------- ----------
Distributions to shareholders from
Net investment income (0.00) 0.00 0.00 0.00 (0.11)
Tax return of capital 0.00 0.00 (0.53) 0.00 0.00
Distribution in excess of net realized gains 0.00 (0.03) 0.00 0.00 0.00
Net realized gain from investment transactions (1.23) (0.43) (1.94) 0.00 (0.08)
-------- --------- --------- --------- ----------
Total distributions (1.23) (0.46) (2.47) 0.00 (0.19)
-------- --------- --------- --------- ----------
Net asset value, end of year $33.08 $16.60 $17.86 $16.26 $14.45
======== ========= ========= ========= ==========
Total return (a) 110.91 % (4.51)% 25.25 % 12.53 % 29.66 %
======== ========= ========= ========= ==========
Ratios/supplemental data
Net assets, end of year (000's) $120,416 $63,426 $92,858 $77,858 $80,252
======== ========= ========= ========= ==========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 1.21 % 1.22 % 1.19 % 1.23 % 1.65 %
After expense reimbursements and waived fees 1.17 % 1.15 % 1.16 % 1.22 % 1.49 %
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees (1.03)% (0.87)% (0.90)% (0.85)% (0.98)%
After expense reimbursements and waived fees (1.00)% (0.80)% (0.88)% (0.84)% (0.82)%
Portfolio turnover rate 165.92 % 121.48 % 105.60 % 126.44 % 99.33 %
(a) Total return does not reflect payment of a sales charge.
See accompanying notes to financial statements (Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <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
Year ended Year ended Year ended of operations)
February 29, February 28, February 28, February 29,
2000 1999 1998 1997
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $16.68 $17.92 $16.29 $15.53
Income (loss) from investment operations
Net investment loss (0.18) (0.11) (0.12) (0.07)
Net realized and unrealized gain (loss) on investments 18.03 (0.67) 4.22 0.83
--------- --------- ---------- ----------
Total from investment operations 17.85 (0.78) 4.10 0.76
--------- --------- ---------- ----------
Distributions to shareholders from
Net investment income (0.00) 0.00 0.00 0.00
Tax return of capital 0.00 0.00 (0.53) 0.00
Distribution in excess of net realized gains 0.00 (0.03) 0.00 0.00
Net realized gain from investment transactions (1.23) (0.43) (1.94) 0.00
--------- ---------- ---------- ----------
Total distributions (1.23) (0.46) (2.47) 0.00
--------- ---------- ---------- ----------
Net asset value, end of period $33.30 $16.68 $17.92 $16.29
========= ========== ========== ==========
Total return (a) 111.10 % (4.32)% 25.40 % 4.89%(b)
========= ========== ========== ==========
Ratios/supplemental data
Net assets, end of period (000's) $238,827 $113,148 $118,246 $94,340
========= ========== ========== ==========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 1.08 % 1.05 % 1.06 % 1.08 %(c)
After expense reimbursements and waived fees 1.04 % 0.99 % 1.04 % 1.04 %(c)
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees (0.91)% (0.71)% (0.77)% (0.75)%(c)
After expense reimbursements and waived fees (0.87)% (0.64)% (0.75)% (0.72)%(c)
Portfolio turnover rate 165.92 % 121.48 % 105.60 % 126.44 %
(a) Total return does not reflect payment of a sales charge.
(b) Aggregate return. Not annualized.
(c) Annualized.
See accompanying notes to financial statements (Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
Series A Investor Shares
------------------------------------------------------------------------------------------------------------------------------------
For the
period from
April 7, 1995
(commencement
Year ended Year ended Year ended Year ended of operations)to
February 29, February 28, February 28, February 28, February 29,
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $16.37 $17.69 $16.18 $14.42 $11.79
Income (loss) from investment operations
Net investment income loss (0.33) (0.24) (0.21) (0.18) (0.06)
Net realized and unrealized gain (loss) on investments 17.66 (0.62) 4.19 1.94 2.88
--------- --------- --------- ---------- -----------
Total from investment operations 17.33 (0.86) 3.98 1.76 2.82
--------- --------- --------- ---------- -----------
Distributions to shareholders from
Net investment income (0.00) 0.00 0.00 0.00 (0.11)
Tax return of capital 0.00 0.00 (0.53) 0.00 0.00
Distribution in excess of net realized gains 0.00 (0.03) 0.00 0.00 0.00
Net realized gain from investment transactions (1.23) (0.43) (1.94) 0.00 (0.08)
--------- --------- --------- ---------- -----------
Total distributions (1.23) (0.46) (2.47) 0.00 (0.19)
--------- --------- --------- ---------- -----------
Net asset value, end of period $32.47 $16.37 $17.69 $16.18 $14.42
========= ========= ========= ========== ===========
Total return (a) 110.07 % (4.83)% 24.80 % 12.21 % 23.86 %(b)
========= ========= ========= ========== ===========
Ratios/supplemental data
Net assets, end of period (000's) $33,200 $25,797 $40,924 $39,376 $32,549
========= ========= ========= ========== ===========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 1.59 % 1.60 % 1.55 % 1.54 % 1.88 %(c)
After expense reimbursements and waived fees 1.56 % 1.53 % 1.52 % 1.53 % 1.71 %(c)
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees (1.41)% (1.26)% (1.27)% (1.16)% (1.20)%(c)
After expense reimbursements and waived fees (1.38)% (1.18)% (1.24)% (1.15)% (1.04)%(c)
Portfolio turnover rate 165.92 % 121.48 % 105.60 % 126.44 % 99.33 %
(a) Total return does not reflect payment of a sales charge.
(b) Aggregate return. Not annualized.
(c) Annualized.
See accompanying notes to financial statements (Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
THE CHESAPEAKE GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
Series C Investor Shares
------------------------------------------------------------------------------------------------------------------------------------
For the
period from
April 7, 1995
(commencement
Year ended Year ended Year ended Year ended of operations)to
February 29, February 28, February 28, February 29, February 28,
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $15.52 $17.12 $15.97 $14.34 $11.79
Income (loss) from investment operations
Net investment income loss (1.14) (0.60) (0.52) (0.29) (0.12)
Net realized and unrealized gain (loss) on investments 16.91 (0.54) 4.14 1.92 2.86
--------- --------- --------- -------- ----------
Total from investment operations 15.77 (1.14) 3.62 1.63 2.74
--------- --------- --------- -------- ----------
Distributions to shareholders from
Net investment income (0.00) 0.00 0.00 0.00 (0.11)
Tax return of capital 0.00 0.00 (0.53) 0.00 0.00
Distribution in excess of net realized gains 0.00 (0.03) 0.00 0.00 0.00
Net realized gain from investment transactions (1.23) (0.43) (1.94) 0.00 (0.08)
--------- --------- --------- -------- ----------
Total distributions (1.23) (0.46) (2.47) 0.00 (0.19)
--------- --------- --------- -------- ----------
Net asset value, end of period $30.06 $15.52 $17.12 $15.97 $14.34
========= ========= ========= ======== ==========
Total return (a) 106.03 % (6.68)% 22.95 % 11.30 % 23.18 %(b)
========= ========= ========= ======== ==========
Ratios/supplemental data
Net assets, end of period (000's) $1,952 $2,740 $4,541 $9,192 $7,908
========= ========= ========= ======== ==========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 4.02 % 3.90 % 3.11 % 2.34 % 2.38 %(c)
After expense reimbursements and waived fees 3.43 % 3.45 % 3.05 % 2.33 % 2.18 %(c)
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees (3.83)% (3.55)% (2.84)% (1.97)% (1.77)%(c)
After expense reimbursements and waived fees (3.25)% (3.11)% (2.78)% (1.96)% (1.57)%(c)
Portfolio turnover rate 165.92 % 121.48 % 105.60 % 126.44 % 99.33 %
(a) Total return does not reflect payment of a sales charge.
(b) Aggregate return. Not annualized.
(c) Annualized.
See accompanying notes to financial statements (Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <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
Year ended Year ended Year ended Year ended of operations)
Feruary 29, February 28, February 28, February 28, February 29,
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $16.04 $17.45 $16.09 $14.41 $11.79
Income (loss) from investment operations
Net investment income loss (0.44) (0.34) (0.32) (0.29) (0.11)
Net realized and unrealized gain (loss) on investments 17.22 (0.61) 4.15 1.97 2.92
--------- -------- -------- -------- ---------
Total from investment operations 16.78 (0.95) 3.83 1.68 2.81
--------- -------- -------- -------- ---------
Distributions to shareholders from
Net investment income (0.00) 0.00 0.00 0.00 (0.11)
Tax return of capital 0.00 0.00 (0.53) 0.00 0.00
Distribution in excess of net realized gains 0.00 (0.03) 0.00 0.00 0.00
Net realized gain from investment transactions (1.23) (0.43) (1.94) 0.00 (0.08)
--------- -------- -------- -------- ---------
Total distributions (1.23) (0.46) (2.47) 0.00 (0.19)
--------- -------- -------- -------- ---------
Net asset value, end of period $31.59 $16.04 $17.45 $16.09 $14.41
========= ======== ======== ======== =========
Total return (a) 108.89 % (5.41)% 24.06 % 11.59 % 23.77 %(b)
========= ======== ======== ======== =========
Ratios/supplemental data
Net assets, end of period (000's) $9,832 $8,060 $11,448 $10,774 $11,929
========= ======== ======== ======== =========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees 2.33 % 2.34 % 2.22 % 2.02 % 2.13 %(c)
After expense reimbursements and waived fees 2.12 % 2.14 % 2.18 % 2.01 % 1.73 %(c)
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees (2.15)% (2.00)% (1.94)% (1.64)% (1.54)%(c)
After expense reimbursements and waived fees (1.94)% (1.79)% (1.89)% (1.63)% (1.14)%(c)
Portfolio turnover rate 165.92 % 121.48 % 105.60 % 126.44 % 99.33 %
(a) Total return does not reflect payment of a sales charge.
(b) Aggregate return. Not annualized.
(c) Annualized.
See accompanying notes to financial statements
</TABLE>
<PAGE>
THE CHESAPEAKE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
February 29, 2000
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 offers 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 - The Fund is considered a personal holding
company as defined under Section 542 of the Internal Revenue Code
since 50% of the value of the Fund's shares were owned directly or
indirectly by five or fewer individuals at certain times during the
last half of the year. As a personal holding company, the Fund is
subject to federal income taxes on undistributed personal holding
company income at the maximum individual income tax rate. No provision
has been made for federal income taxes since substantially all taxable
income has been distributed to shareholders. It is the policy of the
Fund to comply with the provisions of the Internal Revenue Code
applicable to regulated investment companies and to make sufficient
distributions of taxable income to relieve it from all federal income
taxes.
Net investment income (loss) and net realized gains (losses) may
differ for financial statement and income tax purposes primarily
because of losses incurred subsequent to October 31, which are
deferred for income tax purposes. The character of distributions made
during the year from net investment income or net realized gains may
differ from their ultimate characterization for federal income tax
purposes. Also, due to the timing of dividend distributions, the
fiscal year in which amounts are distributed may differ from the year
that the income or realized gains were recorded by the Fund.
(Continued)
<PAGE>
THE CHESAPEAKE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
February 29, 2000
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.
As a result of the Fund's operating net investment loss, a reclassification
adjustment of $2,553,415 has been made on the statement of assets and
liabilities to decrease accumulated net investment loss, bringing it to
zero, and decrease undistributed net realized gain on investments.
C. Investment Transactions - Investment transactions are recorded on the
trade date. Realized gains and losses are determined using the
specific identification cost method. Interest income is recorded daily
on an accrual basis. Dividend income is recorded on the ex-dividend
date.
D. Distributions to Shareholders - The Fund may declare dividends
annually, generally payable on a date selected by the Trust's
Trustees. Distributions to shareholders are recorded on the
ex-dividend date. In addition, distributions may be made annually in
November out of net realized gains through October 31 of that year.
The Fund may make a supplemental distribution subsequent to the end of
its fiscal year.
E. Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
of assets, liabilities, expenses and revenues reported in the
financial statements. Actual results could differ from those
estimates.
NOTE 2 - INVESTMENT ADVISORY FEE AND OTHER RELATED PARTY TRANSACTIONS
Pursuant to an investment advisory agreement, Gardner Lewis Asset
Management (the "Advisor") provides the Fund with a continuous program of
supervision of the Fund's assets, including the composition of its
portfolio, and furnishes advice and recommendations with respect to
investments, investment policies, and the purchase and sale of securities.
As compensation for its services, the Advisor receives a fee at the annual
rate of 1.00% of the Fund's average daily net assets.
The Fund's administrator, The Nottingham Company, (the "Administrator"),
provides administrative services to and is generally responsible for the
overall management and day-to-day operations of the Fund pursuant to a fund
accounting and compliance agreement with the Trust. As compensation for its
services, the Administrator receives a fee at the annual rate of 0.075% of
the average daily net assets for the Institutional Shares and for Series A,
Series C, and Series D Investor Shares and receives a fee at the annual
rate of 0.015% of the average daily net assets for the Super-institutional
Shares. The Administrator also receives a monthly fee of $1,750 for the
Institutional Shares and for Series A, Series C, and Series D Investor
Shares for accounting and recordkeeping services. The 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 29, 2000.
There can be no assurance that the foregoing voluntary fee waivers will
continue.
(Continued)
<PAGE>
THE CHESAPEAKE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
February 29, 2000
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 29, 2000, the Distributor retained sales charges in the
amount of $470.
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 $60,943, $17,085 and $35,088, 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 29, 2000.
NOTE 4 - PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments other than short-term investments
aggregated $417,821,939 and $447,126,270, respectively, for the fiscal year
ended February 29, 2000.
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 29,
2000, the Fund's expenses were reduced by $81,282 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 Fund paid a total amount of $1.23 per
share distributions for the year ended February 29, 2000, including $0.64
that is 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 portfolio of investments, as of February
29, 2000, and the related statement of operations for the year then ended, the
statements of changes in net assets for the years ended February 29, 2000 and
February 28, 1999, 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 29, 2000, 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 29, 2000, the results of its operations
for the year ended, and the changes in its net assets and its financial
highlights for the respective stated periods, in conformity with generally
accepted accounting principles.
