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. 6
---------
and/or
--
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
--
Amendment No. 7
---------
(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:
David M. Leahy, Esq.
Sullivan & Worcester
1025 Connecticut Avenue, NW
Washington, DC 20036
It is proposed that this filing will become effective (check appropriate box)
/X/ immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / ___ days after filing pursuant to paragraph (a)
/ / on (date) pursuant to paragraph (a) of Rule 485
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, 1997 was
filed with the Commission on March 6, 1998.
<PAGE>
SCHWARTZ INVESTMENT TRUST
CROSS REFERENCE SHEET
PURSUANT TO RULE 481(A)
UNDER THE SECURITIES ACT OF 1933
--------------------------------
PART A
- ------
Item No. Registration Statement Caption Caption in Prospectus
- -------- ------------------------------ ---------------------
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>
PART B
- ------
Caption in Statement
of Additional
Item No. Registration Statement Caption Information
- -------- ------------------------------ -----------
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 The Investment Adviser;
Services Custodian; Auditors;
Countrywide Fund
Services, Inc.;
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
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, 1998
SCHWARTZ INVESTMENT TRUST
3707 W. Maple Road
Bloomfield Hills, Michigan 48301
248-644-8500
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 and 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 ............................................... 12
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, 1998
Schwartz Investment Trust
3707 W. Maple Road
Bloomfield Hills, Michigan 48301
(248) 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, 1998, 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
(248) 644-2701
1
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
The Schwartz Value Fund (the "Fund") had a 28% return in 1997 vs. 20.5% for our
benchmark, the Russell 2000 Index. Year-end distributions totaled $3.14 per
share, comprised of $.06 per share net investment income, $.65 per share
short-term gains and $2.43 per share of long-term capital gains. It was a good
year by any measure. Small-cap value stocks are no longer lagging. Micro caps,
after years of discredit, are suddenly down right respectable. Perhaps the love
affair investors have had with the big-cap issues since 1990 has run its course.
Maybe the inflated multiples of the largest and most popular institutional
favorites, finally went too far. Clearly the valuation gap between large and
small companies, which we spoke about a year ago, has started to close. If this
recent trend continues, it's good news for the Fund, since past cycles of
small-cap outperformance have lasted from two to five years.
One of the factors fueling success for the Fund in 1997 was buyouts, especially
during the first half of the year. Six portfolio companies were acquired during
the year -- all at premiums to the Fund's cost -- with an average gain of 57%.
These included Core Industries Inc., American List Corporation, North American
Mortgage Company, First of Michigan Capital Corporation, Detroit and Canada
Tunnel Corporation, and TriMas Corporation (pending). In every case, the
transactions were a realization of previously unrecognized value we have so
often discussed in the past.
It's hard to imagine economic conditions getting any better in 1998 than they
were last year. Even in a tight labor market, when unemployment hit a 25-year
low, inflation was almost non-existent. In past periods of strong economic
expansion, wage pressures tended to push up inflation. But this time, price
increases were moderated by productivity gains and the globalization of
manufacturing. Now however, we're starting to see the darker side of the new
global economy -- the Asian Flu is spreading to the U.S. fast. What initially
appeared to be foreign currency jitters, has in fact proven to be much more
serious, a reflection of the weak economic infrastructure in several Southeast
Asian countries. Poor banking practices led to excessive corporate borrowing and
severe overbuilding in real estate and manufacturing capacity. When combined
with markets that don't allow free competition, it becomes a formula for
disaster. Clearly a deflationary force is rolling in from Southeast Asia that
will adversely affect the U.S. economy, especially our export industries.
Product pricing increases will likely be modest to non-existent for domestic
manufacturers. With U.S. wage pressures escalating, profit margins are getting
squeezed. From a portfolio perspective, small companies in which the Fund
typically invests, generally will be less vulnerable to currency devaluations
and other fallout from the Asian crisis. But even if the Asian contagion ends up
being worse than is now generally perceived, the results for American businesses
are not universally bad.
Over 60% of U.S. gross domestic product consists of services, which are largely
insulated from foreign competition. Thankfully, America is a service-based
economy. Increasingly, the Fund is investing in service-related companies.
Service organizations currently represent two of the Fund's largest industry
concentrations -- insurance and banking, at about 12% of the portfolio each.
Both performed well in 1997, and our stocks in these sectors should continue to
benefit from the ongoing consolidation taking place within these industries.
Given our concerns, the overall portfolio is defensively postured with 15% in
cash equivalents. Beyond that, many of the larger positions are in companies
that are asset rich, have liquid balance sheets, and are debt free. And
importantly, the Fund's stocks are modestly priced in relation to fundamentals
like earnings and cash flow, which reduces risk. Managing risk is an important
part of our investment philosophy. That prudence could prove particularly
important in 1998.
I'm always impressed with the sophistication of Fund shareholders, and their
realistic expectations with respect to returns. Many unsophisticated investors
have come to expect annual double-digit investment returns almost as a
birthright. It's been so easy for so long to achieve outsized returns, it's no
wonder newer entrants to the complicated world of investing think it's easy. At
some point, there'll be a rude awakening for the neophytes. Come what may, we'll
remain committed to the task of finding well managed, micro-cap, small and mid
sized businesses, with sustainable competitive advantages. Before the year is
out, some of them may be available at exceedingly attractive prices. The
Schwartz Value Fund is postured to be opportunistic.
January 19, 1998
George P. Schwartz, CFA
President
2
<PAGE>
Comparison of Change in Value of $10,000 Investment in
the Schwartz Value Fund* and the Russell 2000 Index
Russell 2000 Index
Schwartz Value Fund (Dividends excluded)
------------------- --------------------
12-31-87 $10,000 $10,000
12-31-88 12,310 12,490
12-31-89 13,332 14,513
12-31-90 12,625 11,683
12-31-91 16,665 17,058
12-31-92 20,448 20,196
12-31-93 24,640 24,013
12-31-94 22,964 23,245
12-31-95 26,845 29,335
12-31-96 31,758 33,677
12-31-97 40,650 40,580
Schwartz Value Fund
Average Annual Total Returns
1 Year 5 Years 10 Years
28.04% 14.74% 15.06%
Past performance is not predictive of future performance.
