SCHWARTZ
VALUE FUND
SCHWARTZ INVESTMENT TRUST
-------------------------
PROSPECTUS
MAY 1, 1998
REVISED DECEMBER 24, 1998
<PAGE>
PROSPECTUS
May 1, 1998
Revised December 24, 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 small-cap value 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.
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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
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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
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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
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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
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<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 small-cap value 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 primary 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
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15
<PAGE>
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.
- --------------------------------------------------------------------------------
