SCHWARTZ
VALUE FUND
a series of
SCHWARTZ
INVESTMENT TRUST
ANNUAL REPORT
for the year ended
DECEMBER 31, 1999
<PAGE>
SHAREHOLDER ACCOUNTS CORPORATE OFFICES
-------------------- -----------------
c/o Countrywide Fund 3707 W. Maple Road
Services, Inc. Bloomfield Hills, MI 48301
P.O. Box 5354 Schwartz Value Fund (248) 644-8500
Cincinnati, OH 45201-5354 Fax (248) 644-4250
1-800-543-0407
Dear Fellow Shareowner:
In many ways, 1999 was a repeat of 1998. Looking at the equity indexes, one
would assume the financial markets did extremely well in 1999. They did not.
Even though the Dow was up 25.2%, the S&P 500 up 21.0%, and the NASDAQ up an
astounding 85.5%, most stocks went down in 1999. The averages were again driven
by a few heavily weighted, high-priced technology issues. More than 50% of the
stocks on the NYSE, the S&P 500 and the NASDAQ declined in 1999. Traditional
measures of valuation lost their relevance. The IPO market sizzled and a bubble
grew to encompass the techs and Internets. At year-end, a full-fledged mania was
driving these sectors and the ten largest companies in the S&P were selling for
54 times estimated earnings, leaving little room for error. The equity market
was one of haves and have-nots; a few stocks with high prices and higher
expectations, and the great majority of stocks no one cared about. This was a
continuation of the trend in recent years of investors' preference for large-cap
issues and the avoidance of small-caps, especially small-cap value. Even in the
Russell 2000 Index, results were highly stratified. The Growth component of the
Russell, which is heavily weighted toward technology, was up 43% while the Value
component was down 1.5% in 1999. Bond investors got off no better than most
stock investors last year. The total return on long Treasuries was negative
15.1%. It was the second worst year for bonds since 1973.
In this very mixed environment, Schwartz Value Fund was down 2.5% in 1999. With
the popular stock averages soaring, it was a frustrating year for those of us
concerned with operating fundamentals and managing portfolio risk. Despite the
Fund being down last year, most of our companies improved their financial and
competitive positions.
With the market's single-minded infatuation with large-cap growth stocks, there
has been a great leveling of many small and mid-cap issues. This has created the
opportunity to purchase stocks of larger and better companies at little or no
premium. These companies are frequently industry leaders with excellent growth
prospects. The added liquidity of their stocks further enhances their appeal. We
have taken advantage of this opportunity and in a number of cases have already
seen some price appreciation reflecting these favorable characteristics.
Examples include Nova Corporation, which has gone from our cost of $23 to $32,
NCR Corporation from a cost of $30 to $39, Barra, Inc. from $23 to $36 and RSA
Security from our cost of $18 to $50. Positions have been established in
information technology, housing, real estate and selected financial service
companies. Exposure to underperforming issues has been reduced in healthcare and
consumer goods industries. These portfolio changes began to bear fruit late last
year with the Schwartz Value Fund returning +2.8% during the fourth quarter of
1999 versus the Russell 2000 Value Index of +1.5%.
The current period of economic prosperity is now going into the record books as
the longest ever. There is no apparent reason to predict an immediate end to the
expansion of the economy, but there is a danger. If the stock prices of the
popular market leaders unwind in a serious way
<PAGE>
this year, there could be a spillover effect on the broader economy. (The wealth
effect played out in reverse.) In that environment, investors would certainly
become more conscious of risk, and favor current earnings over the mere
possibility of future earnings. An increased appreciation of risk would be a
boon to the value sector. There are some signs that a rotation favoring value
has already begun, witness the extreme volatility of tech and Internet shares in
recent weeks. If this trend continues, Schwartz Value Fund will be a
beneficiary. It's overdue.
Thanks for investing in the Schwartz Value Fund. Among the many funds in which
you could invest, I think you've made a wise decision to put a portion of your
assets in this vehicle. In the period ahead, that choice may prove especially
wise.