/S/ Deloitte & Touche LLP
Princeton, New Jersey
March 22, 2000
<PAGE>
________________________________________________________________________________
THE CHESAPEAKE GROWTH FUND
________________________________________________________________________________
a series of the Gardner Lewis Investment Trust
This Report has been prepared for
shareholders and may be distributed to
others only if preceded or accompanied by
a current prospectus.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
THE CHESAPEAKE CORE GROWTH FUND
June 30, 2000
A Series of the
GARDNER LEWIS INVESTMENT TRUST
107 North Washington Street, Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Telephone 1-800-430-3863
Table of Contents
-----------------
Page
----
OTHER INVESTMENT POLICIES.................................................... 2
INVESTMENT LIMITATIONS....................................................... 3
PORTFOLIO TRANSACTIONS....................................................... 5
NET ASSET VALUE.............................................................. 6
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION............................... 7
DESCRIPTION OF THE TRUST..................................................... 7
ADDITIONAL INFORMATION CONCERNING TAXES...................................... 8
MANAGEMENT OF THE FUND....................................................... 9
SPECIAL SHAREHOLDER SERVICES................................................. 13
ADDITIONAL INFORMATION ON PERFORMANCE........................................ 14
FINANCIAL STATEMENTS......................................................... 15
APPENDIX A - DESCRIPTION OF RATINGS.......................................... 16
This Statement of Additional Information ("SAI") is meant to be read in
conjunction with the Prospectus for The Chesapeake Core Growth Fund ("Fund"),
dated the same date as this SAI, and is incorporated by reference in its
entirety into the Prospectus. Because this SAI is not itself a prospectus, no
investment in shares of the Fund should be made solely upon the information
contained herein. Copies of the Fund's Prospectus may be obtained at no charge
by writing or calling the Fund at the address and phone number shown above.
Capitalized terms used but not defined herein have the same meanings as in the
Prospectus.
<PAGE>
OTHER INVESTMENT POLICIES
The following policies supplement the Fund's investment objective and policies
as set forth in the Prospectus for the Fund. The Fund was organized in 1997 as a
diversified, open-end, management investment company. Attached to this SAI is
Appendix A, which contains descriptions of the rating symbols used by Rating
Agencies for securities in which the Fund may invest.
Repurchase Agreements. The Fund may acquire U.S. Government Securities or
corporate debt securities subject to repurchase agreements. A repurchase
transaction occurs when, at the time the Fund purchases a security (normally a
U.S. Treasury obligation), it also resells it to the vendor (normally a member
bank of the Federal Reserve or a registered Government Securities dealer) and
must deliver the security (and/or securities substituted for them under the
repurchase agreement) to the vendor on an agreed upon date in the future. The
repurchase price exceeds the purchase price by an amount which reflects an
agreed upon market interest rate effective for the period of time during which
the repurchase agreement is in effect. Delivery pursuant to the resale will
occur within one to seven days of the purchase.
Repurchase agreements are considered "loans" under the Investment Company Act of
1940, as amended (the "1940 Act"), collateralized by the underlying security.
The Trust will implement procedures to monitor on a continuous basis the value
of the collateral serving as security for repurchase obligations. Additionally,
the Advisor to the Fund will consider the creditworthiness of the vendor. If the
vendor fails to pay the agreed upon resale price on the delivery date, the Fund
will retain or attempt to dispose of the collateral. The Fund's risk is that
such default may include any decline in value of the collateral to an amount
which is less than 100% of the repurchase price, any costs of disposing of such
collateral, and any loss resulting from any delay in foreclosing on the
collateral. The Fund will not enter into any repurchase agreement that will
cause more than 10% of its net assets to be invested in repurchase agreements
that extend beyond seven days and other illiquid securities.
Description of Money Market Instruments. Money market instruments may include
U.S. Government Securities or corporate debt securities (including those subject
to repurchase agreements), provided that they mature in thirteen months or less
from the date of acquisition and are otherwise eligible for purchase by the
Fund. Money market instruments also may include Banker's Acceptances and
Certificates of Deposit of domestic branches of U.S. banks, Commercial Paper and
Variable Amount Demand Master Notes ("Master Notes"). Banker's Acceptances are
time drafts drawn on and "accepted" by a bank. When a bank "accepts" such a time
draft, it assumes liability for its payment. When the Fund acquires a Banker's
Acceptance, the bank that "accepted" the time draft is liable for payment of
interest and principal when due. The Banker's Acceptance carries the full faith
and credit of such bank. A Certificate of Deposit ("CD") is an unsecured
interest-bearing debt obligation of a bank. Commercial Paper is an unsecured,
short-term debt obligation of a bank, corporation or other borrower. Commercial
Paper maturity generally ranges from two to 270 days and is usually sold on a
discounted basis rather than as an interest-bearing instrument. The Fund will
invest in Commercial Paper only if it is rated one of the top two rating
categories by Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's
Ratings Services ("S&P"), Fitch Investors Service, Inc. ("Fitch") or Duff &
Phelps ("D&P") or, if not rated, of equivalent quality in the Advisor's opinion.
Commercial Paper may include Master Notes of the same quality. Master Notes are
unsecured obligations which are redeemable upon demand of the holder and which
permit the investment of fluctuating amounts at varying rates of interest.
Master Notes are acquired by the Fund only through the Master Note program of
the Fund's custodian bank, acting as administrator thereof. The Advisor will
monitor, on a continuous basis, the earnings power, cash flow and other
liquidity ratios of the issuer of a Master Note held by the Fund.
Illiquid Investments. The Fund may invest up to 10% of its net assets in
illiquid securities, which are investments that cannot be sold or disposed of in
the ordinary course of business within seven days at approximately the prices at
which they are valued. Under the supervision of the Board of Trustees, the
Advisor determines the liquidity of the Fund's investments and, through reports
from the Advisor, the Board monitors investments in illiquid instruments. In
determining the liquidity of the Fund's investments, the Advisor may consider
various factors including (1) the frequency of trades and quotations, (2) the
number of dealers and prospective purchasers in the marketplace, (3) dealer
undertakings to make a market, (4) the nature of the security (including any
demand or tender features) and (5) the nature of the marketplace for trades
(including the ability to assign or offset the Fund's rights and obligations
relating to the investment). Investments currently considered by the Fund to be
illiquid include repurchase agreements not entitling the holder to payment of
principal and interest within seven days. If through a change in values, net
assets or other circumstances, the Fund were in a position where more than 10%
of its net assets were invested in illiquid securities, it would seek to take
appropriate steps to protect liquidity.
Foreign Securities. The Fund may invest up to 10% of its total assets in foreign
securities and sponsored ADRs. The same factors would be considered in selecting
foreign securities as with domestic securities. Foreign securities investment
presents special consideration not typically associated with investment in
domestic securities. Foreign taxes may reduce income. Currency exchange rates
and regulations may cause fluctuations in the value of foreign securities.
Foreign securities are subject to different regulatory environments than in the
United States and, compared to the United States, there may be a lack of uniform
accounting, auditing and financial reporting standards, less volume and
liquidity and more volatility, less public information, and less regulation of
foreign issuers. Countries have been known to expropriate or nationalize assets,
and foreign investments may be subject to political, financial, or social
instability, or adverse diplomatic developments. There may be difficulties in
obtaining service of process on foreign issuers and difficulties in enforcing
judgments with respect to claims under the U.S. securities laws against such
issuers. Favorable or unfavorable differences between U.S. and foreign economies
could affect foreign securities values. The U.S. Government has, in the past,
discouraged certain foreign investments by U.S. investors through taxation or
other restrictions and it is possible that such restrictions could be imposed
again.
Because of the inherent risk of foreign securities over domestic issues, the
Fund will generally limit foreign investments to those traded domestically as
sponsored American Depository Receipts ("ADRs"). ADRs are receipts issued by a
U.S. bank or trust company evidencing ownership of securities of a foreign
issuer. ADRs may be listed on a national securities exchange or may trade in the
over-the-counter market. The prices of ADRs are denominated in U.S. dollars
while the underlying security may be denominated in a foreign currency. To the
extent the Fund invests in other foreign securities, it will generally limit
such investments to foreign securities traded on foreign securities exchanges.
Investment Companies. In order to achieve its investment objective, the Fund may
invest up to 10% of the value of its total assets in securities of other
investment companies whose investment objectives are consistent with the Fund's
investment objective. The Fund will not acquire securities of any one investment
company if, immediately thereafter, the Fund would own more than 3% of such
company's total outstanding voting securities, securities issued by such company
would have an aggregate value in excess of 5% of the Fund's total assets, or
securities issued by such company and securities held by the Fund issued by
other investment companies would have an aggregate value in excess of 10% of the
Fund's total assets. To the extent the Fund invests in other investment
companies, the shareholders of the Fund would indirectly pay a portion of the
operating costs of the underlying investment companies. These costs include
management, brokerage, shareholder servicing and other operational expenses.
Shareholders of the Fund would then indirectly pay higher operational costs than
if they owned shares of the underlying investment companies directly.
Real Estate Securities. The Fund will not invest in real estate or real estate
mortgage loans (including limited partnership interests), but may invest in
readily marketable securities secured by real estate or interests therein or
issued by companies that invest in real estate or interests therein. The Fund
may also invest in readily marketable interests in real estate investment trusts
("REITs"). REITs are generally publicly traded on the national stock exchanges
and in the over-the-counter market and have varying degrees of liquidity.
Although the Fund is not limited in the amount of these types of real estate
securities it may acquire, it is not presently expected that within the next 12
months the Fund will have in excess of 5% of its total assets in real estate
securities.
Forward Commitments and When-Issued Securities. The Fund may purchase
when-issued securities and commit to purchase securities for a fixed price at a
future date beyond customary settlement time. The Fund is required to hold and
maintain in a segregated account until the settlement date, cash, U.S.
Government Securities or high-grade debt obligations in an amount sufficient to
meet the purchase price. Purchasing securities on a when-issued or forward
commitment basis involves a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in addition to
the risk of decline in value of the Fund's other assets. In addition, no income
accrues to the purchaser of when-issued securities during the period prior to
issuance. Although the Fund would generally purchase securities on a when-issued
or forward commitment basis with the intention of acquiring securities for its
portfolio, the Fund may dispose of a when-issued security or forward commitment
prior to settlement if the Advisor deems it appropriate to do so. The Fund may
realize short-term gains or losses upon such sales.
INVESTMENT LIMITATIONS
The Fund has adopted the following fundamental investment limitations, which
cannot be changed without approval by holders of a majority of the outstanding
voting shares of the Fund. A "majority" for this purpose means the lesser of (i)
67% of the Fund's outstanding shares represented in person or by proxy at a
meeting at which more than 50% of its outstanding shares are represented, or
(ii) more than 50% of its outstanding shares. Unless otherwise indicated,
percentage limitations apply at the time of purchase.
As a matter of fundamental policy, the Fund may not:
1. Issue senior securities, borrow money, or pledge its assets, except
that it may borrow from banks as a temporary measure (a) for
extraordinary or emergency purposes, in amounts not exceeding 5% of its
total assets or (b) to meet redemption requests in amounts not
exceeding 15% of its total assets. The Fund will not make any
investments if borrowing exceeds 5% of its total assets until such time
as total borrowing represents less than 5% of Fund assets;
2. With respect to 75% of its total assets, invest more than 5% of the
value of its total assets in the securities of any one issuer or
purchase more than 10% of the outstanding voting securities of any
class of securities of any one issuer (except that securities of the
U.S. government, its agencies, and instrumentalities are not subject to
this limitation);
3. Invest 25% or more of the value of its total assets in any one industry
(except that securities of the U.S. Government, its agencies, and
instrumentalities are not subject to this limitation);
4. Invest for the purpose of exercising control or management of another
issuer;
5. Purchase or sell commodities or commodities contracts; real estate
(including limited partnership interests, but excluding readily
marketable interests in real estate investment trusts or other
securities secured by real estate or interests therein or readily
marketable securities issued by companies that invest in real estate or
interests therein); or interests in oil, gas, or other mineral
exploration or development programs or leases (although it may invest
in readily marketable securities of issuers that invest in or sponsor
such programs or leases);
6. Underwrite securities issued by others except to the extent that the
disposition of portfolio securities, either directly from an issuer or
from an underwriter for an issuer, may be deemed to be an underwriting
under federal securities laws;
7. Participate on a joint or joint and several basis in any trading
account in securities;
8. Invest its assets in the securities of one or more investment companies
except to the extent permitted by the 1940 Act;
9. Write, purchase, or sell puts, calls, straddles, spreads, combinations
thereof, or futures contracts or related options; and
10. Make loans of money or securities, except that the Fund may invest in
repurchase agreements, money market instruments, and other debt
securities.
The following investment limitations are not fundamental and may be changed
without shareholder approval. As a matter of non-fundamental policy, the Fund
may not:
1. Invest in securities of issuers that have a record of less than three
years' continuous operation (including predecessors and, in the case of
bonds, guarantors) if more than 5% of its total assets would be
invested in such securities;
2. Invest more than 10% of its net assets in illiquid securities. For this
purpose, illiquid securities include, among others, (a) securities for
which no readily available market exists or which have legal or
contractual restrictions on resale, (b) fixed-time deposits that are
subject to withdrawal penalties and have maturities of more than seven
days, and (c) repurchase agreements not terminable within seven days;
3. Invest in the securities of any issuer if those officers or Trustees of
the Trust and those officers and directors of the Advisor who
individually own more than 1/2 of 1% of the outstanding securities of
such issuer together own more than 5% of such issuer's securities;
4. Make short sales of securities or maintain a short position, except
short sales "against the box." (A short sale is made by selling a
security the Fund does not own. A short sale is "against the box" to
the extent that the Fund contemporaneously owns or has the right to
obtain at no additional cost securities identical to those sold short).
While the Fund has reserved the right to make short sales "against the
box," the Advisor has no present intention of engaging in such
transactions at this time or during the coming year; and
5. Purchase foreign securities other than those traded on domestic U.S.
exchanges.
Percentage restrictions stated as an investment policy or investment limitation
apply at the time of investment; if a later increase or decrease in percentage
beyond the specified limits results from a change in securities values or total
assets, it will not be considered a violation.
PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Trust's Board of Trustees, the Advisor
is responsible for, makes decisions with respect to, and places orders for all
purchases and sales of portfolio securities for the Fund.
The annualized portfolio turnover rate for the Fund is calculated by dividing
the lesser of purchases or sales of portfolio securities for the reporting
period by the monthly average value of the portfolio securities owned during the
reporting period. The calculation excludes all securities whose maturities or
expiration dates at the time of acquisition are one year or less. Portfolio
turnover of the Fund may vary greatly from year to year as well as within a
particular year, and may be affected by cash requirements for redemption of
shares and by requirements that enable the Fund to receive favorable tax
treatment. Portfolio turnover will not be a limiting factor in making Fund
decisions, and the Fund may engage in short-term trading to achieve its
investment objectives.