* 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.
3
<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.................................................. .41%
-----
Total Fund Operating Expenses................................... 1.91%
=====
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 $ 19
3 Years 60
5 Years 103
10 Years 223
4
<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, 1997 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 248-644-8500 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 December 31, 1993(A) to
-------------------------------------------------- Dec. 31,
1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 21.19 $ 19.66 $ 18.12 $ 20.97 $ 19.71
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income (loss) ....... 0.06 (0.02) (0.03) (0.05) (0.06)
Net realized and unrealized
gains (losses) on investments ... 5.88 3.61 3.09 (1.37) 1.95
-------- -------- -------- -------- --------
Total from investment operations ...... 5.94 3.59 3.06 (1.42) 1.89
-------- -------- -------- -------- --------
Less distributions:
From net investment income ......... (0.06) -- -- -- --
From net realized capital gains
on investments .................. (3.03) (2.06) (1.52) (1.36) (0.63)
In excess of net realized gains
on investments .................. (0.05) -- -- (0.07) --
-------- -------- -------- -------- --------
Total distributions ................... (3.14) (2.06) (1.52) (1.43) (0.63)
-------- -------- -------- -------- --------
Net asset value at end of period ...... $ 23.99 $ 21.19 $ 19.66 $ 18.12 $ 20.97
======== ======== ======== ======== ========
Total return .......................... 28.0% 18.3% 16.9% (6.8)% 9.6%(B)
======== ======== ======== ======== ========
Ratio of expenses to average net assets 1.91% 1.97% 2.00% 2.01% 2.13%(C)
Ratio of net investment income (loss)
to average net assets .............. 0.24% (0.08)% (0.18)% (0.36)% (0.63)%(C)
Portfolio turnover rate ............... 47% 50% 70% 78% 65%(C)
Average commission rate ............... $ 0.0468 $ 0.0454 -- -- --
Net assets at end of period (000's) ... $ 69,967 $ 55,105 $ 53,137 $ 45,097 $ 40,704
</TABLE>
(A) Commencement of operations.
(B) Not annualized.
(C) Annualized.
5
<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,
6
<PAGE>
including 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.
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
7
<PAGE>
collateralized by 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 at least 102% of 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 at least 102% of 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. High turnover involves correspondingly greater commission expenses
and transaction costs and 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. The Fund may, in
the Adviser's sole discretion, accept certain accounts with less than the stated
minimum investment. 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 the Transfer Agent by 4:00 p.m., Eastern time, are
confirmed at that day's net asset value. Purchase orders received by the
Transfer Agent after 4:00 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 Countrywide Fund Services,
Inc., 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.
Shares of the Fund may be purchased or sold through the Charles Schwab & Co.,
Inc. Mutual Fund MarketplaceTM and through other brokerage firms or financial
institutions. These organizations are authorized to accept purchase orders on
behalf of the Fund at the Fund's net asset value next determined after your
order is received by an organization in proper form before 4:00 p.m., Eastern
time, or such earlier time as may be required by an organization. These
organizations may be authorized to designate other intermediaries to act in this
capacity. These organizations may charge you transaction fees on purchases of
Fund shares and may impose other charges or restrictions or account options that
differ from those applicable to shareholders who purchase shares directly
through the Fund or the Transfer Agent. These organizations may be the
shareholders of record of your shares. The Fund is not responsible for ensuring
that the organizations carry out their obligations to their customers. The
Adviser may pay such organizations for administrative, shareholder subaccounting
and other services, including sales-related services, from the Adviser's own
revenues based on the amount of customer assets maintained in the Fund by such
organizations. The payment of such compensation by the Adviser will not affect
the expense ratio of the Fund.
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.
8
<PAGE>
You may also purchase shares of the Fund by bank 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. 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 Countrywide Fund Services, Inc., 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 Transfer Agent. 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 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.
You may also redeem your shares through a brokerage firm or financial
institution that has been authorized to accept orders on behalf of the Fund at
the Fund's net asset value next determined after your order is received by such
organization in proper form before 4:00 p.m., Eastern time, or such earlier time
as may be required by such organization. These organizations may be authorized
to designate other intermediaries to act in this capacity. Such an organization
may charge you transaction fees on redemptions of Fund shares and may impose
other charges or restrictions or account options that differ from those
applicable to shareholders who redeem shares directly through the Fund or the
Transfer Agent.
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.
9
<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. No interest will
accrue on amounts represented by uncashed distribution checks.
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 capital gains (i.e., the excess of net long-term capital
gains over net short-term capital losses) by the Fund to its shareholders are
taxable to the recipient shareholders as capital gains, without regard to the
length of time a shareholder has held Fund shares. The maximum capital gains
rate for individuals is 28% with respect to assets held more than 12 months, but
not more than 18 months, and 20% with respect to assets held more than 18
months. The maximum capital gains rate for corporate shareholders is the same as
the maximum tax rate for ordinary income. 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. 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.
10
<PAGE>
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.
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 48301, to manage the Fund's investments.
The Adviser was organized in 1980 and has approximately $235 million of assets
under management as of December 31, 1997. 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 48301, 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.
11
<PAGE>
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.
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
248-644-8500 or by writing to the Fund at the address on the front of this
Prospectus.