With best regards,
SCHWARTZ VALUE FUND
/s/ George P. Schwartz
George P. Schwartz, CFA
President
February 7, 2000
P.S. A capital gain distribution, representing realized long-term gains of $1.23
per share, was paid December 31, 1999 and the Fund finished the year with a net
asset value of $19.74 per share.
2
<PAGE>
Annual Total Rates of Return
<TABLE>
<CAPTION>
1984 1985 1986 1987 1988 1989 1990 1991 1992 1993
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <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% 20.5%
RUSSELL 2000 VALUE(B) -1.4% 26.5% 4.9% -9.1% 26.0% 9.6% -24.3% 38.0% 26.3% 21.5%
RUSSELL 2000 GROWTH(B) -17.0% 29.3% 2.6% -11.4% 18.8% 19.0% -18.5% 49.6% 6.8% 12.5%
RUSSELL 2000 INDEX(B) -7.3% 31.1% 5.7% -8.8% 24.9% 16.2% -19.5% 46.0% 18.4% 18.9%
NASDAQ COMPOSITE(B) -11.2% 31.4% 7.4% -5.3% 15.4% 19.3% -17.8% 56.8% 15.5% 14.7%
VALUE LINE COMPOSITE(B) -8.4% 20.7% 5.0% -10.6% 15.4% 11.2% -24.3% 27.2% 7.0% 10.7%
STANDARD & POORS 500 6.1% 31.6% 18.7% 5.3% 16.8% 31.6% -3.2% 30.4% 7.6% 10.1%
CONSUMER PRICE INDEX 4.3% 3.5% 1.1% 4.4% 4.4% 4.6% 6.1% 3.1% 2.9% 2.7%
<CAPTION>
Compound Annual
Rates of Return
--------------------------
1994 1995 1996 1997 1998 1999 3 Year 10 Year 16 Year
---- ---- ---- ---- ---- ---- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SCHWARTZ VALUE FUND(A) -6.8% 16.9% 18.3% 28.0% -10.4% -2.5% 3.8% 10.3% 11.3%
RUSSELL 2000 VALUE(B) -3.7% 22.7% 18.4% 28.9% -8.5% -1.5% 5.1% 10.0% 9.5%
RUSSELL 2000 GROWTH(B) -3.1% 30.1% 10.7% 12.5% 0.8% 42.5% 17.3% 12.7% 9.9%
RUSSELL 2000 INDEX(B) -3.2% 26.2% 14.8% 20.5% -3.5% 19.6% 11.6% 12.4% 11.2%
NASDAQ COMPOSITE(B) -3.2% 39.9% 22.7% 21.6% 39.6% 85.5% 46.6% 24.5% 18.2%
VALUE LINE COMPOSITE(B) -6.0% 19.3% 13.4% 21.1% -3.8% -1.4% 4.7% 5.2% 5.1%
STANDARD & POORS 500 1.3% 37.5% 22.9% 33.4% 28.6% 21.0% 27.6% 18.2% 18.1%
CONSUMER PRICE INDEX 2.7% 2.6% 3.3% 1.7% 1.5% 2.7% 2.0% 2.9% 3.2%
</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.