Purchases of money market instruments by the Fund are made from dealers,
underwriters and issuers. The Fund currently does not expect to incur any
brokerage commission expense on such transactions because money market
instruments are generally traded on a "net" basis by a dealer acting as
principal for its own account without a stated commission. The price of the
security, however, usually includes a profit to the dealer. Securities purchased
in underwritten offerings include a fixed amount of compensation to the
underwriter, generally referred to as the underwriter's concession or discount.
When securities are purchased directly from or sold directly to an issuer, no
commissions or discounts are paid.
Transactions on U.S. stock exchanges involve the payment of negotiated brokerage
commissions. On exchanges on which commissions are negotiated, the cost of
transactions may vary among different brokers. Transactions in the
over-the-counter market are generally on a net basis (i.e., without commission)
through dealers, or otherwise involve transactions directly with the issuer of
an instrument. The Fund's fixed income portfolio transactions will normally be
principal transactions executed in over-the-counter markets and will be executed
on a "net" basis, which may include a dealer markup. With respect to securities
traded only in the over-the-counter market, orders will be executed on a
principal basis with primary market makers in such securities except where
better prices or executions may be obtained on an agency basis or by dealing
with other than a primary market maker.
The Fund may participate, if and when practicable, in bidding for the purchase
of Fund securities directly from an issuer in order to take advantage of the
lower purchase price available to members of a bidding group. The Fund will
engage in this practice, however, only when the Advisor, in its sole discretion,
believes such practice to be otherwise in the Fund's interest.
In executing Fund transactions and selecting brokers or dealers, the Advisor
will seek to obtain the best overall terms available for the Fund. In assessing
the best overall terms available for any transaction, the Advisor shall consider
factors it deems relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution capability of
the broker or dealer, and the reasonableness of the commission, if any, both for
the specific transaction and on a continuing basis. The sale of Fund shares may
be considered when determining the firms that are to execute brokerage
transactions for the Fund. In addition, the Advisor is authorized to cause the
Fund to pay a broker-dealer which furnishes brokerage and research services a
higher commission than that which might be charged by another broker-dealer for
effecting the same transaction, provided that the Advisor determines in good
faith that such commission is reasonable in relation to the value of the
brokerage and research services provided by such broker-dealer, viewed in terms
of either the particular transaction or the overall responsibilities of the
Advisor to the Fund. Such brokerage and research services might consist of
reports and statistics relating to specific companies or industries, general
summaries of groups of stocks or bonds and their comparative earnings and
yields, or broad overviews of the stock, bond and government securities markets
and the economy.
Supplementary research information so received is in addition to, and not in
lieu of, services required to be performed by the Advisor and does not reduce
the advisory fees payable by the Fund. The Trustees will periodically review any
commissions paid by the Fund to consider whether the commissions paid over
representative periods of time appear to be reasonable in relation to the
benefits inuring to the Fund. It is possible that certain of the supplementary
research or other services received will primarily benefit one or more other
investment companies or other accounts for which investment discretion is
exercised by the Advisor. Conversely, the Fund may be the primary beneficiary of
the research or services received as a result of securities transactions
effected for such other account or investment company.
The Fund may also enter into brokerage/service arrangements pursuant to which
selected brokers executing portfolio transactions for the Fund may pay a portion
of the Fund's operating expenses. For the fiscal year ended February 29, 2000,
the Fund participated in brokerage/service arrangements with Instinet
Corporation and Standard & Poors Securities, Inc., both of New York, New York.
During such year the firms received $5,656 and $4,317, respectively, in
brokerage commissions from the Fund and paid $5,446 of the Fund's operating
expenses. There can be no assurance that such arrangements will occur now or in
the future.
The Advisor may also utilize a brokerage firm affiliated with the Trust or the
Advisor if it believes it can obtain the best execution of transactions from
such broker although the Advisor has not utilized such a broker since the Fund's
inception. The Fund will not execute portfolio transactions through, acquire
securities issued by, make savings deposits in or enter into repurchase
agreements with the Advisor or an affiliated person of the Advisor (as such term
is defined in the 1940 Act) acting as principal, except to the extent permitted
by the Securities and Exchange Commission ("SEC"). In addition, the Fund will
not purchase securities during the existence of any underwriting or selling
group relating thereto of which the Advisor, or an affiliated person of the
Advisor, is a member, except to the extent permitted by the SEC. Under certain
circumstances, the Fund may be at a disadvantage because of these limitations in
comparison with other investment companies that have similar investment
objectives but are not subject to such limitations.
Investment decisions for the Fund will be made independently from those for any
other series of the Trust, if any, and for any other investment companies and
accounts advised or managed by the Advisor. Such other investment companies and
accounts may also invest in the same securities as the Fund. To the extent
permitted by law, the Advisor may aggregate the securities to be sold or
purchased for the Fund with those to be sold or purchased for other investment
companies or accounts in executing transactions. When a purchase or sale of the
same security is made at substantially the same time on behalf of the Fund and
another investment company or account, the transaction will be averaged as to
price and available investments allocated as to amount, in a manner which the
Advisor believes to be equitable to the Fund and such other investment company
or account. In some instances, this investment procedure may adversely affect
the price paid or received by the Fund or the size of the position obtained or
sold by the Fund.
For the fiscal years ended February 29, 2000 and February 28, 1999, the Fund
paid brokerage commissions of $17,812 and $23,665, respectively; none of which
was paid to the Distributor.
NET ASSET VALUE
The net asset value per share of the Fund is calculated separately by adding the
value of the Fund's securities and other assets belonging to the Fund,
subtracting the liabilities charged to the Fund, and dividing the result by the
number of outstanding shares. "Assets belonging to" the Fund consist of the
consideration received upon the issuance of shares of the Fund together with all
net investment income, realized gains/losses and proceeds derived from the
investment thereof, including any proceeds from the sale of such investments,
any funds or payments derived from any reinvestment of such proceeds, and a
portion of any general assets of the Trust not belonging to a particular
investment Fund. Assets belonging to the Fund are charged with the direct
liabilities of the Fund and with a share of the general liabilities of the
Trust, which are normally allocated in proportion to the number of or the
relative net asset values of all of the Trust's series at the time of allocation
or in accordance with other allocation methods approved by the Board of
Trustees. Subject to the provisions of the Amended and Restated Declaration of
Trust, determinations by the Board of Trustees as to the direct and allocable
liabilities, and the allocable portion of any general assets, with respect to
the Fund are conclusive.
The net asset value per share of the Fund is determined at the time normal
trading closes on the New York Stock Exchange (currently 4:00 p.m., New York
time, Monday through Friday), except on business holidays when the New York
Stock Exchange is closed. The New York Stock Exchange generally recognizes the
following holidays: New Year's Day, Martin Luther King, Jr.'s Birthday,
President's Day, Good Friday, Memorial Day, Fourth of July, Labor Day,
Thanksgiving Day, and Christmas Day. Any other holiday recognized by the New
York Stock Exchange will be considered a business holiday on which the Fund's
net asset value will not be determined.
The Fund has entered into brokerage/service arrangements with certain brokers
who paid a portion of the Fund's expenses for the fiscal year ended February 29,
2000. These arrangements have been reviewed by the Board of Trustees, subject to
the provisions and guidelines as clearly outlined in the securities laws and
legal precedent of the United States. There can be no assurance that the Fund's
brokerage/service arrangements will continue in the future.
For the fiscal year ended February 29, 2000, the net expenses of the Fund (after
expense reductions of $5,446 paid brokers pursuant to the brokerage/service
arrangement with the Fund, waiver of $69,737 of investment advisory fees, and
waiver of $13,221 of administration fees) were $92,619 (1.15% of the average
daily net assets of the Fund). For the fiscal year ended February 28, 1999, the
net expenses of the Fund (after expense reductions of $3,595 paid by a broker
pursuant to the brokerage/service arrangement with the Fund, waiver of $61,632
of investment advisory fees, and waiver of $17,122 of administration fees) were
$85,702 (1.39% of the average daily net assets of the Fund). For the period
ended February 28, 1998, the net expenses of the Fund (after expense reductions
of $8,432 paid by a broker pursuant to the brokerage/service arrangement with
the Fund, waiver of $19,606 of investment advisory fees, and waiver of $10,320
of administration fees) were $24,311 (1.24% of the average daily net assets of
the Fund).
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Purchases. Shares of the Fund are offered and sold on a continuous basis and may
be purchased through authorized investment dealers or directly by contacting the
Distributor or the Fund. Selling dealers have the responsibility of transmitting
orders promptly to the Fund. The public offering price of shares of the Fund
equals net asset value. See "Investing in the Fund" in the Prospectus.
Redemptions. Under the 1940 Act, the Fund may suspend the right of redemption or
postpone the date of payment for shares during any period when (a) trading on
the New York Stock Exchange is restricted by applicable rules and regulations of
the SEC; (b) the Exchange is closed for other than customary weekend and holiday
closings; (c) the SEC has by order permitted such suspension; or (d) an
emergency exists as determined by the SEC. The Fund may also suspend or postpone
the recordation of the transfer of shares upon the occurrence of any of the
foregoing conditions.
In addition to the situations described in the Prospectus under "Investing in
the Fund - Redeeming Your Shares," the Fund may redeem shares involuntarily to
reimburse the Fund for any loss sustained by reason of the failure of a
shareholder to make full payment for shares purchased by the shareholder or to
collect any charge relating to a transaction effected for the benefit of a
shareholder which is applicable to Fund shares as provided in the Prospectus
from time to time.
DESCRIPTION OF THE TRUST
The Trust is an unincorporated business trust organized under Massachusetts law
on August 12, 1992. The Trust's Amended and Restated Declaration of Trust
authorizes the Board of Trustees to divide shares into series, each series
relating to a separate portfolio of investments, and to classify and reclassify
any unissued shares into one or more classes of shares of each such series. The
Declaration of Trust currently provides for the shares of three series, as
follows: the Fund, The Chesapeake Growth Fund, and The Chesapeake Aggressive
Growth Fund, all managed by the Advisor. The shares of the Fund and The
Chesapeake Aggressive Growth Fund are all of one class; the shares of The
Chesapeake Growth Fund are divided into three classes (Institutional Shares,
Super-Institutional Shares, and Class A Investor Shares). The number of shares
of each series shall be unlimited. The Trust does not intend to issue share
certificates.
In the event of a liquidation or dissolution of the Trust or an individual
series, such as the Fund, shareholders of a particular series would be entitled
to receive the assets available for distribution belonging to such series.
Shareholders of a series are entitled to participate equally in the net
distributable assets of the particular series involved on liquidation, based on
the number of shares of the series that are held by each shareholder. If there
are any assets, income, earnings, proceeds, funds or payments, that are not
readily identifiable as belonging to any particular series, the Trustees shall
allocate them among any one or more of the series as they, in their sole
discretion, deem fair and equitable.
Shareholders of all of the series of the Trust, including the Fund, will vote
together and not separately on a series-by-series or class-by-class basis,
except as otherwise required by law or when the Board of Trustees determines
that the matter to be voted upon affects only the interests of the shareholders
of a particular series or class. Rule 18f-2 under the 1940 Act provides that any
matter required to be submitted to the holders of the outstanding voting
securities of an investment company such as the Trust shall not be deemed to
have been effectively acted upon unless approved by the holders of a majority of
the outstanding shares of each series or class affected by the matter. A series
or class is affected by a matter unless it is clear that the interests of each
series or class in the matter are substantially identical or that the matter
does not affect any interest of the series or class. Under Rule 18f-2, the
approval of an investment advisory agreement or any change in a fundamental
investment policy would be effectively acted upon with respect to a series only
if approved by a majority of the outstanding shares of such series. However, the
Rule also provides that the ratification of the appointment of independent
accountants, the approval of principal underwriting contracts and the election
of Trustees may be effectively acted upon by shareholders of the Trust voting
together, without regard to a particular series or class.
When used in the Prospectus or this SAI, a "majority" of shareholders means the
vote of the lesser of (1) 67% of the shares of the Trust or the applicable
series or class present at a meeting if the holders of more than 50% of the
outstanding shares are present in person or by proxy, or (2) more than 50% of
the outstanding shares of the Trust or the applicable series or class.
When issued for payment as described in the Prospectus and this SAI, shares of
the Fund will be fully paid and non-assessable.
The Amended and Restated Declaration of Trust provides that the Trustees of the
Trust will not be liable in any event in connection with the affairs of the
Trust, except as such liability may arise from his or her own bad faith, willful
misfeasance, gross negligence, or reckless disregard of duties. It also provides
that all third parties shall look solely to the Trust property for satisfaction
of claims arising in connection with the affairs of the Trust. With the
exceptions stated, the Amended and Restated Declaration of Trust provides that a
Trustee or officer is entitled to be indemnified against all liability in
connection with the affairs of the Trust.
ADDITIONAL INFORMATION CONCERNING TAXES
The following summarizes certain additional tax considerations generally
affecting the Fund and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Fund or its shareholders, and the discussion here and in the
Prospectus is not intended as a substitute for careful tax planning and is based
on tax laws and regulations that are in effect on the date hereof; such laws and
regulations may be changed by legislative, judicial, or administrative action.
Investors are advised to consult their tax advisors with specific reference to
their own tax situations.
Each series of the Trust, including the Fund, will be treated as a separate
corporate entity under the Code and intends to qualify or remain qualified as a
regulated investment company. In order to so qualify, each series must elect to
be a regulated investment company or have made such an election for a previous
year and must satisfy, in addition to the distribution requirement described in
the Prospectus, certain requirements with respect to the source of its income
for a taxable year. At least 90% of the gross income of each series must be
derived from dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of stocks, securities or foreign
currencies, and other income derived with respect to the series' business of
investing in such stock, securities or currencies. Any income derived by a
series from a partnership or trust is treated as derived with respect to the
series' business of investing in stock, securities or currencies only to the
extent that such income is attributable to items of income that would have been
qualifying income if realized by the series in the same manner as by the
partnership or trust.
An investment company may not qualify as a regulated investment company for any
taxable year unless it satisfies certain requirements with respect to the
diversification of its investments at the close of each quarter of the taxable
year. In general, at least 50% of the value of its total assets must be
represented by cash, cash items, government securities, securities of other
regulated investment companies and other securities which, with respect to any
one issuer, do not represent more than 5% of the total assets of the investment
company nor more than 10% of the outstanding voting securities of such issuer.
In addition, not more than 25% of the value of the investment company's total
assets may be invested in the securities (other than government securities or
the securities of other regulated investment companies) of any one issuer. The
Fund intends to satisfy all requirements on an ongoing basis for continued
qualification as a regulated investment company.
Each series of the Trust, including the Fund, will designate any distribution of
long-term capital gains as a capital gain dividend in a written notice mailed to
shareholders within 60 days after the close of the series' taxable year.