12
<PAGE>
SCHWARTZ VALUE FUND ACCOUNT NO. 36-_____________________
Account Application (For Fund Use Only)
Please mail completed account FOR BROKER/DEALER USE ONLY
application to: Firm Name:__________________________
Countrywide Fund Services, Inc. Home Office Address:________________
P.O. Box 5354 Branch Address:_____________________
Cincinnati, Ohio 45201-5354 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, Organization, (In case of custodial account
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. The Internal
Revenue Service does not require my consent to any provision of this document
other than the certifications required to avoid backup withholding. 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.
o By Check o By ACH to my bank checking or savings account.
Please attach a voided check.
________________________________________________________________________________
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.
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.
13
<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.
14
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
SCHWARTZ INVESTMENT TRUST
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1998
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,
1998. 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
248-644-8500.
<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........................................... 21
PRINCIPAL SECURITY HOLDERS................................................... 24
CUSTODIAN.................................................................... 24
INDEPENDENT AUDITORS......................................................... 24
COUNTRYWIDE FUND SERVICES, INC............................................... 25
ANNUAL REPORT................................................................ 25
- 2 -
<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 &
- 3 -
<PAGE>
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 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-1 (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-
- 4 -
<PAGE>
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 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 or liquid securities 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
- 5 -
<PAGE>
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 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
- 6 -
<PAGE>
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 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
- 7 -
<PAGE>
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 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.
- 8 -
<PAGE>
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.
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
- 9 -
<PAGE>
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
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.
- 10 -
<PAGE>
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.
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.
- 11 -
<PAGE>
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 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.
- 12 -
<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.
- 13 -
<PAGE>
11. Sell any securities short unless, by virtue of the Fund's ownership of
other securities, the Fund has at the time of 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, 1997. 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 56 Chairman of the Board/Trustee $ 0
*George P. Schwartz, CFA 53 President/Trustee 0
+Donald J. Dawson, Jr. 51 Trustee 7,000
+Fred A. Erb 75 Trustee 7,000
+John J. McHale 76 Trustee 7,000
+Sidney F. McKenna 75 Trustee 7,000
Richard L. Platte, Jr., CFA 47 Vice President, Secretary and Treasurer 0
Robert G. Dorsey 41 Assistant Vice President 0
John F. Splain 41 Assistant Secretary 0
Mark J. Seger 36 Assistant Treasurer 0
</TABLE>
- 14 -
<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 as
the 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.
ROBERT G. DORSEY, 312 Walnut Street, Cincinnati, Ohio, is President and
Treasurer of Countrywide Fund Services, Inc. (a registered transfer agent) and
CW Fund Distributors, Inc. (a registered broker-dealer) and Treasurer of
Countrywide
- 15 -
<PAGE>
Investments, Inc. (a registered broker-dealer and investment adviser) and
Countrywide Financial Services, Inc. (a financial services company and parent of
Countrywide Fund Services, Inc., CW Fund Distributors, Inc. and Countrywide
Investments, Inc. and a wholly-owned subsidiary of Countrywide Credit
Industries, Inc.). He is also Vice President of Countrywide Investment Trust,
Countrywide Tax-Free Trust, Countrywide Strategic Trust, Brundage, Story and
Rose Investment Trust, Markman MultiFund Trust, Dean Family of Funds, The New
York State Opportunity Funds, Lake Shore Family of Funds, Maplewood Investment
Trust and Wells Family of Real Estate Funds and Assistant Vice President of
Interactive Investments, The Tuscarora Investment Trust, Williamsburg Investment
Trust, The Gannett Welsh & Kotler Funds and The Westport Funds (all of which are
registered investment companies).
JOHN F. SPLAIN, 312 Walnut Street, Cincinnati, Ohio, is Vice President,
Secretary and General Counsel of Countrywide Fund Services, Inc. and CW Fund
Distributors, Inc. and Secretary and General Counsel of Countrywide Investments,
Inc. and Countrywide Financial 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, The
Tuscarora Investment Trust, Williamsburg Investment Trust, Lake Shore Family of
Funds, Maplewood Investment Trust and Wells Family of Real Estate Funds and
Assistant Secretary of Interactive Investments, Dean Family of Funds, The New
York State Opportunity Funds, The Gannett Welsh & Kotler Funds and The Westport
Funds.
MARK J. SEGER, C.P.A., 312 Walnut Street, Cincinnati, Ohio, is Vice
President of Countrywide Financial Services, Inc. and 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, Williamsburg Investment Trust, Dean Family of Funds,
The New York State Opportunity Funds, Lake Shore Family of Funds, Maplewood
Investment Trust and Wells Family of Real Estate Funds and Assistant Treasurer
of Interactive Investments, The Tuscarora Investment Trust, The Gannett Welsh &
Kotler Funds and The Westport Funds.
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
- 16 -
<PAGE>
average daily net assets up to $75,000,000, 1.25% of such assets 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, 1997, 1996 and 1995, the Fund paid advisory
fees of $940,830, $801,444 and $765,583, 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, 1999 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 principal
underwriter 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.
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
- 17 -
<PAGE>
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, 1997
and 1996 and 1995, the Adviser paid the Distributor compensation of $209,234,
$168,750 and $160,773, 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, 1997, 1996 and 1995, the Fund paid brokerage commissions of
$122,882, $138,164 and $120,864, 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 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.
- 18 -
<PAGE>
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 any
brokerage firms, brokerage business may be transacted from time to time with
various 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 any 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 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.
- 19 -
<PAGE>
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, 1997 and 1996, the
Fund's portfolio turnover rate was 47% and 50%, 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, Martin Luther King, Jr. 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; and (2) 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 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
- 20 -
<PAGE>
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.
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:
- 21 -
<PAGE>
n
P (1 + T) = 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, 1997 are as follows:
1 Year 28.04%
5 Years 14.74%
10 Years 15.06%
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:
- 22 -
<PAGE>
Year Ended
----------
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%
December 31, 1997 28.0%
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, 1997 was 21.0%. 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
- 23 -
<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 3, 1998, Comerica Bank, as trustee for the benefit of the
Plante & Moran Tax Saving Plan, P.O. Box 75000, Detroit, Michigan 48275, owned
of record 10.3% of the outstanding shares of the Fund.