3
<PAGE>
SCHWARTZ VALUE FUND
Ten Largest Equity Holdings
December 31, 1999
Market
Shares Company Value
------ ------- ------
105,000 SPSS Inc. $2,651,250
125,000 Ottawa Financial Corporation $2,265,625
150,000 Malan Realty Investors, Inc. $2,006,250
240,000 Data Research Associates, Inc. $1,920,000
75,000 Rainbow Technologies, Inc. $1,743,750
35,000 Universal Electronics, Inc. $1,610,000
300,000 Input/Output, Inc. $1,518,750
160,000 Griffon Corporation $1,250,000
250,000 Royce Focus Trust $1,179,688
125,000 Thomas Nelson, Inc. $1,156,250
4
<PAGE>
SCHWARTZ VALUE FUND
SCHEDULE OF INVESTMENTS
December 31, 1999
- --------------------------------------------------------------------------------
Shares COMMON STOCK -- 92.3% Value
- ------ --------------------- -----
APPAREL & TEXTILES -- .9%
10,000 K-Swiss Inc. -- Class A $ 185,781
15,000 Nautica Enterprises, Inc.* 169,687
-----------
355,468
-----------
BUILDING MATERIALS & CONSTRUCTION -- 1.8%
15,000 Champion Enterprises, Inc.* 128,437
25,000 Gardner Denver, Inc.* 417,187
30,000 Schuler Homes, Inc.* 195,000
-----------
740,624
-----------
BUSINESS & INDUSTRIAL PRODUCTS -- .2%
3,000 AptarGroup, Inc. 75,375
-----------
BUSINESS SERVICES -- 1.4%
7,500 Convergys Corporation* 230,625
7,500 NOVA Corporation* 236,719
10,000 The ServiceMaster Company 123,125
-----------
590,469
-----------
COMMUNICATION EQUIPMENT & SERVICES -- 4.8%
10,000 Advanced Communication Systems, Inc.* 191,250
6,100 Datron Systems Incorporated* 51,850
25,000 LoJack Corporation* 168,750
35,000 Universal Electronics Inc.* 1,610,000
-----------
2,021,850
-----------
COMPUTER EQUIPMENT & SERVICES -- 2.8%
50,000 Mechanical Dynamics, Inc.* 256,250
17,500 NCR Corporation* 662,813
7,500 National Data Corporation 254,531
-----------
1,173,594
-----------
5
<PAGE>
CONSUMER PRODUCTS -- DURABLES -- 6.0%
100,000 Craftmade International, Inc. 725,000
160,000 Griffon Corporation* 1,250,000
50,000 HMI Industries Inc.* 53,125
27,500 La-Z-Boy Incorporated 462,344
-----------
2,490,469
-----------
CONSUMER PRODUCTS -- NONDURABLES -- 3.2%
20,000 Helen of Troy Limited * 145,000
54,500 Velcro Industries N.V. 657,406
20,000 Weyco Group, Inc. 513,750
-----------
1,316,156
-----------
EDUCATION -- 2.1%
10,000 Childtime Learning Centers, Inc.* 123,750
5,000 DeVRY, Inc.* 93,125
20,000 Nobel Learning Communities, Inc.* 145,000
11,300 Quest Education Corporation* 98,875
10,000 Strayer Education, Inc. 197,500
75,000 Whitman Education Group, Inc.* 206,250
-----------
864,500
-----------
ELECTRONICS -- .9%
15,000 Littelfuse, Inc.* 363,984
-----------
ENERGY & MINING -- 12.2%
5,000 Diamond Offshore Drilling, Inc. 152,813
30,000 Forest Oil Corporation* 395,625
150,000 Golden Star Resources Ltd.* (2) 164,375
100,000 Inco, Ltd. -- Class VBN* 868,750
300,000 Input/Output, Inc.* 1,518,750
12,500 Newmont Mining Corporation 306,250
25,000 Oglebay Norton Company 593,750
50,000 Patterson Energy, Inc.* 650,000
50,000 Sante Fe Snyder Corporation* 400,000
-----------
5,050,313
-----------
6
<PAGE>
ENVIRONMENTAL SERVICES -- 1.1%
50,000 Sevenson Environmental Services, Inc. 475,000
-----------
FINANCE -- BANKS & THRIFTS -- 6.2%
9,375 Chemical Financial Corporation 298,828
