U.S. 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. 5
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No. 6
(Check appropriate box or boxes)
SCHWARTZ INVESTMENT TRUST
(Exact Name of Registrant as Specified in Charter)
3707 West Maple Road
Bloomfield Hills, Michigan 48301
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (810) 644-8500
George P. Schwartz
Schwartz Investment Counsel, Inc.
3707 West Maple Road
Bloomfield Hills, Michigan 48301
(Name and Address of Agent for Service)
Copies to:
John A. Dudley, Esq.
Sullivan & Worcester
1025 Connecticut Avenue, NW
Washington, DC 20036
Registrant proposes that this Amendment become effective on the date
upon which it is filed with the Commission pursuant to Rule 485(b).
Registrant registered an indefinite number of shares under the
Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act
of 1940. Registrant's Rule 24f-2 Notice for the fiscal year ended December 31,
1996 was filed with the Commission on February 17, 1997.
<PAGE>
SCHWARTZ INVESTMENT TRUST
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(A)
UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
PART A
Item No. Registration Statement Caption Caption in Prospectus
<S> <C> <C>
1. Cover Page Cover Page
2. Synopsis Expense Information
3. Condensed Financial Information Financial Highlights;
Performance Information
4. General Description of Registrant Operation of the Fund;
Investment Objective,
Investment Policies and
Risk Considerations
5. Management of the Fund Operation of the Fund
5A. Management's Discussion of Management Discussion
Fund Performance and Analysis
6. Capital Stock and Other Securities Cover Page; Operation of
the Fund; Dividends and
Distributions; Taxes
7. Purchase of Securities Being Offered How to Purchase Shares;
Calculation of Share
Price; Application
8. Redemption or Repurchase How to Redeem Shares
9. Pending Legal Proceedings Inapplicable
(i)
<PAGE>
<CAPTION>
PART B
Caption in Statement
of Additional
Item No. Registration Statement Caption Information
<S> <C> <C>
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History The Fund
13. Investment Objectives and Policies Definitions, Policies
and Risk Considerations;
Quality Ratings of
Corporate Bonds and
Preferred Stocks;
Investment Limitations;
Securities Transactions;
Portfolio Turnover
14. Management of the Fund Trustees and Officers
15. Control Persons and Principal Holders Principal Security
of Securities Holders
16. Investment Advisory and Other Services The Investment Adviser;
Custodian; Auditors;
MGF Service Corp.;
Securities Transactions
17. Brokerage Allocation and Other Securities Transactions
Practices
18. Capital Stock and Other Securities The Fund
19. Purchase, Redemption and Pricing of Calculation of Share
Securities Being Offered Price; Redemption in
Kind
20. Tax Status Taxes
21. Underwriters The Distributor
22. Calculation of Performance Data Historical Performance
Information
23. Financial Statements Annual Report for the
Year Ended December 31,
1996
</TABLE>
PART C
The information required to be included in Part C is set forth
under the appropriate Item, so numbered, in Part C to this Registration
Statement.
(ii)
<PAGE>
SCHWARTZ
VALUE FUND
SCHWARTZ INVESTMENT TRUST
-------------------------
PROSPECTUS
MAY 1, 1997
SCHWARTZ INVESTMENT TRUST
3707 W. Maple Road
Bloomfield Hills, Michigan 48301
810-644-8500
BOARD OF TRUSTEES
Donald J. Dawson, Jr.
Fred A. Erb
John J. McHale
Sidney F. McKenna
George P. Schwartz, CFA
Gregory J. Schwartz
OFFICERS
Gregory J. Schwartz, Chairman of the Board
George P. Schwartz, CFA, President
Richard L. Platte, Jr., CFA, Vice President/Secretary
Cynthia M. Dickinson, Treasurer
Robert G. Dorsey, CPA, Assistant Vice President
John F. Splain, Assistant Secretary
Mark J. Seger, CPA, Assistant Treasurer
INVESTMENT ADVISER
SCHWARTZ INVESTMENT COUNSEL, INC.
3707 W. Maple Road
Bloomfield Hills, Michigan 48301
DISTRIBUTOR
GREGORY J. SCHWARTZ & CO., INC.
3707 W. Maple Road
Bloomfield Hills, Michigan 48301
TRANSFER AGENT
COUNTRYWIDE FUND SERVICES, INC.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
- ---------------------------------------------------
TABLE OF CONTENTS
Management Discussion and Analysis.............. 2
Expense Information............................. 4
Financial Highlights............................ 5
Investment Objective, Investment Policies and
Risk Considerations........................... 6
How to Purchase Shares.......................... 8
How to Redeem Shares............................ 9
Dividends and Distributions..................... 10
Taxes........................................... 10
Operation of the Fund........................... 11
Calculation of Share Price...................... 11
Performance Information......................... 12
Application..................................... 13
- ---------------------------------------------------
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized
by the Fund. This Prospectus does not constitute an offer by the Fund to
sell shares in any State to any person to whom it is unlawful for the Fund to
make such offer in such State.
<PAGE>
PROSPECTUS
May 1, 1997
Schwartz Investment Trust
3707 W. Maple Road
Bloomfield Hills, Michigan 48301
(810) 644-8500
SCHWARTZ VALUE FUND
A No-Load Fund
=============================================================================
INVESTMENT OBJECTIVE:
Long-term capital appreciation
through investment in basic value common stocks.
MINIMUM INVESTMENT:
Initial purchase - $25,000
No Sales Charge
No Redemption Charge
The Schwartz Value Fund is not a 12b-1 fund.
The Schwartz Value Fund (the "Fund") has retained Schwartz Investment Counsel,
Inc. (the "Adviser") to manage the Fund's investments. The Adviser uses
fundamental security analysis to identify and purchase shares of companies which
it believes to be selling below intrinsic value.
This Prospectus sets forth concisely the information about the Fund that you
should know before investing. Please retain this Prospectus for future
reference. A Statement of Additional Information dated May 1, 1997, has been
filed with the Securities and Exchange Commission and is hereby incorporated by
reference in its entirety. A copy of the Statement of Additional Information can
be obtained at no charge by calling the number listed below.
- ------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- ------------------------------------------------------------------------------
FOR INFORMATION OR ASSISTANCE IN OPENING AN ACCOUNT, PLEASE CALL:
DISTRIBUTOR:
GREGORY J. SCHWARTZ & CO., INC.
Bloomfield Hills, Michigan
(810) 644-2701
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
==============================================================================
As value investors, our focus is on identifying opportunities wherein we can
purchase pieces of individual companies in the marketplace for substantively
less than their intrinsic value. While this is a satisfying intellectual
exercise, our primary motivation is that it's a low risk way to successfully
invest your money. This contrarian style requires fortitude, but generally pays
off with favorable investment results over time. One of the challenges
confronting true value investors is purchasing shares of companies when the
specific event that will cause that underlying value to be realized is not
readily apparent. That is where faith in our analysis, and patience become
essential. The process of value revelation continues at its own pace with
individual companies, but at any given time the operation of that process may
become apparent for individual names in the Schwartz Value Fund portfolio.
The most dramatic method whereby value is realized is in a corporate takeover or
buy-out. One of our portfolio holdings, Detroit & Canada Tunnel Corporation
(DTUN-$54), is a good example. Two years ago we bought the stock at an average
price of $25 per share because we thought it represented a deep discount to
intrinsic value. Today, with no changes in the underlying business, the Company
is being acquired at $54 per share by a New York based investment group. The
Company has operated quietly for years, collecting tolls and producing cash at a
very healthy rate. The shares languished in the over-the-counter market, with a
small float. Among investors, no one cared (which further quickened our pulse).
An inactively traded stock, such as this one, can represent an extraordinary
bargain for a patient, value-oriented investor like the Fund. For years Warren
Buffett has talked about investing in companies with "tollbridge type
franchises" or unregulated monopolies. This Company comes as close to that
description as you're ever going to find. Because we purchased it at a
reasonable price, something good was bound to happen, even though we didn't know
when.
No question, buy-outs, when they occur, are the most fun because they offer
instant gratification. But there are other less dramatic methods whereby hidden
value can surface. Management merely refocusing on core competency can result in
a more profitable company, and thereby attract investor attention. Much has been
made in recent years of many large companies reorganizing and downsizing their
operations in order to maximize shareholder value. Though less well publicized,
that's been going on in many smaller companies as well. Selling losing
divisions, closing inefficient plants, or owners simply redirecting management's
attention, can be a catalyst for the realization of underlying value. Will these
moves reveal the underlying value in every instance? Certainly not. Will they
prove successful often enough to justify the efforts of finding them and
accumulating the shares? Yes. One of the beauties of the process is that it
continues during both bull and bear markets. So while buy-outs will always be
the most dramatic manner in which share prices move up to approximate intrinsic
value, it is not the only road to success. Value continues to compound in
several of our portfolio holdings, even though the share price moves in some
cases, have been less than robust. A few examples follow:
Thomas Nelson, Inc. (TNM-$14), a leading publisher and distributor of Bibles and
Christian books, recently disposed of its Word music division. Management
concluded, rightly in our estimation, that they had no special advantage in
addressing this segment of the overall music market. This divestiture will allow
the Company to devote greater resources to its successful publishing division,
which we believe has a very bright future.
UNR Industries, Inc. (UNRI-$7) is a stock that the Fund has owned for more than
four years. The Company has gone through a significant restructuring by
divesting six operating divisions, leaving only the Rohn Tower division, a maker
of telecommunication towers for cellular and personal communication systems.
Divestitures enabled the Company to make large special cash dividend payments to
shareholders, so our original purchase price of $10 per share has been adjusted
downward to less than $5. The stock is currently selling for twelve times
earnings with an expected growth rate of 20% annually for the next several
years.
Another long-time holding has been TriMas Corporation (TMS-$23), an Ann Arbor
based manufacturer of proprietary specialty fasteners, trailer hitches and
closure devices. The stock traded as high as $29 per share four years ago when
the earnings were half the current level. Excess cash flow has been used to pay
down debt and make selective acquisitions augmenting an internal earnings growth
rate of 12-15%. With $500 million in sales, the Company is not well known
outside the Midwest, but growing institutional investor awareness should add to
the price-earnings ratio in the future.
<PAGE>
Stanhome Inc. (STH-$26) is a conglomerate currently in the process of divesting
non-core operations and concentrating on its basic business which is Enesco
Giftware Group, the distributor of Precious Moments and other collectibles. The
intrinsic value of this Company, which could be twice the current market price,
has been masked by the poorly performing divisions. The underlying business,
which has been growing at a 10% rate for the last six years, has consistently
produced over a 20% annual return on equity. When investors realize how
profitable this Company will be after the streamlining is completed, the share
price could rise substantially.
Smaller stocks, the type in which the Fund typically invests, have
underperformed stocks of larger companies since late 1993. This is obvious from
comparing the performance of the Russell 2000 Index with the S&P 500. In 1996
this bifurcated market really became apparent. In fact, in the six month period
from June 1 to December 1, the Dow rose almost 17% while the Russell 2000
actually declined 2%. This 19% spread was the widest six month divergence
between these two indices since the Russell 2000 was started in 1978. So far in
1997 more of the same, with the Dow up 5.7% in January while the Russell 2000
gained 1.9%. But we look for the pendulum to start swinging back the other way.
Even though the money flowing into large capitalization mutual funds remains
robust, there are some signs that it's slowing. Over time, the valuation
disparity will dictate that large company shares receive less attention and long
neglected smaller cap value stocks will gain adherents. In the meantime, I feel
very confident that the downside risk in our stocks will remain far less than
that of the S&P 500 or the Dow.
Thanks for investing in the Schwartz Value Fund. Obviously, you have many
choices once you decide to invest in a mutual fund. I think you've made a wise
choice, to put a portion of your assets in this vehicle. In the period ahead
that choice may prove especially wise.
February 10, 1997
George P. Schwartz, CFA
President
<TABLE>
<CAPTION>
Comparison of Change in Value of $10,000 Investment in the Schwartz Value
Fund* and the Russell 2000 Index
RUSSELL 2000 INDEX:
ANNUAL
DATE RETURN BALANCE
<S> <C> <C>
12/31/86 10,000
12/31/87 -8.80% 9,120
12/31/88 24.90% 11,391
12/31/89 16.20% 13,236
12/31/90 -19.50% 10,655
12/31/91 46.00% 15,557
12/31/92 18.40% 18,419
12/31/93 18.90% 21,900
12/31/94 -3.20% 21,199
12/31/95 26.20% 26,753
12/31/96 14.80% 30,713
<CAPTION>
SCHWARTZ VALUE FUND:
ANNUAL
DATE RETURN BALANCE
<S> <C> <C>
12/31/86 10,000
12/31/87 -0.60% 9,940
12/31/88 23.10% 12,236
12/31/89 8.30% 13,252
12/31/90 -5.30% 12,549
12/31/91 32.00% 16,565
12/31/92 22.70% 20,326
12/31/93 20.50% 24,492
12/31/94 -6.80% 22,827
12/31/95 16.90% 26,684
12/31/96 18.30% 31,568
<CAPTION>
SCHWARTZ VALUE FUND
Average Annual Total Returns
1 Year 5 Years 10 Years
<S> <C> <C>
18.3% 13.8% 12.2%
Past performance is not predictive of future performance
</TABLE>
* Combines the performance of the Fund, since its commencement of operations on
July 20, 1993, and the performance of RCM Partners Limited Partnership for
periods prior to July 20, 1993. It should be noted that: (1) the Fund's
quoted performance data includes performance for periods before the Fund's
registration statement became effective; (2) the Fund was not registered
under the Investment Company Act of 1940 (the "1940 Act") during such periods
and therefore was not subject to certain investment restrictions imposed by
the 1940 Act; and (3) if the Fund had been registered under the 1940 Act
during such periods, performance may have been adversely affected.
<PAGE>
EXPENSE INFORMATION
==============================================================================
Shareholder Transaction Expenses
Sales Load Imposed on Purchases................................ None
Sales Load Imposed on Reinvested Dividends..................... None
Redemption Fee................................................. None
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees................................................ 1.50%
12b-1 Fees..................................................... None
Other Expenses................................................. .47%
-------
Total Fund Operating Expenses.................................. 1.97%
=======
The purpose of this table is to assist the investor in understanding the various
costs and expenses that an investor in the Fund will bear directly or
indirectly. The percentages expressing annual fund operating expenses are based
on amounts incurred during the most recent fiscal year. THE EXAMPLE BELOW SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
Example
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period:
1 Year $ 20
3 Years 62
5 Years 106
10 Years 230
<PAGE>
FINANCIAL HIGHLIGHTS
==============================================================================
The following information, which has been audited by Deloitte & Touche LLP, is
an integral part of the audited financial statements and should be read in
conjunction with the financial statements. The financial statements as of
December 31, 1996 and related auditors' report appear in the Statement of
Additional Information of the Fund, which can be obtained by shareholders at no
charge by calling 810-644-8500 or by writing to the Fund at the address on the
front of this Prospectus.
<TABLE>
<CAPTION>
Per Share Data for a Share Outstanding Throughout Each Period
===================================================================================================================
July 20,
Year Ended 1993(A) to
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1996 1995 1994 1993
------------ -------------- ------------- --------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period......... $ 19.66 $ 18.12 $ 20.97 $ 19.71
------------ -------------- ------------- --------------
Income from investment operations:
Net investment loss......................... (0.02) (0.03) (0.05) (0.06)
Net realized and unrealized
gains (losses) on investments............. 3.61 3.09 (1.37) 1.95
------------ -------------- ------------- --------------
Total from investment operations............... 3.59 3.06 (1.42) 1.89
------------ -------------- ------------- --------------
Less dividends and distributions:
From net realized capital gains
on investments............................ (2.06) (1.52) (1.36) (0.63)
In excess of net realized gains
on investments............................ -- -- (0.07) --
------------ -------------- ------------- --------------
Total dividends and distributions.............. (2.06) (1.52) (1.43) (0.63)
------------ -------------- ------------- --------------
Net asset value at end of period............... $ 21.19 $ 19.66 $ 18.12 $ 20.97
============ ============== ============= ==============
Total return................................... 18.3% 16.9% (6.8)% 9.6%(B)
Ratio of expenses to average net assets........ 1.97% 2.00% 2.01% 2.13%(C)
Ratio of net investment loss to average net assets (0.08)% (0.18)% (0.36)% (0.63)%(C)
Portfolio turnover rate........................ 50% 70% 78% 65%(C)
Average commission rate........................ $ 0.0454 -- -- --
Net assets at end of period (in 000's)......... $ 55,105 $ 53,137 $ 45,097 $ 40,704
<FN>
(A) Commencement of operations.
(B) Not annualized.
(C) Annualized.
</FN>
</TABLE>
<PAGE>
INVESTMENT OBJECTIVE, INVESTMENT POLICIES AND RISK CONSIDERATIONS
===============================================================================
The investment objective of the Fund is to seek long-term capital appreciation
through investment in basic value common stocks. Dividend and interest income is
only an incidental consideration to the Fund's investment objective. The Fund is
not intended to be a complete investment program, and there is no assurance that
its investment objective can be achieved. The Fund's investment objective is
fundamental and as such may not be changed without the affirmative vote of the
holders of a majority of its outstanding shares. The term "majority" of the
outstanding shares means the lesser of (1) 67% or more of the outstanding shares
of the Fund present at a meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present at or represented at such meeting or
(2) more than 50% of the outstanding shares of the Fund. Unless otherwise
indicated, all investment practices and limitations of the Fund are
nonfundamental policies which may be changed by the Board of Trustees without
shareholder approval.
The Fund maintains a disciplined approach to investing. The Adviser uses
fundamental security analysis to identify and purchase shares of companies which
it believes to be selling below intrinsic value. The price of shares in relation
to book value, asset value, earnings, dividends and cash flow, both historical
and prospective, are key determinants in the security selection process. The
Fund buys shares in companies of all sizes, although emphasis is placed on small
and medium sized companies because the Adviser believes these companies are more
likely to offer opportunities for capital appreciation. Regardless of the size
of the company, a common thread in the Fund's investments is that the market
price is below what a corporate or entrepreneurial buyer would be willing to pay
for the entire business. The auction nature and the inefficiencies of the stock
market are such that the Fund can often buy a minority interest in a company at
a small fraction of the price per share necessary to acquire the entire company.
Under normal market conditions, the Fund will invest primarily in common stocks,
which by definition entail risk of loss of capital. Securities in the Fund's
portfolio may not increase as much as the market as a whole and some undervalued
securities may continue to be undervalued for long periods of time. Some
securities may be inactively traded, i.e., not quoted daily in the financial
press, and thus may not be readily bought or sold. Although profits in some Fund
holdings may be realized quickly, it is not expected that most investments will
appreciate rapidly. The Fund will not invest more than 10% of its total assets
in securities of unseasoned issuers or in securities which are subject to legal
or contractual restrictions on resale.
The Fund may from time to time invest a substantial portion of its assets in
small, unseasoned companies. While smaller companies generally have potential
for rapid growth, they often involve higher risks because they lack the
management experience, financial resources, product diversification and
competitive strengths of larger corporations. In addition, in many instances,
the securities of smaller companies are traded only over-the-counter or on a
regional securities exchange, and the frequency and volume of their trading is
substantially less than is typical of larger companies. Therefore, the
securities of smaller companies may be subject to wider price fluctuations. When
making large sales, the Fund may have to sell portfolio holdings at discounts
from quoted prices or may have to make a series of small sales over an extended
period of time.
Although the Fund invests primarily in common stocks, the Fund may, in seeking
its objective of long-term capital appreciation, invest in preferred stocks and
corporate debt securities, including securities convertible into common stocks,
without regard to quality ratings assigned by rating organizations such as
Moody's Investors Service, Inc. and Standard & Poor's Ratings Group. The Fund
does not hold, nor intend to invest, more than 5% of its net assets in preferred
stocks and corporate debt securities rated less than "investment grade" by
either of these two rating organizations. Lower-rated debt securities (commonly
called "junk bonds") are often considered to be speculative and involve greater
risk of default or price changes due to changes in the issuer's
creditworthiness.
The Fund may invest in foreign companies through the purchase of sponsored
American Depository Receipts (certificates of ownership issued by an American
bank or trust company as a convenience to investors in lieu of the underlying
shares which it holds in custody) or other securities of foreign issuers that
are publicly traded in the United States. When selecting foreign investments,
the Adviser will seek to invest in securities that have investment
characteristics and qualities comparable to the kinds of domestic securities in
which the Fund invests. The Fund does not currently intend to invest more than
15% of its net assets in American Depository Receipts and other foreign
securities. Foreign investments may be subject to special risks, including
<PAGE>
future political and economic developments and the possibility of seizure or
nationalization of companies, imposition of withholding taxes on income,
establishment of exchange controls or adoption of other restrictions, that might
affect an investment adversely.