As of April 3, 1998 the Trustees and officers of the Fund as a group owned
of record or beneficially 4.0% 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.
INDEPENDENT AUDITORS
- --------------------
The firm of Deloitte & Touche LLP has been selected as independent auditors
for the Fund for the fiscal year ending December 31, 1998. 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.
- 24 -
<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,
1997, 1996 and 1995, the Fund paid Countrywide compensation of $130,486,
$111,853 and $112,416, 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, 1997 appear in the
Fund's annual report which is attached to this Statement of Additional
Information.
- 25 -
<PAGE>
SCHWARTZ
VALUE FUND
a series of
SCHWARTZ
INVESTMENT TRUST
[LOGO]
ANNUAL REPORT
for the year ended
DECEMBER 31, 1997
<PAGE>
Shareholder Accounts Corporate Offices
c/o Countrywide Fund 3707 W. Maple Road
Services, Inc. [LOGO] Bloomfield Hills, MI 48301
P.O.Box 5354 (248) 644-8500
Cincinnati, OH 45201-5354 Fax (248) 644-4250
1-800-543-0407
Schwartz Value Fund
Dear Fellow Shareowner:
The Schwartz Value Fund ("SVF") had a 28% return in 1997 vs. 20.5% for our
benchmark, the Russell 2000 Index. Year-end distributions totaled $3.14 per
share, comprised of $.06 per share net investment income, $.65 per share
short-term gains and $2.43 per share of long-term capital gains. It was a good
year by any measure. Small-cap value stocks are no longer lagging. Micro caps,
after years of discredit, are suddenly down right respectable. Perhaps the love
affair investors have had with the big-cap issues since 1990 has run its course.
Maybe the inflated multiples of the largest and most popular institutional
favorites, finally went too far. Clearly the valuation gap between large and
small companies, which we spoke about a year ago, has started to close. If this
recent trend continues, it's good news for SVF, since past cycles of small-cap
outperformance have lasted from two to five years.
One of the factors fueling success for SVF in 1997 was buyouts, especially
during the first half of the year. Six portfolio companies were acquired during
the year -- all at premiums to the Fund's cost -- with an average gain of 57%.
These included Core Industries Inc., American List Corporation, North American
Mortgage Company, First of Michigan Capital Corporation, Detroit and Canada
Tunnel Corporation, and TriMas Corporation (pending). In every case, the
transactions were a realization of previously unrecognized value we have so
often discussed in the past.
It's hard to imagine economic conditions getting any better in 1998 than they
were last year. Even in a tight labor market, when unemployment hit a 25-year
low, inflation was almost non-existent. In past periods of strong economic
expansion, wage pressures tended to push up inflation. But this time, price
increases were moderated by productivity gains and the globalization of
manufacturing. Now however, we're starting to see the darker side of the new
global economy -- the Asian Flu is spreading to the U.S. fast. What initially
appeared to be foreign currency jitters, has in fact proven to be much more
serious, a reflection of the weak economic infrastructure in several Southeast
Asian countries. Poor banking practices led to excessive corporate borrowing and
severe overbuilding in real estate and manufacturing capacity. When combined
with markets that don't allow free competition, it became a formula for
disaster. Clearly a deflationary force is rolling in from Southeast Asia that
will adversely affect the U.S. economy, especially our export industries.
Product pricing increases will likely be modest to non-existent for domestic
manufacturers. With U.S. wage pressures escalating, profit margins are getting
squeezed. From a portfolio perspective, smaller companies in which SVF typically
invests, generally will be less vulnerable to currency devaluations and other
<PAGE>
fallout from the Asian crisis. But even if the Asian contagion ends up being
worse than is now generally perceived, the results for American businesses are
not universally bad.
Over 60% of U.S. gross domestic product consists of services, which are largely
insulated from foreign competition. Thankfully, America is a service-based
economy. Increasingly, SVF is investing in service-related companies. Service
organizations currently represent two of the Fund's largest industry
concentrations -- insurance and banking, at about 12% of the portfolio each.
Both performed well in 1997, and our stocks in these sectors should continue to
benefit from the ongoing consolidation taking place within these industries.
Given our concerns, the overall portfolio is defensively postured with 15% in
cash equivalents. Beyond that, many of the larger positions are in companies
that are asset rich, have liquid balance sheets, and are debt free. And
importantly, the Fund's stocks are modestly priced in relation to fundamentals
like earnings and cash flow, which reduces risk. Managing risk is an important
part of our investment philosophy. That prudence could prove particularly
important in 1998.
I'm always impressed with the sophistication of SVF shareholders, and their
realistic expectations with respect to returns. Many unsophisticated investors
have come to expect annual double-digit investment returns almost as a
birthright. It's been so easy for so long to achieve outsized returns, it's no
wonder newer entrants to the complicated world of investing think it's easy. At
some point, there'll be a rude awakening for the neophytes. Come what may, we'll
remain committed to the task of finding well managed, micro-cap, small and
mid-sized businesses, with sustainable competitive advantages. Before the year
is out, some of them may be available at exceedingly attractive prices. The
Schwartz Value Fund is postured to be opportunistic.
With best wishes,
SCHWARTZ VALUE FUND
/s/ George P. Schwartz
George P. Schwartz, CFA
President
January 19, 1998
<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(B) (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 1997 3 Year 10 Year 14 Year
---- ---- ---- ---- ---- ---- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SCHWARTZ
VALUE FUND(A) 22.7% 20.5% (6.8)% 16.9% 18.3% 28.0% 21.0% 15.1% 14.1%
RUSSELL 2000
INDEX(B) 18.4% 18.9% (3.2)% 26.2% 14.8% 20.5% 20.4% 15.0% 11.8%
NASDAQ COMPOSITE(B) 15.5% 14.7% (3.2)% 39.9% 22.7% 21.6% 27.8% 16.9% 13.1%
VALUE LINE COMPOSITE(B) 7.0% 10.7% (6.0)% 19.3% 13.4% 21.1% 17.9% 8.5% 6.3%
STANDARD & POORS 500 7.6% 10.1% 1.3% 37.5% 22.9% 33.4% 31.1% 18.0% 17.1%
CONSUMER PRICE INDEX 2.9% 2.7% 2.7% 2.6% 3.3% 1.7% 2.5% 3.4% 3.4%
- ----------------
(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.
