[LOGO]
Shareholder Accounts Corporate Offices
-------------------- -----------------
c/o Countrywide Fund 3707 W. Maple Road
Services, Inc. Bloomfield Hills, MI 48301
P.O. Box 5354 (248) 644-8500
Cincinnati, OH 45201-5354 Fax (248) 644-4250
1-800-543-0407
<PAGE>
Schwartz Value Fund
Dear Fellow Shareowner:
I've long been intrigued by the ancient Chinese toast, "May you live in
interesting times." It's a paradoxical wish which some consider a curse. 1998
certainly proved to be interesting times for investors and in many respects, a
paradoxical year. Worldwide commodity prices went off the cliff, while Asia,
Latin America and Russia experienced chaotic economic conditions. Here at home,
while the President was being impeached, the domestic economy continued to roar
ahead with virtually no unemployment and no inflation. (What a country!) U.S.
equity markets reflected this surreal environment. In a year when more stocks
went down than up, the S&P 500 Index was up an incredible 28.6%.
This paradox was reflected in the Schwartz Value Fund's disappointing 1998
performance of -10.4%. (For the fifteen-year period ended December 31, 1998, the
compound annual rate of return was +12.3%.) Some shareholders have asked why the
Fund performed so poorly last year in relation to the quoted averages. First,
let me assure you that the Schwartz Value Fund was not managed any differently
in 1998 than in previous years. We maintained our disciplined approach of buying
small and mid-sized companies with attractive growth potential, at prices below
intrinsic value. But clearly, our lower risk, value style was totally
out-of-favor last year. The popular stock averages seemed to indicate that it
was another wonderful year for investing. However, a closer look reveals that
most stocks had astonishingly poor results last year and a small number of
high-flyers accounted for most of the gains and all of the headlines. Indeed, a
handful of mega-cap issues that dominate the indices had spectacular price
run-ups, resulting in highly stratified returns by market capitalization, as the
following table compiled by Salomon Smith Barney shows:
1998
By Capitalization Unweighted Performance
----------------- ----------------------
Less than $250 Million -24.1%
$250 Million-$2 Billion -16.6
$2 Billion-$5 Billion -6.1
$5 Billion-$20 Billion +6.2
Greater than $20 Billion +25.9
The larger the market cap, the greater the appreciation last year. In the
Russell 2000, the largest decile by size was up 41% while deciles 5 through 10
(the size of most of our companies) were down an average of 33%. Needless to
say, anyone focusing investment efforts on anything other than the largest
companies was disappointed. That was certainly our experience in managing the
Schwartz Value Fund. The outperformance of large-cap stocks over small-caps
represents a departure from the long-term norm. This aberration has had little
to do with the financial performance of the companies themselves, but instead is
the product of indexing, momentum investing and foreign investors' proclivity to
buy large-cap U.S. stocks, regardless of price. Since investment styles go
through cycles, these trends are apt to prove transitory. The narrowness of the
market leadership is cause for concern. With the S&P 500
<PAGE>
selling at 27 times earnings and profits generally flattening, the downside risk
in big-caps is noteworthy, since there is little room for error. If the U.S.
economy enters a recessionary period, or gets jolted by unexpected bad news on
the dollar, inflation or interest rates, things could get ugly for
high-expectation stocks. Now more than ever, we are convinced of the merits of
value investing to generate favorable long-term returns and minimize risk.
Even though the Fund was down last year, there were bright spots. Most of our
companies made good fundamental progress in their operations and improved their
financial and competitive positions, even though their shares languished from
lack of investor interest. In fact, ten issues in the portfolio appreciated 30%
or more. One large position, Sunrise Assisted Living, Inc., was up 100% in 1998.
During the year, several of our companies were acquired and other holdings were
sold at substantial profits. In the general market correction this past fall,
many stocks fell to prices not seen since the early nineties. This created an
opportunity to add to attractive holdings and to also establish new positions in
companies that were previously too expensive. New names include Impath Inc., a
leading healthcare information and service provider. The Company's consultative
services are enhanced by its extensive database of cancer cases and outcomes.