The Fund may also invest up to 10% of its total assets in securities of other
investment companies. Investments by the Fund in shares of other investment
companies will result in duplication of advisory, administrative and
distribution fees. The Fund will not invest more than 5% of its total assets in
securities of any single investment company and will not purchase more than 3%
of the outstanding voting securities of any investment company.
For defensive purposes, the Fund may from time to time have a significant
portion, and possibly all, of its assets in U.S. Government obligations. "U.S.
Government obligations" include securities which are issued or guaranteed by the
United States Treasury, by various agencies of the United States Government, and
by various instrumentalities which have been established or sponsored by the
United States Government. U.S. Treasury obligations are backed by the "full
faith and credit" of the United States Government. U.S. Treasury obligations
include Treasury bills, Treasury notes, and Treasury bonds. Agencies and
instrumentalities established by the United States Government include the
Federal Home Loan Banks, the Federal Land Bank, the Government National Mortgage
Association, the Federal National Mortgage Association, the Federal Home Loan
Mortgage Corporation, the Student Loan Marketing Association, the Small Business
Administration, the Bank for Cooperatives, the Federal Intermediate Credit Bank,
the Federal Financing Bank, the Federal Farm Credit Banks, the Federal
Agricultural Mortgage Corporation, the Resolution Funding Corporation, the
Financing Corporation of America and the Tennessee Valley Authority. Some of
these securities are supported by the full faith and credit of the United States
Government while others are supported only by the credit of the agency or
instrumentality, which may include the right of the issuer to borrow from the
United States Treasury. The Fund may purchase debt securities on a when-issued
basis, but the Fund does not currently intend to invest more than 5% of its net
assets in such securities during the coming year.
Although the Fund will invest primarily in common stocks under normal market
conditions, the Fund's relative equity, debt and cash positions may be increased
or decreased, as deemed appropriate by the Adviser. It is not the Adviser's
intention to have the Fund invested in debt securities primarily for capital
appreciation. The Fund may, however, from time to time, have all or a portion of
its assets invested in debt securities for defensive purposes or to preserve
capital on a temporary basis pending a more permanent disposition of assets
subject to the Adviser's analysis of economic and market conditions. There is no
formula as to the percentage of assets that may be invested in any one type of
security, except as set forth herein. When the Fund has a portion of its assets
in U.S. Government obligations or corporate debt securities, the maturities of
these securities (which may range from one day to thirty years) will be based in
large measure both on the Adviser's perception as to general risk levels in the
debt market versus the equity market, and on the Adviser's perception of the
future trend and term structure of interest rates.
Investments in equity and debt securities are subject to inherent market risks
and fluctuations in value due to earnings, economic conditions, quality ratings
and other factors beyond the control of the Adviser. Debt securities are subject
to price fluctuations based upon changes in the level of interest rates, which
will generally result in all those securities changing in price in the same way,
i.e., all those securities experiencing appreciation when interest rates decline
and depreciation when interest rates rise. As a result, the return and net asset
value of the Fund will fluctuate.
For defensive purposes, the Fund may temporarily hold all or a portion of its
assets in money market instruments. The money market instruments which the Fund
may own from time to time include U.S. Government obligations having a maturity
of less than one year, commercial paper rated A-1 by Standard & Poor's Ratings
Group or Prime-1 by Moody's Investors Service, Inc., repurchase agreements, bank
debt instruments (certificates of deposit, time deposits and bankers'
acceptances) and other short-term instruments issued by domestic branches of
U.S. financial institutions that are insured by the Federal Deposit Insurance
Corporation and have assets exceeding $10 billion.
Repurchase agreements are transactions by which the Fund purchases a security
and simultaneously commits to resell that security to the seller at an agreed
upon time and price, thereby determining the yield during the term of the
agreement. In the event of a bankruptcy or other default of the seller of a
repurchase agreement, the Fund could experience both delays in liquidating the
underlying security and losses. To minimize these possibilities, the Fund
intends to enter into repurchase agreements only with its Custodian, banks
having assets in excess of $10 billion and the largest and, in the Adviser's
judgment, most creditworthy primary U.S. Government securities dealers.
Repurchase agreements entered into by the Fund will be collateralized by
<PAGE>
high-grade debt obligations. Collateral for repurchase agreements is held in
safekeeping in the customer-only account of the Fund's Custodian at the Federal
Reserve Bank. At the time the Fund enters into a repurchase agreement, the value
of the collateral, including accrued interest, will equal or exceed the value of
the repurchase agreement and, in the case of a repurchase agreement exceeding
one day, the seller agrees to maintain sufficient collateral so that the value
of the collateral, including accrued interest, will at all times equal or exceed
the value of the repurchase agreement. The Fund will not enter into a repurchase
agreement not terminable within seven days if, as a result thereof, more than
15% of the value of the net assets of the Fund would be invested in such
securities and other illiquid securities.
The Fund may borrow money from banks or as may be necessary for the clearance of
securities transactions but only for emergency or extraordinary purposes in an
amount not exceeding 5% of the Fund's total assets. The Fund's policy on
borrowing is a fundamental policy which may not be changed without the
affirmative vote of a majority of its outstanding shares.
The Fund does not intend to use short-term trading as a primary means of
achieving its investment objective. However, the Fund's rate of portfolio
turnover will depend upon market and other conditions, and it will not be a
limiting factor when portfolio changes are deemed necessary or appropriate by
the Adviser. Although the annual portfolio turnover rate of the Fund cannot be
accurately predicted, it is not expected to exceed 100%, but may be either
higher or lower. High turnover involves correspondingly greater commission
expenses and transaction costs and increases the possibility that the Fund would
not qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code. The Fund will not qualify as a regulated investment company if it
derives more than 30% or more of its gross income from gains (without offset for
losses) from the sale or other disposition of securities held for less than
three months. High turnover may result in the Fund recognizing greater amounts
of income and capital gains, which would increase the amount of income and
capital gains which the Fund must distribute to its shareholders in order to
maintain its status as a regulated investment company and to avoid the
imposition of federal income or excise taxes (see "Taxes").
HOW TO PURCHASE SHARES
===============================================================================
Your initial investment in the Fund must be at least $25,000. Shares of the Fund
are sold on a continuous basis at the net asset value next determined after
receipt of a purchase order by the Fund. Purchase orders received by dealers
prior to 4:00 p.m., Eastern time, on any business day and transmitted to the
Fund's transfer agent, Countrywide Fund Services, Inc. (the "Transfer Agent"),
by 5:00 p.m., Eastern time, that day are confirmed at the net asset value
determined as of the close of the regular session of trading on the New York
Stock Exchange on that day. It is the responsibility of dealers to transmit
properly completed orders so that they will be received by the Transfer Agent by
5:00 p.m., Eastern time. Dealers may charge a fee for effecting purchase orders.
Direct purchase orders received by the Transfer Agent by 4:00 p.m., Eastern
time, are confirmed at that day's net asset value. Direct investments received
by the Transfer Agent after 4:00 p.m., Eastern time, and orders received from
dealers after 5:00 p.m., Eastern time, are confirmed at the net asset value next
determined on the following business day.
You may open an account and make an initial investment in the Fund by sending a
check and a completed account application form to the Transfer Agent, P.O. Box
5354, Cincinnati, Ohio 45201-5354. Checks should be made payable to the
"Schwartz Value Fund." An account application is included in this Prospectus.
The Fund mails you confirmations of all purchases or redemptions of Fund shares.
Certificates representing shares are not issued. The Fund and the Distributor
reserve the rights to limit the amount of investments and to refuse to sell to
any person.
Investors should be aware that the Fund's account application contains
provisions in favor of the Fund, the Transfer Agent and certain of their
affiliates, excluding such entities from certain liabilities (including, among
others, losses resulting from unauthorized shareholder transactions) relating to
the various services made available to investors.
Should an order to purchase shares be canceled because your check does not
clear, you will be responsible for any resulting losses or fees incurred by the
Fund or the Transfer Agent in the transaction.
You may also purchase shares of the Fund by wire. Please telephone the Transfer
Agent (Nationwide call toll-free 800-545-0103) for instructions. You should be
prepared to give the name in which the account is to be established, the
address, telephone number and taxpayer identification number for the account,
and the name of the bank which will wire the money.
<PAGE>
Your investment will be made at the next determined net asset value after your
wire is received together with the account information indicated above. If the
Fund does not receive timely and complete account information, there may be a
delay in the investment of your money and any accrual of dividends. To make your
initial wire purchase, you are required to mail a completed account application
to the Transfer Agent. Your bank may impose a charge for sending your wire.
There is presently no fee for receipt of wired funds, but the Transfer Agent
reserves the right to charge shareholders for this service upon thirty days'
prior notice to shareholders.
You may purchase and add shares to your account by mail or by bank wire. Checks
should be sent to the Transfer Agent, P.O. Box 5354, Cincinnati, Ohio
45201-5354. Checks should be made payable to the "Schwartz Value Fund." Bank
wires should be sent as outlined above. You may also make additional investments
at the Fund's offices at 3707 W. Maple Road, Bloomfield Hills, Michigan 48301.
Each additional purchase request must contain the name of your account and your
account number to permit proper crediting to your account. While there is no
minimum amount required for subsequent investments, the Fund reserves the right
to impose such requirement.
HOW TO REDEEM SHARES
==============================================================================
You may redeem shares of the Fund on each day that the Fund is open for business
by sending a written request to the Fund. The request must state the number of
shares or the dollar amount to be redeemed and your account number. The request
must be signed exactly as your name appears on the Fund's account records. If
the shares to be redeemed have a value of $25,000 or more, your signature must
be guaranteed by any eligible guarantor institution, including banks, brokers
and dealers, municipal securities brokers and dealers, government securities
brokers and dealers, credit unions, national securities exchanges, registered
securities associations, clearing agencies and savings associations.
Redemption requests may direct that the proceeds be wired directly to your
existing account in any commercial bank or brokerage firm in the United States.
There is currently no charge for processing wire redemptions. However, the
Transfer Agent reserves the right, upon thirty days' written notice, to make
reasonable charges for wire redemptions. All charges will be deducted from your
account by redemption of shares in your account. Your bank or brokerage firm may
also impose a charge for processing the wire. In the event that wire transfer of
funds is impossible or impractical, the redemption proceeds will be sent by mail
to the designated account.
You may also redeem shares by placing a wire redemption through a securities
broker or dealer. Unaffiliated broker-dealers may impose a fee on the
shareholder for this service. You will receive the net asset value per share
next determined after receipt by the Fund or its agent of your wire redemption
request. It is the responsibility of broker-dealers to properly transmit wire
redemption orders.
You will receive the net asset value per share next determined after receipt by
the Transfer Agent of your redemption request in the form described above.
Payment is made within three business days after tender in such form, provided
that payment in redemption of shares purchased by check will be effected only
after the check has been collected, which may take up to fifteen days from the
purchase date. To eliminate this delay, you may purchase shares of the Fund by
certified check or wire.
At the discretion of the Fund or the Transfer Agent, corporate investors and
other associations may be required to furnish an appropriate certification
authorizing redemptions to ensure proper authorization. The Fund reserves the
right to require you to close your account if at any time the value of your
shares is less than $25,000 (based on actual amounts invested, unaffected by
market fluctuations), or such other minimum amount as the Fund may determine
from time to time. After notification to you of the Fund's intention to close
your account, you will be given sixty days to increase the value of your account
to the minimum amount.
The Fund reserves the right to suspend the right of redemption or to postpone
the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission.
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
==============================================================================
The Fund expects to distribute substantially all of its net investment income
and net realized capital gains, if any, on an annual basis. Distributions are
paid according to one of the following options:
Share Option -- income distributions and capital gains distributions reinvested
in additional shares.
Income Option -- income distributions and short-term capital gains
distributions paid in cash; long-term capital gains
distributions reinvested in additional shares.
Cash Option -- income distributions and capital gains distributions paid in
cash.
You should indicate your choice of option on your application. If no option is
specified on your application, distributions will automatically be reinvested in
additional shares. All distributions will be based on the net asset value in
effect on the payable date.
If you select the Income Option or the Cash Option and the U.S. Postal Service
cannot deliver your checks or if your checks remain uncashed for six months,
your dividends may be reinvested in your account at the then-current net asset
value and your account will be converted to the Share Option.
TAXES
==============================================================================
The Fund has qualified and intends to continue to qualify for the special tax
treatment afforded a "regulated investment company" under Subchapter M of the
Internal Revenue Code so that it does not pay federal taxes on income and
capital gains distributed to shareholders. The Fund intends to distribute
substantially all of its net investment income and any net realized capital
gains to its shareholders. Distributions of net investment income as well as net
realized short-term capital gains, if any, are taxable to investors as ordinary
income. Dividends distributed by the Fund from net investment income may be
eligible, in whole or in part, for the dividends received deduction available to
corporations. Distributions of net realized long-term capital gains are taxable
as long-term capital gains regardless of how long you have held your Fund
shares. Redemptions of shares of the Fund are taxable events on which a
shareholder may realize a gain or loss.
On July 19, 1993, prior to the offering of shares of the Fund to the public, the
Fund exchanged its shares for portfolio securities of RCM Partners Limited
Partnership (the "Partnership"), a Michigan limited partnership, after which the
Partnership was dissolved and distributed Fund shares received pro rata to its
partners. Following this exchange transaction (the "Exchange"), partners of the
Partnership constituted all of the shareholders of the Fund, except for shares
representing seed capital contributed to the Fund by the Adviser. The Exchange
was intended to qualify as a tax-free reorganization, with no gain or loss to be
recognized by the Partnership or its partners. The Exchange may result in
adverse tax consequences to future shareholders of the Fund. As a result of this
Exchange, the Fund acquired securities that had appreciated in value from the
date they were originally acquired by the Partnership. If these appreciated
securities are subsequently sold, the amount of the gain will be taxable to
future shareholders as well as to shareholders who received Fund shares in the
Exchange. The effect of this for future shareholders would be to immediately tax
them on a distribution that represents a return of the purchase price of their
shares rather than an increase in the value of their investment. The effect on
shareholders who received Fund shares in the Exchange would be to reduce their
potential liability for tax on capital gains by spreading it over a larger asset
base.
The Fund will mail to each of its shareholders a statement indicating the amount
and federal income tax status of all distributions made during the year. In
addition to federal taxes, shareholders of the Fund may be subject to state and
local taxes on distributions. Shareholders should consult their tax advisors
about the tax effect of distributions and withdrawals from the Fund. The tax
consequences described in this section apply whether distributions are taken in
cash or reinvested in additional shares.
<PAGE>
OPERATION OF THE FUND
==============================================================================
The Fund is a diversified series of Schwartz Investment Trust, an open-end
management investment company organized as an Ohio business trust on August 31,
1992. The Board of Trustees supervises the business activities of the Fund. Like
other mutual funds, various organizations are retained to perform specialized
services for the Fund.
The Fund retains Schwartz Investment Counsel, Inc. (the "Adviser"),
3707 W. Maple Road, Bloomfield Hills, Michigan, to manage the Fund's
investments. The Adviser was organized in 1980 and has approximately $200
million of assets under management as of December 31, 1996. The controlling
shareholders of the Adviser are George P. Schwartz and Gregory J. Schwartz.
George P. Schwartz, who is President of both the Fund and the Adviser, is, and
since the Fund's inception has been, primarily responsible for managing the
Fund's portfolio.
The Fund pays the Adviser a fee at the annual rate of 1.5% of the average value
of its daily net assets up to $75 million; 1.25% of such assets from $75 million
to $100 million; and 1% of such assets in excess of $100 million.
The Fund is responsible for the payment of all operating expenses, including
fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under federal and state securities
laws, insurance expenses, taxes or governmental fees, fees and expenses of the
custodian, transfer agent and accounting and pricing agent of the Fund, fees and
expenses of members of the Board of Trustees who are not interested persons of
the Fund, the cost of preparing and distributing prospectuses, statements,
reports and other documents to shareholders, expenses of shareholders' meetings
and proxy solicitations, and such extraordinary or non-recurring expenses as may
arise, including litigation to which the Fund may be a party and indemnification
of the Fund's officers and Trustees with respect thereto.
The Fund has retained Countrywide Fund Services, Inc. (the "Transfer Agent"),
P.O. Box 5354, Cincinnati, Ohio, to provide administrative services and
accounting and pricing services to the Fund and to serve as its transfer agent
and dividend paying agent. The Transfer Agent is an indirect wholly-owned
subsidiary of Countrywide Credit Industries, Inc., a New York Stock Exchange
listed company principally engaged in the business of residential mortgage
lending. The Fund pays the Transfer Agent a fee for these services at the annual
rate of .22% of the average value of its daily net assets up to $25 million, .2%
of such assets from $25 million to $100 million and .15% of such assets in
excess of $100 million; provided, however, that the minimum fee is $6,000 per
month.
Gregory J. Schwartz & Co., Inc. (the "Distributor"), 3707 W. Maple Road,
Bloomfield Hills, Michigan, serves as the exclusive agent for the
distribution of shares of the Fund. Gregory J. Schwartz, Chairman of the Board
and a Trustee of the Fund, is also President and the controlling shareholder
of the Distributor. The Distributor will pay for the distribution of Fund
shares out of its own resources.
Shares of the Fund have equal voting rights and liquidation rights. When matters
are submitted to shareholders for a vote, each shareholder is entitled to one
vote for each full share owned and fractional votes for fractional shares owned.
The Fund is not required to hold annual meetings of shareholders. The Trustees
shall promptly call and give notice of a meeting of shareholders for the purpose
of voting upon removal of any Trustee when requested to do so in writing by
shareholders holding 10% or more of the Fund's outstanding shares. The Fund will
comply with the provisions of Section 16(c) of the Investment Company Act of
1940 in order to facilitate communications among shareholders.
CALCULATION OF SHARE PRICE
===============================================================================
On each day that the Fund is open for business, the share price (net asset
value) of the Fund's shares is determined as of the close of the regular session
of trading on the New York Stock Exchange, currently 4:00 p.m., Eastern time.
The Fund is open for business on each day the New York Stock Exchange is open
for business and on any other day when there is sufficient trading in the Fund's
investments that its net asset value might be materially affected. The net asset
value per share of the Fund is calculated by dividing the sum of the value of
the securities held by the Fund plus cash or other assets minus all liabilities
(including estimated accrued expenses) by the total number of shares outstanding
of the Fund, rounded to the nearest cent.
<PAGE>
U.S. Government obligations are valued at their most recent bid prices as
obtained from one or more of the major market makers for such securities. Other
portfolio securities are valued as follows: (1) securities which are traded on
stock exchanges or are quoted by NASDAQ are valued at the last reported sale
price as of the close of the regular session of trading on the New York Stock
Exchange on the day the securities are being valued, or, if not traded on a
particular day, at the average of the highest current independent bid and lowest
current independent offer, (2) securities traded in the over-the-counter market,
and which are not quoted by NASDAQ, are valued at the average of the highest
current independent bid and lowest current independent offer as of the close of
the regular session of trading on the New York Stock Exchange on the day the
securities are being valued, (3) securities which are traded both in the
over-the-counter market and on a stock exchange are valued according to the
broadest and most representative market, and (4) securities (and other assets)
for which market quotations are not readily available are valued at their fair
value as determined in good faith in accordance with consistently applied
procedures established by and under the general supervision of the Board of
Trustees. The net asset value per share of the Fund will fluctuate with the
value of the securities it holds.
PERFORMANCE INFORMATION
==============================================================================
From time to time, the Fund may advertise its "average annual total return."
Average annual total return figures are based on historical earnings and are not
intended to indicate future performance.
The "average annual total return" of the Fund refers to the average annual
compounded rates of return over the most recent 1, 5 and 10 year periods (which
periods will be stated in the advertisement) that would equate an initial amount
invested at the beginning of a stated period to the ending redeemable value of
the investment. The calculation of "average annual total return" assumes the
reinvestment of all dividends and distributions. The Fund may also advertise
total return (a "nonstandardized quotation") which is calculated differently
from "average annual total return." A nonstandardized quotation of total return
may be a cumulative return which measures the percentage change in the value of
an account between the beginning and end of a period, assuming no activity in
the account other than reinvestment of dividends and capital gains
distributions. A nonstandardized quotation of total return may also indicate
average annual compounded rates of return over periods other than those
specified for "average annual total return." A nonstandardized quotation of
total return will always be accompanied by the Fund's "average annual total
return" as described above.