125,000 Ottawa Financial Corporation 2,265,625
1,000 Republic Bancorp Inc. 12,141
-----------
2,576,594
-----------
FINANCE -- INSURANCE -- 2.9%
38,000 Acceptance Insurance Companies Inc.* 220,875
15,000 GAINSCO, Inc. 80,625
100,000 Queensway Financial Holdings Limited* 334,178
85,000 Unico American Corporation 595,000
-----------
1,230,678
-----------
FINANCE -- MISCELLANEOUS -- 2.7%
45,000 Countrywide Credit Industries, Inc. 1,136,250
-----------
HEALTHCARE -- 4.6%
70,000 America Service Group Inc.* 1,050,000
10,000 Brookdale Living Communities, Inc.* 123,750
5,000 IMPATH Inc.* 127,187
60,000 STERIS Corporation* 618,750
-----------
1,919,687
-----------
HOLDING COMPANIES -- 1.5%
50,000 PICO Holdings, Inc.* 615,625
-----------
7
<PAGE>
INDUSTRIAL PRODUCTS & SERVICES -- 3.3%
12,500 Crown Cork & Seal Company, Inc. 279,688
3,000 Greif Bros. Corporation -- Class A 89,250
10,000 Kaydon Corporation 268,125
50,000 Maritrans Inc. 268,750
60,000 Perceptron, Inc.* 240,000
7,500 United Dominion Industries Limited 149,531
15,000 X-Rite, Incorporated 93,750
-----------
1,389,094
-----------
INFORMATION TECHNOLOGY -- 20.3%
5,000 BARRA, Inc.* 158,750
25,000 Compuware Corporation * 931,250
240,000 Data Research Associates, Inc. 1,920,000
2,500 National Computer Systems, Inc. 94,063
12,500 RSA Security Inc.* 968,750
75,000 Rainbow Technologies, Inc.* 1,743,750
105,000 SPSS Inc.* 2,651,250
-----------
8,467,813
-----------
PRINTING & PUBLISHING -- 2.9%
465 The Detroit Legal News Company* 71,610
125,000 Thomas Nelson, Inc. 1,156,250
-----------
1,227,860
-----------
REAL ESTATE -- 5.4%
16,499 I. Gordon Realty Corporation* 150,553
15 LaFourche Realty Company, Inc. 96,000
150,000 Malan Realty Investors, Inc. 2,006,250
-----------
2,252,803
-----------
8
<PAGE>
RETAIL -- 2.5%
50,000 Charming Shoppes, Inc.* 331,250
10,000 Miami Computer Supply Corporation* 371,250
3,000 Payless ShoeSource, Inc.* 141,000
20,000 The Good Guys, Inc.* 186,250
-----------
1,029,750
-----------
TRANSPORTATION -- 2.6%
7,500 Aviation Sales Company* 123,750
Providence and Worcester Railroad
25,000 Company 200,000
135,000 The Morgan Group, Inc. -- Class A 776,250
-----------
1,100,000
-----------
TOTAL COMMON STOCK (Cost -- $32,950,766) 38,463,956
-----------
PREFERRED STOCK -- 0.3% (Cost -- $132,739)
Telos Corporation, 12% Cumulative
35,000 Exchangable Preferred* 122,500
-----------
CLOSED-END FUNDS -- 4.5% (Cost -- $1,852,119)
25,000 Central Securities Corporation 681,250
250,000 Royce Focus Trust, Inc. 1,179,688
-----------
1,860,938
-----------
9
<PAGE>
Face Amount Value
- ----------- -----
REPURCHASE AGREEMENTS(1) -- 5.8% (Cost $2,430,178)
Fifth Third Bank, 1.10%, dated 12/31/99, due
$ 2,430,178 1/03/00, repurchase proceeds: $2,430,401 $ 2,430,178
-----------
TOTAL INVESTMENTS -- 102.9% (Cost $37,365,802) 42,877,572
-----------
LIABILITIES IN EXCESS OF OTHER ASSETS -- (2.9%) (1,205,099)
-----------
NET ASSETS -- 100.0% $41,672,473
===========
* Non-income producing security.
(1) Repurchase agreements are fully collateralized by U.S. Government
obligations.
(2) Includes 100,000 warrants entitling the Fund to purchase one additional
common share per warrant for $.70 through February 25, 2001.
See notes to financial statements.