Another new holding is Strayer Education, Inc., a rapidly expanding, for-profit,
adult education company which offers post-secondary degree programs. This theme
seems to have a lot of staying power with the growing need to train and retrain
individuals for technical careers. The Fund increased its position in
Perceptron, Inc., a leader in laser and machine vision technology. With a new
generation of proprietary products rolling out in 1999, profits should be
enhanced meaningfully. These are financially powerful and growing companies with
significant appreciation prospects.
No capital gains distribution was made at year-end and the net asset value of
the Fund finished the year at $21.50 per share.
As frustrating as 1998 was, we're sticking to our discipline, confident that our
turn in the sun is coming.
Best personal regards,
SCHWARTZ VALUE FUND
/s/ George P. Schwartz
George P. Schwartz, CFA
President
February 2, 1999
The annual meeting of shareholders will be held at Bloomfield Hills Country Club
on Long Lake Road in Bloomfield Hills, Michigan on Thursday, April 22, 1999 at
10:00 A.M.
2
<PAGE>
Annual Total Rates of Return
<TABLE>
<CAPTION>
1984 1985 1986 1987 1988 1989 1990 1991 1992
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <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% 22.7%
RUSSELL 2000
INDEX (B) -7.3% 31.1% 5.7% -8.8% 24.9% 16.2% -19.5% 46.0% 18.4%
NASDAQ COMPOSITE (B) -11.2% 31.4% 7.4% -5.3% 15.4% 19.3% -17.8% 56.8% 15.5%
VALUE LINE COMPOSITE (B) -8.4% 20.7% 5.0% -10.6% 15.4% 11.2% -24.3% 27.2% 7.0%
STANDARD & POORS 500 6.1% 31.6% 18.7% 5.3% 16.8% 31.6% -3.2% 30.4% 7.6%
CONSUMER
PRICE INDEX 4.3% 3.5% 1.1% 4.4% 4.4% 4.6% 6.1% 3.1% 2.9%
</TABLE>
<TABLE>
<CAPTION>
Compound Annual
Rates of Return
-----------------------
3 10 15
1993 1994 1995 1996 1997 1998 Year Year Year
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SCHWARTZ
VALUE FUND( (A)) 20.5% -6.8% 16.9% 18.3% 28.0% -10.4% 10.7% 11.5% 12.3%
RUSSELL 2000
INDEX( (B)) 18.9% -3.2% 26.2% 14.8% 20.5% -3.5% 10.1% 12.1% 10.7%
NASDAQ COMPOSITE( (B)) 14.7% -3.2% 39.9% 22.7% 21.6% 39.6% 27.7% 19.1% 14.7%
VALUE LINE COMPOSITE( (B)) 10.7% -6.0% 19.3% 13.4% 21.1% -3.8% 9.7% 6.5% 5.6%
STANDARD & POORS 500 10.1% 1.3% 37.5% 22.9% 33.4% 28.6% 28.2% 19.2% 17.9%
CONSUMER
PRICE INDEX 2.7% 2.7% 2.6% 3.3% 1.7% 1.5% 2.2% 3.1% 3.3%
</TABLE>
- ----------------
(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.