From time to time, the Fund may advertise its performance rankings as published
by recognized independent mutual fund statistical services such as Lipper
Analytical Services, Inc. ("Lipper"), or by publications of general interest
such as Forbes, Money, The Wall Street Journal, Business Week, Barron's, Fortune
or Morningstar Mutual Fund Values. The Fund may also compare its performance to
that of other selected mutual funds, averages of the other mutual funds within
its category as determined by Lipper, or recognized indicators such as the Dow
Jones Industrial Average, the Standard & Poor's 500 Stock Index, the Value Line
Composite Index, the NASDAQ Composite Index and the Russell 2000 Index. In
connection with a ranking, the Fund may provide additional information, such as
the particular category of funds to which the ranking relates, the number of
funds in the category, the criteria upon which the ranking is based, and the
effect of fee waivers and/or expense reimbursements, if any. The Fund may also
present its performance and other investment characteristics, such as volatility
or a temporary defensive posture, in light of the Adviser's view of current or
past market conditions or historical trends.
Further information about the Fund's performance is contained in the Fund's
annual report which can be obtained by shareholders at no charge by calling
810-644-8500 or by writing to the Fund at the address on the front of this
Prospectus.
<PAGE>
SCHWARTZ VALUE FUND ACCOUNT NO. 36- ________________
ACCOUNT APPLICATION (For Fund Use Only)
Please mail completed account application to:
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
FOR BROKER/DEALER USE ONLY
Firm Name:_____________________________________
Home Office Address:___________________________
Branch Address:________________________________
Rep Name & No.:________________________________
Rep. Signature:________________________________
=============================================================================
Initial Investment of $ __________________ ($25,000 minimum)
o Check or draft enclosed payable to the Schwartz Value Fund.
o Bank Wire From:_____________________________________________________
==============================================================================
ACCOUNT NAME S.S. #/TAX L.D.#
_____________________________________________ _____________________________
Name of Individual, Corporation, (In case of custodial account
Organization, or Minor, etc. please list minor's S.S.#)
_____________________________________________ Citizenship:
Name of Joint Tenant, Partner, Custodian o U.S.
o Other____________
ADDRESS PHONE
_____________________________________________ ___________________________
Street or P.O. Box Business Phone
_____________________________________________ ___________________________
City State Zip Home Phone
Check Appropriate Box: o Individual
o Joint Tenant (Right of survivorship presumed)
o Corporation
o Trust
o Custodial
o Other
Occupation and Employer Name/Address:_________________________________________
Are you an associated person of an NASD member? o Yes o No
==============================================================================
TAXPAYER IDENTIFICATION NUMBER -- Under penalties of perjury I certify that the
Taxpayer Identification Number listed above is my correct number. Check box if
appropriate:
o I am exempt from backup withholding under the provisions of section
3406(a)(1)(c) of the Internal Revenue Code; or I am not subject to backup
withholding because I have not been notified that I am subject to backup
withholding as a result of a failure to report all interest or dividends;
or the Internal Revenue Service has notified me that I am no longer subject
to backup withholding.
o I certify under penalties of perjury that a Taxpayer Identification Number
has not been issued to me and I have mailed or delivered an application to
receive a Taxpayer Identification Number to the Internal Revenue Service
Center or Social Security Administration Office. I understand that if I do
not provide a Taxpayer Identification Number within 60 days that 31% of all
reportable payments will be withheld until I provide a number.
==============================================================================
DISTRIBUTIONS (If no election is checked the SHARE OPTION will be assigned.)
o Share Option -- Income distributions and capital gains distributions
automatically reinvested in additional shares.
o Income Option -- Income distributions and short-term capital gains
distributions paid in cash, long-term capital gains
distributions reinvested in additional shares.
o Cash Option -- Income distributions and capital gains distributions
paid in cash.
==============================================================================
SIGNATURES
By signature below each investor certifies that he has received a copy of the
Fund's current Prospectus, that he is of legal age, and that he has full
authority and legal capacity for himself or the organization named below, to
make this investment and to use the options selected above. The investor
appoints Countrywide Fund Services, Inc. as his agent to enter orders for
shares, to receive dividends and distributions for automatic reinvestment in
additional shares of the Fund for credit to the investor's account and to
surrender for redemption shares held in the investor's account in accordance
with any of the procedures elected above or for payment of service charges
incurred by the investor. The investor further agrees that Countrywide Fund
Services, Inc. can cease to act as such agent upon ten days' notice in writing
to the investor at the address contained in this Application. The investor
hereby ratifies any instructions given pursuant to this Application and for
himself and his successors and assigns does hereby release the Fund, Schwartz
Investment Counsel, Inc., Countrywide Fund Services, Inc., Gregory J. Schwartz &
Co., and their respective officers, employees, agents and affiliates from any
and all liability in the performance of the acts instructed herein. The Internal
Revenue Service does not require your consent to any provision of this document
other than the certifications required to avoid backup withholding.
By: _____________________________________ ___________________________________
Signature & Title Date
By: _____________________________________ ___________________________________
Signature & Title Date
NOTE: CORPORATIONS, TRUSTS AND OTHER ORGANIZATIONS MUST COMPLETE THE
RESOLUTION FORM ON THE REVERSE SIDE. UNLESS OTHERWISE SPECIFIED, EACH
JOINT OWNER SHALL HAVE FULL AUTHORITY TO ACT ON BEHALF OF THE ACCOUNT.
<PAGE>
RESOLUTIONS
(This Section to be completed by Corporations, Trusts, and Other Organizations)
RESOLVED: That this corporation or organization become a shareholder of the
Schwartz Value Fund (the Fund) and that
______________________________________________________________________________
is (are) hereby authorized to complete and execute the Application on behalf of
the corporation or organization and to take any action for it as may be
necessary or appropriate with respect to its shareholder account with the Fund,
and it is FURTHER RESOLVED: That any one of the above noted officers is
authorized to sign any documents necessary or appropriate to appoint Countrywide
Fund Services, Inc. as redemption agent of the corporation or organization for
shares of the Fund, to establish or acknowledge terms and conditions governing
the redemption of said shares and to otherwise implement the privileges elected
on the Application.
CERTIFICATE
I hereby certify that the foregoing resolutions are in conformity with the
Charter and By-Laws or other empowering documents of the
______________________________________________________________________________
(Name of Organization)
incorporated or formed under the laws of______________________________________
(State)
and were adopted at a meeting of the Board of Directors or Trustees of the
organization or corporation duly called and held on __________ at which a
quorum was present and acting throughout, and that the same are now in full
force and effect.
I further certify that the following is (are) duly elected officer(s) of the
corporation or organization, authorized to act in accordance with the foregoing
resolutions.
NAME TITLE
__________________________________ ____________________________________
__________________________________ ____________________________________
__________________________________ ____________________________________
Witness my hand and seal of the corporation or organization this_________day
of_____, 19___
______________________________________ ______________________________________
*Secretary-Clerk Other Authorized Officer (if required)
*If the Secretary or other recording officer is authorized to act by the above
resolutions, this certificate must also be signed by another officer.
<PAGE>
SCHWARTZ INVESTMENT TRUST
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1997
SCHWARTZ VALUE FUND
This Statement of Additional Information is not a prospectus. It should
be read in conjunction with the Prospectus of the Schwartz Value Fund dated May
1, 1997. A copy of the Fund's Prospectus can be obtained by writing the Fund at
3707 W. Maple Road, Bloomfield Hills, Michigan 48301, or by calling the Fund at
810-644-8500.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Schwartz Investment Trust
3707 W. Maple Road
Bloomfield Hills, Michigan 48301
TABLE OF CONTENTS
PAGE
THE FUND............................................................... 3
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS.......................... 3
QUALITY RATINGS OF CORPORATE BONDS AND PREFERRED STOCKS................ 8
INVESTMENT LIMITATIONS................................................. 13
TRUSTEES AND OFFICERS.................................................. 14
THE INVESTMENT ADVISER................................................. 16
THE DISTRIBUTOR........................................................ 17
SECURITIES TRANSACTIONS................................................ 18
PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . .................... 19
CALCULATION OF SHARE PRICE . . . . . . . . . . . . .................... 20
TAXES.................................................................. 20
REDEMPTION IN KIND..................................................... 21
HISTORICAL PERFORMANCE INFORMATION..................................... 22
PRINCIPAL SECURITY HOLDERS............................................. 24
CUSTODIAN.............................................................. 24
AUDITORS. . ........................................................... 24
COUNTRYWIDE FUND SERVICES, INC......................................... 25
ANNUAL REPORT. . . . . . .. . . . .. . ................................ 25
<PAGE>
THE FUND
Schwartz Investment Trust (the "Trust") was organized as an Ohio
business trust on August 31, 1992. The Trust currently offers one series of
shares to investors, the Schwartz Value Fund (the "Fund"). Prior to June 1,
1994, the name of the Fund was The RCM Fund.
Each share of the Fund represents an equal proportionate interest in
the assets and liabilities belonging to the Fund with each other share of the
Fund and is entitled to such dividends and distributions out of the income
belonging to the Fund as are declared by the Trustees. The shares do not have
cumulative voting rights or any preemptive or conversion rights, and the
Trustees have the authority from time to time to divide or combine the shares of
the Fund into a greater or lesser number of shares of the Fund so long as the
proportionate beneficial interest in the assets belonging to the Fund are in no
way affected. In case of any liquidation of the Fund, the holders of shares of
the Fund will be entitled to receive as a class a distribution out of the
assets, net of the liabilities, belonging to the Fund. No shareholder is liable
to further calls or to assessment by the Fund without his express consent.
On July 19, 1993, prior to the offering of Fund shares to the public,
the Fund exchanged its shares for portfolio securities of RCM Partners Limited
Partnership, a Michigan limited partnership (the "Partnership"), after which the
Partnership dissolved and distributed the Fund shares received pro rata to its
partners.
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS
A more detailed discussion of some of the terms used and investment
policies described in the Prospectus (see "Investment Objective, Investment
Policies and Risk Considerations") appears
below:
Majority. As used in the Prospectus and this Statement of Additional
Information, the term "majority" of the outstanding shares of the Fund means the
lesser of (1) 67% or more of the outstanding shares of the Fund present at a
meeting, if the holders of more than 50% of the outstanding shares of the Fund
are present or represented at such meeting or (2) more than 50% of the
outstanding shares of the Fund.
Commercial Paper. Commercial paper consists of short-term (usually from
one to two hundred seventy days) unsecured promissory notes issued by
corporations in order to finance their current operations. The Fund will only
invest in commercial paper rated A-1 by Standard & Poor's Ratings Group
("Standard & Poor's") or Prime-1 by Moody's Investors Service, Inc. ("Moody's")
or unrated paper of issuers who have outstanding unsecured debt rated AA or
better by Standard & Poor's or Aa or better by Moody's. Certain notes may have
floating or variable rates. Variable and floating rate notes with a demand
notice period exceeding seven days will be subject to the Fund's policy
<PAGE>
with respect to illiquid investments unless, in the judgment of the Adviser,
such note is liquid.
The rating of Prime-1 is the highest commercial paper rating assigned
by Moody's. Among the factors considered by Moody's in assigning ratings are the
following: valuation of the management of the issuer; economic evaluation of the
issuer's industry or industries and an appraisal of speculative-type risks which
may be inherent in certain areas; evaluation of the issuer's products in
relation to competition and customer acceptance; liquidity; amount and quality
of long-term debt; trend of earnings over a period of 10 years; financial
strength of the parent company and the relationships which exist with the
issuer; and recognition by the management of obligations which may be present or
may arise as a result of public interest questions and preparations to meet such
obligations. These factors are all considered in determining whether the
commercial paper is rated Prime-1. Commercial paper rated A (highest quality) by
Standard & Poor's has the following characteristics: liquidity ratios are
adequate to meet cash requirements; long-term senior debt is rated "A" or
better, although in some cases "BBB" credits may be allowed; the issuer has
access to at least two additional channels of borrowing; basic earnings and cash
flow have an upward trend with allowance made for unusual circumstances;
typically, the issuer's industry is well established and the issuer has a strong
position within the industry; and the reliability and quality of management are
unquestioned. The relative strength or weakness of the above factors determines
whether the issuer's commercial paper is rated A-1.
Bank Debt Instruments. Bank debt instruments in which the Fund may
invest consist of certificates of deposit, bankers' acceptances and time
deposits issued by national banks and state banks, trust companies and mutual
savings banks, or by banks or institutions the accounts of which are insured by
the Federal Deposit Insurance Corporation or the Federal Savings and Loan
Insurance Corporation. Certificates of deposit are negotiable certificates
evidencing the indebtedness of a commercial bank to repay funds deposited with
it for a definite period of time (usually from fourteen days to one year) at a
stated or variable interest rate. Bankers' acceptances are credit instruments
evidencing the obligation of a bank to pay a draft which has been drawn on it by
a customer, which instruments reflect the obligation both of the bank and of the
drawer to pay the face amount of the instrument upon maturity. Time deposits are
non-negotiable deposits maintained in a banking institution for a specified
period of time at a stated interest rate. The Fund will not invest in time
deposits maturing in more than seven days if, as a result thereof, more than 15%
of the value of its net assets would be invested in such securities and other
illiquid securities.
When-Issued Securities. The Fund will only make commitments
to purchase securities on a when-issued basis with the intention
<PAGE>
of actually acquiring the securities. In addition, the Fund may purchase
securities on a when-issued basis only if delivery and payment for the
securities takes place within 120 days after the date of the transaction. In
connection with these investments, the Fund will direct the Custodian to place
cash, U.S. Government obligations or high-grade debt instruments in a segregated
account in an amount sufficient to make payment for the securities to be
purchased. When a segregated account is maintained because the Fund purchases
securities on a when-issued basis, the assets deposited in the segregated
account will be valued daily at market for the purpose of determining the
adequacy of the securities in the account. If the market value of such
securities declines, additional cash or securities will be placed in the account
on a daily basis so that the market value of the account will equal the amount
of the Fund's commitments to purchase securities on a when-issued basis. To the
extent funds are in a segregated account, they will not be available for new
investment or to meet redemptions. Securities purchased on a when-issued basis
and the securities held in the Fund's portfolio are subject to changes in market
value based upon changes in the level of interest rates (which will generally
result in all of those securities changing in value in the same way, i.e., all
those securities experiencing appreciation when interest rates decline and
depreciation when interest rates rise). Therefore, if in order to achieve higher
returns, the Fund remains substantially fully invested at the same time that it
has purchased securities on a when-issued basis, there will be a possibility
that the market value of the Fund's assets will experience greater fluctuation.
The purchase of securities on a when-issued basis may involve a risk of loss if
the broker-dealer selling the securities fails to deliver after the value of the
securities has risen.
When the time comes for the Fund to make payment for securities
purchased on a when-issued basis, the Fund will do so by using then available
cash flow, by sale of the securities held in the segregated account, by sale of
other securities or, although it would not normally expect to do so, by
directing the sale of the securities purchased on a when-issued basis themselves
(which may have a market value greater or less than the Fund's payment
obligation). Although the Fund will only make commitments to purchase securities
on a when-issued basis with the intention of actually acquiring the securities,
the Fund may sell these securities before the settlement date if it is deemed
advisable by the Adviser as a matter of investment strategy.
Repurchase Agreements. Repurchase agreements are transactions by
which the Fund purchases a security and simultaneously commits to resell that
security to the seller at an agreed upon time and price, thereby determining
the yield during the term of the agreement. In the event of a bankruptcy
<PAGE>
or other default by the seller of a repurchase agreement, the Fund could
experience both delays in liquidating the underlying security and losses. To
minimize these possibilities, the Fund intends to enter into repurchase
agreements only with its Custodian, with banks having assets in excess of $10
billion and with broker-dealers who are recognized as primary dealers in U.S.
Government obligations by the Federal Reserve Bank of New York. Collateral for
repurchase agreements is held in safekeeping in the customer-only account of the
Fund's Custodian at the Federal Reserve Bank. The Fund will not enter into a
repurchase agreement not terminable within seven days if, as a result thereof,
more than 15% of the value of its net assets would be invested in such
securities and other illiquid securities.
Although the securities subject to a repurchase agreement might bear
maturities exceeding one year, settlement for the repurchase would never be more
than one year after the Fund's acquisition of the securities and normally would
be within a shorter period of time. The resale price will be in excess of the
purchase price, reflecting an agreed upon market rate effective for the period
of time the Fund's money will be invested in the securities, and will not be
related to the coupon rate of the purchased security. At the time the Fund
enters into a repurchase agreement, the value of the underlying security,
including accrued interest, will equal or exceed the value of the repurchase
agreement, and, in the case of a repurchase agreement exceeding one day, the
seller will agree that the value of the underlying security, including accrued
interest, will at all times equal or exceed the value of the repurchase
agreement. The collateral securing the seller's obligation must be of a credit
quality at least equal to the Fund's investment criteria for portfolio
securities and will be held by the Custodian or in the Federal Reserve Book
Entry System.
For purposes of the Investment Company Act of 1940, a repurchase
agreement is deemed to be a loan from the Fund to the seller subject to the
repurchase agreement and is therefore subject to the Fund's investment
restriction applicable to loans. It is not clear whether a court would consider
the securities purchased by the Fund subject to a repurchase agreement as being
owned by the Fund or as being collateral for a loan by the Fund to the seller.
In the event of the commencement of bankruptcy or insolvency proceedings with
respect to the seller of the securities before repurchase of the security under
a repurchase agreement, the Fund may encounter delay and incur costs before
being able to sell the security. Delays may involve loss of interest or decline
in price of the security. If a court characterized the transaction as a loan and
the Fund has not perfected a security interest in the security, the Fund may be
required to return the security to the seller's estate and be treated as an
unsecured creditor of the seller. As an unsecured
<PAGE>
creditor, the Fund would be at the risk of losing some or all of the principal
and income involved in the transaction. As with any unsecured debt obligation
purchased for the Fund, the Adviser seeks to minimize the risk of loss through
repurchase agreements by analyzing the creditworthiness of the obligor, in this
case, the seller. Apart from the risk of bankruptcy or insolvency proceedings,
there is also the risk that the seller may fail to repurchase the security, in
which case the Fund may incur a loss if the proceeds to the Fund of the sale of
the security to a third party are less than the repurchase price. However, if
the market value of the securities subject to the repurchase agreement becomes
less than the repurchase price (including interest), the Fund will direct the
seller of the security to deliver additional securities so that the market value
of all securities subject to the repurchase agreement will equal or exceed the
repurchase price. It is possible that the Fund will be unsuccessful in seeking
to enforce the seller's contractual obligation to deliver additional securities.
Foreign Securities. Subject to the Fund's investment policies and
quality standards, the Fund may invest in the securities (payable in U.S.
dollars) of foreign issuers. Because the Fund may invest in foreign securities,
investment in the Fund involves risks that are different in some respects from
an investment in a fund which invests only in securities of U.S. domestic
issuers. Foreign investments may be affected favorably or unfavorably by changes
in currency rates and exchange control regulations. There may be less publicly
available information about a foreign company than about a U.S. company, and
foreign companies may not be subject to accounting, auditing and financial
reporting standards and requirements comparable to those applicable to U.S.
companies. There may be less governmental supervision of securities markets,
brokers and issuers of securities. Securities of some foreign companies are less
liquid or more volatile than securities of U.S. companies, and foreign brokerage
commissions and custodian fees are generally higher than in the United States.
Settlement practices may include delays and may differ from those customary in
United States markets. Investments in foreign securities may also be subject to
other risks different from those affecting U.S. investments, including local
political or economic developments, expropriation or nationalization of assets,
restrictions on foreign investment and repatriation of capital, imposition of
withholding taxes on dividend or interest payments, currency blockage (which
would prevent cash from being brought back to the United States), and difficulty
in enforcing legal rights outside the United States.
Warrants and Rights. Warrants are options to purchase equity
securities at a specified price and are valid for a specific time period.
Rights are similar to warrants, but
<PAGE>
normally have a short duration and are distributed by the issuer to its
shareholders. The Fund may purchase warrants and rights, provided that the Fund
does not invest more than 5% of its net assets at the time of purchase in
warrants and rights other than those that have been acquired in units or
attached to other securities. Of such 5%, no more than 2% of the Fund's assets
at the time of purchase may be invested in warrants which are not listed on
either the New York Stock Exchange or the American Stock Exchange.
QUALITY RATINGS OF CORPORATE BONDS AND PREFERRED STOCKS
The ratings of Moody's and Standard & Poor's for corporate bonds in
which the Fund may invest are as follows:
Moody's Investors Service, Inc.
Aaa - Bonds which 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 by 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 which 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 - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. 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 - Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are 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 bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
<PAGE>
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.
Ca - 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.
C - 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.
Standard & Poor's Ratings Group
AAA - Bonds rated AAA have the highest rating assigned by Standard &
Poor's to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
AA - Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from the highest rated issues only in small degree.
A - Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to
pay interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for bonds in this category than for bonds in higher rated categories.
BB, B, CCC and CC - Bonds rated BB, B, CCC and CC are regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While
<PAGE>
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
C - The rating C is reserved for income bonds on which no interest is
being paid.
D - Bonds rated D are in default, and payment of interest and/or
repayment of principal is in arrears.