10
<PAGE>
SCHWARTZ VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
- --------------------------------------------------------------------------------
ASSETS
Investments, at value (cost of $37,365,802) (Note 1) ....... $ 42,877,572
Cash ....................................................... 4,539
Receivable for securities sold ............................. 502,045
Receivable for capital shares sold ......................... 21,318
Dividends receivable ....................................... 76,337
Interest receivable ........................................ 74
Other assets ............................................... 23,705
------------
TOTAL ASSETS ........................................... 43,505,590
------------
LIABILITIES
Payable for capital shares redeemed ........................ 309,772
Payable for securities purchased ........................... 1,087,813
Accrued investment advisory fees (Note 2) .................. 168,391
Distributions payable to shareholders ...................... 236,912
Other accrued expenses and liabilities ..................... 30,229
------------
TOTAL LIABILITIES ...................................... 1,833,117
------------
NET ASSETS ................................................. $ 41,672,473
============
NET ASSETS CONSIST OF
Paid-in capital ............................................ $ 36,531,410
Distributions in excess of realized gains .................. (370,707)
Net unrealized appreciation on investments ................. 5,511,770
------------
NET ASSETS ................................................. $ 41,672,473
============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, no par value) ............... 2,111,529
============
Net asset value, redemption price, and offering price
per share ................................................ $ 19.74
============
See notes to financial statements.
11
<PAGE>
SCHWARTZ VALUE FUND
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends ................................................. $ 576,402
Interest .................................................. 187,654
-----------
TOTAL INVESTMENT INCOME ................................. 764,056
-----------
EXPENSES
Investment advisory fees (Note 2) ......................... 796,035
Administration, accounting and transfer agent fees
(Note 2) ................................................ 111,129
Trustees' fees and expenses ............................... 59,491
Legal and audit fees ...................................... 41,436
Insurance expense ......................................... 20,125
Registration fees ......................................... 18,096
Custodian fees ............................................ 13,429
Reports to shareholders ................................... 12,069
Other expenses ............................................ 15,500
-----------
TOTAL EXPENSES .......................................... 1,087,310
-----------
NET INVESTMENT LOSS ......................................... (323,254)
-----------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized gains on investments ......................... 2,790,206
Net change in unrealized appreciation/depreciation
on investments .......................................... (4,141,106)
-----------
NET REALIZED AND UNREALIZED LOSSES ON INVESTMENTS ........... (1,350,900)
-----------
NET DECREASE IN NET ASSETS FROM OPERATIONS .................. $(1,674,154)
===========
See notes to financial statements.
12
<PAGE>
SCHWARTZ VALUE FUND STATEMENTS OF CHANGES IN NET ASSETS For the Years Ended
December 31, 1999 and 1998
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net investment loss .............................. $ (323,254) $ (263,130)
Net realized gains (losses) on investments ....... 2,790,206 (542,124)
Net change in unrealized appreciation/depreciation
on investments ................................. (4,141,106) (7,053,405)
------------ ------------
Net decrease in net assets from operations ......... (1,674,154) (7,858,659)
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ....................... -- --
From net realized gains on investments ........... (2,111,109) --
Distributions in excess of realized gains ........ (370,707) --
------------ ------------
Net decrease in net assets from distributions to
shareholders ..................................... (2,481,816) --
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ........................ 4,815,186 8,246,596
Reinvestment of distributions to shareholders .... 2,244,904 --
Payments for shares redeemed ..................... (23,929,076) (7,657,068)
------------ ------------
Net increase (decrease) in net assets from capital
share transactions ............................... (16,868,986) 589,528
------------ ------------
TOTAL DECREASE IN NET ASSETS ....................... (21,024,956) (7,269,131)
NET ASSETS
Beginning of year ................................ 62,697,429 69,966,560
------------ ------------
End of year ...................................... $ 41,672,473 $ 62,697,429
============ ============
ACCUMULATED NET INVESTMENT INCOME .................. $ -- $ --
============ ============
------------
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ........................................ 224,924 344,319
Shares issued in reinvestment of distributions to
shareholders ....................................... 113,724 --
Shares redeemed .................................... (1,143,853) (343,575)
------------ ------------
Net increase (decrease) in shares outstanding ...... (805,205) 744
Shares outstanding, beginning of year .............. 2,916,734 2,915,990
------------ ------------
Shares outstanding, end of year .................... 2,111,529 2,916,734
============ ============
</TABLE>
See notes to financial statements.