</TABLE>
SCHWARTZ VALUE FUND
Ten Largest Equity Holdings
December 31, 1997
Market
Shares Company Value
------ ------- -----
181,500 Ottawa Financial Corporation $6,171,000
235,000 K-Swiss Inc. -- Class A $3,818,750
100,000 Leucadia National Corporation $3,450,000
209,000 Data Research Associates, Inc. $2,978,250
170,000 Griffon Corporation $2,486,250
200,000 Unico American Corporation $2,450,000
200,000 Thomas Nelson, Inc. $2,312,500
60,000 RJR Nabisco Holdings Corp. $2,250,000
90,000 SPSS Inc. $1,732,500
600,000 Pentech International, Inc. $1,725,000
<PAGE>
SCHWARTZ VALUE FUND
SCHEDULE OF INVESTMENTS
December 31, 1997
- --------------------------------------------------------------------------------
Shares COMMON STOCK -- 88.6% Value
- ---------- ---------------------------------------------- -----------
APPAREL & TEXTILES -- 6.0%
235,000 K-Swiss Inc. -- Class A .................. $ 3,818,750
17,500 Nautica Enterprises, Inc.* ............... 406,875
-----------
4,225,625
-----------
BUILDING MATERIALS & CONSTRUCTION -- 4.4%
20,000 ABT Building Products Corporation* ....... 360,000
60,000 Gardner Denver Machinery Inc.* ........... 1,518,750
24,000 Industrial Acoustics Company, Inc. ....... 250,500
35,000 MLX Corp.* ............................... 651,875
40,000 Schuler Homes, Inc.* ..................... 257,500
-----------
3,038,625
-----------
CONSUMER PRODUCTS - DURABLES -- 5.8%
37,500 Craftmade International, Inc. ............ 426,563
170,000 Griffon Corporation* ..................... 2,486,250
70,000 HMI Industries Inc. ...................... 420,000
40,000 Sturm, Ruger & Company, Inc. ............. 737,500
-----------
4,070,313
-----------
CONSUMER PRODUCTS - NONDURABLES -- 9.1%
25,000 Helen of Troy Limited* ................... 403,125
600,000 Pentech International, Inc.* ............. 1,725,000
20,000 The Scotts Company* ...................... 605,000
20,000 Standex International Corporation ........ 705,000
50,000 Tupperware Corporation ................... 1,393,750
10,000 Velcro Industries N.V .................... 960,000
24,000 Weyco Group, Inc. ........................ 543,000
-----------
6,334,875
-----------
ENERGY & MINING -- 3.4%
70,000 Forest Oil Corporation* .................. 1,155,000
200,000 Golden Star Resources Ltd.* .............. 712,500
18,000 Newmont Mining Corporation ............... 528,750
-----------
2,396,250
-----------
<PAGE>
SCHEDULE OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
Shares COMMON STOCK -- 88.6% Value
- ---------- ---------------------------------------------- -----------
ENVIRONMENTAL SERVICES -- 0.1%
2,400 GZA GeoEnvironmental Technologies, Inc.* . 12,000
3,000 Sevenson Environmental Services, Inc. .... 36,750
-----------
48,750
-----------
FINANCE - BANKING & THRIFTS -- 12.3%
10,050 Calumet Bancorp, Inc.* ................... 330,394
65,000 Flagstar Bancorp, Inc. ................... 1,286,797
15,000 MSB Bancorp, Inc. ........................ 564,375
181,500 Ottawa Financial Corporation ............. 6,171,000
12,150 Peoples Bancorp .......................... 267,300
-----------
8,619,866
-----------
FINANCE - INSURANCE -- 12.0%
45,000 The Commerce Group, Inc. ................. 1,468,125
75,100 Danielson Holding Corporation* ........... 544,475
100,000 Leucadia National Corporation ............ 3,450,000
20,000 MMI Companies, Inc. ...................... 502,500
200,000 Unico American Corporation ............... 2,450,000
-----------
8,415,100
-----------
FOOD & TABACCO -- 3.2%
60,000 RJR Nabisco Holdings Corp. ............... 2,250,000
-----------
HEALTHCARE -- 2.6%
15,000 Health Care & Retirement Corporation* .... 603,750
50,000 Hologic, Inc.* ........................... 1,034,375
9,000 SteriGenics International, Inc.* ......... 171,000
-----------
1,809,125
-----------
HOLDING COMPANY -- 1.3%
20,000 Maxxam Inc.* ............................. 872,500
-----------
INDUSTRIAL PRODUCTS & SERVICES -- 3.9%
30,000 Greif Brothers Corporation -- Class A .... 1,005,000
50,000 Maritrans Inc. ........................... 487,500
10,055 M.H. Rhodes, Inc. ........................ 40,220
<PAGE>
SCHEDULE OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
Shares COMMON STOCK -- 88.6% Value
- ---------- ---------------------------------------------- -----------
100,000 Rohn Industries, Inc. .................... $ 515,625
20,000 TriMas Corporation ....................... 687,500
-----------
2,735,845
-----------
LEISURE & ENTERTAINMENT -- 2.2%
75,000 Circus Circus Enterprises, Inc.* ......... 1,537,500
-----------
PRINTING & PUBLISHING -- 3.8%
465 The Detroit Legal News Company ........... 58,590
200,000 Thomas Nelson, Inc. ...................... 2,312,500
7,200 Value Line, Inc. ......................... 284,400
-----------
2,655,490
-----------
REAL ESTATE -- 1.0%
16,499 I. Gordon Corporation* ................... 164,990
15 LaFourche Realty Company, Inc. ........... 62,250
25,000 Malan Realty Investors, Inc. ............. 453,125
-----------
680,365
-----------
RETAIL -- 1.3%
2,000 Dart Group Corporation -- Class A ........ 232,000
100,000 Ellett Brothers, Inc. .................... 553,125
20,000 The Good Guys, Inc.* ..................... 152,500
-----------
937,625
-----------
TECHNOLOGY & ELECTRONICS -- 11.7%
33,500 Astrosystems, Inc.* ...................... 41,875
209,000 Data Research Associates, Inc. ........... 2,978,250
100,000 Nematron Corporation* .................... 406,250
50,000 Rainbow Technologies, Inc.* .............. 1,450,000
90,000 SPSS Inc.* ............................... 1,732,500
60,000 Universal Electronics Inc.* .............. 600,000