The ratings of Moody's and Standard & Poor's for preferred stocks in
which the Fund may invest are as follows:
Moody's Investors Service, Inc.
aaa - An issue which is rated aaa is considered to be a top- quality
preferred stock. This rating indicates good asset protection and the least risk
of dividend impairment within the universe of preferred stocks.
aa - An issue which is rated aa is considered a high-grade preferred
stock. This rating indicates that there is reasonable assurance that earnings
and asset protection will remain relatively well maintained in the foreseeable
future.
a - An issue which is rated a is considered to be an upper- medium
grade preferred stock. While risks are judged to be somewhat greater than in the
"aaa" and "aa" classifications, earnings and asset protection are, nevertheless,
expected to be maintained at adequate levels.
baa - An issue which is rated baa is considered to be medium grade,
neither highly protected nor poorly secured. Earnings and asset protection
appear adequate at present but may be questionable over any great length of
time.
ba - An issue which is rated ba is considered to have speculative
elements and its future cannot be considered well assured. Earnings and asset
protection may be very moderate and not well safeguarded during adverse periods.
Uncertainty of position characterizes preferred stocks in this class.
b - An issue which is rated b generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of other
terms of the issue over any long period of time may be small.
caa - An issue which is rated caa is likely to be in arrears on
dividend payments. This rating designation does not purport to indicate the
future status of payments.
<PAGE>
Standard & Poor's Ratings Group
AAA - This is the highest rating that may be assigned by Standard &
Poor's to a preferred stock issue and indicates an extremely strong capacity to
pay the preferred stock obligations.
AA - A preferred stock issue rated AA also qualifies as a high-quality
fixed-income security. The capacity to pay preferred stock obligations is very
strong, although not as overwhelming as for issues rated AAA.
A - An issue rated A is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the diverse
effects of changes in circumstances and economic conditions.
BBB - An issue rated BBB is regarded as backed by an adequate capacity
to pay the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to make payments for a preferred
stock in this category than for issues in the A category.
BB, B and CCC - Preferred stock rated BB, B and CCC are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay preferred stock obligations. BB indicates the lowest degree of speculation
and CCC the highest degree of speculation. While such issues will likely have
some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
CC - The rating CC is reserved for a preferred stock issue in arrears
on dividends or sinking fund payments but that is currently paying.
C - A preferred stock rated C is a non-paying issue.
D - A preferred stock rated D is a non-paying issue with the issuer in
default on debt instruments.
Risk Factors of Lower-Rated Securities:
Lower-rated debt securities (commonly called "junk bonds") may be
subject to certain risk factors to which other securities are not subject to the
same degree. An economic downturn tends to disrupt the market for lower-rated
bonds and adversely affect their values. Such an economic downturn may be
expected to result in increased price volatility of lower-rated bonds and of
<PAGE>
the value of the Fund's shares, and an increase in issuers'
defaults on such bonds.
Also, many issuers of lower-rated bonds are substantially leveraged,
which may impair their ability to meet their obligations. In some cases, the
securities in which the Fund invests are subordinated to the prior payment of
senior indebtedness, thus potentially limiting the Fund's ability to recover
full principal or to receive payments when senior securities are in default.
The credit rating of a security does not necessarily address its market
value risk. Also, ratings may, from time to time, be changed to reflect
developments in the issuer's financial condition. Lower-rated securities held by
the Fund have speculative characteristics which are apt to increase in number
and significance with each lower rating category.
When the secondary market for lower-rated bonds becomes increasingly
illiquid, or in the absence of readily available market quotations for
lower-rated bonds, the relative lack of reliable, objective data makes the
responsibility of the Trustees to value such securities more difficult, and
judgment plays a greater role in the valuation of portfolio securities. Also,
increased illiquidity of the market for lower-rated bonds may affect the Fund's
ability to dispose of portfolio securities at a desirable price.
In addition, if the Fund experiences unexpected net redemptions, it
could be forced to sell all or a portion of its lower-rated bonds without regard
to their investment merits, thereby decreasing the asset base upon which the
Fund's expenses can be spread and possibly reducing the Fund's rate of return.
Also, prices of lower-rated bonds have been found to be less sensitive to
interest rate changes and more sensitive to adverse economic changes and
individual corporate developments than more highly rated investments. Certain
laws or regulations may have a material effect on the Fund's investments in
lower-rated bonds.
<PAGE>
INVESTMENT LIMITATIONS
The Fund has adopted certain fundamental investment limitations
designed to reduce the risk of an investment in the Fund. These limitations may
not be changed without the affirmative vote of a majority of the outstanding
shares of the Fund. The Fund may not:
1. Borrow amounts in excess of 5% of the Fund's total
assets, except as a temporary measure for extraordinary or
emergency purposes.
2. Underwrite securities issued by other persons, except insofar
as the Fund may technically be deemed an underwriter under the Securities Act
of 1933 in selling a portfolio security.
3. Invest 25% or more of the Fund's total assets in any
one industry.
4. Purchase or sell real estate, mineral leases, futures
contracts or commodities in the ordinary course of business.
5. Make loans; however, the Fund may enter into repurchase
agreements and may purchase corporate and debt obligations for
investment purposes.
6. Purchase the securities of an issuer (other than the United
States Government, its agencies or instrumentalities) if such purchase, at the
time thereof, would cause more than 5% of the Fund's total assets taken at
market value to be invested in the securities of such issuer.
7. Purchase voting securities of any issuer if such purchase, at
the time thereof, would cause more than 10% of the outstanding voting
securities of such issuer to be held by the Fund.
8. Invest for the purpose of exercising control or management.
9. Issue senior securities as defined in the Investment Company
Act of 1940 or mortgage, pledge, hypothecate or in any way transfer as security
for indebtedness any securities owned or held by the Fund except as may be
necessary in connection with permissible borrowings, and then not exceeding 5%
of the Fund's total assets, taken at the lesser of cost or market value.
10. Purchase any securities on margin; however, the Fund
may obtain such short-term credit as may be necessary for the
clearance of purchases and sales of securities.
11. Sell any securities short unless, by virtue of the
Fund's ownership of other securities, the Fund has at the time of
<PAGE>
sale a right to obtain securities, without payment of further consideration,
equivalent in kind and amount to the securities sold and provided that if such
right is conditional, the sale is made upon the same conditions.
12. Purchase or sell any put or call options or any combination
thereof, provided that this shall not prevent the purchase, ownership, holding
or sale of warrants where the grantor of the warrants is the issuer of the
underlying securities.
13. Invest more than 10% of its total assets in securities of
unseasoned issuers or in securities which are subject to legal or contractual
restrictions on resale.
With respect to the percentages adopted by the Fund as maximum
limitations on the Fund's investment policies and restrictions, an excess above
the fixed percentage (except for the percentage limitations relative to the
borrowing of money) will not be a violation of the policy or restriction unless
the excess results immediately and directly from the acquisition of any security
or the action taken.
The Fund has never made, nor does it presently intend to make, short
sales of securities "against the box" as described in investment limitation 11.
This statement of intention reflects a nonfundamental policy which may be
changed by the Board of Trustees without shareholder approval.
TRUSTEES AND OFFICERS
The following is a list of the Trustees and executive officers of the
Fund and their aggregate compensation from the Fund for the fiscal year ended
December 31, 1996. Each Trustee who is an "interested person" of the Fund, as
defined by the Investment Company Act of 1940, is indicated by an asterisk.
Gregory J. Schwartz and George P. Schwartz are brothers.
<TABLE>
<CAPTION>
NAME AGE POSITION HELD COMPENSATION
- ---- --- -------------------------------- ------------
<S> <C> <C> <C>
*Gregory J. Schwartz 55 Chairman of the Board/Trustee $ 0
*George P. Schwartz, CFA 52 President/Trustee 0
+Donald J. Dawson, Jr. 50 Trustee 7,000
+Fred A. Erb 74 Trustee 7,000
+John J. McHale 75 Trustee 7,000
+Sidney F. McKenna 74 Trustee 7,000
Richard L. Platte, Jr., CFA 46 Vice President and Secretary 0
Cynthia M. Dickinson 37 Treasurer 0
Robert G. Dorsey 40 Assistant Vice President 0
John F. Splain 40 Assistant Secretary 0
Mark J. Seger 35 Assistant Treasurer 0
</TABLE>
<PAGE>
*Gregory J. Schwartz and George P. Schwartz, as affiliated persons of Schwartz
Investment Counsel, Inc., the Fund's investment adviser, are "interested
persons" of the Fund within the meaning of Section 2(a)(19) of the Investment
Company Act of 1940.
+Member of Audit Committee.
The principal occupations of the Trustees and executive officers of the
Fund during the past five years are set forth below:
GREGORY J. SCHWARTZ, 3707 W. Maple Road, Bloomfield Hills, Michigan,
is Chairman of Schwartz Investment Counsel, Inc., the Fund's investment
manager, and is also President and Chief Executive Officer of Gregory J.
Schwartz & Co., Inc., an investment banking firm which serves as the Fund's
distributor.
GEORGE P. SCHWARTZ, CFA, 3707 W. Maple Road, Bloomfield Hills,
Michigan, is President and Chief Investment Officer of Schwartz Investment
Counsel, Inc. and is President and portfolio manager of the Fund.
DONALD J. DAWSON, JR., 333 West Seventh Street, Royal Oak, Michigan,
is President of Payroll 1, Inc. (a payroll processing company).
FRED A. ERB, 44 East Long Lake Road, Bloomfield Hills, Michigan, is
the Chairman and Chief Executive Officer of Edgemere Enterprises, Inc. (a real
estate investment, development and management company). He is also the
Chairman of D.I.Y. Home Warehouse (a retail building supplies company).
JOHN J. McHALE, 2014 Royal Fern Court, Palm City, Florida, is retired
President of the Montreal Expos (a major league baseball team). He is
President of Japan Sports System, Inc. (owners and operators of professional
baseball franchises). He is also a director of Perini Corp. (a construction
and real estate company).
SIDNEY F. McKENNA, 3707 W. Maple Road, Bloomfield Hills, Michigan, is
retired Senior Vice President of United Technologies Corporation (a major
manufacturer of aircraft engines and other industrial products).
RICHARD L. PLATTE, JR., CFA, 3707 W. Maple Road, Bloomfield Hills,
Michigan, is Executive Vice President, Secretary and Treasurer of Schwartz
Investment Counsel, Inc.
CYNTHIA M. DICKINSON, 3707 W. Maple Road, Bloomfield Hills, Michigan,
is Vice President-Operations and Chief Financial Officer of Schwartz Investment
Counsel, Inc.
<PAGE>
ROBERT G. DORSEY, 312 Walnut Street, 21st Floor, Cincinnati, Ohio, is
President and Treasurer of Countrywide Fund Services, Inc. (a registered
transfer agent) and Treasurer of Countrywide Investments, Inc. (a registered
broker-dealer) and Countrywide Financial Services, Inc. (a financial services
company and parent of Countrywide Investments, Inc. and Countrywide Fund
Services, Inc.). He is also Vice President of Brundage, Story and Rose
Investment Trust, Markman MultiFund Trust, PRAGMA Investment Trust, Maplewood
Investment Trust, a series company, The Thermo Opportunity Fund, Inc. and
Capitol Square Funds and Assistant Vice President of Williamsburg Investment
Trust, The Tuscarora Investment Trust, Fremont Mutual Funds, Inc., The Gannett
Welsh & Kotler Funds and Interactive Investments (all of which are registered
investment companies).
JOHN F. SPLAIN, 312 Walnut Street, 21st Floor, Cincinnati, Ohio, is
Secretary and General Counsel of Countrywide Investments, Inc. and Countrywide
Financial Services, Inc. and Vice President, Secretary and General Counsel of
Countrywide Fund Services, Inc. He is also Secretary of Countrywide Investment
Trust, Countrywide Tax-Free Trust, Countrywide Strategic Trust, Brundage, Story
and Rose Investment Trust, Markman MultiFund Trust, PRAGMA Investment Trust, The
Tuscarora Investment Trust, Williamsburg Investment Trust, Maplewood Investment
Trust, a series company, and The Thermo Opportunity Fund, Inc. and Assistant
Secretary of Fremont Mutual Funds, Inc., Capitol Square Funds, The Gannett Welsh
& Kotler Funds and Interactive Investments (all of which are registered
investment companies).
MARK J. SEGER, 312 Walnut Street, 21st Floor, Cincinnati, Ohio, is Vice
President and Fund Controller of Countrywide Fund Services, Inc. He is also
Treasurer of Countrywide Investment Trust, Countrywide Tax-Free Trust,
Countrywide Strategic Trust, Brundage, Story and Rose Investment Trust, Markman
MultiFund Trust, PRAGMA Investment Trust, Williamsburg Investment Trust,
Maplewood Investment Trust, a series company, The Thermo Opportunity Fund, Inc.
and Capitol Square Funds, Assistant Treasurer of The Tuscarora Investment Trust,
The Gannett Welsh & Kotler Funds and Interactive Investments and Assistant
Secretary of Fremont Mutual Funds, Inc.
THE INVESTMENT ADVISER
Schwartz Investment Counsel, Inc. (the "Adviser") is the Fund's
investment manager. George P. Schwartz and Gregory J. Schwartz, as the
controlling shareholders of the Adviser, may directly or indirectly receive
benefits from the advisory fees paid to the Adviser.
Under the terms of the investment advisory agreement between the Fund
and the Adviser, the Adviser manages the Fund's investments. The Fund pays the
Adviser a fee computed and accrued daily and paid quarterly at an annual rate of
1.5% of its average daily net assets up to $75,000,000, 1.25% of such assets
<PAGE>
from $75,000,000 to $100,000,000 and 1% of such assets in excess of
$100,000,000. For the fiscal years ended December 31, 1996, 1995 and 1994, the
Fund paid advisory fees of $801,444, $765,583 and $667,931, respectively.
The Fund is responsible for the payment of all expenses incurred in
connection with the registration of shares and operations of the Fund, including
such extraordinary or non-recurring expenses as may arise, such as litigation to
which the Fund may be a party. The Fund may have an obligation to indemnify the
Fund's officers and Trustees with respect to such litigation, except in
instances of willful misfeasance, bad faith, gross negligence or reckless
disregard by such officers and Trustees in the performance of their duties. The
compensation and expenses of any officer, Trustee or employee of the Fund who is
an officer, director or employee of the Adviser are paid by the Adviser, except
that the Fund reimburses all officers and Trustees, including those who may be
officers, directors or employees of the Adviser, for actual reasonable
out-of-pocket costs related to attending meetings of the Fund's Trustees.
By its terms, the Fund's investment advisory agreement will remain in
force until January 28, 1998 and from year to year thereafter, subject to annual
approval by (a) the Board of Trustees or (b) a vote of the majority of the
fund's outstanding voting securities; provided that in either event continuance
is also approved by a majority of the Trustees who are not interested persons of
the Fund, by a vote cast in person at a meeting called for the purpose of voting
such approval. The Fund's investment advisory agreement may be terminated at any
time, on sixty days' written notice, without the payment of any penalty, by the
Board of Trustees, by a vote of the majority of the Fund's outstanding voting
securities, or by the Adviser. The investment advisory agreement automatically
terminates in the event of its assignment, as defined by the Investment Company
Act of 1940 and the rules thereunder.
THE DISTRIBUTOR
Gregory J. Schwartz & Co., Inc. (the "Distributor") is the exclusive
agent for distribution of shares of the Fund. The Distributor is obligated to
sell the shares on a best efforts basis only against purchase orders for the
shares. Shares of the Fund are offered to the public on a continuous basis. The
Distributor pays from its own resources promotional expenses in connection with
the distribution of the Fund's shares and any other expenses incurred by it in
the performance of its obligations under the Underwriting Agreement with the
Fund.
<PAGE>
Gregory J. Schwartz is principal owner of the Distributor. The Adviser
pays out of its legitimate profits commissions to the Distributor which are
based on gross proceeds of Fund shares purchased for which the Distributor is
responsible for recommending for investment in the Fund. Such commissions are
equal to 4%. Upon redemption of Fund shares for any reason at any time prior to
the one-year anniversary of the applicable subscription date of such shares, the
Distributor refunds to the Adviser 75% of the commission paid upon the original
purchase of such shares. Upon redemption of Fund shares after the one-year
anniversary of the applicable subscription date of such shares, but prior to the
two-year anniversary, the Distributor refunds to the Adviser 37.5% of the
commission paid upon the original purchase of such shares. For the fiscal
periods ended December 31, 1996 and 1995 and 1994, the Adviser paid the
Distributor compensation of $168,750, $160,773 and $458,389, respectively, in
respect to sales of shares of the Fund to the Distributor's clients.
SECURITIES TRANSACTIONS
Decisions to buy and sell securities for the Fund and the placing of
the Fund's securities transactions and negotiation of commission rates where
applicable are made by the Adviser and are subject to review by the Board of
Trustees of the Fund. In the purchase and sale of portfolio securities, the
Adviser seeks best execution for the Fund, taking into account such factors as
price (including the applicable brokerage commission or dealer spread), the
execution capability, financial responsibility and responsiveness of the broker
or dealer and the brokerage and research services provided by the broker or
dealer. The Adviser generally seeks favorable prices and commission rates that
are reasonable in relation to the benefits received. For the fiscal years ended
December 31, 1996, 1995 and 1994, the Fund paid brokerage commissions of
$138,164, $120,864 and $143,740, respectively.
Generally, the Fund attempts to deal directly with the dealers who make
a market in the securities involved unless better prices and execution are
available elsewhere. Such dealers usually act as principals for their own
account. On occasion, portfolio securities for the Fund may be purchased
directly from the issuer.
The Adviser is specifically authorized to select brokers who also
provide brokerage and research services to the Fund and/or other accounts over
which the Adviser exercises investment discretion and to pay such brokers a
commission in excess of the commission another broker would charge if the
Adviser determines in good faith that the commission is reasonable in relation
to the value of the brokerage and research services provided. The
<PAGE>
determination may be viewed in terms of a particular transaction or the
Adviser's overall responsibilities with respect to the Fund and to accounts over
which it exercises investment discretion.
Research services include securities and economic analyses, reports on
issuers' financial conditions and future business prospects, newsletters and
opinions relating to interest trends, general advice on the relative merits of
possible investment securities for the Fund and statistical services and
information with respect to the availability of securities or purchasers or
sellers of securities. Although this information is useful to the Fund and the
Adviser, it is not possible to place a dollar value on it. Research services
furnished by brokers through whom the Fund effects securities transactions may
be used by the Adviser in servicing all of its accounts and not all such
services may be used by the Adviser in connection with the Fund.
The Fund has no obligation to deal with any broker or dealer in the
execution of securities transactions. Over-the-counter transactions will be
placed either directly with principal market makers or with broker-dealers.
Although the Fund does not anticipate any ongoing arrangements with other
brokerage firms, brokerage business may be transacted from time to time with
other firms. Neither the Distributor nor affiliates of the Fund, the Adviser or
the Distributor will receive reciprocal brokerage business as a result of the
brokerage business transacted by the Fund with other brokers.
CODE OF ETHICS. The Fund, the Adviser and the Underwriter have each adopted a
Code of Ethics under Rule 17j-1 of the Investment Company Act of 1940. The Code
significantly restricts the personal investing activities of all employees of
the Adviser and, as described below, imposes additional, more onerous,
restrictions on investment personnel of the Adviser. No employee may purchase or
sell any security which at the time is being purchased or sold (as the case may
be), or to the knowledge of the employee is being considered for purchase or
sale, by the Fund. Furthermore, the Code provides for trading "blackout periods"
which prohibit trading by investment personnel of the Adviser within periods of
trading by the Fund in the same (or equivalent) security.
PORTFOLIO TURNOVER
The Fund's portfolio turnover rate is calculated by dividing the lesser
of purchases or sales of portfolio securities for the fiscal year by the monthly
average of the value of the portfolio securities owned by the Fund during the
fiscal year. High portfolio turnover involves correspondingly greater brokerage
commissions and other transaction costs, which will be borne
<PAGE>
directly by the Fund. A 100% turnover rate would occur if all of the Fund's
portfolio securities were replaced once within a one year period.
Generally, the Fund intends to invest for long-term purposes. However,
the rate of portfolio turnover will depend upon market and other conditions, and
it will not be a limiting factor when the Adviser believes that portfolio
changes are appropriate. For the fiscal years ended December 31, 1996 and 1995,
the Fund's portfolio turnover rate was 50% and 70%, respectively.
CALCULATION OF SHARE PRICE
The share price (net asset value) of the shares of the Fund is
determined as of the close of the regular session of trading on the New York
Stock Exchange (currently 4:00 p.m., Eastern time), on each day the Fund is open
for business. The Fund is open for business on every day except Saturdays,
Sundays and the following holidays: New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.