Shareholders should note that, upon the sale or exchange of series shares, if
the shareholder has not held such shares for at least six months, any loss on
the sale or exchange of those shares will be treated as long-term capital loss
to the extent of the capital gain dividends received with respect to the shares.
A 4% nondeductible excise tax is imposed on regulated investment companies that
fail to currently distribute an amount equal to specified percentages of their
ordinary taxable income and capital gain net income (excess of capital gains
over capital losses). Each series of the Trust, including the Fund, intends to
make sufficient distributions or deemed distributions of its ordinary taxable
income and any capital gain net income prior to the end of each calendar year to
avoid liability for this excise tax.
If for any taxable year a series does not qualify for the special federal income
tax treatment afforded regulated investment companies, all of its taxable income
will be subject to federal income tax at regular corporate rates (without any
deduction for distributions to its shareholders). In such event, dividend
distributions (whether or not derived from interest on tax-exempt securities)
would be taxable as ordinary income to shareholders to the extent of the series'
current and accumulated earnings and profits, and would be eligible for the
dividends received deduction for corporations.
Each series of the Trust, including the Fund, will be required in certain cases
to withhold and remit to the U.S. Treasury 31% of taxable dividends or 31% of
gross proceeds realized upon sale paid to shareholders who have failed to
provide a correct tax identification number in the manner required, or who are
subject to withholding by the Internal Revenue Service for failure to properly
include on their return payments of taxable interest or dividends, or who have
failed to certify to the Fund that they are not subject to backup withholding
when required to do so or that they are "exempt recipients."
Dividends paid by the Fund derived from net investment income or net short-term
capital gains are taxable to shareholders as ordinary income, whether received
in cash or reinvested in additional shares. Long-term capital gains
distributions, if any, are taxable as long-term capital gains, whether received
in cash or reinvested in additional shares, regardless of how long Fund shares
have been held.
The Fund will send shareholders information each year on the tax status of
dividends and disbursements. A dividend or capital gains distribution paid
shortly after shares have been purchased, although in effect a return of
investment, is subject to federal income taxation. Dividends from net investment
income, along with capital gains, will be taxable to shareholders, whether
received in cash or shares and no matter how long you have held Fund shares,
even if they reduce the net asset value of shares below your cost and thus, in
effect, result in a return of a part of your investment.
MANAGEMENT OF THE FUND
The Board of Trustees of the Trust ("Trustees") is responsible for the
management and supervision of the Fund. The Trustees approve all significant
agreements between the Trust, on behalf of the Fund, and those companies that
furnish services to the Fund. This section of the SAI provides information about
the persons who serve as Trustees and Officers to the Trust and Fund,
respectively, as well as the entities that provide services to the Fund.
Trustees and Officers. The Trustees and executive officers of the Trust, their
addresses and ages, and their principal occupations for the last five years are
as follows:
===================================== ==========================================
Name, Age*, Position(s) Principal Occupation(s)
and Address During Past 5 Years
===================================== ==========================================
Jack E. Brinson, 68 President, Brinson Investment Co.
Trustee (personal investments)
1105 Panola Street President, Brinson Chevrolet, Inc.
Tarboro, North Carolina (auto dealership)
Tarboro, North Carolina
Independent Trustee, Nottingham Investment
Trust II, New Providence Investment Trust,
de Leon Funds Trust
Rocky Mount, North Carolina
------------------------------------ ------------------------------------------
W. Whitfield Gardner, 37 Chairman and Chief Executive Officer
Trustee** Gardner Lewis Asset Management
Chief Executive Officer (Advisor to the Chesapeake Funds)
The Chesapeake Funds Chadds Ford, Pennsylvania
285 Wilmington-West Chester Pike
Chadds Ford, Pennsylvania 19317
------------------------------------ ------------------------------------------
Stephen J. Kneeley, 37 Chief Operating Officer
Trustee Turner Investment Partners
1235 Westlakes Drive (investment manager)
Suite 350 Berwyn, Pennsylvania
Berwyn, Pennsylvania 19312
------------------------------------ ------------------------------------------
John L. Lewis, IV, 36 President
President Gardner Lewis Asset Management
The Chesapeake Funds (Advisor to the Chesapeake Funds)
285 Wilmington-West Chester Pike Chadds Ford, Pennsylvania
Chadds Ford, Pennsylvania 19317
------------------------------------ ------------------------------------------
William D. Zantzinger, 38 Director of Trading
Vice President Gardner Lewis Asset Management
The Chesapeake Funds (Advisor to the Chesapeake Funds)
285 Wilmington-West Chester Pike Chadds Ford, Pennsylvania
Chadds Ford, Pennsylvania 19317
------------------------------------ ------------------------------------------
C. Frank Watson, III, 29 President
Secretary and Assistant Treasurer The Nottingham Company
105 North Washington Street (Administrator to the Fund)
Rocky Mount, North Carolina 27802 Rocky Mount, North Carolina
------------------------------------ ------------------------------------------
Julian G. Winters, 31 Legal and Compliance Director
Treasurer and Assistant Secretary The Nottingham Company
105 North Washington Street (Administrator to the Fund)
Rocky Mount, North Carolina 27802 Rocky Mount, North Carolina since 1996;
previously, Operations Manager
Tar Heel Medical, Inc.
(pharmaceutical supplier)
Nashville, North Carolina
------------------------------------ ------------------------------------------
* As of June 30, 2000.
** Indicates that Trustee is an "interested person" of the Trust for
purposes of the 1940 Act.
Compensation. The officers of the Trust will not receive compensation from the
Trust for performing the duties of their offices. Each Trustee who is not an
"interested person" of the Trust receives a fee of $7,500 each year, plus $400
per series of the Trust per meeting attended in person or $150 per series of the
Trust per meeting attended by telephone. All Trustees are reimbursed for any
out-of-pocket expenses incurred in connection with attendance at meetings.
<TABLE>
<S> <C> <C> <C> <C>
Compensation Table*
Pension Total
Retirement Compensation
Aggregate Benefits Estimated from the
Compensation Accrued As Annual Trust
Name of Person, from the Part of Fund Benefits Upon Paid to
Position Fund Expenses Retirement Trustees**
-------- ---- -------- ---------- --------
Jack E. Brinson $3,450 None None $10,350
Trustee
W. Whitfield Gardner None None None None
Trustee
Stephen J. Kneeley $3,450 None None $10,350
Trustee
</TABLE>
* Figures are for the fiscal year ended February 29, 2000.
** Each of the Trustees serves as a Trustee to the three funds of the Trust,
including the Fund.
Principal Holders of Voting Securities. As of June 9, 2000, the Trustees and
Officers of the Trust as a group owned beneficially (i.e., had voting and/or
investment power) 4.823% of the then outstanding shares of the Fund. On the same
date the following shareholders owned of record more than 5% of the outstanding
shares of beneficial interest of the Fund. Except as provided below, no person
is known by the Trust to be the beneficial owner of more than 5% of the
outstanding shares of the Fund as of June 9, 2000.
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership* of Fund
---------------- --------------------- -------
Shoreline Properties LP 160,060.568 shares 22.747%
Shoreline Management LLC
P.O. Box 329
Jackson, MS 39205
Arrowhead Properties 104,649.980 shares 14.219%
P.O. Box 6100
Ridgeland, MS 39158
River Ridge, Inc. 67,722.084 shares 9.201%
Raymond Building
Suite 204
3411 Silverside RD.
Wilmington, DE 19810
H. Henry Hederman 59,881.480 shares 8.136%
P.O. Box 6100
Ridgeland, MS 39158
Gail Hederman Wallace 58,647.880 shares 7.968%
P.O. Box 6100
Ridgeland, MS 39158
H. Henry Hederman Trust 55,979.939 shares 7.606%
FBO Gail Hederman Wallace
U/A 12-31-75
P.O. Box 6100
Ridgeland, MS 39158
Investment Advisor. Information about Gardner Lewis Asset Management, Chadds
Ford, Pennsylvania (the "Advisor") and its duties and compensation as Advisor is
contained in the Prospectus. The Advisor supervises the Fund's investments
pursuant to an Investment Advisory Agreement (the "Advisory Agreement"). The
Advisory Agreement is currently effective for a one-year period and will be
renewed thereafter only so long as such renewal and continuance is specifically
approved at least annually by the Board of Trustees or by vote of a majority of
the Fund's outstanding voting securities, provided the continuance is also
approved by a majority of the Trustees who are not parties to the Advisory
Agreement or interested persons of any such party. The Advisory Agreement is
terminable without penalty on 60-days' notice by the Board of Trustees of the
Trust or by vote of a majority of the outstanding voting securities of the Fund.
The Advisory Agreement provides that it will terminate automatically in the
event of its assignment.
The Advisor is entitled to a monthly management fee equal to an annual rate of
1.00% of the average daily net asset value of the Fund. For the fiscal year
ended February 29, 2000, the Advisor received its fee in the amount of $10,891
after voluntarily waiving a portion of its fee in the amount of $69,737. For the
fiscal year ended February 28, 1999, the Advisor voluntarily waived its fee in
the amount of $61,632 and voluntarily reimbursed a portion of the Fund's
operating expenses in the amount of $3,595. For the fiscal period ended February
28, 1998, the Advisor voluntarily waived its fee in the amount of $19,606 and
voluntarily reimbursed a portion of the Fund's operating expenses in the amount
of $8,432.
Under the Advisory Agreement, the Advisor is not liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with the performance of such Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Advisor in the performance of its duties or from its reckless
disregard of its duties and obligations under the Agreement.
Administrator. The Trust has entered into a Fund Accounting and Compliance
Administration Agreement with The Nottingham Company, Inc. (the
"Administrator"), 105 North Washington Street, Post Office Box 69, Rocky Mount,
North Carolina 27802-0069, pursuant to which the Administrator receives a fund
administration fee at the annual rate of 0.075% of the average daily net assets
of the Fund, plus an annual fee of $12,500 per class. In addition, the
Administrator receives a base monthly fund accounting fee of $1,750 for each
class of shares for fund accounting and recordkeeping services of the Fund. The
Administrator also charges the Fund for certain costs involved with the daily
valuation of investment securities and is reimbursed for out-of-pocket expenses.
For services to the Fund for the fiscal years ended February 29, 2000 and
February 28, 1999, the Administrator received $5,343 (after waivers of $13,221)
and $9,000 (after waivers of $17,122), respectively, in fund administration fees
and for the fiscal period ended February 28, 1998, the Administrator waived all
fund administration fees of $10,320. For the same periods, the Administrator
received fund accounting fees of $21,000, $21,000 and $8,750, respectively.
The Administrator performs the following services for the Fund: (1) coordinate
with the Custodian and monitor the services it provides to the Fund; (2)
coordinate with and monitor any other third parties furnishing services to the
Fund; (3) provide the Fund with necessary office space, telephones and other
communications facilities and personnel competent to perform administrative and
clerical functions for the Fund; (4) supervise the maintenance by third parties
of such books and records of the Fund as may be required by applicable federal
or state law; (5) prepare or supervise the preparation by third parties of all
federal, state and local tax returns and reports of the Fund required by
applicable law; (6) prepare and, after approval by the Trust, file and arrange
for the distribution of proxy materials and periodic reports to shareholders of
the Fund as required by applicable law; (7) prepare and, after approval by the
Trust, arrange for the filing of such registration statements and other
documents with the SEC and other federal and state regulatory authorities as may
be required by applicable law; (8) review and submit to the officers of the
Trust for their approval invoices or other requests for payment of Fund expenses
and instruct the Custodian to issue checks in payment thereof; and (9) take such
other action with respect to the Fund as may be necessary in the opinion of the
Administrator to perform its duties under the agreement. The Administrator will
also provide certain accounting and pricing services for the Fund.
Transfer Agent. The Trust has also entered into a Dividend Disbursing and
Transfer Agent Agreement with NC Shareholder Services, LLC (the "Transfer
Agent"), a North Carolina limited liability company, 107 North Washington
Street, Post Office Box 4365, Rocky Mount, North Carolina 27803-0365 to serve as
transfer, dividend paying, and shareholder servicing agent for the Fund. For its
services, the Transfer Agent receives a shareholder recordkeeping fee of $15 per
shareholder per year, with a minimum fee of $750 per month per class. For the
fiscal year ended February 29, 2000, the Transfer Agent received $9,000 in such
shareholder servicing fees. Prior to March 1, 1999, the Transfer Agent was
compensated by the Administrator for its services to the Fund.
Distributor. Capital Investment Group, Inc. (the "Distributor"), Post Office Box
32249, Raleigh, North Carolina 27622, acts as an underwriter and distributor of
the Fund's shares for the purpose of facilitating the registration of shares of
the Fund under state securities laws and to assist in sales of Fund shares
pursuant to a Distribution Agreement (the "Distribution Agreement") approved by
the Board of Trustees of the Trust.
In this regard, the Distributor has agreed at its own expense to qualify as a
broker-dealer under all applicable federal or state laws in those states which
the Fund shall from time to time identify to the Distributor as states in which
it wishes to offer its shares for sale, in order that state registrations may be
maintained for the Fund.
The Distributor is a broker-dealer registered with the SEC and a member in good
standing of the National Association of Securities Dealers, Inc.
The Distribution Agreement may be terminated by either party upon 60-days' prior
written notice to the other party.
Custodian. First Union National Bank (the "Custodian"), 123 South Broad Street,
Institutional Custody-PA4942, Philadelphia, Pennsylvania 19109, serves as
custodian for the Fund's assets. The Custodian acts as the depository for the
Fund, safekeeps its portfolio securities, collects all income and other payments
with respect to portfolio securities, disburses monies at the Fund's request and
maintains records in connection with its duties as Custodian. For its services
as Custodian, the Custodian is entitled to receive from the Fund an annual fee
based on the average net assets of the Fund held by the Custodian.
Independent Auditors. Deloitte & Touche LLP, Princeton Forrestal Village,
116-300 Village Boulevard, Princeton, New Jersey 08540, serves as independent
auditors for the Fund, audits the annual financial statements of the Fund,
prepares the Fund's federal and state tax returns, and consults with the Fund on
matters of accounting and federal and state income taxation. A copy of the most
recent annual report of the Fund will accompany this SAI whenever it is
requested by a shareholder or prospective investor.
Legal Counsel. Dechert Price & Rhoads serves as legal counsel to the Trust and
the Fund.
Code of Ethics. The Trust and the Advisor each have adopted a code of ethics, as
required by applicable law, which is designed to prevent affiliated persons of
the Trust and the Advisor from engaging in deceptive, manipulative, or
fraudulent activities in connection with securities held or to be acquired by
the Fund (which may also be held by persons subject to a code). There can be no
assurance that the codes will be effective in preventing such activities.