SCHWARTZ VALUE FUND
Ten Largest Equity Holdings
December 31, 1998
Market
Shares Company Value
- ------ ------- -----
165,000 Ottawa Financial Corporation $3,506,250
180,000 Rainbow Technologies, Inc. $3,386,250
238,200 Data Research Associates, Inc. $3,334,800
300,000 Griffon Corporation $3,187,500
150,000 SPSS Inc. $2,831,250
200,000 Thomas Nelson Inc. $2,700,000
150,000 Transition Systems, Inc. $2,250,000
75,000 K-Swiss Inc. -- Class A $2,015,625
250,000 Input/Output, Inc. $1,828,125
150,000 Unico American Corporation $1,725,000
3
<PAGE>
SCHWARTZ VALUE FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
================================================================================
Shares COMMON STOCK -- 96.0% Value
- --------------------------------------------------------------------------------
APPAREL & TEXTILES -- 3.6%
75,000 K-Swiss Inc. -- Class A 2,015,625
15,000 Nautica Enterprises, Inc.* 225,000
------------
2,240,625
------------
BUILDING MATERIALS & CONSTRUCTION -- 1.6%
50,000 Gardner Denver, Inc.* 737,500
40,000 Schuler Homes, Inc.* 285,000
------------
1,022,500
------------
CONSUMER PRODUCTS -- DURABLES -- 6.5%
52,500 Craftmade International, Inc. 872,813
300,000 Griffon Corporation* 3,187,500
------------
4,060,313
------------
CONSUMER PRODUCTS -- NONDURABLES -- 4.5%
20,000 Helen of Troy Limited* 293,750
250,000 Pentech International, Inc.* 226,563
15,000 Tupperware Corporation 246,562
9,800 Velcro Industries N.V. 1,460,200
24,200 Weyco Group, Inc. 614,075
------------
2,841,150
------------
EDUCATION -- 0.8%
5,000 Childtime Learning Centers, Inc.* 73,125
15,000 Computer Learning Centers, Inc.* 100,313
15,000 Nobel Learning Communities, Inc.* 82,500
8,000 Quest Education Corporation* 80,000
2,500 Strayer Education, Inc. 88,125
25,000 Whitman Education Group, Inc.* 82,812
------------
506,875
------------
ENERGY & MINING -- 9.9%
35,000 Diamond Offshore Drilling, Inc. 829,063
40,000 Forest Oil Corporation* 340,000
400,000 Golden Star Resources Ltd.* 425,000
175,000 Inco, Ltd. -- Class VBN 885,937
250,000 Input/Output, Inc.* 1,828,125
30,000 Newmont Mining Corporation 541,875
4
<PAGE>
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares COMMON STOCK -- 96.0% Value
- --------------------------------------------------------------------------------
150,000 Patterson Energy, Inc.* 609,375
100,000 Sante Fe Energy Resources, Inc.* 737,500
------------
6,196,875
------------
ENVIRONMENTAL SERVICES -- 1.0%
12,400 GZA GeoEnvironmental Technologies, Inc.* 54,250
73,800 Sevenson Environmental Services, Inc. 590,400
------------
644,650
------------
FINANCE -- BANKING & THRIFTS -- 7.4%
California Federal Contingent Participation
15,000 Interests 185,625
9,375 Chemical Financial Corporation 318,750
15,000 Flagstar Bancorp, Inc. 391,875
165,000 Ottawa Financial Corporation 3,506,250
12,150 Peoples Bancorp 249,075
------------
4,651,575
------------
FINANCE -- INSURANCE -- 11.1%
30,000 Acceptance Insurance Companies Inc.* 607,500
35,000 The Commerce Group, Inc. 1,240,313
50,000 Danielson Holding Corporation* 178,125
18,700 Frontier Adjusters of America, Inc. 45,581
40,000 Leucadia National Corporation 1,260,000
15,000 Loews Corporation 1,473,750
25,000 MMI Companies, Inc. 418,750
150,000 Unico American Corporation 1,725,000
------------
6,949,019
------------
HEALTHCARE -- 9.0%
132,000 America Service Group, Inc.* 1,716,000
10,000 HCR Manor Care, Inc.* 293,750
50,000 Hologic, Inc.* 606,250
10,000 IMPATH Inc.* 265,000
10,000 Sunrise Assisted Living, Inc.* 518,750
150,000 Transition Systems, Inc.* 2,250,000
------------
5,649,750
------------
HOLDING COMPANY -- 1.8%
20,000 Maxxam Inc.* 1,147,500
------------
5
<PAGE>
SCHEDULE OF INVESTMENTS (Continued)
================================================================================
Shares COMMON STOCK -- 96.0% Value
- --------------------------------------------------------------------------------
INDUSTRIAL PRODUCTS & SERVICES -- 3.9%
20,000 Greif Brothers Corporation -- Class A 583,750
50,000 Maritrans Inc. 328,125
75,000 United Dominion Industries, Ltd. 1,528,125
------------
2,440,000
------------