13
<PAGE>
SCHWARTZ VALUE FUND
FINANCIAL HIGHLIGHTS
Per Share Data for a Share Outstanding
Throughout Each Period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------------
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of year ............... $ 21.50 $ 23.99 $ 21.19 $ 19.66 $ 18.12
--------- --------- --------- --------- ---------
Income from investment operations:
Net investment income (loss) ................... (0.15) (0.09) 0.06 (0.02) (0.03)
Net realized and unrealized gains (losses) on
investments .................................. (0.38) (2.40) 5.88 3.61 3.09
--------- --------- --------- --------- ---------
Total from investment operations ................... (0.53) (2.49) 5.94 3.59 3.06
--------- --------- --------- --------- ---------
Less distributions:
From net investment income ....................... -- -- (0.06) -- --
From net realized gains on investments ........... (1.05) -- (3.03) (2.06) (1.52)
In excess of net realized gains on investments ... (0.18) -- (0.05) -- --
--------- --------- --------- --------- ---------
Total distributions ................................ (1.23) -- (3.14) (2.06) (1.52)
--------- --------- --------- --------- ---------
Net asset value at end of year ..................... $ 19.74 $ 21.50 $ 23.99 $ 21.19 $ 19.66
========= ========= ========= ========= =========
Total return ....................................... (2.5)% (10.4)% 28.0% 18.3% 16.9%
========= ========= ========= ========= =========
Ratios/Supplementary Data:
Ratio of expenses to average net assets ............ 2.05% 1.94% 1.91% 1.97% 2.00%
Ratio of net investment income (loss) to average net
assets ........................................... (0.61)% (0.39)% 0.24% (0.08)% (0.18)%
Portfolio turnover rate ............................ 59% 54% 47% 50% 70%
Net assets at end of year (000's) .................. $ 41,672 $ 62,697 $ 69,967 $ 55,105 $ 53,137
</TABLE>
See notes to financial statements.
14
<PAGE>
SCHWARTZ VALUE FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
- --------------------------------------------------------------------------------
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 the regular session of trading 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. At December 31, 1999, Lafourche Realty Company, Inc. was
valued pursuant to these procedures. 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
15
<PAGE>
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. Discounts and premiums on securities purchased are
amortized in accordance with income tax regulations which approximate
GAAP.
(d) Dividends and distributions -- Dividends from net investment income
and net capital gains, if any, are declared and paid annually in December.
Dividends and distributions to shareholders are recorded on the
ex-dividend date.
(e) Repurchase agreements -- The Fund 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.
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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, 1999, were
$28,997,882 and $48,502,102, respectively.
4. FEDERAL INCOME TAXES
As of December 31, 1999, net unrealized appreciation of securities was
$5,141,063 for federal income tax purposes of which $8,893,305 related to
appreciated securities and $3,752,242 related to depreciated securities. The
aggregate cost of investments at December 31, 1999 for federal income tax
purposes was $37,736,509.
5. FEDERAL TAX INFORMATION FOR SHAREHOLDERS (UNAUDITED)
On December 31, 1999, the Schwartz Value Fund declared and paid a long-term
capital gain of $1.2326 per share. In January of 2000, shareholders will be
provided with Form 1099-DIV which reports the amount and tax status of the
capital gain distribution paid during calendar year 1999.
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INDEPENDENT AUDITORS' REPORT
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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, 1999, the related statement 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 Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, 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, 1999, 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 21, 2000
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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.
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[ Back Cover ]
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, Chairman
Officers
George P. Schwartz, CFA, President
Richard L. Platte, Jr., CFA, V.P./Secretary/Treasurer
Tina D. Hosking, CPA, Assistant Secretary
Brian J. Manley, CPA, Assistant Secretary
Robert L. Bennett, 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.