SPECIAL SHAREHOLDER SERVICES
The Fund offers the following shareholder services:
Regular Account. The regular account allows for voluntary investments to be made
at any time. Available to individuals, custodians, corporations, trusts,
estates, corporate retirement plans and others, investors are free to make
additions and withdrawals to or from their account as often as they wish. When
an investor makes an initial investment in the Fund, a shareholder account is
opened in accordance with the investor's registration instructions. Each time
there is a transaction in a shareholder account, such as an additional
investment or the reinvestment of a dividend or distribution, the shareholder
will receive a confirmation statement showing the current transaction and all
prior transactions in the shareholder account during the calendar year to date,
along with a summary of the status of the account as of the transaction date. As
stated in the Prospectus, share certificates are not issued.
Automatic Investment Plan. The automatic investment plan enables shareholders to
make regular monthly or quarterly investment in shares through automatic charges
to their checking account. With shareholder authorization and bank approval, the
Fund will automatically charge the checking account for the amount specified
($100 minimum) which will be automatically invested in shares at the public
offering price on or about the 21st day of the month. The shareholder may change
the amount of the investment or discontinue the plan at any time by writing to
the Fund.
Systematic Withdrawal Plan. Shareholders owning shares with a value of $25,000
or more may establish a Systematic Withdrawal Plan. A shareholder may receive
monthly or quarterly payments, in amounts of not less than $250 per payment, by
authorizing the Fund to redeem the necessary number of shares periodically (each
month, or quarterly in the months of March, June, September and December) in
order to make the payments requested. The Fund has the capacity of
electronically depositing the proceeds of the systematic withdrawal directly to
the shareholder's personal bank account ($5,000 minimum per bank wire).
Instructions for establishing this service are included in the Fund Shares
Application, enclosed in the Prospectus, or available by calling the Fund. If
the shareholder prefers to receive his systematic withdrawal proceeds in cash,
or if such proceeds are less than the $5,000 minimum for a bank wire, checks
will be made payable to the designated recipient and mailed within 7 days of the
valuation date. If the designated recipient is other than the registered
shareholder, the signature of each shareholder must be guaranteed on the
application (see "Signature Guarantees" in the Prospectus). A corporation (or
partnership) must also submit a "Corporate Resolution" (or "Certification of
Partnership") indicating the names, titles and required number of signatures
authorized to act on its behalf. The application must be signed by a duly
authorized officer(s) and the corporate seal affixed. No redemption fees are
charged to shareholders under this plan. Costs in conjunction with the
administration of the plan are borne by the Fund. Shareholders should be aware
that such systematic withdrawals may deplete or use up entirely their initial
investment and may result in realized long-term or short-term capital gains or
losses. The Systematic Withdrawal Plan may be terminated at any time by the Fund
upon sixty days written notice or by a shareholder upon written notice to the
Fund. Applications and further details may be obtained by calling the Fund at
1-800-430-3863, or by writing to:
The Chesapeake Core Growth Fund
107 North Washington Street
Post Office Box 4365
Rocky Mount, North Carolina 27803-0365
Purchases in Kind. The Fund may accept securities in lieu of cash in payment for
the purchase of shares in the Fund. The acceptance of such securities is at the
sole discretion of the Advisor based upon the suitability of the securities
accepted for inclusion as a long-term investment of the Fund, the marketability
of such securities, and other factors that the Advisor may deem appropriate. If
accepted, the securities will be valued using the same criteria and methods as
described in "How Shares are Valued" in the Prospectus.
Redemptions in Kind. The Fund does not intend, under normal circumstances, to
redeem its securities by payment in kind. It is possible, however, that
conditions may arise in the future which would, in the opinion of the Trustees,
make it undesirable for the Fund to pay for all redemptions in cash. In such
case, the Board of Trustees may authorize payment to be made in readily
marketable portfolio securities of the Fund. Securities delivered in payment of
redemptions would be valued at the same value assigned to them in computing the
net asset value per share. Shareholders receiving them would incur brokerage
costs when these securities are sold. An irrevocable election has been filed
under Rule 18f-1 of the 1940 Act, wherein the Fund committed itself to pay
redemptions in cash, rather than in kind, to any shareholder of record of the
Fund who redeems during any ninety-day period, the lesser of (a) $250,000 or (b)
one percent (1%) of the Fund's net asset value at the beginning of such period.
Transfer of Registration. To transfer shares to another owner, send a written
request to the Fund at the address shown herein. Your request should include the
following: (1) the Fund name and existing account registration; (2) signature(s)
of the registered owner(s) exactly as the signature(s) appear(s) on the account
registration; (3) the new account registration, address, social security or
taxpayer identification number and how dividends and capital gains are to be
distributed; (4) signature guarantees (See the Prospectus under the heading
"Signature Guarantees"); and (5) any additional documents which are required for
transfer by corporations, administrators, executors, trustees, guardians, etc.
If you have any questions about transferring shares, call or write the Fund.
ADDITIONAL INFORMATION ON PERFORMANCE
From time to time, the total return of the Fund may be quoted in advertisements,
sales literature, shareholder reports or other communications to shareholders.
The Fund computes the "average annual total return" of the Fund by determining
the average annual compounded rates of return during specified periods that
equate the initial amount invested to the ending redeemable value of such
investment. This is done by determining the ending redeemable value of a
hypothetical $1,000 initial payment. This calculation is as follows:
P(1+T)^n = ERV
Where: T = average annual total return.
ERV = ending redeemable value at the end of the period covered
by the computation of a hypothetical $1,000 payment made
at the beginning of the period.
P = hypothetical initial payment of $1,000 from which the
maximum sales load is deducted.
n = period covered by the computation, expressed in terms of
years.
The Fund may also compute the aggregate total return of the Fund, which is
calculated in a similar manner, except that the results are not annualized.
The calculation of average annual total return and aggregate total return assume
an initial $1,000 investment and that there is a reinvestment of all dividends
and capital gain distributions on the reinvestment dates during the period. The
ending redeemable value is determined by assuming complete redemption of the
hypothetical investment and the deduction of all nonrecurring charges at the end
of the period covered by the computations. These performance quotations should
not be considered representative of the Fund's performance for any specified
period in the future.
The average annual returns of the Fund for the fiscal year ended February 29,
2000, and since inception (September 29, 1997) are 66.64% and 36.38%,
respectively. The cumulative total return of the Fund since inception through
February 29, 2000, is 111.84%. Past performance is not a guarantee of future
results. Cumulative total return is calculated in a similar manner to average
annual total return, except that the return is aggregated, rather than
annualized.
The Fund's performance may be compared in advertisements, sales literature,
shareholder reports, and other communications to the performance of other mutual
funds having similar objectives or to standardized indices or other measures of
investment performance. In particular, the Fund may compare its performance to
the S&P 500 Total Return Index and the NASDAQ Industrials Index, which are
generally considered to be representative of the performance of unmanaged common
stocks that are publicly traded in the United States securities markets.
Comparative performance may also be expressed by reference to a ranking prepared
by a mutual fund monitoring service or by one or more newspapers, newsletters or
financial periodicals. The Fund may also occasionally cite statistics to reflect
its volatility and risk. The Fund may also compare its performance to other
published reports of the performance of unmanaged portfolios of companies. The
performance of such unmanaged portfolios generally does not reflect the effects
of dividends or dividend reinvestment. Of course, there can be no assurance that
the Fund will experience the same results. Performance comparisons may be useful
to investors who wish to compare the Fund's past performance to that of other
mutual funds and investment products. Of course, past performance is not a
guarantee of future results.
The Fund's performance fluctuates on a daily basis largely because net earnings
and net asset value per share fluctuate daily. Both net earnings and net asset
value per share are factors in the computation of total return as described
above.
As indicated, from time to time, the Fund may advertise its performance compared
to similar funds or portfolios using certain indices, reporting services, and
financial publications. These may include the following:
o Lipper Analytical Services, Inc. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes
the reinvestment of all capital gains distributions and income dividends
and takes into account any change in net asset value over a specific
period of time.
o Morningstar, Inc., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for
two weeks.
Investors may use such indices in addition to the Fund's Prospectus to obtain a
more complete view of the Fund's performance before investing. Of course, when
comparing the Fund's performance to any index, factors such as composition of
the index and prevailing market conditions should be considered in assessing the
significance of such comparisons. When comparing funds using reporting services,
or total return, investors should take into consideration any relevant
differences in funds such as permitted portfolio compositions and methods used
to value portfolio securities and compute offering price. Advertisements and
other sales literature for the Fund may quote total returns that are calculated
on non-standardized base periods. The total returns represent the historic
change in the value of an investment in the Fund based on monthly reinvestment
of dividends over a specified period of time.
From time to time the Fund may include in advertisements and other
communications information, charts, and illustrations relating to inflation and
the effects of inflation on the dollar, including the purchasing power of the
dollar at various rates of inflation. The Fund may also disclose from time to
time information about its portfolio allocation and holdings at a particular
date (including ratings of securities assigned by independent rating services
such as S&P and Moody's). The Fund may also depict the historical performance of
the securities in which the Fund may invest over periods reflecting a variety of
market or economic conditions either alone or in comparison with alternative
investments, performance indices of those investments, or economic indicators.
The Fund may also include in advertisements and in materials furnished to
present and prospective shareholders statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds that may be employed
to meet specific financial goals, such as saving for retirement, children's
education, or other future needs.
FINANCIAL STATEMENTS
The audited financial statements for the fiscal year ended February 29, 2000,
including the financial highlights appearing in the Annual Report to
shareholders, are incorporated by reference and made a part of this document.
<PAGE>
APPENDIX A
DESCRIPTION OF RATINGS
The Fund will normally be at least 90% invested in equities. As a temporary
defensive position, however, the Fund may invest up to 100% of its assets in
investment grade bonds, U.S. Government Securities, repurchase agreements, or
money market instruments ("Investment-Grade Debt Securities"). When the Fund
invests in Investment-Grade Debt Securities as a temporary defensive measure, it
is not pursuing its investment objective. Under normal circumstances, however,
the Fund may invest in money market or repurchase agreement instruments as
described in the SAI. The various ratings used by the nationally recognized
securities rating services are described below.
A rating by a rating service represents the service's opinion as to the credit
quality of the security being rated. However, the ratings are general and are
not absolute standards of quality or guarantees as to the creditworthiness of an
issuer. Consequently, the Advisor believes that the quality of fixed income
securities in which the Fund may invest should be continuously reviewed and that
individual analysts give different weightings to the various factors involved in
credit analysis. A rating is not a recommendation to purchase, sell or hold a
security, because it does not take into account market value or suitability for
a particular investor. When a security has received a rating from more than one
service, each rating is evaluated independently. Ratings are based on current
information furnished by the issuer or obtained by the rating services from
other sources that they consider reliable. Ratings may be changed, suspended or
withdrawn as a result of changes in or unavailability of such information, or
for other reasons.
Standard & Poor's Ratings Services. The following summarizes the highest four
ratings used by Standard & Poor's Ratings Services ("S&P") for bonds which are
deemed to be Investment-Grade Debt Securities by the Advisor:
AAA - This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity of the obligor to meet its
financial commitment on the obligation.
AA - Debt rated AA differs from AAA issues only in a small degree. The
obligor's capacity to meet its financial commitment on the obligation is
very strong.
A - Debt rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in
higher-rated categories. However, the obligor's capacity to meet its
financial commitment on the obligation is still strong.
BBB - Debt rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
Bonds rated BB, B, CCC, CC and C are not considered by the Advisor to be
Investment-Grade Debt Securities and are regarded, on balance, as having
significant speculative characteristics with respect to the obligor's capacity
to meet its financial commitment on the obligation. BB indicates the lowest
degree of speculation and C the highest degree of speculation. While such bonds
may have some quality and protective characteristics, these may be outweighed by
large uncertainties or major risk exposures to adverse conditions.
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1.
The rating SP-1 is the highest rating assigned by S&P to short term notes and
indicates strong capacity to pay principal and interest. An issue determined to
possess a very strong capacity to pay debt service is given a plus (+)
designation. The rating SP-2 indicates a satisfactory capacity to pay principal
and interest, with some vulnerability to adverse financial and economic changes
over the term of the notes.
Moody's Investors Service, Inc. The following summarizes the highest four
ratings used by Moody's Investors Service, Inc. ("Moody's") for bonds which are
deemed to be Investment-Grade Debt Securities by the Advisor:
Aaa - Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A - Debt that is rated A possesses many favorable investment attributes
and is to be considered as an upper medium grade obligation. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa - Debt that is rated Baa is considered as a medium grade obligation,
i.e., it is neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such debt lacks outstanding
investment characteristics and in fact has speculative characteristics as
well.
Moody's applies numerical modifiers (l, 2 and 3) with respect to bonds rated Aa,
A and Baa. The modifier 1 indicates that the bond being rated ranks in the
higher end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the bond ranks in the lower end of
its generic rating category. Bonds which are rated Ba, B, Caa, Ca or C by
Moody's are not considered "Investment-Grade Debt Securities" by the Advisor.
Bonds rated Ba are judged to have speculative elements because their future
cannot be considered as well assured. Uncertainty of position characterizes
bonds in this class, because the protection of interest and principal payments
often may be very moderate and not well safeguarded.
Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the security over any long period for time may be small. Bonds
which are rated Caa are of poor standing. Such securities may be in default or
there may be present elements of danger with respect to principal or interest.
Bonds which are rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
Bonds which are rated C are the lowest rated class of bonds and issues so rated
can be regarded as having extremely poor prospects of ever attaining any real
investment standing.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers rated Prime-1 (or supporting institutions) are considered to have a
superior ability for repayment of short-term promissory obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structures with
moderate reliance on debt and ample asset protection; broad margins in earning
coverage of fixed financial charges and high internal cash generation; and well
established access to a range of financial markets and assured sources of
alternative liquidity. Issuers rated Prime-2 (or supporting institutions) are
considered to have a strong ability for repayment of short-term promissory
obligations. This will normally be evidenced by many of the characteristics of
issuers rated Prime-1 but to a lesser degree. Earnings' trends and coverage
ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriated may be more affected by external
conditions. Ample alternate liquidity is maintained.
The following summarizes the two highest ratings used by Moody's for short-term
notes and variable rate demand obligations:
MIG-l; VMIG-l - Obligations bearing these designations are of the best
quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
MIG-2; VMIG-2 - Obligations bearing these designations are of a high
quality with ample margins of protection.
Duff & Phelps Credit Rating Co. The following summarizes the highest four
ratings used by Duff & Phelps Credit Rating Co. ("D&P") for bonds which are
deemed to be "Investment-Grade Debt Securities" by the Advisor:
AAA - Bonds that are rated AAA are of the highest credit quality. The
risk factors are considered to be negligible, being only slightly more
than for risk-free U.S. Treasury debt.