PRINTING & PUBLISHING -- 4.9%
200,000 Thomas Nelson, Inc. 2,700,000
465 The Detroit Legal News Company 67,890
7,200 Value Line, Inc. 283,500
------------
3,051,390
------------
REAL ESTATE -- .6%
16,499 I. Gordon Realty Corporation* 150,553
15 LaFourche Realty Coompany, Inc. 78,000
10,000 Malan Realty Investors, Inc. 158,750
------------
387,303
------------
RETAIL -- 1.4%
125,000 Charming Shoppes, Inc.* 539,063
47,000 Ellett Brothers, Inc. 217,375
20,000 The Good Guys, Inc.* 128,750
------------
885,188
------------
TECHNOLOGY & ELECTRONICS -- 21.1%
33,500 Astrosystems, Inc.* 83,750
238,200 Data Research Associates, Inc. 3,334,800
25,000 Littelfuse, Inc.* 481,250
15,600 LoJack Corporation* 185,250
200,000 Perceptron, Inc.* 1,325,000
180,000 Rainbow Technologies, Inc.* 3,386,250
150,000 SPSS, Inc.* 2,831,250
60,000 Universal Electronics Inc.* 645,000
125,000 X-Rite, Incorporated 968,750
------------
13,241,300
------------
TRANSPORTATION -- 2.8%
25,000 Aviall, Inc.* 293,750
50,000 Providence & Worcester Railroad Company 625,000
114,300 The Morgan Group, Inc. -- Class A 842,962
------------
1,761,712
------------
MISCELLANEOUS -- .1%
12,500 Bull & Bear Group, Inc. -- Class A* 37,500
------------
CLOSED-END FUNDS -- 4.0%
300,000 Royce Global Trust, Inc. 1,462,500
38,700 Royce Micro-Cap Trust, Inc.* 343,462
40,000 Scudder New Europe Fund, Inc. 705,000
------------
2,510,962
------------
TOTAL COMMON STOCK (Cost $50,483,072) 60,226,187
------------
PREFERRED STOCK -- .2% (Cost $132,739)
Telos Corporation, 12% Cumulative
35,000 Exchangable Preferred* 105,000
------------
Par Value
- ---------
CORPORATE BONDS -- 1.6% (Cost $1,052,500)
$ 1,000,000 Whittaker Corp., 7.00%, 5/01/05 990,000
------------
REPURCHASE AGREEMENTS((1)) -- 2.6% (Cost $1,647,000)
1,647,000 Fifth Third Bank, 3.82%, dated 12/31/98, due
01/04/99 repurchase proceeds: 1,647,000
------------
TOTAL INVESTMENTS -- 100.4% (Cost $53,315,311) 62,968,187
------------
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.4)% (270,758)
------------
NET ASSETS -- 100.0% $ 62,697,429
============
* Non-income producing securities.
(1) Repurchase agreements are fully collateralized by U.S. Government agency
obligations.
See notes to financial statements.
7
<PAGE>
SCHWARTZ VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
===============================================================================
ASSETS
Investments, at market value (cost of $53,315,311)
(Note 1) ................................................. $ 62,968,187
Cash ....................................................... 4,122
Receivable for securities sold ............................. 158,995
Receivable for capital shares sold ......................... 4,570
Dividends receivable ....................................... 168,486
Interest receivable ........................................ 11,841
Other assets ............................................... 32,269
------------
TOTAL ASSETS ........................................... 63,348,470
============
LIABILITIES
Payable for capital shares redeemed ........................ 5,440
Payable for securities purchased ........................... 381,757
Accrued investment advisory fees (Note 2) .................. 227,212
Other accrued expenses and liabilities ..................... 36,632
------------
TOTAL LIABILITIES ...................................... 651,041
------------
NET ASSETS ................................................. $ 62,697,429
============
NET ASSETS CONSIST OF
Paid-in capital ............................................ $ 53,723,650
Accumulated net realized losses from security
transactions ............................................. (679,097)
Net unrealized appreciation on investments ................. 9,652,876
------------
NET ASSETS ................................................. $ 62,697,429
============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) ............... 2,916,734
============
Net asset value, redemption price, and offering price
per share .................................................. $ 21.50
============
See notes to financial statements.