53,900 X-Rite, Incorporated ..................... 983,675
-----------
8,192,550
-----------
TRANSPORTATION -- 0.8%
58,800 The Morgan Group, Inc. -- Class A ........ 543,900
-----------
MISCELLANEOUS -- 0.1%
12,500 Bull & Bear Group, Inc. -- Class A* ...... 37,500
-----------
<PAGE>
SCHEDULE OF INVESTMENTS (continued)
- --------------------------------------------------------------------------------
Shares
Par Value COMMON STOCK -- 88.6% Value
- ---------- ---------------------------------------------- -----------
CLOSED-END FUNDS -- 3.6%
90,000 Royce Global Trust, Inc. ................. $ 455,625
90,000 Royce Micro-Cap Trust, Inc. .............. 911,250
60,000 Scudder New Europe Fund, Inc. ............ 907,500
25,000 Templeton Dragon Fund, Inc. .............. 268,750
-----------
2,543,125
-----------
TOTAL COMMON STOCK (COST $45,284,516) 61,944,929
-----------
PREFERRED STOCK -- 0.2% (COST $132,739)
35,000 Telos Corporation, 12% Cumulative
Exchangable Preferred ................ 158,025
-----------
U.S. GOVERNMENT AGENCY BONDS -- 11.3%
$1,000,000 Federal Home Loan Bank, 0%, 05/14/98 ..... 979,760
$1,000,000 Federal Home Loan Bank, 5.90%, 06/19/98 .. 1,000,937
$2,000,000 Federal National Mortgage Association,
5.87% 09/25/98 ........................... 2,001,938
$2,000,000 Federal National Mortgage Association,
0%, 11/06/98 ............................. 1,906,916
$2,000,000 Federal National Mortgage Association,
5.77%, 12/17/98 .......................... 2,000,552
-----------
TOTAL U.S. GOVERNMENT AGENCY BONDS
(COST $7,869,521) 7,890,103
-----------
REPURCHASE AGREEMENTS(1) -- 1.2% (COST $866,000)
$ 866,000 Fifth Third Bank, 5.09%, dated 12/31/97, due
01/02/98 repurchase proceeds: .......... 866,000
-----------
TOTAL INVESTMENTS -- 101.3% (COST $54,152,776) 70,859,057
-----------
LIABILITIES IN EXCESS OF OTHER ASSETS -- (1.3)% (892,497)
-----------
NET ASSETS -- 100.0% ......................... $69,966,560
===========
* Non-income producing securities.
(1) Repurchase agreements are fully collateralized by U.S. Government
obligations.
See notes to financial statements.
<PAGE>
SCHWARTZ VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
- --------------------------------------------------------------------------------
ASSETS
Investments, at value (cost of $54,152,776) (Note 1) ......... $ 70,859,057
Cash ......................................................... 870,237
Dividends receivable ......................................... 217,208
Interest receivable .......................................... 37,883
Receivable for securities sold ............................... 50,311
Other assets ................................................. 23,637
------------
TOTAL ASSETS ............................................. 72,058,333
------------
LIABILITIES
Payable for capital shares redeemed .......................... 582
Payable for securities purchased ............................. 1,213,684
Accrued investment advisory fees (Note 2) .................... 265,313
Distributions payable to shareholders ........................ 576,964
Other accrued expenses and liabilities ....................... 35,230
------------
TOTAL LIABILITIES ........................................ 2,091,773
------------
NET ASSETS ................................................... $ 69,966,560
============
NET ASSETS CONSIST OF:
Paid-in capital .............................................. $ 53,397,252
Distributions in excess of net realized gains on
investments ................................................ (136,973)
Net unrealized appreciation on investments ................... 16,706,281
------------
NET ASSETS ................................................... $ 69,966,560
============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) ................. 2,915,990
============
Net asset value, redemption price, and offering price
per share .................................................. $ 23.99
============
See notes to financial statements.
<PAGE>
SCHWARTZ VALUE FUND
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends ................................................... $ 973,032
Interest .................................................... 373,184
-----------
TOTAL INVESTMENT INCOME ................................... 1,346,216
-----------
EXPENSES
Investment advisory fees (Note 2) ........................... 940,830
Administration, accounting and transfer agent fees
(Note 2) .................................................... 130,486
Trustees' fees and expenses ................................. 54,213
Legal and audit fees ........................................ 30,433
Insurance expense ........................................... 18,175
Reports to shareholders ..................................... 6,602
Custodian fees .............................................. 8,616
Registration fees ........................................... 5,628
Other expenses .............................................. 3,128
-----------
TOTAL EXPENSES ............................................ 1,198,111
-----------
NET INVESTMENT INCOME ......................................... 148,105
-----------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains on investments ........................... 7,830,848
Net change in unrealized appreciation on
investments ............................................... 7,620,060
-----------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS .............. 15,450,908
-----------
NET CHANGE IN NET ASSETS FROM OPERATIONS ...................... $15,599,013
===========
See notes to financial statements.