AA - Bonds that are rated AA are of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to
time because of economic conditions.
A - Bonds rated A have average but adequate protection factors. The risk
factors are more variable and greater in periods of economic stress.
BBB - Bonds rated BBB have below-average protection factors but are still
considered sufficient for prudent investment. There is considerable
variability in risk during economic cycles.
Bonds rated BB, B and CCC by D&P are not considered Investment-Grade Debt
Securities and are regarded, on balance, as predominantly speculative with
respect to the issuer's ability to pay interest and make principal payments in
accordance with the terms of the obligations. BB indicates the lowest degree of
speculation and CCC the highest degree of speculation.
The rating Duff l is the highest rating assigned by D&P for short-term debt,
including commercial paper. D&P employs three designations, Duff l+, Duff 1 and
Duff 1- within the highest rating category. Duff l+ indicates highest certainty
of timely payment. Short-term liquidity, including internal operating factors
and/or access to alternative sources of funds, is judged to be "outstanding, and
safety is just below risk-free U.S. Treasury short-term obligations." Duff 1
indicates very high certainty of timely payment. Liquidity factors are excellent
and supported by good fundamental protection factors. Risk factors are
considered to be minor. Duff 1- indicates high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are very small.
Fitch Investors Service, Inc. The following summarizes the highest four ratings
used by Fitch Investors Service, Inc. ("Fitch") for bonds which are deemed to be
Investment-Grade Debt Securities by the Advisor:
AAA - Bonds are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA - Bonds are considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated AAA. Because
bonds rated in the AAA and AA categories are not significantly vulnerable
to foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
A - Bonds that are rated A are considered to be investment grade and of
high credit quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more vulnerable to
adverse changes in economic conditions and circumstances than bonds with
higher ratings.
BBB - Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and
repay principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have adverse
impact on these bonds, and therefore impair timely payment. The
likelihood that the ratings of these bonds will fall below investment
grade is higher than for bonds with higher ratings.
To provide more detailed indications of credit quality, the AA, A and BBB
ratings may be modified by the addition of a plus or minus sign to show relative
standing within a rating category. A "ratings outlook" is used to describe the
most likely direction of any rating change over the intermediate term. It is
described as "Positive" or "Negative". The absence of a designation indicates a
stable outlook.
Bonds rated BB, B and CCC by Fitch are not considered Investment-Grade Debt
Securities and are regarded, on balance, as predominantly speculative with
respect to the issuer's ability to pay interest and make principal payments in
accordance with the terms of the obligations. BB indicates the lowest degree of
speculation and CCC the highest degree of speculation.
The following summarizes the two highest ratings used by Fitch for short-term
notes, municipal notes, variable rate demand instruments and commercial paper:
F-1+ - Instruments assigned this rating are regarded as having the
strongest degree of assurance for timely payment.
F-1 - Instruments assigned this rating reflect an assurance of timely
payment only slightly less in degree than issues rated F-1+.
The term symbol "LOC" indicates that the rating is based on a letter of credit
issued by a commercial bank.
<PAGE>
________________________________________________________________________________
THE CHESAPEAKE CORE GROWTH FUND
________________________________________________________________________________
a series of the Gardner Lewis Investment Trust
Annual Report 2000
FOR THE YEAR ENDED FEBRUARY 29
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>
__________________________________
THE CHESAPEAKE FUNDS
__________________________________
April 3, 2000
Dear Shareholder:
The Chesapeake Core Growth Fund closed the first quarter with a gain of
13.1%. This gain compares to gains of 2.3% and 7.1% for the S&P 500 and Russell
2000, respectively. This quarterly letter, the 40th one we have written, brings
to close our firm's tenth year in business. Over this time we have made tens of
thousands of telephone calls to, and met with, thousands of companies. The net
result has been success across the market cap spectrum. Our Smaller Cap, Growth
(mid cap), and Core Growth (large cap) disciplines have each outperformed both
the S&P 500 and the Russell 2000 since their respective inceptions. This is
despite volatile environments and those environments from time to time favoring
other investment styles. Throughout our tenure, one thing has rung true perhaps
more than any other. Ultimately stock price will reflect underlying company
fundamentals.
This simple understanding is not only what drives us, but also what
grounds us when market volatility rears its head. We have been amazed in recent
months both by the intraday and the intraweek movements in market indices.
Reactive investors have been panicked to buy and panicked to sell based solely
on price action. All the while, fundamentals have been relatively constant.
This psychological tug of war has been centered around the desire to be
invested in or divested of either the "new economy" or the "old economy". Not
one of us here has been able to locate either one of these economies. The only
one we seem to be able to find is the one that we have been investing in for
years. The point is that no one need make an either-or decision.
We have visited with automotive parts suppliers whose factories would
be thought leading edge in Silicon Valley. And, we have visited with companies
whose involvement with the internet has brought them great investor notoriety,
but whose business models we thought doomed for failure from the beginning.
Whether supposed "new economy" or "old", for us it is always about the same
thing. How defensible is this company's position? What catalyst for positive
change exists? At what rate can this company grow? And, how is its stock
currently priced?
We believe that many of today's technological innovators, those with
evolutionary product or service and proprietary position will continue to
experience dramatic success. Those whose companies were formulated simply to
catch part of this amazing wave of available investment capital will not. We
missed the e-tailers' dramatic moves to the upside in 1998 because we could
neither grow comfortable with their business models nor their valuations. Given
that this group was responsible for the heaviest contribution to most index
results by a wide margin in that year, our lack of ownership certainly hurt our
comparative returns. But now that many of these e-commerce companies are at the
point of bankruptcy and their stock prices reflect this, we feel somewhat
vindicated. We will attempt to avoid the hundreds of companies that in the next
couple of years will suffer the fate of the also-ran e-tailers. But, at the same
time, we will attempt to capitalize on the unprecedented technological changes
that are now shaping and reshaping our lives.
Fund Administration Investment Advisor
107 North Washington Street Gardner Lewis Asset Management
Post Office Drawer 4365 285 Wilmington - West Chester Pike
Rocky Mount, North Carolina 27803-0365 Chadds Ford, Pennsylvania 19317
(800) 430-3863 (610) 558-2800
<PAGE>
As to what are now being simplistically categorized as "old economy"
companies, similar statements can be made. Those that do not adapt to a more
fiercely competitive landscape simply will not succeed. Those that will succeed
are adapting already. In coming quarters this dichotomy will become more
apparent.
Many of the so-called "new economy" companies are evidencing extremely
strong fundamentals. Many of the so-called "old economy" companies are also
evidencing strong fundamentals, just not as strong. However, they are less
expensive. We own some of both because our bottom-up fundamental approach has
led us to them. But whether labeled "new" or "old" economy, we expect our
companies to exceed Wall Street's expectations. Our process attempts to avoid
the significant number that will not. For despite "new/old" distinctions,
minefields still exist and navigating them is important.
We dig every day in all sectors of the economy, and the opportunity in
a number of them is now very compelling. Our current positioning is intended to
best advantage us of the good news we expect forthcoming in our portfolio
companies. As in the past, these positions will change when we discover other
opportunities we think better.
In one final note, we would like to welcome Brett Nelson, John
Fraunces, and Joel Fishbein to our research staff and Sharon Hayden to our
settlements area. Have a pleasant Spring!
Sincerely,
/s/ W. Whitfield Gardner
W. Whitfield Gardner
<PAGE>
____________________________________________
THE CHESAPEAKE CORE GROWTH FUND
____________________________________________
March 31, 2000
Investment Strategy
--------------------------------------------------------------------------------
The Chesapeake Core Growth Fund seeks capital appreciation through investments
in large capitalization growth equities. The cornerstone of the fund's intensive
in-house fundamental analysis is constant contact with the management,
customers, competitors, and suppliers of both current and potential investments.
Investment Guidelines
--------------------------------------------------------------------------------
The Fund seeks companies that:
o are experiencing a rapid growth rate - companies in our portfolio are
forecasted to grow their profits in excess of 15% annually;
o are selling at a stock price not yet fully reflective of their growth rate;
o are undergoing a positive change created by new products, managements,
distribution strategies or manufacturing technologies;
o have a strong balance sheet;
o are less susceptible to macroeconomic change.
The Largest Industry Groups
--------------------------------------------------------------------------------
[Pie Chart Here]
Computer Software 5.4%
Computers & Peripherals 8.9%
Electronics/Instruments 5.3%
Energy Services 8.9%
Financial Services 10.9%
Machinery, Construction & Manufacturing 6.4%
Networking 4.9%
Pharmaceuticals 6.7%
Semiconductors & Related 10.5%
Telecommunications 11.9%
All Others 20.3%
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 $4 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 16.
<PAGE>
Ten Largest Holdings
---------------------------------------
1. EMC Corporation 5.6%
2. Cisco Systems 3.3%
3. Enron Corporation 3.1%
4. JDS Uniphase, Inc. 3.0%
5. Amgen 2.8%
6. Citigroup, Inc. 2.7%
7. Goldman Sachs, Inc. 2.7%
8. Ciena Corp 2.7%
9. Tyco Industries, Inc. 2.7%
10. Oracle Corp. 2.6%
Portfolio Characteristics
---------------------------------------
Number of Companies 48
5 Yr. Historical Earnings Growth 16%
Earnings Growth - net year 25%
P/E Ratio - next year 36
(Gardner Lewis earnings estimates)
Performance Summary
---------------------------------------
Annualized
--------------------------------------------------------------------
Quarter Since
End 1 Year Inception
--------------------------------------------------------------------
The Chesapeake
Core Growth Fund 13.1% 60.3% 34.8%
--------------------------------------------------------------------
The inception date of the Fund was September 29, 1997. The performance quoted
represents past performance and is not a guarantee of future results. Share
price and investment return will vary, so you may have a gain or loss when you
sell shares.
For more complete information regarding The Fund or to obtain an additional copy
of the prospectus please call (800)430-3863 or contact Gardner Lewis Asset
Management, the Investment Advisor at (610)558-2800.
Must be accompanied or preceded by a prospectus.
Capital Investment Group, Inc., Distributor
Raleigh, NC (800)525-3863
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
____________________________________________
THE CHESAPEAKE CORE GROWTH FUND
____________________________________________
PORTFOLIO OF INVESTMENTS
(unaudited)
March 31, 2000
------------------------------------------------------------ -----------------------------------------------------------
Quantity Security Market Value Quantity Security Market Value
============================================================ ===========================================================
5,000 ADC Telecommunications, Inc. 269,375 6,300 IMS Health Inc. 106,706
2,600 AES Corporation 204,750 3,400 Infineon Technologies ADS 195,500
4,200 AT&T 236,512 2,800 JDS Uniphase, Inc. 337,575
2,600 Agilent Technologies, Inc. 270,400 7,200 Jones Apparel Group, Inc. 227,700
5,200 Amgen 319,150 6,222 MCI Worldcom Inc. 281,934
2,800 BEA Systems, Inc. 205,450 5,300 Medtronic, Inc. 272,619
5,300 Banc One Corp. 182,850 6,600 Nabors Industries, Inc. 256,162
4,465 BankAmerica Corp. 234,133 1,300 Nokia Corp. 288,600
3,500 Boeing Co. 132,344 3,800 Oracle Corp. 296,637
6,600 Boston Scientific Corp. 140,662 2,800 Pharmacia & Upjohn Inc. 166,600
900 CMGI, Inc. 101,981 1,300 SDL, Inc. 276,737
2,800 CVS Corporation 105,175 5,300 Solectron Corporation 212,662
6,800 Cendant Corporation 125,800 3,080 Sun Microsystems, Inc. 288,606
2,600 Chase Manhattan Bank 226,687 1,500 Sycamore Networks, Inc. 193,500
2,400 Ciena Corp. 302,700 2,600 Target Corp. 194,350
4,800 Cisco Systems 371,100 3,100 Teradyne, Inc. 254,200
5,150 Citigroup Inc. 308,356 6,000 Tyco Industries, Inc. 300,750
8,400 Columbia/HCA Healthcare Corp. 212,625 2,500 United Parcel Service, Inc. 157,471
4,000 Compaq Computer Corp. 108,000 5,625 Walt Disney Co. 232,031
1,300 Corning, Inc. 252,200 2,900 Warner Lambert & Co. 283,294
5,040 EMC Corporation 635,040 3,850 Weatherford International, Inc. 225,225
4,600 Enron Corporation 344,425 8,200 Webvan Group, Inc. 63,037
2,900 Goldman Sachs, Inc. 305,225 3,200 Xilinx Inc. 265,000
3,500 Honeywell International, Inc. 184,406 950 i2 Technologies, Inc. 116,019
TOTAL EQUITY 11,272,265
CASH EQUIVALENT 263,112
TOTAL ASSETS 11,535,377
</TABLE>
<PAGE>
THE CHESAPEAKE CORE GROWTH FUND
Performance Update - $25,000 Investment
For the period from September 29,1997
(Commencement of Operations) to February 29, 2000
[Line Graph Here]:
-------------------------------------------------------
The Chesapeake S&P 500 Total
Core Growth Fund Return Index
-------------------------------------------------------
9/29/97 $25,000 $25,000
11/30/97 24,825 25,123
2/28/98 26,872 27,701
5/31/98 27,649 28,907
8/31/98 23,391 25,458
11/30/98 28,676 31,067
2/28/99 31,781 33,168
5/31/99 41,198 34,984
8/31/99 34,736 35,596
11/30/99 41,998 37,559
2/29/00 52,961 37,058
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 Returns
--------------------------------------------
One Year Since Inception
--------------------------------------------
66.64% 36.38%
--------------------------------------------
The graph assumes an initial $25,000 investment at September 29, 1997. All
dividends and distributions are reinvested.
At February 29, 2000, The Chesapeake Core Growth Fund would have grown to
$52,961 - total investment return of 111.84% since September 29, 1997.