The Fund may also be open for business on other days in which there is
sufficient trading in the Fund's portfolio securities that its net asset value
might be materially affected. For a description of the methods used to determine
the share price, see "Calculation of Share Price" in the Prospectus.
TAXES
The Prospectus describes generally the tax treatment of distributions
by the Fund. This section of the Statement of Additional Information includes
additional information concerning federal taxes.
The Fund has qualified and intends to qualify annually for the special
tax treatment afforded a "regulated investment company" under Subchapter M of
the Internal Revenue Code so that it does not pay federal taxes on income and
capital gains distributed to shareholders. To so qualify the Fund must, among
other things, (1) derive at least 90% of its gross income in each taxable year
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stock, securities or foreign currency, or
certain other income (including but not limited to gains from options, futures
and forward contracts) derived with respect to its business of investing in
stock, securities or currencies; (2) derive less than 30% of its gross income in
each taxable year from the sale or other disposition of the following assets
held for less than three months: (a) stock or securities, (b) options, futures
or forward contracts not directly related to its principal business of investing
in stock or securities; and (3) diversify its holdings so that at the end of
each quarter of its taxable year the following two conditions are met: (a) at
least 50% of the
<PAGE>
value of the Fund's total assets is represented by cash, U.S. Government
securities, securities of other regulated investment companies and other
securities (for this purpose such other securities will qualify only if the
Fund's investment is limited in respect to any issuer to an amount not greater
than 5% of the Fund's assets and 10% of the outstanding voting securities of
such issuer) and (b) not more than 25% of the value of the Fund's assets is
invested in securities of any one issuer (other than U.S. Government securities
or securities of other regulated investment companies).
The Fund's net realized capital gains from securities transactions will
be distributed only after reducing such gains by the amount of any available
capital loss carryforwards. Capital losses may be carried forward to offset any
capital gains for eight years, after which any undeducted capital loss remaining
is lost as a deduction.
A federal excise tax at the rate of 4% will be imposed on the excess,
if any, of the Fund's "required distribution" over actual distributions in any
calendar year. Generally the "required distribution" is 98% of the Fund's
ordinary income for the calendar year plus 98% of its net capital gains
recognized during the one year period ending on October 31 of the calendar year
plus undistributed amounts from prior years. The Fund intends to make
distributions sufficient to avoid imposition of the excise tax.
The Fund is required to withhold and remit to the U.S. Treasury a
portion (31%) of dividend income on any account unless the shareholder provides
a taxpayer identification number and certifies that such number is correct and
that the shareholder is not subject to backup withholding.
REDEMPTION IN KIND
Under unusual circumstances, when the Board of Trustees deems it in the
best interests of the Fund's shareholders, the Fund may make payment for shares
repurchased or redeemed in whole or in part in securities of the Fund taken at
current value. If any such redemption in kind is to be made, the Fund intends to
make an election pursuant to Rule 18f-1 under the Investment Company Act of
1940. This election will require the Fund to redeem shares solely in cash up to
the lesser of $250,000 or 1% of the net asset value of the Fund during any 90
day period for any one shareholder. Should payment be made in securities, the
redeeming shareholder will generally incur brokerage costs in converting such
securities to cash. Portfolio securities which are issued in an in-kind
redemption will be readily marketable.
<PAGE>
HISTORICAL PERFORMANCE INFORMATION
From time to time, the Fund may advertise average annual total return.
Average annual total return quotations will be computed by finding the average
annual compounded rates of return over 1, 5 and 10 year periods that would
equate the initial amount invested to the ending redeemable value, according to
the following formula:
P (1 + T)n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5 and 10 year periods
at the end of the 1, 5 or 10 year periods (or fractional
portion thereof)
The calculation of average annual total return assumes the reinvestment of all
dividends and distributions and will include performance of the Partnership
prior to July 20, 1993. It should be noted that: (1) the quoted performance data
includes performance for periods before the Fund's registration statement became
effective; (2) the Fund was not registered under the Investment Company Act of
1940 (the "1940 Act") during such periods and therefore was not subject to
certain investment restrictions imposed by the 1940 Act; and (3) if the Fund had
been registered under the 1940 Act during such periods, performance may have
been adversely affected. The average annual total returns of the Fund for the
periods ended December 31, 1996 are as follows:
1 Year 18.3%
5 Years 13.8%
10 Years 12.2%
The Fund may also advertise total return (a "nonstandardized
quotation") which is calculated differently from average annual total return. A
nonstandardized quotation of total return may be a cumulative return which
measures the percentage change in the value of an account between the beginning
and end of a period, assuming no activity in the account other than reinvestment
of dividends and capital gains distributions. The Fund may also show, for
comparative purposes and as information to Fund shareholders who previously were
partners in the Partnership, the return data for the Partnership, and may
combine such data for the year of combination. If so, such depiction will be
clearly noted in text accompanying such depiction. The Fund's total returns as
calculated in this manner for each of the past ten fiscal years are as follows:
<PAGE>
Year Ended
December 31, 1987 -0.6%
December 31, 1988 23.1%
December 31, 1989 8.3%
December 31, 1990 -5.3%
December 31, 1991 32.0%
December 31, 1992 22.7%
December 31, 1993 20.5%
December 31, 1994 -6.8%
December 31, 1995 16.9%
December 31, 1996 18.3%
A nonstandardized quotation may also indicate average annual compounded rates of
return over periods other than those specified for average annual total return.
For example, the Fund's average annual compounded rate of return for the three
years ended December 31, 1996 was 8.8%. A nonstandardized quotation of total
return will always be accompanied by the Fund's average annual total return as
described above.
The performance quotations described above are based on historical
earnings and are not intended to indicate future performance.
To help investors better evaluate how an investment in the Fund might
satisfy their investment objective, advertisements regarding the Fund may
discuss various measures of Fund performance, including current performance
ratings and/or rankings appearing in financial magazines, newspapers and
publications which track mutual fund performance. Advertisements may also
compare performance (using the calculation methods set forth in the Prospectus)
to performance as reported by other investments, indices and averages. When
advertising current ratings or rankings, the Fund may use the following
publications or indices to discuss or compare Fund performance:
Lipper Mutual Fund Performance Analysis measures total return and
average current yield for the mutual fund industry and ranks individual mutual
fund performance over specified time periods assuming reinvestment of all
distributions, exclusive of sales loads. The Fund may provide comparative
performance information appearing in the Small Company Growth Funds category. In
addition, the Fund may use comparative performance information of relevant
indices, including the S&P 500 Index, the Dow Jones Industrial Average, the
Russell 2000 Index, the NASDAQ Composite Index and the Value Line Composite
Index. The S&P 500 Index is an unmanaged index of 500 stocks, the purpose of
which is to portray the pattern of common stock price movement. The Dow Jones
Industrial Average is a measurement of general market price movement for 30
widely held stocks listed on the New York Stock Exchange. The Russell 2000
Index, representing approximately 11% of the U.S. equity market, is an unmanaged
index comprised of the
<PAGE>
2,000 smallest U.S. domiciled publicly-traded common stocks in the Russell 3000
Index (an unmanaged index of the 3,000 largest U.S. domiciled publicly-traded
common stocks by market capitalization representing approximately 98% of the
U.S. publicly-traded equity market). The NASDAQ Composite Index is an unmanaged
index which averages the trading prices of more than 3,000 domestic
over-the-counter companies. The Value Line Composite Index is an unmanaged index
comprised of approximately 1,700 stocks, the purpose of which is to portray the
pattern of common stock price movement.
In assessing such comparisons of performance an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to the Fund's portfolio, that the averages are
generally unmanaged and that the items included in the calculations of such
averages may not be identical to the formula used by the Fund to calculate its
performance. In addition, there can be no assurance that the Fund will continue
this performance as compared to such other averages.
PRINCIPAL SECURITY HOLDERS
As of April 4, 1997, Comerica Bank, as trustee for the benefit of the
Plante & Moran Tax Saving Plan, P.O. Box 75000, Detroit, Michigan 48275, owned
of record 9.96% of the outstanding shares of the Fund.
As of April 4, 1997, the Trustees and officers of the Fund as a group
owned of record or beneficially 4.02% of the outstanding shares of the Fund.
CUSTODIAN
The Fifth Third Bank, 38 Fountain Square Plaza, Cincinnati, Ohio, has
been retained to act as Custodian for the Fund's investments. The Fifth Third
Bank acts as the Fund's depository, safekeeps its portfolio securities, collects
all income and other payments with respect thereto, disburses funds as
instructed and maintains records in connection with its duties.
AUDITORS
The firm of Deloitte & Touche LLP has been selected as independent
auditors for the Fund for the fiscal year ending December 31, 1997. Deloitte &
Touche LLP, 1700 Courthouse Plaza Northeast, Dayton, Ohio, performs an annual
audit of the Fund's financial statements and advises the Fund as to certain
accounting matters.
<PAGE>
COUNTRYWIDE FUND SERVICES, INC.
The Fund's transfer agent, Countrywide Fund Services, Inc.
("Countrywide"), 312 Walnut Street, Cincinnati, Ohio, maintains the records of
each shareholder's account, processes purchases and redemptions of the Fund's
shares and acts as dividend and distribution disbursing agent. Countrywide also
provides administrative services to the Fund, calculates daily net asset value
per share and maintains such books and records as are necessary to enable
Countrywide to perform its duties. For the performance of these services, the
Fund pays Countrywide a fee at the annual rate of .22% of the average value of
its daily net assets up to $25,000,000, .2% of such assets from $25,000,000 to
$100,000,000 and .15% of such assets in excess of $100,000,000; provided,
however, that the minimum fee is $6,000 per month. In addition, the Fund pays
out-of-pocket expenses, including but not limited to, postage, stationery,
checks, drafts, forms, reports, record storage, communication lines and the
costs of external pricing services. For the fiscal years ended December 31,
1996, 1995 and 1994, the Fund paid Countrywide compensation of $111,853,
$112,416 and $79,212, respectively.
Countrywide is a wholly-owned subsidiary of Countrywide Financial
Services, Inc., which in turn is a wholly-owned subsidiary of Countrywide Credit
Industries, Inc., a New York Stock Exchange listed company principally engaged
in the business of residential mortgage lending.
ANNUAL REPORT
The Fund's financial statements as of December 31, 1996 appear in the
Fund's annual report which is attached to this Statement of Additional
Information.
<PAGE>
[frontcover]
SCHWARTZ
VALUE FUND
a series of
SCHWARTZ
INVESTMENT TRUST
ANNUAL REPORT
for the year ended
DECEMBER 31, 1996
<PAGE>
schwz-house
[LOGO]
Shareholder Accounts Corporate Offices
c/o MGF Service Corp. 3707 W. Maple Road
P.O.Box 5354 Bloomfield Hills, MI 48301
Cincinnati, OH 45201-5354 (810) 644-8500
1-800-543-0407 Fax (810) 644-4250
Schwartz Value Fund
Dear Fellow Shareowner:
As value investors, our focus is on identifying opportunities wherein we can
purchase pieces of individual companies in the marketplace for substantively
less than their intrinsic value. While this is a satisfying intellectual
exercise, our primary motivation is that it's a low risk way to successfully
invest your money. This contrarian style requires fortitude, but almost always
pays off with favorable investment results over time. One of the challenges
confronting true value investors is purchasing shares of companies when the
specific event that will cause that underlying value to be realized is not
readily apparent. That is where faith in our analysis, and patience become
essential. The process of value revelation continues at its own pace with
individual companies, but at any given time the operation of that process may
become apparent for individual names in the Schwartz Value Fund portfolio.
The most dramatic method whereby value is realized is in a corporate takeover
or buy-out. One of our portfolio holdings, DETROIT & CANADA TUNNEL CORPORATION
(DTUN-$54), is a good example. Two years ago we bought the stock at an average
price of $25 per share because we thought it represented a deep discount to
intrinsic value. Today, with no changes in the underlying business, the
Company is being acquired at $54 per share by a New York based investment
group. The Company has operated quietly for years, collecting tolls and
producing cash at a very healthy rate. The shares languished in the
over-the-counter market, with a small float. Among investors, no one cared
(which further quickened our pulse). An inactively traded stock, such as this
one, can represent an extraordinary bargain for a patient, value-oriented
investor like SVF. For years Warren Buffett has talked about investing in
companies with "tollbridge type franchises" or unregulated monopolies. This
Company comes as close to that description as you're ever going to find.
Because we purchased it at a reasonable price, something good was bound to
happen, even though we didn't know when.
No question, buy-outs, when they occur, are the most fun because they offer
instant gratification. But there are other less dramatic methods whereby
hidden value can surface. Management merely refocusing on core competency can
result in a more profitable company, and thereby attract investor attention.
Much has been made in recent years of many large companies reorganizing and
downsizing their operations in order to maximize shareholder value. Though
less well publicized, that's been going on in many smaller companies as well.
Selling losing divisions, closing inefficient plants, or owners simply
redirecting management's attention, can be a catalyst for the realization of
underlying value. Will these moves reveal the underlying value in every
instance? Certainly not. Will they prove successful often enough to justify
the efforts of finding them and accumulating the shares? Yes. One of the
beauties of the process is that it continues during both bull and bear
markets. So while buy-outs will always be the most dramatic manner in which
share prices move up to approximate intrinsic value, it is not the only road
to success. Value continues to compound in several of our portfolio holdings,
even though the share price moves in some cases, have been less than robust.
A few examples follow:
THOMAS NELSON, INC. (TNM-$14), a leading publisher and distributor of Bibles
and Christian books, recently disposed of its Word music division. Management
concluded, rightly in our estimation, that they had no special advantage in
addressing this segment of the overall music market. This divestiture will
allow the Company to devote greater resources to its successful publishing
division, which we believe has a very bright future.
<PAGE>
UNR INDUSTRIES, INC. (UNRI-$7) is a stock that SVF has owned for more than
four years. The Company has gone through a significant restructuring by
divesting six operating divisions, leaving only the Rohn Tower division, a
maker of telecommunication towers for cellular and personal communication
systems. Divestitures enabled the Company to make large special cash dividend
payments to shareholders, so our original purchase price of $10 per share has
been adjusted downward to less than $5. The stock is currently selling for
twelve times earnings with an expected growth rate of 20% annually for the
next several years.
Another long-time holding has been TRIMAS CORPORATION (TMS-$23), an Ann Arbor
based manufacturer of proprietary specialty fasteners, trailer hitches and
closure devices. The stock traded as high as $29 per share four years ago when
the earnings were half the current level. Excess cash flow has been used to
pay down debt and make selective acquisitions augmenting an internal earnings
growth rate of 12-15%. With $500 million in sales, the Company is not well
known outside the Midwest, but growing institutional investor awareness should
add to the price-earnings ratio in the future.
STANHOME INC. (STH-$26) is a conglomerate currently in the process of
divesting non-core operations and concentrating on its basic business which is
Enesco Giftware Group, the distributor of Precious Moments and other
collectibles. The intrinsic value of this Company, which could be twice the
current market price, has been masked by the poorly performing divisions. The
underlying business, which has been growing at a 10% rate for the last six
years, has consistently produced over a 20% annual return on equity. When
investors realize how profitable this Company will be after the streamlining
is completed, the share price could rise substantially.
Smaller stocks, the type in which SVF typically invests, have underperformed
stocks of larger companies since late 1993. This is obvious from comparing the
performance of the Russell 2000 Index with the S&P 500. In 1996 this
bifurcated market really became apparent. In fact, in the six month period
from June 1 to December 1, the Dow rose almost 17% while the Russell 2000
actually declined 2%. This 19% spread was the widest six month divergence
between these two indices since the Russell 2000 was started in 1978. So far
in 1997 more of the same, with the Dow up 5.7% in January while the Russell
2000 gained 1.9%. But we look for the pendulum to start swinging back the
other way. Even though the money flowing into large capitalization mutual
funds remains robust, there are some signs that it's slowing. Over time, the
valuation disparity will dictate that large company shares receive less
attention and long neglected smaller cap value stocks will gain adherents. In
the meantime, I feel very confident that the downside risk in our stocks will
remain far less than that of the S&P 500 or the Dow.
Thanks for investing in the Schwartz Value Fund. Obviously, you have many
choices once you decide to invest in a mutual fund. I think you've made a wise
choice, to put a portion of your assets in this vehicle. In the period ahead
that choice may prove especially wise.
Sincerely,
SCHWARTZ VALUE FUND
George P. Schwartz, CFA
President
February 10, 1997
<PAGE>
<TABLE>
<CAPTION>
Annual Total Rates of Return
1984 1985 1986 1987 1988 1989 1990 1991
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SCHWARTZ
VALUE FUND((A)) 11.1% 21.7% 16.4% -0.6% 23.1% 8.3% -5.3% 32.0%
RUSSELL 2000
INDEX -7.3% 31.1% 5.7% -8.8% 24.9% 16.2% -19.5% 46.0%
NASDAQ COMPOSITE( (B)) -11.2% 31.4% 7.4% -5.3% 15.4% 19.3% -17.8% 56.8%
VALUE LINE COMPOSITE((B)) -8.4% 20.7% 5.0% -10.6% 15.4% 11.2% -24.3% 27.2%
STANDARD & POORS 500 6.1% 31.6% 18.7% 5.3% 16.8% 31.6% -3.2% 30.4%
CONSUMER
PRICE INDEX 4.3% 3.5% 1.1% 4.4% 4.4% 4.6% 6.1% 3.1%
</TABLE>
<TABLE>
<CAPTION>
Compound Annual
Rates of Return
---------------------------
1992 1993 1994 1995 1996 5 Year 10 Year 13 Year
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SCHWARTZ
VALUE FUND((A)) 22.7% 20.5% -6.8% 16.9% 18.3% 13.8% 12.2% 13.1%
RUSSELL 2000
INDEX 18.4% 18.9% -3.2% 26.2% 14.8% 14.6% 11.9% 11.1%
NASDAQ COMPOSITE((B)) 15.5% 14.7% -3.2% 39.9% 22.7% 17.1% 14.0% 12.5%
VALUE LINE COMPOSITE((B)) 7.0% 10.7% -6.0% 19.3% 13.4% 8.5% 5.2% 5.2%
STANDARD & POORS 500 7.6% 10.1% 1.3% 37.5% 22.9% 15.2% 15.3% 15.9%
CONSUMER
PRICE INDEX 2.9% 2.7% 2.7% 2.6% 3.3% 2.8% 3.7% 3.5%
<FN>
- ----------------
((A)) Schwartz Value Fund's performance combines the performance of the Fund,
since its commencement of operations as a registered investment company
on July 20, 1993, and the performance of RCM Partners Limited
Partnership for periods prior thereto.
((B) )Excludes dividends.