<PAGE>
SCHWARTZ VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended December 31, 1997 and 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
---- ----
FROM OPERATIONS
<S> <C> <C>
Net investment income (loss) .................... $ 148,105 $ (45,028)
Net realized gains on investments ............... 7,830,848 5,144,508
Net change in unrealized appreciation on
investments ................................... 7,620,060 3,932,331
------------ ------------
Net increase in net assets from operations ........ 15,599,013 9,031,811
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income ...................... (148,105) --
From net realized gains on investments .......... (7,879,894) (4,922,816)
In excess of net realized gains on investments .. (136,973) --
------------ ------------
Net decrease in net assets from distributions to
shareholders .................................... (8,164,972) (4,922,816)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS(A):
Proceeds from shares sold ....................... 7,555,701 5,572,508
Reinvestment of distributions to shareholders ... 7,588,008 4,524,185
Payments for shares redeemed .................... (7,716,318) (12,237,448)
------------ ------------
Net increase (decrease) in net assets from
capital share transactions ...................... 7,427,391 (2,140,755)
------------ ------------
TOTAL INCREASE IN NET ASSETS ...................... 14,861,432 1,968,240
NET ASSETS:
Beginning of year ............................... 55,105,128 53,136,888
------------ ------------
End of year ..................................... $ 69,966,560 $ 55,105,128
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME ............... $ $
============ ============
- ----------
(A) SUMMARY OF CAPITAL SHARE ACTIVITY:
Shares sold ..................................... 324,868 264,865
Shares issued in reinvestment of distributions
to shareholders ............................... 316,298 213,506
Shares redeemed ................................. (326,230) (580,219)
------------ ------------
Net increase (decrease) in shares outstanding ... 314,936 (101,848)
Shares outstanding, beginning of year ........... 2,601,054 2,702,902
------------ ------------
Shares outstanding, end of year ................. 2,915,990 2,601,054
============ ============
See notes to financial statements.
</TABLE>
<PAGE>
SCHWARTZ VALUE FUND
FINANCIAL HIGHLIGHTS
Per Share Data for a Share Outstanding
Throughout Each Period
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31, July 20, 1993 (A)
----------------------- To
1997 1996 1995 1994 Dec. 31, 1993
---- ---- ---- ---- -------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period ....... $ 21.19 $ 19.66 $ 18.12 $ 20.97 $ 19.71
------- ------- ------- ------- -------
Income from investment operations:
Net investment income (loss) ............. 0.06 (0.02) (0.03) (0.05) (0.06)
Net realized and unrealized gains
(losses) on investments ................ 5.88 3.61 3.09 (1.37) 1.95
------- ------- ------- ------- -------
Total from investment operations ............. 5.94 3.59 3.06 (1.42) 1.89
------- ------- ------- ------- -------
Less distributions:
From net investment income ................. (0.06) -- -- -- --
From net realized gains on investments ..... (3.03) (2.06) (1.52) (1.36) (0.63)
In excess of net realized gains on
investments .............................. (.05) -- -- (0.07) --
------- ------- ------- ------- -------
Total distributions .......................... (3.14) (2.06) (1.52) (1.43) (0.63)
------- ------- ------- ------- -------
Net asset value at end of period ............. $ 23.99 $ 21.19 $ 19.66 $ 18.12 $ 20.97
======= ======= ======= ======= =======
Total return ................................. 28.0% 18.3% 16.9% (6.8)% 9.6%(B)
======= ======= ======= ======= =======
Ratios/Supplementary Data:
Ratio of expenses to average net assets ...... 1.91% 1.97% 2.00% 2.01% 2.13%(C)
Ratio of net investment income (loss) to
average net assets ......................... 0.24% (0.08)% (0.18)% (0.36)% (0.63)%(C)
Portfolio turnover rate ...................... 47% 50% 70% 78% 65%(C)
Average commission rate ...................... $0.0468 $0.0454 -- -- --
Net assets at end of period (000's) .......... $69,967 $55,105 $53,137 $45,097 $40,704
</TABLE>
- ----------------
(A) Commencement of operations.
(B) Not annualized.
(C) Annualized.
See notes to financial statements.
<PAGE>
SCHWARTZ VALUE FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
- --------------------------------------------------------------------------------
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 primarily 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. Distributions
which exceed net realized gains for financial reporting purposes but not
for tax purposes, if any, are shown as distributions in excess of net
realized gains in the accompanying statements.
<PAGE>
(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.
(d) DIVIDENDS AND DISTRIBUTIONS -- Dividends from net investment income
and net capital gains, if any, are declared and paid annually in December.
Dividends and distributions to shareholders are recorded on the
ex-dividend date.
(e) REPURCHASE AGREEMENTS -- The Fund intends to enter into repurchase
agreements only with its Custodian, banks having assets in excess of $10
billion, and creditworthy primary U.S. Government securities dealers.
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. With respect to such agreements, it is the Fund's
policy to take possession of the underlying securities and, on a daily
basis, mark-to-market such securities to ensure that the value, including
accrued interest, is at least equal to the amount to be repaid to the Fund
under each agreement. The seller under a repurchase agreement, is required
to pledge securities as collateral pursurant to the agreement at not less
than 102% of the repurchase price (including accrued interest). Repurchase
agreements are considered to be loans by a Fund under the 1940 Act.
(f) 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 Countrywide Fund Services, Inc. (CFS), 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.
Pursuant to an Administration, Accounting and Transfer Agency Agreement between
the Fund and CFS, CFS 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
<PAGE>
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 CFS, CFS 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 CFS 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, 1997 were $27,221,664
and $31,701,528, respectively. As of December 31, 1997, net unrealized
appreciation of securities was $16,569,639 for federal income tax purposes of
which $18,142,440 related to appreciated securities and $1,572,801 related to
depreciated securities. The aggregate cost of investments at December 31, 1997,
for federal income tax purposes was $54,289,418.