8
<PAGE>
SCHWARTZ VALUE FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
===============================================================================
INVESTMENT INCOME
Dividends ................................................. $ 592,326
Interest .................................................. 466,168
-----------
TOTAL INVESTMENT INCOME ................................. 1,058,494
-----------
EXPENSES
Investment advisory fees (Note 2) ......................... 1,024,114
Administration, accounting and transfer agent fees
(Note 2) ................................................ 141,478
Trustees' fees and expenses ............................... 50,838
Legal and audit fees ...................................... 33,912
Registration fees ......................................... 25,272
Insurance expense ......................................... 18,988
Reports to shareholders ................................... 10,730
Custodian fees ............................................ 8,016
Other expenses ............................................ 8,276
-----------
TOTAL EXPENSES .......................................... 1,321,624
NET INVESTMENT LOSS ......................................... (263,130)
-----------
REALIZED AND UNREALIZED LOSSES ON INVESTMENTS
Net realized losses on investments ........................ (542,124)
Net change in unrealized depreciation on
investments ............................................. (7,053,405)
-----------
NET REALIZED AND UNREALIZED LOSSES ON INVESTMENTS ........... (7,595,529)
-----------
NET DECREASE IN NET ASSETS FROM OPERATIONS .................. $(7,858,659)
===========
See notes to financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
SCHWARTZ VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
=========================================================================================
1998 1997
- -----------------------------------------------------------------------------------------
FROM OPERATIONS
<S> <C> <C>
Net investment income (loss) ......................... $ (263,130) $ 148,105
Net realized gains (losses) on investments ........... (542,124) 7,830,848
Net change in unrealized appreciation/depreciation
on investments ..................................... (7,053,405) 7,620,060
------------ ------------
Net increase (decrease) in net assets from operations .. (7,858,659) 15,599,013
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ........................... -- (148,105)
From net realized gains on investments ............... -- (7,879,894)
In excess of net realized gains on investments ....... -- (136,973)
------------ ------------
Net decrease in net assets from distributions to
shareholders ......................................... -- (8,164,972)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS((A))
Proceeds from shares sold ............................ 8,246,596 7,555,701
Reinvestment of distributions to shareholders ........ -- 7,588,008
Payments for shares redeemed ......................... (7,657,068) (7,716,318)
------------ ------------
Net increase in net assets from capital share
transactions ......................................... 589,528 7,427,391
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ................ (7,269,131) 14,861,432
NET ASSETS
Beginning of year .................................... 69,966,560 55,105,128
------------ ------------
End of year .......................................... $ 62,697,429 $ 69,966,560
UNDISTRIBUTED NET INVESTMENT INCOME .................... $ -- $ --
============ ============
(A) SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ....................................... 344,319 324,868
Shares issued in reinvestment of distributions
to shareholders ................................ -- 316,298
Shares redeemed ................................... (343,575) (326,230)
------------ ------------
Net increase in shares outstanding ................ 744 314,936
Shares outstanding, beginning of year ............. 2,915,990 2,601,054
------------ ------------
Shares outstanding, end of year ................... 2,916,734 2,915,990
============ ============
</TABLE>
See notes to financial statements.
10
<PAGE>
<TABLE>
<CAPTION>
SCHWARTZ VALUE FUND
FINANCIAL HIGHLIGHTS
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
=========================================================================================================
Year Ended December 31,
--------------------------------------------------------------------
1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning
of year ...................... $ 23.99 $ 21.19 $ 19.66 $ 18.12 $ 20.97
--------- --------- --------- --------- ---------
Income from investment
operations:
Net investment income
(loss) ................... (0.09) 0.06 (0.02) (0.03) (0.05)
Net realized and
unrealized gains
(losses) on investments .. (2.40) 5.88 3.61 3.09 (1.37)
--------- --------- --------- --------- ---------
Total from investment
operations ................... (2.49) 5.94 3.59 3.06 (1.42)
--------- --------- --------- --------- ---------
Less distributions:
From net investment income ... -- (0.06) -- -- --
From net realized gains on
investments ................ -- (3.03) (2.06) (1.52) (1.36)
In excess of net realized
gains on investments ....... -- (0.05) -- -- (0.07)
--------- --------- --------- --------- ---------
Total distributions ............ -- (3.14) (2.06) (1.52) (1.43)
Net asset value at end of
year ......................... $ 21.50 $ 23.99 $ 21.19 $ 19.66 18.12
========= ========= ========= ========= =========
Total return ................... (10.4)% 28.0% 18.3% 16.9% (6.8)%
========= ========= ========= ========= =========
Ratios/Supplementary Data:
Ratio of expenses to average
net assets ................... 1.94% 1.91% 1.97% 2.00% 2.01%
Ratio of net investment
income (loss) to average
net assets ................... (0.39)% 0.24% (0.08)% (0.18)% (0.36)%
Portfolio turnover rate ........ 54% 47% 50% 70% 78%
Net assets at end of year
(000's) ...................... $ 62,697 69,967 $ 55,105 $ 53,137 $ 45,097
</TABLE>
- ----------------
(A) Commencement of operations.