</FN>
</TABLE>
SCHWARTZ VALUE FUND
Ten Largest Equity Holdings
December 31, 1996
<TABLE>
<CAPTION>
Market
Shares Company Value
- -------- -------------------------------------------- ----------
<S> <C> <C>
165,000 Ottawa Financial Corporation $2,774,063
235,000 K-Swiss Inc. -- Class A $2,320,625
85,000 Leucadia National Corporation $2,273,750
70,000 UST Inc. $2,266,250
200,000 Unico American Corporation $2,175,000
170,000 Griffon Corporation $2,082,500
60,000 American List Corporation $1,822,500
120,000 Data Research Associates, Inc. $1,800,000
100,000 Core Industries Inc. $1,650,000
115,000 Dravo Corporation $1,624,375
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHWARTZ VALUE FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1996
Market
Shares COMMON STOCK -- 94.6% Value
- -------- ----------------------------------------------------- -----------
<S> <C> <C>
APPAREL & TEXTILES -- 6.6%
235,000 K-Swiss Inc. -- Class A 2,320,625
19,300 Nautica Enterprises, Inc.* 487,325
20,000 Reebok International Ltd. 840,000
-----------
3,647,950
-----------
BUILDING MATERIALS AND CONSTRUCTION -- 4.4%
20,000 ABT Building Products Corporation* 500,000
30,000 Gardner Denver Machinery Inc.* 1,027,500
24,000 Industrial Acoustics Company, Inc. 210,000
51,000 MLX Corp.* 675,750
-----------
2,413,250
-----------
CONSUMER PRODUCTS -- DURABLES -- 5.9%
40,000 Craftmade International, Inc. 245,000
170,000 Griffon Corporation* 2,082,500
70,000 HMI Industries Inc. 367,500
30,000 Sturm, Ruger & Company, Inc. 581,250
-----------
3,276,250
-----------
CONSUMER PRODUCTS -- NONDURABLES -- 7.7%
40,000 Helen of Troy Limited* 880,000
700,000 Pentech International, Inc.* 831,250
15,000 Stanhome, Inc. 397,500
20,000 Standex International Corporation 617,500
11,950 Velcro Industries N.V. 746,875
9,200 Weyco Group, Inc. 370,300
30,000 Windmere-Durable Holdings, Inc. 386,250
-----------
4,229,675
-----------
ENERGY & MINING -- 5.5%
15,000 Dawson Geophysical Company* 168,750
115,000 Dravo Corporation* 1,624,375
70,000 Forest Oil Corporation* 1,233,750
-----------
3,026,875
-----------
<PAGE>
FINANCE -- BANKING & THRIFTS -- 16.5%
7,500 Calumet Bancorp, Inc.* 249,375
40,000 Coastal Bancorp, Inc. 915,000
40,000 The Commerce Group, Inc. 1,010,000
23,400 First of Michigan Capital Corporation* 187,200
14,500 FirstFed Bancshares, Inc. 250,125
15,000 GreenPoint Financial Corp.* 708,750
85,000 Leucadia National Corporation 2,273,750
15,000 MSB Bancorp, Inc. 294,375
165,000 Ottawa Financial Corporation 2,774,063
8,100 Peoples Bancorp 157,950
16,200 TF Financial Corporation 263,250
-----------
9,083,838
-----------
FINANCE -- INSURANCE -- 5.5%
26,000 MMI Companies, Inc. 838,500
200,000 Unico American Corporation 2,175,000
-----------
3,013,500
-----------
FOOD & TOBACCO -- 4.1%
70,000 UST Inc. 2,266,250
-----------
HEALTHCARE -- 0.8%
15,000 Health Care & Retirement Corporation* 429,375
-----------
INDUSTRIAL PRODUCTS & SERVICES -- 12.1%
100,000 Core Industries Inc. 1,650,000
22,155 Detroit & Canada Tunnel Corporation 1,102,211
24,835 Greif Brothers Corporation -- Class A 701,589
30,000 Maritrans Inc. 183,750
35,800 The Morgan Group, Inc. -- Class A 268,500
10,055 M.H. Rhodes, Inc.* 37,706
64,600 TriMas Corporation 1,542,325
200,000 UNR Industries, Inc. 1,200,000
-----------
6,686,081
-----------
<PAGE>
PRINTING & PUBLISHING -- 5.9%
60,000 American List Corporation 1,822,500
465 The Detroit Legal News Company 44,640
66,000 Thomas Nelson, Inc. 981,750
9,800 Value Line, Inc. 433,650
-----------
3,282,540
-----------
REAL ESTATE -- 4.5%
16,499 I. Gordon Corporation* 140,242
15 LaFourche Realty Company, Inc. 62,250
40,000 Malan Realty Investors, Inc. 650,000
30,000 North American Mortgage Company 592,500
40,000 Schuler Homes, Inc.* 250,000
35,000 Trizec Hahn Corporation 770,000
-----------
2,464,992
-----------
RETAIL -- 2.2%
30,000 The Dress Barn, Inc.* 450,000
100,000 Ellett Brothers, Inc. 500,000
76,500 Evans, Inc.* 124,312
20,000 The Good Guys, Inc.* 130,000
-----------
1,204,312
-----------
TECHNOLOGY & ELECTRONICS -- 10.0%
33,500 Astrosystems, Inc.* 159,125
120,000 Data Research Associates, Inc. 1,800,000
53,200 Metatec Corporation* 359,100
120,000 Nematron Corporation* 615,000
50,000 Rainbow Technologies, Inc.* 931,250
30,000 SPSS Inc.* 836,250
60,000 Universal Electronics Inc.* 330,000
28,500 X-Rite, Incorporated 470,250
-----------
5,500,975
-----------
MISCELLANEOUS -- 0.1%
12,500 Bull & Bear Group, Inc. -- Class A* 37,500
-----------
CLOSED-END FUNDS -- 2.8%
90,000 Royce Micro-Cap Trust, Inc. 742,500
60,000 Scudder New Europe Fund, Inc. 832,500
-----------
1,575,000
-----------
TOTAL COMMON STOCK (COST $43,060,770) 52,138,363
-----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Shares/ Market
Par Value Value
- ----------- ---------------------------------------------------- ------------
<S> <C> <C>
PREFERRED STOCK -- 0.3% (COST $132,739)
Telos Corporation, 12% Cumulative Exchangable
35,000 Preferred $ 135,625
-----------
U.S. GOVERNMENT & AGENCY BONDS -- 5.4%
$1,000,000 U.S. Treasury Notes, 4.75%, 02/15/97 998,438
$1,000,000 Federal Farm Credit Bank , 5.60%, 06/03/97 1,000,585
$1,000,000 U.S. Treasury Notes, 6.00%, 11/30/97 1,000,313
-----------
TOTAL U.S. GOVERNMENT & AGENCY BONDS
(COST $2,993,594) 2,999,336
-----------
REPURCHASE AGREEMENTS((1)) -- 1.6% (COST $858,000)
$858,000 Fifth Third Bank, 5.00%, dated 12/31/96, due
01/02/97, repurchase proceeds $858,238 858,000
-----------
TOTAL INVESTMENTS -- 101.9% (COST $47,045,103) 56,131,324
OTHER LIABILITIES IN EXCESS OF OTHER
ASSETS -- (1.9)% (1,026,196)
-----------
NET ASSETS -- 100% $55,105,128
===========
<FN>
* Non-income producing securities.
((1)) Repurchase agreements are fully collateralized by U.S. Government
obligations.
See notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SCHWARTZ VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<S> <C>
ASSETS
Investments, at market value (cost of $47,045,103)
(Note 1) .......................................... $56,131,324
Cash ................................................ 3,930
Dividends and interest receivable ................... 104,824
Receivable for capital shares sold .................. 15,503
Other assets ........................................ 8,320
-----------
TOTAL ASSETS .................................... 56,263,901
-----------
LIABILITIES
Payable for capital shares redeemed ................. 12,250
Payable for securities purchased .................... 504,301
Accrued investment advisory fees (Note 2) ........... 206,611
Distributions payable to shareholders ............... 398,631
Other accrued expenses and liabilities .............. 36,980
-----------
TOTAL LIABILITIES ............................... 1,158,773
-----------
NET ASSETS .......................................... $55,105,128
===========
NET ASSETS CONSIST OF:
Paid in capital ..................................... $45,969,861
Undistributed net realized gains on investments ..... 49,046
Net unrealized appreciation on investments .......... 9,086,221
-----------
NET ASSETS .......................................... $55,105,128
===========
Shares of beneficial interest outstanding (unlimited
number of shares
authorized, no par value) ......................... 2,601,054
===========
Net asset value, redemption price, and offering price
per share ......................................... $ 21.19
===========
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
SCHWARTZ VALUE FUND
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
<S> <C>
INVESTMENT INCOME
Interest .......................................... $ 258,998
Dividends ......................................... 749,730
----------
TOTAL INVESTMENT INCOME ......................... 1,008,728
----------
EXPENSES
Investment advisory fees (Note 2) ................. 801,444
Administration, accounting, and transfer agent fees
and expenses (Note 2) ........................... 111,853
Legal and audit fees .............................. 40,646
Trustees' fees and expenses ....................... 49,431
Insurance expense ................................. 18,175
Custodian fees .................................... 12,188
Reports to shareholders ........................... 10,698
Registration fees ................................. 5,330
Other expenses .................................... 3,991
----------
TOTAL EXPENSES .................................. 1,053,756
----------
NET INVESTMENT LOSS ................................. (45,028)
----------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains on investments ................. 5,144,508
Net change in unrealized appreciation on
investments ..................................... 3,932,331
----------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS .... 9,076,839
----------
NET CHANGE IN NET ASSETS FROM OPERATIONS ............ $9,031,811
==========
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
SCHWARTZ VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended December 31, 1996 and 1995
1996 1995
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net investment loss ............................... $ (45,028) $ (94,454)
Net realized gains on investments ................. 5,144,508 3,912,706
Net change in unrealized appreciation on
investments ......................................... 3,932,331 3,856,574
------------ -----------
Net increase in net assets from operations .......... 9,031,811 7,674,826
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS
From net realized gains on investments ............ (4,922,816) (3,830,754)
------------ -----------
Net decrease in net assets from distributions to
shareholders ........................................ (4,922,816) (3,830,754)
------------ -----------
FROM FUND SHARE TRANSACTIONS((A))
Proceeds from shares sold ......................... 5,572,508 5,819,563
Reinvestment of distributions ..................... 4,524,185 3,580,547
Payments for shares redeemed ...................... (12,237,448) (5,203,945)
------------ -----------
Net increase (decrease) in net assets from Fund
share transactions ............................... (2,140,755) 4,196,165
------------ -----------
TOTAL INCREASE IN NET ASSETS ........................ 1,968,240 8,040,237
NET ASSETS
Beginning of year ................................. 53,136,888 45,096,651
------------ -----------
End of year ....................................... $ 55,105,128 $53,136,888
============ ===========
((A)) SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ................................... 264,865 291,957
Shares issued in reinvestment of
distributions to shareholders ............. 213,506 182,123
Shares redeemed ............................... (580,219) (260,324)
------------ -----------
Net increase (decrease) in shares
outstanding ................................. (101,848) 213,756
Shares outstanding, beginning of year ......... 2,702,902 2,489,146
------------ -----------
Shares outstanding, end of year ............... 2,601,054 2,702,902
============ ===========
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
SCHWARTZ VALUE FUND
FINANCIAL HIGHLIGHTS
Per Share Data for a Share Outstanding
Throughout Each Period
July 20,
Year Ended 1993 ((A))
------------------------------ To
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1996 1995 1994 1993
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Net asset value at beginning of period .............. $ 19.66 $ 18.12 $ 20.97 $ 19.71
-------- -------- -------- --------
Income from investment operations:
Net investment loss ............................... (0.02) (0.03) (0.05) (0.06)
Net realized and unrealized gains (losses) on
investments ..................................... 3.61 3.09 (1.37) 1.95
-------- -------- -------- --------
Total from investment operations .................... 3.59 3.06 (1.42) 1.89
-------- -------- -------- --------
Less dividends and distributions:
From net realized capital gains on investments .... (2.06) (1.52) (1.36) (0.63)
In excess of net realized gains on investments .... -- -- (0.07) --
-------- -------- -------- --------
Total dividends and distributions ................... (2.06) (1.52) (1.43) (0.63)
-------- -------- -------- --------
Net asset value at end of period .................... $ 21.19 $ 19.66 $ 18.12 $ 20.97
======== ======== ======== ========
Total return ........................................ 18.3 % 16.9 % (6.8)% 9.6 % ((B))
Ratio of expenses to average net assets ............. 1.97 % 2.00 % 2.01 % 2.13 % ((C))
Ratio of net investment loss to average net assets .. (0.08)% (0.18)% (0.36)% (0.63)% ((C))
Portfolio turnover rate ............................. 50 % 70 % 78 % 65 % ((C))
Average commission rate ............................. $0.0454 -- -- --
Net assets at end of period (in 000's) .............. $55,105 $53,137 $45,097 $40,704
<FN>
- ----------------
((A)) Commencement of operations.
((B)) Not annualized.
((C)) Annualized.
See notes to financial statements.
</FN>
</TABLE>
<PAGE>
SCHWARTZ VALUE FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
1. Significant Accounting Policies
Schwartz Value Fund (the "Fund") is a series of Schwartz Investment Trust, a
diversified open-end management investment company established as an Ohio
Business Trust under a Declaration of Trust dated August 31, 1992. The Fund is
registered under the Investment Company Act of 1940 and commenced operations
on July 20, 1993. The Fund determines and makes available for publication the
net asset value of its shares on a daily basis.
The investment objective of the Fund is to seek long-term capital appreciation
through investment in basic value common stocks. This investment in common
stocks, by definition, entails the risk of loss of capital to shareholders.
See the Prospectus for more detailed information regarding the investment
objectives of the Fund.
The following is a summary of significant accounting policies followed by the
Fund.
(a) Valuation of investments -- Securities which are traded on stock
exchanges or are quoted by NASDAQ are valued at the last reported sale
price as of the close of business on the day of valuation, or, if not
traded on a particular day, at the average of the highest current
independent bid and lowest current independent offer; securities traded
in the over-the-counter market, not quoted by NASDAQ, are valued at the
average of the highest current independent bid and lowest current
independent offer as of the close of trading on the day of valuation,
and; securities (and other assets) for which market quotations are not
readily available are valued at their fair market value as determined in
good faith pursuant to procedures established by the Board of Trustees.
Short-term securities are valued at amortized cost, which approximates
market value.
(b) Income taxes -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all taxable income
to the shareholders. Therefore, no provision for income taxes is
necessary.
The Fund files a tax return annually using tax accounting methods
required under provisions of the Code which may differ from generally
accepted accounting principles ("GAAP"), the basis on which these
financial statements are prepared. The differences arise primarily from
the deferral of certain losses under Federal income tax regulations.
Accordingly, the amount of net investment income or loss and net
realized capital gain or loss reported in the financial statements may
differ from that reported in the Fund's tax return and, consequently,
the character of distributions to shareholders reported in the financial
highlights may differ from that reported to shareholders for Federal
income tax purposes.
(c) Security transactions and investment income -- Security transactions
are accounted for on the trade date. Dividend income is recorded on the
ex-dividend date. Interest income is recognized on the accrual basis.
Realized gains and losses on security transactions are determined on the
identified cost basis.
<PAGE>
(d) Dividends and distributions -- Dividends from net investment income
and net capital gains are declared and paid annually in December.
Dividends and distributions to shareholders are recorded on the
ex-dividend date.
(e) Estimates -- The preparation of financial statements in conformity
with GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. Investment Advisory Agreement and Transactions with Related Parties
The President of the Fund is also the President and Chief Investment Officer of
Schwartz Investment Counsel, Inc. (the "Adviser"). The Chairman of the Board of
the Fund is also the President and CEO of Gregory J. Schwartz & Co., Inc. (the
"Distributor"). Certain other trustees and officers of the Fund are officers of
the Adviser or of MGF Service Corp. ("MGF"), the administrative, accounting and
transfer agent for the Fund.
Pursuant to an Investment Advisory Agreement between the Fund and the Adviser,
the Adviser is responsible for the management of the Fund and provides
investment advice along with the necessary personnel, facilities, equipment,
and certain other services necessary to the operations of the Fund. For such
services, the Fund pays the Adviser a quarterly fee equal to the annual rate
of 1.5% of the average daily net assets up to $75 million; 1.25% of such
assets from $75 million to $100 million; and 1% of such assets in excess of
$100 million.
The Distributor is the exclusive agent for the distribution of the Fund and
receives fees from the Adviser, not the Fund or its shareholders.
Pursuant to an Administration, Accounting and Transfer Agency Agreement
between the Fund and MGF, MGF supplies regulatory and compliance services,
calculates the daily net asset value per share, maintains the financial books
and records of the Fund, maintains the records of each shareholder's account,
and processes purchases and redemptions of the Fund's shares. For the
performance of these services, the Fund pays MGF a fee, payable monthly, at an
annual rate of .22% of average daily net assets up to $25 million; .20% of
such assets from $25 million to $100 million; and .15% of such assets in
excess of $100 million.
3. Investment Transactions
Purchases and proceeds from sales and maturities of investments other than
short-term investments, for the year ended December 31, 1996, were $24,883,172
and $32,033,045, respectively. As of December 31, 1996, net unrealized
appreciation of securities was $9,073,360 for federal income tax purposes of
which $11,337,988 related to appreciated securities and $2,264,628 related to
depreciated securities. The aggregate cost of investments at December 31,
1996, for federal income tax purposes was $47,057,964.
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS AND TRUSTEES
SCHWARTZ VALUE FUND
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of Schwartz Value Fund ("Fund") as of
December 31, 1996, the related statement of operations for the year then
ended, the statements of changes in net assets and the financial highlights
for each of 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 securities
owned as of December 31, 1996, by correspondence with the Fund's 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 present
fairly, in all material respects, the financial position of Schwartz Value
Fund at December 31, 1996, the results of its operations, the changes in its
net assets, and the financial highlights for the respective stated periods, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Dayton, Ohio
JANUARY 17, 1997
<PAGE>
Schwartz Value Fund
INVESTMENT PHILOSOPHY
Schwartz Value Fund ("SVF") seeks superior, long-term performance
through value investing -- purchasing shares of strong, growing companies at
reasonable prices. Because small and medium size companies offer vast reward
opportunities, fundamental analysis is used to identify emerging companies
with outstanding business characteristics. Sometimes the best values are
issues not followed by Wall Street analysts.
Most value investors buy fair companies at an excellent price. SVF buys
excellent companies at a fair price. This is the essence of value investing.
SVF attempts to find companies with great business characteristics like an
unassailable franchise which by its nature, offers a margin of safety. A truly
fine business requires few assets to produce a consistently expanding stream
of income. SVF also purchases shares which are temporarily out-of-favor and
selling below intrinsic value.
A common thread in SVF investments is that the market price is below
what a corporate or entrepreneurial buyer might be willing to pay for the
entire business. The auction nature and the inefficiencies of the stock market
are such that SVF can often buy a minority interest in a fine company at a
small fraction of the price per share necessary to acquire the entire company.
<PAGE>
[backcov]
Schwartz Value Fund
a series of
Schwartz Investment Trust
3707 W. Maple Road
Bloomfield Hills, Michigan 48301
(810) 644-8500
Board of Trustees
Donald J. Dawson, Jr.
Fred A. Erb
John J. McHale
Sidney F. McKenna
George P. Schwartz, CFA
Gregory J. Schwartz
Officers
Gregory J. Schwartz, Chairman of the Board
George P. Schwartz, CFA, President
Richard L. Platte, Jr., CFA, Vice President/Secretary
Cynthia M. Dickinson, Treasurer
Robert G. Dorsey, CPA, Assistant Vice President
John F. Splain, Assistant Secretary
Mark J. Seger, CPA, Assistant Treasurer
Investment Adviser
SCHWARTZ INVESTMENT COUNSEL, INC.
3707 W. Maple Road
Bloomfield Hills, Michigan 48301
Distributor
GREGORY J. SCHWARTZ & CO., INC.
3707 W. Maple Road
Bloomfield Hills, Michigan 48301
Custodian
FIFTH THIRD BANK
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Administrator
MGF SERVICE CORP.
P.O. Box 5354
Cincinnati, Ohio 45201
Auditors
DELOITTE & TOUCHE LLP
1700 Courthouse Plaza Northeast
Dayton, Ohio 45402
Legal Counsel
SULLIVAN & WORCESTER 1025 Connecticut Avenue, N.W.
Suite 1000
Washington, D.C. 20036
Schwartz Value Fund is a 100% no load diversified investment company (a
mutual fund). The investment objective is long-term capital appreciation.
<PAGE>
SCHWARTZ INVESTMENT TRUST
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) (i) Financial Statements included in Part A:
Financial Highlights for the Years Ended December
31, 1996, 1995, 1994 and 1993
(ii) Financial Statements included in Part B:
Statement of Assets and Liabilities, December 31,
1996
Statement of Operations for the Year Ended
December 31, 1996
Statement of Changes in Net Assets for the Years
Ended December 31, 1996 and 1995
Schedule of Investments, December 31, 1996
Financial Highlights for the Years Ended December
31, 1996, 1995, 1994 and 1993
Notes to Financial Statements, December 31, 1996
Independent Auditors' Report
(b) Exhibits
(1) Agreement and Declaration of Trust*
(2) Bylaws*
(3) Inapplicable
(4) Inapplicable
(5) Advisory Agreement with Schwartz Investment
Counsel, Inc.*
(6) Underwriting Agreement with Gregory J.
Schwartz & Co., Inc.*
(7) Inapplicable
(8) Custody Agreement with The Fifth Third Bank*
(9) Administration, Accounting and Transfer
<PAGE>
Agency Agreement with Countrywide Fund
Services, Inc.
(10) Opinion and Consent of Counsel relating to
Issuance of Shares*
(11) Consent of Independent Public Accountants
(12) Inapplicable
(13) Agreement Relating to Initial Capital*
(14) Inapplicable
(15) Inapplicable
(16) Computation for Performance Quotations*
(17) Financial Data Schedule
(18) Inapplicable
- --------------------------------------
* Incorporated by reference to Registration Statement on
Form N-1A.
Item 25. Persons Controlled by or Under Common Control with
Registrant.
No person is directly or indirectly controlled by or under
common control with the Registrant.
Item 26. Number of Holders of Securities.
As of April 1, 1997, there were 383 holders of the shares of
beneficial interest of the Registrant.