At February 29, 2000, a similar investment in the S&P 500 Total Return Index
would have grown to $37,058 - total investment return of 48.23% 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>
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THE CHESAPEAKE CORE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 29, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - 99.63%
Aerospace & Defense - 1.12%
The Boeing Company ................................................. 3,500 $ 129,063
-----------
Apparel Manufacturing - 1.41%
(a)Jones Apparel Group, Inc. .......................................... 7,200 162,900
-----------
Commercial Services - 2.24%
(a)Cendant Corporation ................................................ 6,800 121,125
United Parcel Service, Inc. ........................................ 2,500 136,563
-----------
257,688
-----------
Computers - 7.74%
EMC Corporation .................................................... 5,040 599,760
(a)Sun Microsystems, Inc. ............................................. 3,080 293,370
-----------
893,130
-----------
Computer Software & Services - 11.64%
(a)BEA Systems, Inc. .................................................. 3,000 379,687
(a)BMC Software, Inc. ................................................. 2,420 111,320
(a)i2 Technologies, Inc. .............................................. 2,000 327,000
IMS Health Incorporated ............................................ 6,300 127,575
(a)Oracle Corporation ................................................. 3,800 282,150
(a)Vignette Corporation ............................................... 500 115,250
-----------
1,342,982
-----------
Electrical Equipment - 1.46%
Honeywell International Inc. ....................................... 3,500 168,875
-----------
Electronics - 2.34%
(a)Teradyne, Inc. ..................................................... 3,100 269,700
-----------
Electronics - Semiconductor - 3.63%
(a)SDL, Inc. .......................................................... 400 164,000
(a)Xilinx, Inc. ....................................................... 3,200 255,200
-----------
419,200
-----------
Entertainment - 1.54%
The Walt Disney Company ............................................ 5,300 177,550
-----------
Financial - Banks, Commercial - 1.03%
Bank of America Corporation ........................................ 2,590 119,302
-----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
THE CHESAPEAKE CORE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 29, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Financial - Banks, Money Center - 4.87%
Banc One Corporation ............................................... 5,300 $ 137,137
Citigroup Inc. ..................................................... 5,150 266,191
(a)The Chase Manhattan Corporation .................................... 2,000 159,250
-----------
562,578
-----------
Financial - Securities Broker - 2.32%
The Goldman Sachs Group, Inc. ...................................... 2,900 268,250
-----------
Food - Wholesale - 0.81%
(a)Webvan Group Inc. .................................................. 8,200 93,275
-----------
Forest Products & Paper - 0.99%
International Paper Company ........................................ 3,100 114,119
-----------
Medical - Biotechnology - 12.73%
(a)Affymetrix, Inc. ................................................... 800 231,700
(a)Amgen, Inc. ........................................................ 5,200 354,575
(a)Human Genome Sciences, Inc. ........................................ 2,600 567,450
Medtronic, Inc. .................................................... 6,500 315,656
-----------
1,469,381
-----------
Medical - Hospital Mgmt & Service - 1.41%
Columbia/HCA Healthcare Corporation ................................ 8,400 162,750
-----------
Medical Supplies - 1.04%
(a)Boston Scientific Corporation ...................................... 6,600 120,450
-----------
Miscellaneous - Manufacturing - 4.09%
Corning Incorporated ............................................... 1,300 244,400
Tyco International Ltd. ............................................ 6,000 227,625
-----------
472,025
-----------
Oil & Gas - Domestic - 2.74%
Enron Corp. ........................................................ 4,600 316,538
-----------
Pharmaceuticals - 3.31%
Pharmacia & Upjohn, Inc. ........................................... 2,800 133,350
Warner-Lambert Company ............................................. 2,900 248,131
-----------
381,481
-----------
(Continued)
</TABLE>
<PAGE>
<TABLE>
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THE CHESAPEAKE CORE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 29, 2000
------------------------------------------------------------------------------------------------------------------------------------
Value
Shares (note 1)
------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS - (Continued)
Retail - Drug Stores - 0.85%
CVS Corporation .................................................... 2,800 $ 98,000
-----------
Retail - General Merchandise - 1.33%
Target Corporation ................................................. 2,600 153,400
-----------
Scientific & Electrical Instruments - 3.14%
(a)Agilent Technologies, Inc. ......................................... 3,500 362,906
-----------
Telecommunications - 8.27%
(a)CIENA Corporation .................................................. 2,600 415,513
(a)Sycamore Networks, Inc. ............................................ 1,500 222,000
(a)Cisco Systems, Inc. ................................................ 2,400 317,250
-----------
954,763
-----------
Telecommunications Equipment - 13.28%
(a)ADC Telecommunications, Inc. ....................................... 5,000 224,375
(a)Infonet Services Corporation - Class B ............................. 5,800 160,225
(a)JDS Uniphase Corporation ........................................... 1,400 369,250
(a)Nokia Oyj - ADR .................................................... 1,600 318,000
Telefonaktiebolaget LM Ericsson - ADR .............................. 4,800 460,800
-----------
1,532,650
-----------
Utilities - Electric - 1.89%
(a)The AES Corporation ................................................ 2,600 217,912
-----------
Utilities - Telecommunications - 2.41%
(a)MCI WorldCom, Inc. ................................................. 6,222 277,657
-----------
Total Common Stocks (Cost $7,416,235) ................................................. 11,498,525
-----------
INVESTMENT COMPANY - 0.46%
Evergreen Money Market Institutional Money
Market Fund Institutional Service Shares .............................................. 53,250 53,250
(Cost $53,250) -----------
Total Value of Investments (Cost $7,469,485 (b)) .................................................. 100.09 % $11,551,775
Liabilities In Excess of Other Assets ............................................................. (0.09)% (9,881)
------ -----------
Net Assets ................................................................................. 100.00 % $11,541,894
====== ===========
(Continued)
</TABLE>
<PAGE>
<TABLE>
<S> C> <C>
THE CHESAPEAKE CORE GROWTH FUND
PORTFOLIO OF INVESTMENTS
February 29, 2000
(a) Non-income producing investment.
(b) Aggregate cost for federal income tax purposes is $7,483,621. Unrealized appreciation (depreciation)
of investments for federal income tax purposes is as follows:
Unrealized appreciation .............................................................................. $ 4,623,240
Unrealized depreciation .............................................................................. (555,086)
-----------
Net unrealized appreciation .......................................................... $ 4,068,154
===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
THE CHESAPEAKE CORE GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
February 29, 2000
ASSETS
Investments, at value (cost $7,469,485) .......................................................... $11,551,775
Income receivable ................................................................................ 5,674
-----------
Total assets ................................................................................ 11,557,449
-----------
LIABILITIES
Accrued expenses ................................................................................. 15,555
-----------
NET ASSETS
(applicable to 594,210 shares outstanding; unlimited
shares of no par value beneficial interest authorized) .......................................... $11,541,894
===========
NET ASSET VALUE, REDEMPTION AND OFFERING PRICE PER SHARE
($11,541,894 / 594,210 shares) ................................................................... $19.42
===========
NET ASSETS CONSIST OF
Paid-in capital .................................................................................. $ 6,819,277
Undistributed net realized gain on investments ................................................... 640,327
Net unrealized oappreciation on investments ...................................................... 4,082,290
-----------
$11,541,894
===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
THE CHESAPEAKE CORE GROWTH FUND
STATEMENT OF OPERATIONS
Year ended February 29, 2000
INVESTMENT LOSS
Income
Dividends ..................................................................................... $ 52,964
-----------
Expenses
Investment advisory fees (note 2) ............................................................. 80,628
Fund administration fees (note 2) ............................................................. 6,064
Custody fees .................................................................................. 4,446
Registration and filing administration fees (note 2) .......................................... 2,996
Fund accounting fees (note 2) ................................................................. 21,000
Audit fees .................................................................................... 17,957
Securities pricing fees ....................................................................... 3,415
Shareholder administration fees (note 2) ...................................................... 12,500
Shareholder recordkeeping fees ................................................................ 9,000
Shareholder servicing expenses ................................................................ 3,404
Registration and filing expenses .............................................................. 5,800
Printing expenses ............................................................................. 4,294
Trustee fees and meeting expenses ............................................................. 7,010
Other operating expenses ...................................................................... 2,509
-----------
Total expenses .......................................................................... 181,023
-----------
Less:
Expense reimbursements (note 4) .................................................... (5,446)
Investment advisory fees waived (note 2) ........................................... (69,737)
Fund administration fees waived (note 2) ........................................... (4,882)
Shareholder administration fees waived (note 2) .................................... (8,339)
-----------
Net expenses ............................................................................ 92,619
-----------
Net investment loss ................................................................ (39,655)
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from investment transactions ................................................ 1,466,680
Increase in unrealized appreciation on investments ............................................ 3,065,717
-----------
Net realized and unrealized gain on investments ............................................... 4,532,397
-----------
Net increase in net assets resulting from operations .................................... $ 4,492,742
===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
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THE CHESAPEAKE CORE GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS
------------------------------------------------------------------------------------------------------------------------------------
Year ended Year ended
February 29, February 28,
2000 1999
------------------------------------------------------------------------------------------------------------------------------------
INCREASE IN NET ASSETS
Operations
Net investment loss .............................................................. $ (39,655) $ (33,853)
Net realized gain from investment transactions ................................... 1,466,680 175,957
Increase in unrealized appreciation on investments ............................... 3,065,717 581,260
----------- -----------
Net increase in net assets resulting from operations ......................... 4,492,742 723,364
----------- -----------
Distributions to shareholders from
Net realized gain from investment transactions ................................... (744,241) 0
----------- -----------
Capital share transactions
Increase in net assets resulting from capital share transactions (a) ............. 1,743,880 (722,119)
----------- -----------
Total increase in net assets ............................................ 5,492,381 1,245
NET ASSETS
Beginning of year ..................................................................... 6,049,513 6,048,268
----------- -----------
End of year ........................................................................... $11,541,894 $ 6,049,513
=========== ===========
(a) A summary of capital share activity follows:
---------------------------------------------------------------------------------------
Year ended Year ended
February 29, 2000 February 28, 1999
Shares Value Shares Value
---------------------------------------------------------------------------------------
Shares sold .............................. 71,242 $ 1,034,336 200,589 $ 2,203,206
Shares issued for reinvestment
of distributions .................... 48,484 744,241 0 0
----------- ----------- ----------- -----------
119,726 1,778,577 200,589 2,203,206
Shares redeemed .......................... (2,420) (34,697) (287,983) (2,925,325)
----------- ----------- ----------- -----------
Net increase (decrease) ............. 117,306 $ 1,743,880 (87,394) $ (722,119)
=========== =========== =========== ===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
THE CHESAPEAKE CORE GROWTH FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout the Period)
------------------------------------------------------------------------------------------------------------------------------------
Year ended Year ended Period ended
February 29, February 28, February 28,
2000 1999 1998 (a)
------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ............................. $12.68 $10.72 $10.00
Income from investment operations
Net investment loss ................................... (0.07) (0.07) (0.01)
Net realized and unrealized gain on investments ....... 8.18 2.03 0.75
----------- ----------- -----------
Total from investment operations ................. 8.11 1.96 0.74
----------- ----------- -----------
Distributions to shareholders from
Distribution in excess of net investment income ....... (0.00) 0.00 (0.02)
Net realized gain from investment transactions ........ (1.37) 0.00 0.00
----------- ----------- -----------
Total distributions .............................. (1.37) 0.00 (0.02)
----------- ----------- -----------
Net asset value, end of period ................................... $19.42 $12.68 $10.72
=========== =========== ===========
Total return ..................................................... 66.64 % 18.27 % 7.49 %
=========== =========== ===========
Ratios/supplemental data
Net assets, end of period .................................. $11,541,894 $ 6,049,513 $ 6,048,268
=========== =========== ===========
Ratio of expenses to average net assets
Before expense reimbursements and waived fees ......... 2.25 % 2.73 % 3.19 % (b)
After expense reimbursements and waived fees .......... 1.15 % 1.39 % 1.24 % (b)
Ratio of net investment loss to average net assets
Before expense reimbursements and waived fees ......... (1.59)% (1.89)% (2.19)% (b)
After expense reimbursements and waived fees .......... (0.49)% (0.55)% (0.24)% (b)
Portfolio turnover rate .................................... 130.44 % 174.44 % 29.83 %
(a) For the period from September 29, 1997 (Commencement of Operations) to February 28, 1998.
(b) Annualized.
See accompanying notes to financial statements
</TABLE>
<PAGE>
THE CHESAPEAKE CORE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
February 29, 2000
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.
C. Investment Transactions - Investment transactions are recorded
on the trade date. Realized gains and losses are determined
using the specific identification cost method. Interest income
is recorded daily on an accrual basis. Dividend income is
recorded on the ex-dividend date.
D. Distributions to Shareholders - The Fund may declare dividends
annually on a date selected by the Trust's Trustees.
Distributions to shareholders are recorded on the ex-dividend
date. In addition, distributions may be made annually in
November out of net realized gains through October 31 of that
year. The Fund may make a supplemental distribution subsequent
to the end of its fiscal year ending February 29.
(Continued)
<PAGE>
THE CHESAPEAKE CORE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
February 29, 2000
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
$69,737 ($0.13 per share) for the fiscal year ended February 29, 2000.
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 $13,221 ($0.02 per share) for the fiscal year
ended February 29, 2000.
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 $11,261,361 and $10,349,061, respectively, for the fiscal
year ended February 29, 2000.
NOTE 4 - EXPENSE REDUCTION
The Advisor has transacted certain portfolio trades with brokers who
paid a portion of the Fund's expenses. For the year ended February 29,
2000, the Fund's expenses were reduced by $5,446 under this agreement.
(Continued)
<PAGE>
THE CHESAPEAKE CORE GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
February 29, 2000
NOTE 5 - DISTRIBUTIONS TO SHAREHOLDERS
For federal income tax purposes, the Fund must report distributions
from net realized gains from investment transactions that represent
long-term and short-term capital gains to its shareholders. Of the
total $1.37 per share distribution for the year ended February 29,
2000, $0.41 represents long-term capital gains and the remaining $0.96
represents the short-term capital gains. 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 Core Growth Fund:
We have audited the accompanying statement of assets and liabilities of The
Chesapeake Core Growth Fund, including the portfolio of investments, as of
February 29, 2000, and the related statement of operations for the year then
ended, the statements of changes in net assets for the years ended February 29,
2000 and February 28, 1999, 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 29, 2000, by correspondence with the custodian and brokers. 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 29, 2000, the results of its
operations for the year ended, and 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
Princeton, New Jersey
March 22, 2000
<PAGE>
PART C
======
FORM N1-A
OTHER INFORMATION
ITEM 23. Exhibits
--------
(a) Amended and Restated Declaration of Trust.^4
(b) Amended and Restated By-Laws.^4
(c) Not Applicable.