(B) Not annualized.
(C) Annualized.
See notes to financial statements.
11
<PAGE>
SCHWARTZ VALUE FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
===============================================================================
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 small cap value stocks. This investment in
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 or excise 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 statements of changes and 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. Net investment losses, for tax purposes, are reclassified to
paid in capital.
(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. Discount and premiums on securities purchased are
amortized in accordance with income tax regulations, which approximates
generally accepted accounting principles.
(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.
12
<PAGE>
(e) Repurchase agreements -- The Fund may enter into repurchase agreements
(agreements to purchase securities subject to the seller's agreement to
repurchase them at a specified time and price) with well-established
registered securities dealers or banks. Repurchase agreements are the
equivalent of loans by the Fund. The Fund's policy is 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 the agreement.
(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.
The Distributor is the primary 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
Cost of purchases and proceeds from sales and maturities of investments other
than short-term investments, for the year ended December 31, 1998 were
$38,613,325 and $33,699,036, respectively.
4. FEDERAL INCOME TAXES
As of December 31, 1998, net unrealized appreciation of securities was
$8,991,949 for federal income tax purposes of which $12,883,935 related to
appreciated securities and $3,891,986 related to depreciated securities. The
aggregate cost of investments at December 31,1998, for federal income tax
purposes was $53,976,238. At December 31, 1998, the Fund had a capital loss
carryforward of $18,170 for Federal income tax purposes, expiring December 31,
2006. This carryforward is available to offset future capital gains, if any.
13
<PAGE>
INDEPENDENT AUDITORS' REPORT
===============================================================================
To the Shareholders and Trustees of
Schwartz Value Fund:
We have audited the accompanying statement of assets and liabilities of Schwartz
Value Fund (the "Fund"), including the schedule of investments, as of December
31, 1998, and the related statements of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Funds'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, 1998, 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 referred to
above present fairly, in all material respects, the financial position of
Schwartz Value Fund as of December 31, 1998, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and the financial highlights for each of the five years
in the period then ended in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Dayton, Ohio
January 15, 1998
14
<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.
15
<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, V.P./Secretary/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
VALUE FUND
a series of
SCHWARTZ
INVESTMENT TRUST
ANNUAL REPORT
for the year ended
DECEMBER 31, 1998
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000891160
<NAME> SCHWARTZ INVESTMENT TRUST
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 53,315,311
<INVESTMENTS-AT-VALUE> 62,968,187
<RECEIVABLES> 343,892
<ASSETS-OTHER> 32,269
<OTHER-ITEMS-ASSETS> 4,122
<TOTAL-ASSETS> 63,348,470
<PAYABLE-FOR-SECURITIES> 381,757
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 269,284
<TOTAL-LIABILITIES> 651,041
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 53,723,650
<SHARES-COMMON-STOCK> 2,916,734
<SHARES-COMMON-PRIOR> 2,915,990
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (679,097)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,652,876
<NET-ASSETS> 62,697,429
<DIVIDEND-INCOME> 592,326
<INTEREST-INCOME> 466,168
<OTHER-INCOME> 0
<EXPENSES-NET> 1,321,624
<NET-INVESTMENT-INCOME> (263,130)
<REALIZED-GAINS-CURRENT> (542,124)
<APPREC-INCREASE-CURRENT> (7,053,405)
<NET-CHANGE-FROM-OPS> 7,858,659)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 344,319
<NUMBER-OF-SHARES-REDEEMED> 343,575
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (7,269,131)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 136,973
<GROSS-ADVISORY-FEES> 1,024,114
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,321,624
<AVERAGE-NET-ASSETS> 68,254,334
<PER-SHARE-NAV-BEGIN> 23.99
<PER-SHARE-NII> (.09)
<PER-SHARE-GAIN-APPREC> (2.40)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 21.50
<EXPENSE-RATIO> 1.94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