Item 27. Indemnification
Article VI of the Registrant's Agreement and Declaration of
Trust provides for indemnification of officers and Trustees as
follows:
"Section 6.4 INDEMNIFICATION OF TRUSTEES, OFFICERS, ETC. The
Trust shall indemnify each of its Trustees and officers,
including persons who serve at the Trust's request as
directors, officers or trustees of another organization in
which the Trust has any interest as a shareholder, creditor or
otherwise (hereinafter referred to as a "Covered Person")
against all liabilities, including but not limited to amounts
<PAGE>
paid in satisfaction of judgments, in compromise or as fines
and penalties, and expenses, including reasonable accountants'
and counsel fees, incurred by any Covered Person in connection
with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which such Covered
Person may be or may have been involved as a party or
otherwise or with which such person may be or may have been
threatened, while in office or thereafter, by reason of being
or having been such a Trustee or officer, director or trustee,
and except that no Covered Person shall be indemnified against
any liability to the Trust or its Shareholders to which such
Covered Person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such Covered Person's
office.
Section 6.5 ADVANCES OF EXPENSES. The Trust shall advance
attorneys' fees or other expenses incurred by a Covered Person
in defending a proceeding to the full extent permitted by the
Securities Act of 1933, as amended, the 1940 Act, and Ohio
Revised Code Chapter 1707, as amended. In the event any of
these laws conflict with Ohio Revised Code Section 1701.13(E),
as amended, these laws, and not Ohio Revised Code Section
1701.13(E), shall govern.
Section 6.6 INDEMNIFICATION NOT EXCLUSIVE, ETC. The right of
indemnification provided by this Article VI shall not be
exclusive of or affect any other rights to which any such
Covered Person may be entitled. As used in this Article VI,
"Covered Person" shall include such person's heirs, executors
and administrators. Nothing contained in this article shall
affect any rights to indemnification to which personnel of the
Trust, other than Trustees and officers, and other persons may
be entitled by contract or otherwise under law, nor the power
of the Trust to purchase and maintain liability insurance on
behalf of any such person."
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to Trustees, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
<PAGE>
liabilities (other than the payment by the Registrant of
expenses incurred or paid by a Trustee, officer or controlling
person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such Trustee,
officer or controlling person in connection with the
securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
The Registrant maintains a standard mutual fund and investment
advisory professional and directors and officers liability
policy. The policy provides coverage to the Registrant, its
Trustees and officers, its Adviser and its Underwriter.
Coverage under the policy includes losses by reason of any
act, error, omission, misstatement, misleading statement,
neglect or breach of duty.
The Advisory Agreement with Schwartz Investment Counsel, Inc.
(the "Adviser") provides that the Adviser shall not be liable
for any action taken, omitted or suffered to be taken by it in
its reasonable judgment, in good faith and believed by it to
be authorized or within the discretion or rights or powers
conferred upon it by the Agreement, or in accordance with (or
in the absence of) specific directions or instructions from
Registrant, provided, however, that such acts or omissions
shall not have resulted from Adviser's willful misfeasance,
bad faith or gross negligence, a violation of the standard of
care established by and applicable to the Adviser in its
actions under the Agreement or breach of its duty or of its
obligations thereunder.
The Underwriting Agreement with Gregory J. Schwartz & Co.,
Inc. (the "Distributor") provides that the Distributor, its
directors, officers, employees, partners, shareholders and
control persons shall not be liable for any error of judgment
or mistake of law or for any loss suffered by Registrant in
connection with the matters to which the Agreement relates,
except a loss resulting from willful misfeasance, bad faith or
gross negligence on the part of any of such persons in the
performance of Distributor's duties or from the reckless
disregard by any of such persons of Distributor's obligations
and duties under the Agreement. Registrant will advance
attorneys' fees or other expenses incurred by any such person
in defending a proceeding, upon the undertaking by or on
behalf of
<PAGE>
such person to repay the advance if it is ultimately
determined that such person is not entitled to
indemnification.
Notwithstanding any provisions to the contrary in Registrant's
Agreement and Declaration of Trust, in Ohio law or in the
Advisory Agreement and the Underwriting Agreement, Registrant
will not indemnify its Trustees and officers, the Adviser or
the Distributor for any liability to the Registrant or its
shareholders to which such persons would otherwise be subject
unless (1) a final decision on the merits is made by a court
or other body before whom the proceeding was brought that the
person to be indemnified ("indemnitee") was not liable by
reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of duties ("disabling conduct") or (2) in
the absence of such a decision, a reasonable determination is
made, based upon a review of the facts, that the indemnitee
was not liable by reason of disabling conduct, by (a) the vote
of a majority of a quorum of Trustees who are neither
"interested persons" of Registrant as defined in the
Investment Company Act of 1940 nor parties to the proceeding
("disinterested, non-party Trustees"), or (b) an independent
legal counsel in a written opinion. Registrant may advance
attorneys' fees or other expenses incurred by the indemnitee
in defending a proceeding, upon the undertaking by or on
behalf of the indemnitee to repay the advance unless it is
ultimately determined that he is entitled to indemnification,
so long as one of the following conditions is met: (1) the
indemnitee shall provide a security for his undertaking, (2)
the Registrant shall be insured against losses arising by
reason of any lawful advances, or (3) a majority of a quorum
of the disinterested, non-party Trustees, or an independent
legal counsel in a written opinion, shall determine, based on
a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the
indemnitee ultimately will be found entitled to
indemnification.
Item 28. Business and Other Connections of the Investment
Adviser
(a) The Adviser was organized in 1980 and has assets
under management of approximately $200 million as of
December 31, 1996. The Adviser served as the
investment adviser to RCM Partners Limited
Partnership, the predecessor entity to the Fund.
(b) The directors and officers of the Adviser and any
<PAGE>
other business, profession, vocation or employment of
a substantial nature engaged in at any time during
the past two years:
(i) Gregory J. Schwartz -- President and Chief
Executive Officer of Gregory J. Schwartz &
Co., Inc. (an investment banking firm and the
Registrant's principal underwriter).
(ii) George P. Schwartz
(iii) Walter G. Schwartz
(iv) Richard L. Platte, Jr.
(v) Cynthia M. Dickinson
Item 29. Principal Underwriters
(a) Inapplicable
Position Position
with with
(b) Name Distributor Registrant
Gregory J. Schwartz President/ Chairman of
Director the Board
Judith M. Schwartz Director None
Stella Z. Pappas Vice President None
Joseph E. Schwartz Treasurer None
Walter G. Schwartz Director None
Gregory J. Schwartz, Jr. Director None
Edward A. Schwartz Secretary None
The address of all of the above-named persons is 3707 West Maple Road,
Bloomfield Hills, Michigan 48301.
(c) Inapplicable
Item 30. Location of Accounts and Records
Accounts, books and other documents required to be maintained
by Section 31(a) of the Investment Company Act of 1940 and the Rules promulgated
thereunder will be maintained by the Registrant at its offices located at 3707
West Maple Road, Bloomfield Hills, Michigan 48301 or at the offices of the
Registrant's transfer agent located at 312 Walnut Street, Cincinnati, Ohio
45202.
Item 31. Management Services Not Discussed in Parts A or B
Inapplicable
<PAGE>
Item 32. Undertakings
(a) Inapplicable
(b) Inapplicable
(c) The Registrant undertakes that, if so requested, it
will furnish each person to whom a prospectus is
delivered with a copy of Registrant's latest annual
report to shareholders without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed below on its behalf by the undersigned,
thereunto duly authorized, in the City of Bloomfield Hills and State of Michigan
on the 25th day of April, 1996.
SCHWARTZ INVESTMENT TRUST
By:/s/ George P. Schwartz
George P. Schwartz
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Gregory J. Schwartz
__________________________ Chairman of April 25, 1996
Gregory J. Schwartz the Board
and Trustee
/s/ George P. Schwartz
_________________________ President April 25, 1996
George P. Schwartz and Trustee
/s/ Cynthia M. Dickinson
_________________________ Treasurer April 25, 1996
Cynthia M. Dickinson
/s/ Donald J. Dawson, Jr.
________________________ Trustee April 25, 1996
Donald J. Dawson, Jr.
/s/ Fred A. Erb
_______________________ Trustee April 25, 1996
Fred A. Erb
/s/ Sidney F. McKenna
_______________________ Trustee April 25, 1996
Sidney F. McKenna
/s/ John J. McHale
_______________________ Trustee April 25, 1996
John J. McHale
</TABLE>
INDEX TO EXHIBITS
(1) Agreement and Declaration of Trust*
(2) Bylaws*
(3) Inapplicable
(4) Inapplicable
(5) Advisory Agreement*
(6) Underwriting Agreement*
(7) Inapplicable
(8) Custody Agreement*
(9) Administration, Accounting and Transfer Agency
Agreement
(10) Opinion and Consent of Counsel relating to
Issuance of Shares*
(11) Consent of Independent Public Accountants
(12) Inapplicable
(13) Agreement Relating to Initial Capital*
(14) Inapplicable
(15) Inapplicable
(16) Computations for Performance Quotations*
(17) Financial Data Schedule
(18) Inapplicable
- ----------------------------
* Incorporated by reference to Registration Statement on
Form N-1A.
ADMINISTRATION, ACCOUNTING AND TRANSFER AGENCY AGREEMENT
AGREEMENT dated as of February 28, 1997 by and between Schwartz
Investment Trust (the "Trust"), an Ohio business trust, and Countrywide Fund
Services, Inc. ("Countrywide"), an Ohio corporation.
WHEREAS, the Trust is an investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust wishes to employ the services of Countrywide to
serve as its administrative agent, accounting and pricing agent and transfer and
dividend disbursing agent; and
WHEREAS, Countrywide wishes to provide such services under the
conditions set forth below:
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein in this Agreement, the Trust and Countrywide agree as follows:
1. APPOINTMENT.
The Trust hereby appoints and employs Countrywide as agent to
perform those services described in this Agreement for the Trust. Countrywide
shall act under such appointment and perform the obligations thereof upon the
terms and conditions hereinafter set forth.
2. DOCUMENTATION.
The Trust will furnish from time to time the following
documents:
A. Each resolution of the Board of Trustees of the Trust
authorizing the original issue of its shares;
B. Each Registration Statement filed with the Securities
and Exchange Commission (the "SEC") and amendments
thereof;
C. A certified copy of each amendment to the Agreement and
Declaration of Trust and the Bylaws of the Trust;
D. Certified copies of each resolution of the Board of
Trustees authorizing officers to give instructions to
Countrywide;
E. Specimens of all new forms of share certificates
accompanied by Board of Trustees' resolutions approving
such forms;
<PAGE>
F. Such other certificates, documents or opinions which
Countrywide may, in its discretion, deem necessary or
appropriate in the proper performance of its duties;
G. Copies of all Underwriting and Dealer Agreements in
effect;
H. Copies of all Investment Advisory Agreements in effect;
and
I. Copies of all documents relating to special investment
or withdrawal plans which are offered or may be offered
in the future by the Trust and for which Countrywide is
to act as plan agent.
3. TRUST ADMINISTRATION.
Subject to the direction and control of the Trustees and the
Trust, Countrywide shall supervise the Trust's business affairs not otherwise
supervised by other agents of the Trust. To the extent not otherwise the primary
responsibility of, or provided by, other agents of the Trust, Countrywide shall
supply (i) office facilities, (ii) internal auditing and regulatory services,
and (iii) executive and administrative services. Countrywide shall coordinate
the preparation of (i) reports to shareholders of the Trust, (ii) reports to and
filings with the SEC and state securities authorities including preliminary and
definitive proxy materials, post-effective amendments to the Trust's
registration statement, and the Trust's Form N-SAR, and (iii) necessary
materials for Board of Trustees' meetings unless prepared by other parties under
agreement with the Trust. Countrywide shall also supervise the preparation of
all federal, state and local tax returns of the Trust required by applicable
law. Countrywide shall provide personnel to serve as officers of the Trust if so
elected by the Board of Trustees; provided, however, that the Trust shall
reimburse Countrywide for the reasonable out-of-pocket expenses incurred by such
personnel in attending Board of Trustees' meetings and shareholders' meetings of
the Trust.
4. CALCULATION OF NET ASSET VALUE.
Countrywide will maintain and keep current the general ledger
for each series of the Trust, recording all income and expenses, capital share
activity and security transactions of the Trust. Countrywide will calculate the
net asset value of each series of the Trust and the per share net asset value of
each series of the Trust, in accordance with the Trust's current prospectus and
statement of additional information, once daily as of the time selected by the
Trust's Board of Trustees. Countrywide will prepare and maintain a daily
valuation of all securities and other assets of the Trust in accordance with
instructions from a designated officer of the Trust or its investment adviser
and in the manner set forth in the Trust's
<PAGE>
current prospectus and statement of additional information. In valuing
securities of the Trust, Countrywide may contract with, and rely upon market
quotations provided by, outside services.
5. PAYMENT OF TRUST EXPENSES.
Countrywide shall process each request received from the Trust
or its authorized agents for payment of the Trust's expenses. Upon receipt of
written instructions signed by an officer or other authorized agent of the
Trust, Countrywide shall prepare checks in the appropriate amounts which shall
be signed by an authorized officer of Countrywide and mailed to the appropriate
party.
6. COUNTRYWIDE TO RECORD SHARES.
Countrywide shall record the issuance of shares of the Trust
and maintain pursuant to applicable rules of the SEC a record of the total
number of shares of the Trust which are authorized, issued and outstanding,
based upon data provided to it by the Trust. Countrywide shall also provide the
Trust on a regular basis or upon reasonable request the total number of shares
which are authorized, issued and outstanding, but shall have no obligation when
recording the issuance of the Trust's shares, except as otherwise set forth
herein, to monitor the issuance of such shares or to take cognizance of any laws
relating to the issue or sale of such shares, which functions shall be the sole
responsibility of the Trust.
7. COUNTRYWIDE TO VALIDATE TRANSFERS.
Upon receipt of a proper request for transfer and upon
surrender to Countrywide of certificates, if any, in proper form for transfer,
Countrywide shall approve such transfer and shall take all necessary steps to
effectuate the transfer as indicated in the transfer request. Upon approval of
the transfer, Countrywide shall notify the Trust in writing of each such
transaction and shall make appropriate entries on the shareholder records
maintained by Countrywide.
8. SHARE CERTIFICATES.
If the Trust authorizes the issuance of share certificates and
an investor requests a share certificate, Countrywide will countersign and mail,
by insured first class mail, a share certificate to the investor at his address
as set forth on the transfer books of the Trust, subject to any other
instructions for delivery of certificates representing newly purchased shares
and subject to the limitation that no certificates representing newly purchased
shares shall be mailed to the investor until the cash purchase price of such
shares has been collected and credited to the account of the Trust maintained by
the Custodian. The Trust shall supply Countrywide with a sufficient supply of
blank share certificates and from
<PAGE>
time to time shall renew such supply upon request of Countrywide. Such blank
share certificates shall be properly signed, manually or, if authorized by the
Trust, by facsimile; and notwithstanding the death, resignation or removal of
any officers of the Trust authorized to sign share certificates, Countrywide may
continue to countersign certificates which bear the manual or facsimile
signature of such officer until otherwise directed by the Trust. In case of the
alleged loss or destruction of any share certificate, no new certificates shall
be issued in lieu thereof, unless there shall first be furnished an appropriate
bond satisfactory to Countrywide and the Trust, and issued by a surety company
satisfactory to Countrywide and the Trust.
9. RECEIPT OF FUNDS.
Upon receipt of any check or other instrument drawn or
endorsed to it as agent for, or identified as being for the account of, the
Trust or the principal underwriter of the Trust (the "Underwriter"), Countrywide
shall stamp the check or instrument with the date of receipt, determine the
amount thereof due the Trust and shall forthwith process the same for
collection. Upon receipt of notification of receipt of funds eligible for share
purchases in accordance with the Trust's then current prospectus and statement
of additional information, Countrywide shall notify the Trust, at the close of
each business day, in writing of the amount of said funds credited to the Trust
and deposited in its account with the Custodian.
10. PURCHASE ORDERS.
Upon receipt of an order for the purchase of shares of the
Trust, accompanied by sufficient information to enable Countrywide to establish
a shareholder account, Countrywide shall, as of the next determination of net
asset value after receipt of such order in accordance with the Trust's then
current prospectus and statement of additional information, compute the number
of shares due to the shareholder, credit the share account of the shareholder,
subject to collection of the funds, with the number of shares so purchased,
shall notify the Trust in writing or by computer report at the close of each
business day of such transactions and shall mail to the shareholder and/or
dealer of record a notice of such credit when requested to do so by the Trust.
11. RETURNED CHECKS.
In the event that Countrywide is notified by the Trust's
Custodian that any check or other order for the payment of money is returned
unpaid for any reason, Countrywide will:
<PAGE>
A. Give prompt notification to the Trust of the non-
payment of said check;
B. In the absence of other instructions from the Trust
or the Underwriter, take such steps as may be necessary to redeem any shares
purchased on the basis of such returned check and cause the proceeds of such
redemption plus any dividends declared with respect to such shares to be
credited to the account of the Trust and to request the Trust's Custodian to
forward such returned check to the person who originally submitted the check;
and
C. Notify the Trust of such actions and correct the
Trust's records maintained by Countrywide pursuant to this
Agreement.
12. DIVIDENDS AND DISTRIBUTIONS.
The Trust shall furnish Countrywide with appropriate evidence
of trustee action authorizing the declaration of dividends and other
distributions. Countrywide shall establish procedures in accordance with the
Trust's then current prospectus and statement of additional information and with
other authorized actions of the Trust's Board of Trustees under which it will
have available from the Custodian or the Trust any required information for each
dividend and other distribution. After deducting any amount required to be
withheld by any applicable laws, Countrywide shall, as agent for each
shareholder who so requests, invest the dividends and other distributions in
full and fractional shares in accordance with the Trust's then current
prospectus and statement of additional information. If a shareholder has elected
to receive dividends or other distributions in cash, then Countrywide shall
disburse dividends to shareholders of record in accordance with the Trust's then
current prospectus and statement of additional information. Countrywide shall,
on or before the mailing date of such checks, notify the Trust and the Custodian
of the estimated amount of cash required to pay such dividend or distribution,
and the Trust shall instruct the Custodian to make available sufficient funds
therefor in the appropriate account of the Trust. Countrywide shall mail to the
shareholders periodic statements, as requested by the Trust, showing the number
of full and fractional shares and the net asset value per share of shares so
credited. When requested by the Trust, Countrywide shall prepare and file with
the Internal Revenue Service, and when required, shall address and mail to
shareholders, such returns and information relating to dividends and
distributions paid by the Trust as are required to be so prepared, filed and
mailed by applicable laws, rules and regulations.
<PAGE>
13. UNCLAIMED DIVIDENDS AND UNCLAIMED REDEMPTION PROCEEDS.
Countrywide shall, at least annually, furnish in writing to
the Trust the names and addresses, as shown in the shareholder accounts
maintained by Countrywide, of all shareholders for which there are, as of the
end of the calendar year, dividends, distributions or redemption proceeds for
which checks or share certificates mailed in payment of distributions have been
returned. Countrywide shall use its best efforts to contact the shareholders
affected and to follow any other written instructions received from the Trust
concerning the disposition of any such unclaimed dividends, distributions or
redemption proceeds.
14. REDEMPTIONS AND EXCHANGES.
A. Countrywide shall process, in accordance with the Trust's
then current prospectus and statement of additional information, each order for
the redemption of shares accepted by Countrywide. Upon its approval of such
redemption transactions, Countrywide, if requested by the Trust, shall mail to
the shareholder and/or dealer of record a confirmation showing trade date,
number of full and fractional shares redeemed, the price per share and the total
redemption proceeds. For each such redemption, Countrywide shall either: (a)
prepare checks in the appropriate amounts for approval and verification by the
Trust and signature by an authorized officer of Countrywide and mail the checks
to the appropriate person, or (b) in the event redemption proceeds are to be
wired through the Federal Reserve Wire System or by bank wire, cause such
proceeds to be wired in federal funds to the bank account designated by the
shareholder, or (c) effectuate such other redemption procedures which are
authorized by the Trust's Board of Trustees or its then current prospectus and
statement of additional information. The requirements as to instruments of
transfer and other documentation, the applicable redemption price and the time
of payment shall be as provided in the then current prospectus and statement of
additional information, subject to such supplemental instructions as may be
furnished by the Trust and accepted by Countrywide. If Countrywide or the Trust
determines that a request for redemption does not comply with the requirements
for redemptions, Countrywide shall promptly notify the shareholder indicating
the reason therefor.
B. If shares of the Trust are eligible for exchange with
shares of any other investment company, Countrywide, in accordance with the then
current prospectus and statement of additional information and exchange rules of
the Trust and such other investment company, or such other investment company's
transfer agent, shall review and approve all exchange requests and shall, on
behalf of the Trust's shareholders, process such approved exchange requests.
<PAGE>
C. Countrywide shall notify the Trust, the Custodian and the
Underwriter on each business day of the amount of cash required to meet payments
made pursuant to the provisions of this Paragraph, and, on the basis of such
notice, the Trust shall instruct the Custodian to make available from time to
time sufficient funds therefor in the appropriate account of the Trust.