(d)(1) Investment Advisory Agreement for The Chesapeake Aggressive Growth Fund
between the Gardner Lewis Investment Trust and Gardner Lewis Asset
Management, as Advisor.^1
(d)(2) Investment Advisory Agreement for The Chesapeake Growth Fund between
the Gardner Lewis Investment Trust and Gardner Lewis Asset Management,
as Advisor.^2
(d)(3) Investment Advisory Agreement for The Chesapeake Core Growth Fund
between the Gardner Lewis Investment Trust and Gardner Lewis Asset
Management, as Advisor.^10
(e)(1) Distribution Agreement for The Chesapeake Aggressive Growth Fund
between the Gardner Lewis Investment Trust and Capital Investment
Group, Inc., as Distributor.^3
(e)(2) Distribution Agreement for the Chesapeake Growth Fund between the
Gardner Lewis Investment Trust and Capital Investment Group, Inc., as
Distributor.^2
(e)(3) Distribution Agreement for the Chesapeake Core Growth Fund between the
Gardner Lewis Investment Trust and Capital Investment Group, Inc., as
Distributor.^10
(f) Not Applicable.
(g) Custodian Agreement between the Registrant and First Union National
Bank of North Carolina, as Custodian.^9
(h)(1) Fund Accounting, Dividend Disbursing & Transfer Agent and
Administration Agreement between the Gardner Lewis Investment Trust and
The Nottingham Company, Inc., as Administrator.^1
(h)(2) Amendment to the Fund Accounting, Dividend Disbursing & Transfer Agent
and Administration Agreement between the Gardner Lewis Investment Trust
and The Nottingham Company, Inc., as Administrator.^6
(h)(3) Amendment to the Fund Accounting, Dividend Disbursing & Transfer Agent
and Administration Agreement between the Gardner Lewis Investment Trust
and The Nottingham Company, Inc., as Administrator.^7
(h)(4) Amendment to the Fund Accounting, Dividend Disbursing & Transfer Agent
and Administration Agreement between the Gardner Lewis Investment Trust
and The Nottingham Company, Inc., as Administrator.^10
(h)(5) Amendment to the Fund Accounting, Dividend Disbursing & Transfer Agent
and Administration Agreement between the Gardner Lewis Investment Trust
and The Nottingham Company, Inc., as Administrator.^11
(h)(6) Fund Accounting and Compliance Administration Agreement between the
Gardner Lewis Investment Trust and The Nottingham Company, Inc., as
Administrator.^12
(h)(7) Dividend Disbursing and Transfer Agent Agreement between the Gardner
Lewis Investment Trust and NC Shareholder Services, LLC, as Transfer
Agent.^12
(h)(8) Expense Limitation Agreement between Gardner Lewis Investment Trust and
Gardner Lewis Asset Management with respect to The Chesapeake Core
Growth Fund.^13
(i)(1) Opinion and Consent of Counsel.^11
(i)(2) Consent of Dechert Price & Rhoads, Counsel, with respect to
Post-Effective Amendment No. 19.^12
(i)(3) Consent of Dechert Price & Rhoads, Counsel, with respect to
Post-Effective Amendment No. 20.^13
(i)(4) Consent of Dechert Price & Rhoads, Counsel.
(j)(1) Consent of Deloitte & Touche LLP, Independent Public Accountants, with
respect to The Chesapeake Aggressive Growth Fund.^13
(j)(2) Consent of Deloitte & Touche LLP, Independent Public Accountants, with
respect to The Chesapeake Growth Fund.
(j)(3) Consent of Deloitte & Touche LLP, Independent Public Accountants, with
respect to The Chesapeake Core Growth Fund.
(k) Not applicable.
(l) Not applicable.
(m) Distribution Plan under Rule 12b-1 for the Gardner Lewis Investment
Trust regarding the Chesapeake Growth Fund Class A Investor Shares,
Class C Investor Shares and Class D Investor Shares.^5
(n) Amended and Restated Rule 18f-3 Multi-Class Plan.^12
(p)(1) Code of Ethics for the Gardner Lewis Investment Trust
(p)(2) Code of Ethics for Gardner Lewis Asset Management
(q) Copy of Powers of Attorney.^8
-----------------------
1. Incorporated herein by reference to Registrant's Registration Statement
Post-Effective Amendment No. 4 on Form N-1A filed on December 21, 1993
(File No. 33-53800).
2. Incorporated herein by reference to Registrant's Registration Statement
Post-Effective Amendment No. 5 on Form N-1A filed on January 27, 1994 (File
No. 33-53800).
3. Incorporated herein by reference to Registrant's Registration Statement
Post-Effective Amendment No. 6 on Form N-1A filed on November 16, 1994
(File No. 33-53800).
4. Incorporated herein by reference to Registrant's Registration Statement
Post-Effective Amendment No. 7 on Form N-1A filed on February 3, 1995 (File
No. 33-53800).
5. Incorporated herein by reference to Registrant's Registration Statement
Post-Effective Amendment No. 8 on Form N-1A filed on February 7, 1995 (File
No. 33-53800).
6. Incorporated herein by reference to Registrant's Registration Statement
Post-Effective Amendment No. 9 on Form N-1A filed on October 26, 1995 (File
No. 33-53800).
7. Incorporated herein by reference to Registrant's Registration Statement
Post-Effective Amendment No. 11 on Form N-1A filed on July 8, 1996 (File
No. 33-53800).
8. Incorporated herein by reference to Registrant's Registration Statement
Post-Effective Amendment No. 12 on Form N-1A filed on December 11, 1996
(File No. 33-53800).
9. Incorporated herein by reference to Registrant's Registration Statement
Post-Effective Amendment No. 13 on Form N-1A filed on June 30, 1997 (File
No. 33-53800).
10. Incorporated herein by reference to Registrant's Registration Statement
Post-Effective Amendment No. 14 on Form N-1A filed on September 3, 1997
(File No. 33-53800).
11. Incorporated herein by reference to Registrant's Registration Statement
Post-Effective Amendment No. 15 on Form N-1A filed on October 9, 1997 (File
No. 33-53800).
12. Incorporated herein by reference to Registrant's Registration Statement
Post-Effective Amendment No. 19 on Form N-1A filed on April 30, 1999 (File
No. 33-53800).
13. Incorporated herein by reference to Registrant's Registration Statement
Post-Effective Amendment No. 20 on Form N-1A filed on January 3, 2000 (File
No. 33-53800).
ITEM 24. Persons Controlled by or Under Common Control with the Registrant
-----------------------------------------------------------------
No person is controlled by or under common control with the
Registrant.
ITEM 25. Indemnification
---------------
The Amended and Restated Declaration of Trust and Bylaws of the
Registrant contain provisions covering indemnification of the
officers and trustees. The following are summaries of the
applicable provisions.
The Registrant's Declaration of Trust provides that every
person who is or has been a trustee, officer, employee or agent of
the Registrant and every person who serves at the trustees' request
as director, officer, employee or agent of another enterprise will
be indemnified by the Registrant to the fullest extent permitted by
law against all liabilities and against all expenses reasonably
incurred or paid by him in connection with any debt, claim, action,
demand, suit, proceeding, judgment, decree, liability or obligation
of any kind in which he becomes involved as a party or otherwise or
is threatened by virtue of his being or having been a trustee,
officer, employee or agent of the Registrant or of another
enterprise at the request of the Registrant and against amounts
paid or incurred by him in the compromise or settlement thereof.
No indemnification will be provided to a trustee or officer:
(i) against any liability to the Registrant or its shareholders by
reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his
office ("disabling conduct"); (ii) with respect to any matter as to
which he shall, by the court or other body by or before which the
proceeding was brought or engaged, have been finally adjudicated to
be liable by reason of disabling conduct; (iii) in the absence of a
final adjudication on the merits that such trustee or officer did
not engage in disabling conduct, unless a reasonable determination,
based upon a review of the facts that the person to be indemnified
is not liable by reason of such conduct, is made by vote of a
majority of a quorum of the trustees who are neither interested
persons nor parties to the proceedings, or by independent legal
counsel, in a written opinion.
The rights of indemnification may be insured against by
policies maintained by the Registrant, will be severable, will not
affect any other rights to which any trustee, officer, employee or
agent may now or hereafter be entitled, will continue as to a
person who has ceased to be such trustee, officer, employee, or
agent and will inure to the benefit of the heirs, executors and
administrators of such a person; provided, however, that no person
may satisfy any right of indemnity or reimbursement except out of
the property of the Registrant, and no other person will be
personally liable to provide indemnity or reimbursement (except an
insurer or surety or person otherwise bound by contract).
Article XIV of the Registrant's Bylaws provides that the
Registrant will indemnify each trustee and officer to the full
extent permitted by applicable federal, state and local statutes,
rules and regulations and the Declaration of Trust, as amended from
time to time. With respect to a proceeding against a trustee or
officer brought by or on behalf of the Registrant to obtain a
judgment or decree in its favor, the Registrant will provide the
officer or trustee with the same indemnification, after the same
determination, as it is required to provide with respect to a
proceeding not brought by or on behalf of the Registrant.
This indemnification will be provided with respect to an
action, suit proceeding arising from an act or omission or alleged
act or omission, whether occurring before or after the adoption of
Article XIV of the Registrant's Bylaws.
ITEM 26. Business and other Connections of the Investment Advisor
--------------------------------------------------------
See the section entitled "Management of the Fund" in the
Statement of Additional Information for each fund and the
Investment Advisor's Form ADV filed with the Commission, which is
hereby incorporated by reference, for the activities and
affiliations of the officers and directors of the Investment
Advisor who serves the same role for the Registrant. Except as so
provided, to the knowledge of Registrant, none of the directors or
executive officers of the Investment Advisor is or has been at any
time during the past two fiscal years engaged inany other business,
profession, vocation or employment of a substantial nature. The
Investment Advisor currently serves as investment advisor to
numerous institutional and individual clients.
ITEM 27. Principal Underwriter
---------------------
(a) Capital Investment Group, Inc. is underwriter and distributor for
The Chesapeake Aggressive Growth Fund, The Chesapeake Growth Fund,
The Chesapeake Core Growth Fund, Capital Value Fund, The Brown
Capital Management Equity Fund, The Brown Capital Management
Balanced Fund, The Brown Capital Management Small Company Fund, The
Brown Capital Management International Equity Fund, EARNEST
Partners Fixed Income Trust, WST Growth Fund, Blue Ridge Total
Return Fund, SCM Strategic Growth Fund, The CarolinasFund, Wisdom
Fund, and de Leon Internet 100 Fund.
(b)
POSITION(S) AND
NAME AND PRINCIPAL POSITION(S) AND OFFICE(S) WITH OFFICE(S)
BUSINESS ADDRESS CAPITAL INVESTMENT GROUP, INC. WITH REGISTRANT
================ ============================== ===============
Richard K. Bryant President None
17 Glenwood Avenue
Raleigh, N.C. 27622
E.O. Edgerton, Jr. Vice President None
17 Glenwood Avenue
Raleigh, N.C. 27622
Delia Zimmerman Secretary None
17 Glenwood Avenue
Raleigh, N.C. 27622
Con T. McDonald Assistant Vice-President None
17 Glenwood Avenue
Raleigh, N.C. 27622
W. Harold Eddins, Jr. Assistant Vice-President None
17 Glenwood Avenue
Raleigh, N.C. 27622
Richard S. Battle Assistant Vice-President None
17 Glenwood Avenue
Raleigh, N.C. 27622
(c)
<TABLE>
<S> <C> <C> <C> <C>
====================================== ================== ==================== ================== ==================
Net Underwriting Compensation on
Discounts and Redemption and Brokerage Other
Name of Principal Underwriter Commissions Repurchases Commissions* Compensation
====================================== ================== ==================== ================== ==================
Capital Investment Group, Inc. None None $784 None
-------------------------------------- ------------------ -------------------- ------------------ ------------------
</TABLE>
* Total for The Chesapeake Aggressive Growth Fund and The
Chesapeake Growth Fund for their fiscal years ended August 31,
1999 and February 29, 2000, respectively.
ITEM 28. Location of Accounts and Records
--------------------------------
All account books and records not normally held by First
Union National Bank, the Custodian to the Registrant, are held by
the Registrant in the offices of The Nottingham Company, Fund
Accountant and Administrator; NC Shareholder Services, Transfer
Agent to the Registrant; or by Gardner Lewis Asset Management, the
Advisor to the Registrant.
The address of The Nottingham Company is 105 North Washington
Street, Post Office Box 69, Rocky Mount, North Carolina 27802-0069.
The address of NC Shareholder Services is 107 North Washington
Street, Post Office Box 4365, Rocky Mount, North Carolina
27803-0365. The address of Gardner Lewis Asset Management is 285
Wilmington-West Chester Pike, Chadds Ford, Pennsylvania 19317. The
address of First Union National Bank is 123 South Broad Street,
Philadelphia, Pennsylvania 19109.
ITEM 29. Management Services
-------------------
The substantive provisions of the Fund Accounting and
Compliance Administration and the Dividend Disbursing & Transfer
Agent Agreement between the Registrant and The Nottingham Company
and NC Shareholder Services, respectively, are discussed in Part B
hereof.
ITEM 30. Undertakings
------------
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended
("Securities Act"), and the Investment Company Act of 1940, as amended, the
Registrant certifies that it meets all of the requirements for effectiveness of
this registration statement under Rule 485(b) under the Securities Act and has
duly caused this Post-Effective Amendment No. 21 to its Registration Statement
to be signed on its behalf by the undersigned, thereto duly authorized, in the
City of Rocky Mount, and State of North Carolina on this 30th day of June, 2000.
GARDNER LEWIS INVESTMENT TRUST
By: /s/ C. Frank Watson, III
______________________________
C. Frank Watson, III
Secretary
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Post-Effective Amendment No. 20 to the Registration Statement has been signed
below by the following persons in the capacities and on the date indicated.
*
_____________________________________________ Trustee
Jack E. Brinson Date
*
_____________________________________________ Trustee and Chairman,
W. Whitfield Gardner Date (Principal Executive Officer)
*
_____________________________________________ Trustee
Steve J. Kneeley Date
/s/ Julian G. Winters June 30, 2000
_____________________________________________ Treasurer
Julian G. Winters Date
* By: /s/ C. Frank Watson, III Dated: June 30, 2000
________________________________
C. Frank Watson, III
Attorney-in-Fact
<PAGE>
GARDNER LEWIS INVESTMENT TRUST
EXHIBIT INDEX
(FOR POST-EFFECTIVE AMENDMENT NO. 21)
_____________________________________
EXHIBIT NO.
UNDER PART C
OF FORM N-1A DESCRIPTION
------------ -----------
(i)(4) Consent of Dechert Price & Rhoads, Counsel
(j)(2) Consent of Deloitte & Touche LLP, Independent Public Accountants,
with respect to The Chesapeake Growth Fund
(j)(3) Consent of Deloitte & Touche LLP, Independent Public Accountants,
with respect to The Chesapeake Core Growth Fund
(p)(1) Code of Ethics for the Gardner Lewis Investment Trust
(p)(2) Code of Ethics for Gardner Lewis Asset Management