<PAGE>
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Shareholders and Trustees of
Schwartz Value Fund:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of the Schwartz Value Fund (the "Fund") as of
December 31, 1997, 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, 1997, 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 the Schwartz Value
Fund at December 31, 1997, 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 16, 1998
<PAGE>
Schwartz Value Fund
INVESTMENT PHILOSOPHY
Schwartz Value Fund ("SVF") seeks long-term capital appreciation 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
attempts to buy excellent companies at a fair price. The essence of value
investing is finding companies with great business characteristics which by
their nature, offer 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>
SCHWARTZ VALUE FUND
a series of
Schwartz Investment Trust
3707 W. Maple Road
Bloomfield Hills, Michigan 48301
(248) 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
COUNTRYWIDE FUND SERVICES, INC.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
AUDITORS
DELOITTE & TOUCHE LLP
1700 Courthouse Plaza Northeast
Dayton, Ohio 45402
LEGAL COUNSEL
SULLIVAN & WORCESTER LLP
1025 Connecticut Avenue, N.W.
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, 1997,
1996, 1995, 1994 and 1993
(ii) Financial Statements included in Part B:
Statement of Assets and Liabilities, December 31, 1997
Statement of Operations for the Year Ended December 31, 1997
Statement of Changes in Net Assets for the Years Ended
December 31, 1997 and 1996
Schedule of Investments, December 31, 1997
Financial Highlights for the Years Ended December 31, 1997,
1996, 1995, 1994 and 1993
Notes to Financial Statements, December 31, 1997
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 Agency Agreement
with Countrywide Fund Services, Inc.*
- 1 -
<PAGE>
(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, 1998, there were 437 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 paid in satisfaction of judgments, in compromise or as
fines and penalties, and expenses, including reasonable accountants'
and counsel fees, incurred by any Covered
- 2 -
<PAGE>
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 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
- 3 -
<PAGE>
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 such person to repay the advance if
it is ultimately determined that such person is not entitled to
indemnification.
- 4 -
<PAGE>
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 $235 million as of December 31, 1997. 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 other business,
profession, vocation or employment of a substantial nature
engaged in at any time during the past two years:
- 5 -
<PAGE>
(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) Robert B. Dailey
(vi) George O. Sertl
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
- 6 -
<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.
- 7 -
<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 1st day of May, 1998.
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.
Signature Title Date
--------- ----- ----
/s/ Gregory J. Schwartz Chairman of May 1, 1998
- ----------------------------- the Board
Gregory J. Schwartz and Trustee
/s/ George P. Schwartz President May 1, 1998
- ----------------------------- and Trustee
George P. Schwartz
/s/ Richard L. Platte, Jr. Vice President, May 1, 1998
- ----------------------------- Secretary and
Richard L. Platte, Jr. Treasurer
/s/ Donald J. Dawson, Jr. Trustee May 1, 1998
- -----------------------------
Donald J. Dawson, Jr.
/s/ Fred A. Erb Trustee May 1, 1998
- -----------------------------
Fred A. Erb
/s/ Sidney F. McKenna Trustee May 1, 1998
- -----------------------------
Sidney F. McKenna
/s/ John J. McHale Trustee May 1, 1998
- -----------------------------
John J. McHale
<PAGE>
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-lA.
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 6 to Registration
Statement under the Securities Act of 1933 filed under Registration Statement
No. 33-51626 of our report dated January 16, 1998, relating to Schwartz Value
Fund appearing in the Statement of Additional Information, which is part of such
Registration Statement, and to the references to us under the captions
"Independent Auditors" and "Financial Highlights" in such Registration
Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Dayton, Ohio
April 24, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000891160
<NAME> SCHWARTZ INVESTMENT TRUST
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 54,152,776
<INVESTMENTS-AT-VALUE> 70,859,057
<RECEIVABLES> 305,402
<ASSETS-OTHER> 23,637
<OTHER-ITEMS-ASSETS> 870,237
<TOTAL-ASSETS> 72,058,333
<PAYABLE-FOR-SECURITIES> 1,213,684
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 878,089
<TOTAL-LIABILITIES> 2,091,773
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 53,397,252
<SHARES-COMMON-STOCK> 2,915,990
<SHARES-COMMON-PRIOR> 2,601,054
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (136,973)
<ACCUM-APPREC-OR-DEPREC> 16,706,281
<NET-ASSETS> 69,966,560
<DIVIDEND-INCOME> 973,032
<INTEREST-INCOME> 373,184
<OTHER-INCOME> 0
<EXPENSES-NET> 1,198,111
<NET-INVESTMENT-INCOME> 148,105
<REALIZED-GAINS-CURRENT> 7,830,848
<APPREC-INCREASE-CURRENT> 7,620,060
<NET-CHANGE-FROM-OPS> 15,599,013
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 148,105
<DISTRIBUTIONS-OF-GAINS> 7,879,894
<DISTRIBUTIONS-OTHER> 136,973
<NUMBER-OF-SHARES-SOLD> 324,868
<NUMBER-OF-SHARES-REDEEMED> 326,230
<SHARES-REINVESTED> 316,298
<NET-CHANGE-IN-ASSETS> 14,861,432
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 49,046
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 940,830
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,198,111
<AVERAGE-NET-ASSETS> 62,762,503
<PER-SHARE-NAV-BEGIN> 21.19
<PER-SHARE-NII> .06
<PER-SHARE-GAIN-APPREC> 5.88
<PER-SHARE-DIVIDEND> (.06)
<PER-SHARE-DISTRIBUTIONS> 3.08
<RETURNS-OF-CAPITAL> .05
<PER-SHARE-NAV-END> 23.99
<EXPENSE-RATIO> 1.91
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