Procedures for effecting redemption orders accepted from shareholders or dealers
of record by telephone or other methods shall be established by mutual agreement
between Countrywide and the Trust consistent with the then current prospectus
and statement of additional information.
D. The authority of Countrywide to perform its
responsibilities under Paragraph 10, Paragraph 12, and this Paragraph 14 shall
be suspended with respect to any series of the Trust upon receipt of
notification by it of the suspension of the determination of such series' net
asset value.
15. WIRE-ORDER PURCHASES.
Countrywide will send confirmations to the dealers of record
containing all details of the wire-order purchases placed by each such dealer by
the close of business on the business day following receipt of such orders by
Countrywide or the Underwriter, with copies to the Underwriter. Upon receipt of
any check drawn or endorsed to the Trust (or Countrywide, as agent) or otherwise
identified as being payment of an outstanding wire- order, Countrywide will
stamp said check with the date of its receipt and deposit the amount represented
by such check to Countrywide's deposit accounts maintained with the Custodian.
Countrywide will cause the Custodian to transfer federal funds in an amount
equal to the net asset value of the shares so purchased to the Trust's account
with the Custodian, and will notify the Trust and the Underwriter before noon of
each business day of the total amount deposited in the Trust's deposit accounts,
and in the event that payment for a purchase order is not received by
Countrywide or the Custodian on the tenth business day following receipt of the
order, prepare an NASD "notice of failure of dealer to make payment" and forward
such notification to the Underwriter.
16. OTHER PLANS.
Countrywide will process such accumulation plans, automatic
withdrawal plans, group programs and other plans or programs for investing in
shares of the Trust as are now provided for in the Trust's current prospectus
and statement of additional information and will act as plan agent for
shareholders pursuant to the terms of such plans and programs duly executed by
such shareholders.
<PAGE>
17. RECORDKEEPING AND OTHER INFORMATION.
Countrywide shall create and maintain all records required by
applicable laws, rules and regulations, including but not limited to records
required by Section 31(a) of the 1940 Act and the rules thereunder, as the same
may be amended from time to time, pertaining to the various functions performed
by it and not otherwise created and maintained by another party pursuant to
contract with the Trust. All such records shall be the property of the Trust at
all times and shall be available for inspection and use by the Trust. Where
applicable, such records shall be maintained by Countrywide for the periods and
in the places required by Rule 31a-2 under the 1940 Act. The retention of such
records shall be at the expense of the Trust. Countrywide shall make available
during regular business hours all records and other data created and maintained
pursuant to this Agreement for reasonable audit and inspection by the Trust, or
any regulatory agency having authority over the Trust.
18. SHAREHOLDER RECORDS.
Countrywide shall maintain records for each shareholder
account showing the following:
A. Names, addresses and tax identifying numbers;
B. Name of the dealer of record, if any;
C. Number of shares held of each series;
D. Historical information regarding the account of each
shareholder, including dividends and distributions in
cash or invested in shares;
E. Information with respect to the source of all dividends
and distributions allocated among income, realized
short-term gains and realized long-term gains;
F. Any instructions from a shareholder including all forms
furnished by the Trust and executed by a shareholder
with respect to (i) dividend or distribution elections
and (ii) elections with respect to payment options in
connection with the redemption of shares;
G. Any correspondence relating to the current maintenance
of a shareholder's account;
H. Certificate numbers and denominations for any
shareholder holding certificates;
<PAGE>
I. Any stop or restraining order placed against a
shareholder's account;
J. Information with respect to withholding in the case of
a foreign account or any other account for which
withholding is required by the Internal Revenue Code of
1986, as amended; and
K. Any information required in order for Countrywide to
perform the calculations contemplated under this
Agreement.
19. TAX RETURNS AND REPORTS.
Countrywide will prepare in the appropriate form, file with
the Internal Revenue Service and appropriate state agencies and, if required,
mail to shareholders of the Trust such returns for reporting dividends and
distributions paid by the Trust as are required to be so prepared, filed and
mailed and shall withhold such sums as are required to be withheld under
applicable federal and state income tax laws, rules and regulations.
20. FORM N-SAR.
Countrywide shall maintain such records within its control and
shall be requested by the Trust to assist the Trust in fulfilling the
requirements of Form N-SAR.
21. OTHER INFORMATION TO THE TRUST.
Subject to such instructions, verification and approval of the
Custodian and the Trust as shall be required by any agreement or applicable law,
Countrywide will also maintain such records as shall be necessary to furnish to
the Trust the following: annual shareholder meeting lists, proxy lists and
mailing materials, shareholder reports and confirmations and checks for
disbursing redemption proceeds, dividends and other distributions or expense
disbursements.
22. COOPERATION WITH ACCOUNTANTS.
Countrywide shall cooperate with the Trust's independent
public accountants and shall take all reasonable action in the performance of
its obligations under this Agreement to assure that the necessary information is
made available to such accountants for the expression of their unqualified
opinion where required for any document for the Trust.
<PAGE>
23. SHAREHOLDER SERVICE AND CORRESPONDENCE.
Countrywide will provide and maintain adequate personnel,
records and equipment to receive and answer all shareholder and dealer inquiries
relating to account status, share purchases, redemptions and exchanges and other
investment plans available to Trust shareholders. Countrywide will answer
written correspondence from shareholders relating to their share accounts and
such other written or oral inquiries as may from time to time be mutually agreed
upon, and Countrywide will notify the Trust of any correspondence or inquiries
which may require an answer from the Trust.
24. PROXIES.
Countrywide shall assist the Trust in the mailing of proxy
cards and other material in connection with shareholder meetings of the Trust,
shall receive, examine and tabulate returned proxies and shall, if requested by
the Trust, provide at least one inspector of election to attend and participate
as required by law in shareholder meetings of the Trust.
25. FURTHER ACTIONS.
Each party agrees to perform such further acts and execute
such further documents as are necessary to effectuate the purposes hereof.
26. COMPENSATION.
For the performance of Countrywide's obligations under this
Agreement, each series of the Trust shall pay Countrywide, on the first business
day following the end of each month, a monthly fee calculated at an annual rate
as a percentage of the Fund's average daily net assets according to the
following schedule:
Percentage Rate Average Daily Net Assets
.22% First $ 25,000,000
.20% Next 75,000,000
.15% Over 100,000,000
The monthly fee for each series is subject to a $6,000 minimum charge.
Countrywide shall not be required to reimburse the Trust or the Trust's
investment adviser for (or have deducted from its fees) any expenses in excess
of expense limitations imposed by certain state securities commissions having
jurisdiction over the Trust. The Trust shall promptly reimburse Countrywide for
any out-of-pocket expenses and advances which are to be paid by the Trust in
accordance with Paragraph 27.
<PAGE>
27. EXPENSES.
Countrywide shall furnish, at its expense and without cost to
the Trust (i) the services of its personnel to the extent that such services are
required to carry out its obligations under this Agreement and (ii) use of data
processing equipment. All costs and expenses not expressly assumed by
Countrywide under this Paragraph 27 shall be paid by the Trust, including, but
not limited to, costs and expenses of officers and employees of Countrywide in
attending meetings of the Board of Trustees and shareholders of the Trust, as
well as costs and expenses for postage, envelopes, checks, drafts, continuous
forms, reports, communications, statements and other materials, telephone,
telegraph and remote transmission lines, use of outside pricing services, use of
outside mailing firms, necessary outside record storage, media for storage of
records (e.g., microfilm, microfiche, computer tapes), printing, confirmations
and any other shareholder correspondence and any and all assessments, taxes or
levies assessed on Countrywide for services provided under this Agreement.
Postage for mailings of dividends, proxies, reports and other mailings to all
shareholders shall be advanced to Countrywide three business days prior to the
mailing date of such materials.
28. REFERENCES TO COUNTRYWIDE.
The Trust shall not circulate any printed matter which
contains any reference to Countrywide without the prior written approval of
Countrywide, excepting solely such printed matter as merely identifies
Countrywide as Administrative Services Agent, Transfer, Shareholder Servicing
and Dividend Disbursing Agent and Accounting Services Agent. The Trust will
submit printed matter requiring approval to Countrywide in draft form, allowing
sufficient time for review by Countrywide and its counsel prior to any deadline
for printing.
29. EQUIPMENT FAILURES.
In the event of equipment failures beyond Countrywide's
control, Countrywide shall take all steps necessary to minimize service
interruptions but shall have no liability with respect thereto. Countrywide
shall endeavor to enter into one or more agreements making provision for
emergency use of electronic data processing equipment to the extent appropriate
equipment is available.
30. INDEMNIFICATION OF COUNTRYWIDE.
A. Countrywide may rely on information reasonably believed
by it to be accurate and reliable. Except as may otherwise be
required by the 1940 Act and the rules thereunder, neither
<PAGE>
Countrywide nor its shareholders, officers, directors, employees, agents,
control persons or affiliates of any thereof shall be subject to any liability
for, or any damages, expenses or losses incurred by the Trust in connection
with, any error of judgment, mistake of law, any act or omission connected with
or arising out of any services rendered under or payments made pursuant to this
Agreement or any other matter to which this Agreement relates, except by reason
of willful misfeasance, bad faith or negligence on the part of any such persons
in the performance of the duties of Countrywide under this Agreement or by
reason of reckless disregard by any of such persons of the obligations and
duties of Countrywide under this Agreement.
B. Notwithstanding any other provision of this Agreement, the Trust
shall each indemnify and hold harmless Countrywide, its directors, officers,
employees, shareholders, agents, control persons and affiliates from and against
any and all claims, demands, expenses and liabilities (whether with or without
basis in fact or law) of any and every nature which Countrywide may sustain or
incur or which may be asserted against Countrywide by any person by reason of,
or as a result of: (i) any action taken or omitted to be taken by Countrywide in
good faith in reliance upon any certificate, instrument, order or share
certificate believed by it to be genuine and to be signed, countersigned or
executed by any duly authorized person, upon the oral instructions or written
instructions of an authorized person of the Trust or upon the opinion of legal
counsel for the Trust or its own counsel; or (ii) any action taken or omitted to
be taken by Countrywide in connection with its appointment in good faith in
reliance upon any law, act, regulation or interpretation of the same even though
the same may thereafter have been altered, changed, amended or repealed.
However, indemnification under this subparagraph shall not apply to actions or
omissions of Countrywide or its directors, officers, employees, shareholders or
agents in cases of its or their own negligence, willful misconduct, bad faith,
or reckless disregard of its or their own duties hereunder.
31. TERMINATION
A. The provisions of this Agreement shall be effective on the
date first above written, shall continue in effect for one year from that date
and shall continue in force from year to year thereafter, but only so long as
such continuance is approved (1) by Countrywide, (2) by vote, cast in person at
a meeting called for the purpose, of a majority of the Trust's trustees who are
not parties to this Agreement or interested persons (as defined in the 1940 Act)
of any such party, and (3) by vote of a majority of the Trust's Board of
Trustees or a majority of the Trust's outstanding voting securities.
<PAGE>
B. Either party may terminate this Agreement on any date by
giving the other party at least sixty (60) days' prior written notice of such
termination specifying the date fixed therefor. Upon termination of this
Agreement, the Trust shall pay to Countrywide such compensation as may be due as
of the date of such termination, and shall likewise reimburse Countrywide for
any out-of-pocket expenses and disbursements reasonably incurred by Countrywide
to such date.
C. In the event that in connection with the termination of
this Agreement a successor to any of Countrywide's duties or responsibilities
under this Agreement is designated by the Trust by written notice to
Countrywide, Countrywide shall, promptly upon such termination and at the
expense of the Trust, transfer all records maintained by Countrywide under this
Agreement and shall cooperate in the transfer of such duties and
responsibilities, including provision for assistance from Countrywide's
cognizant personnel in the establishment of books, records and other data by
such successor.
32. SERVICES FOR OTHERS.
Nothing in this Agreement shall prevent Countrywide or any
affiliated person (as defined in the 1940 Act) of Countrywide from providing
services for any other person, firm or corporation (including other investment
companies); provided, however, that Countrywide expressly represents that it
will undertake no activities which, in its judgment, will adversely affect the
performance of its obligations to the Trust under this Agreement.
33. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
The parties hereto acknowledge and agree that nothing
contained herein shall be construed to require Countrywide to perform any
services for the Trust which services could cause Countrywide to be deemed an
"investment adviser" of the Trust within the meaning of Section 2(a)(20) of the
1940 Act or to supersede or contravene the Trust's prospectus or statement of
additional information or any provisions of the 1940 Act and the rules
thereunder. Except as otherwise provided in this Agreement and except for the
accuracy of information furnished to it by Countrywide, the Trust assumes full
responsibility for complying with all applicable requirements of the 1940 Act,
the Securities Act of 1933, as amended, and any other laws, rules and
regulations of governmental authorities having jurisdiction.
34. LIMITATION OF LIABILITY.
It is expressly agreed that the obligations of the Trust
hereunder shall not be binding upon any of the Trustees, shareholders, nominees,
officers, agents or employees of the
<PAGE>
Trust, personally, but bind only the trust property of the Trust. The execution
and delivery of this Agreement have been authorized by the Trustees of the Trust
and signed by an officer of the Trust, acting as such, and neither such
authorization by such Trustees nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the trust property of
the Trust.
35. SEVERABILITY.
In the event any provision of this Agreement is determined to
be void or unenforceable, such determination shall not affect the remainder of
this Agreement, which shall continue to be in force.
36. QUESTIONS OF INTERPRETATION.
This Agreement shall be governed by the laws of the State of
Ohio. Any question of interpretation of any term or provision of this Agreement
having a counterpart in or otherwise derived from a term or provision of the
1940 Act shall be resolved by reference to such term or provision of the 1940
Act and to interpretations thereof, if any, by the United States Courts or in
the absence of any controlling decision of any such court, by rules, regulations
or orders of the SEC issued pursuant to said 1940 Act. In addition, where the
effect of a requirement of the 1940 Act, reflected in any provision of this
Agreement, is revised by rule, regulation or order of the SEC, such provision
shall be deemed to incorporate the effect of such rule, regulation or order.
37. NOTICES.
All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing (including telex
and telegraphic communication) and shall be (as elected by the person giving
such notice) hand delivered by messenger or courier service, telecommunicated,
or mailed (airmail if international) by registered or certified mail (postage
prepaid), return receipt requested, addressed to:
To the Trust: Schwartz Investment Trust
3707 W. Maple Road
Bloomfield Hills, Michigan 48301
Attention: George P. Schwartz
To Countrywide: Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Attention: Robert G. Dorsey
<PAGE>
or to such other address as any party may designate by notice complying with the
terms of this Section 37. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery; (b) on the date telecommunicated if by
telegraph; (c) on the date of transmission with confirmed answer back if by
telex, telefax or other telegraphic method; and (d) on the date upon which the
return receipt is signed or delivery is refused or the notice is designated by
the postal authorities as not deliverable, as the case may be, if mailed.
38. CONFIDENTIALITY.
A. All information furnished to Countrywide or its
representatives by the Trust, including without limitation all names, addresses,
telephone numbers and other information of customers and prospective customers,
and whether furnished before or after the date hereof (the "Information"), will
be kept confidential by Countrywide and/or its representatives, and will not,
except to the extent necessary in order to carry out Countrywide's
responsibilities and obligations under this Agreement, be disclosed by
Countrywide or any of its representatives and will not be used by Countrywide or
any of its representatives for any purpose other than fulfilling Countrywide's
responsibilities and obligations under this Agreement. The term
"representatives" as used herein shall include Countrywide's affiliates, and
Countrywide and its affiliates' respective officers, directors, employees,
agents, and controlling persons. Countrywide acknowledges and agrees that any
information supplied to Countrywide by a customer or potential customer of the
Trust as a result of discussions, solicitations, or communications between the
Trust and said customer or potential customer shall constitute "Information" for
the purposes hereof. Countrywide shall be permitted to transmit the Information
only to those of its representatives who need to know the Information for the
purpose of assisting Countrywide in fulfilling its responsibilities and
obligations under this Agreement, who are informed by Countrywide of the
confidential nature of the Information and who have agreed in writing to keep
the Information confidential on the same terms as if such representatives were
signatories hereto. Copies of all agreements by which Countrywide's
representatives have agreed to keep the Information confidential shall be
delivered by Countrywide to the Trust promptly after execution thereof. In any
event Countrywide shall be responsible for the breach of this Agreement by its
representatives.
B. In the event that Countrywide or its representatives is requested or
becomes legally compelled to disclose any of the Information, said party agrees
to provide the Trust with prompt written notice so that the Trust may seek (with
Countrywide's and/or its representatives' cooperation, if so requested by the
<PAGE>
Trust) a protective order or other appropriate remedy. In the event that such
protective order or other remedy is not obtained, or that the Trust waives
compliance with these confidentiality provisions, Countrywide and its
representatives agree to furnish only that portion of the Information which in
the reasonable opinion of its counsel is legally required and will use its best
efforts to obtain reliable assurance that confidential treatment will be
accorded the Information.
C. The term "Information" as used herein shall not include matters
which (i) are or become generally available to the public other than as a result
of a disclosure by Countrywide or its representatives, or (ii) were know to
Countrywide on a non- confidential basis prior to its disclosure to Countrywide
by the Trust.
D. The Trust shall be entitled to injunctive relief to prevent breaches
of Countrywide's confidentiality obligations hereunder and to specifically
enforce the terms hereof in addition to any other remedy to which the Trust or
the Company may be entitled at law or in equity.
E. The confidentiality provisions of this Agreement shall survive the
termination of this Agreement.
39. AMENDMENT.
This Agreement may not be amended or modified except by a
written agreement executed by both parties.
40. GOVERNING LAW.
This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
41. BINDING EFFECT.
Each of the undersigned expressly warrants and represents that
he has the full power and authority to sign this Agreement on behalf of the
party indicated, and that his signature will operate to bind the party indicated
to the foregoing terms.
42. COUNTERPARTS.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
<PAGE>
43. FORCE MAJEURE.
If Countrywide shall be delayed in its performance of services
or prevented entirely or in part from performing services due to causes or
events beyond its control, including and without limitation, acts of God,
interruption of power or other utility, transportation or communication
services, acts of civil or military authority, sabotages, national emergencies,
explosion, flood, accident, earthquake or other catastrophe, fire, strike or
other labor problems, legal action, present or future law, governmental order,
rule or regulation, or shortages of suitable parts, materials, labor or
transportation, such delay or non-performance shall be excused and a reasonable
time for performance in connection with this Agreement shall be extended to
include the period of such delay or non-performance.
44. MISCELLANEOUS.
The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
SCHWARTZ INVESTMENT TRUST
By:__________________________
Its: President
COUNTRYWIDE FUND SERVICES, INC.
By:____________________________
Its: President
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 5 to Registration
Statement under the Securities Act of 1933 filed under Registration Statement
No. 33-51626 of our report dated January 17, 1997, relating to Schwartz Value
Fund appearing in the Statement of Additional Information, which is part of
such Registration Statement, and to the reference to us under the caption
"Auditors", in such Registration Statement and to the reference to us under
the caption "Financial Highlights" appearing in the Prospectus of Schwartz
Value Fund.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Dayton, Ohio
April 28, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000891160
<NAME> SCHWARTZ INVESTMENT TRUST - SCHWARTZ VALUE FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 47,045,103
<INVESTMENTS-AT-VALUE> 56,131,324
<RECEIVABLES> 120,327
<ASSETS-OTHER> 8,320
<OTHER-ITEMS-ASSETS> 3,930
<TOTAL-ASSETS> 56,263,901
<PAYABLE-FOR-SECURITIES> 504,301
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 654,472
<TOTAL-LIABILITIES> 1,158,773
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 45,969,861
<SHARES-COMMON-STOCK> 2,601,054
<SHARES-COMMON-PRIOR> 2,702,902
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 49,046
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,086,221
<NET-ASSETS> 55,105,128
<DIVIDEND-INCOME> 749,730
<INTEREST-INCOME> 258,998
<OTHER-INCOME> 0
<EXPENSES-NET> 1,053,756
<NET-INVESTMENT-INCOME> (45,028)
<REALIZED-GAINS-CURRENT> 5,144,508
<APPREC-INCREASE-CURRENT> 3,932,331
<NET-CHANGE-FROM-OPS> 9,031,811
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 4,922,816
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 264,865
<NUMBER-OF-SHARES-REDEEMED> 580,219
<SHARES-REINVESTED> 213,506
<NET-CHANGE-IN-ASSETS> 1,968,240
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 127,618
<GROSS-ADVISORY-FEES> 801,444
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,053,756
<AVERAGE-NET-ASSETS> 53,435,021
<PER-SHARE-NAV-BEGIN> 19.66
<PER-SHARE-NII> (.02)
<PER-SHARE-GAIN-APPREC> 3.61
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 2.06
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.19
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<AVG-DEBT-PER-SHARE> 0
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