U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/
Pre-Effective Amendment No.
Post-Effective Amendment No. 9
-------
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No. 10
-------
(Check appropriate box or boxes)
SCHWARTZ INVESTMENT TRUST
(Exact Name of Registrant as Specified in Charter)
3707 West Maple Road
Bloomfield Hills, Michigan 48301
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (810) 644-8500
George P. Schwartz
Schwartz Investment Counsel, Inc.
3707 West Maple Road
Bloomfield Hills, Michigan 48301
(Name and Address of Agent for Service)
Copies to:
David M. Leahy, Esq.
Sullivan & Worcester LLP
1025 Connecticut Avenue, NW
Washington, DC 20036
It is proposed that this filing will become effective (check appropriate box)
/X/ immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / days after filing pursuant to paragraph (a)
/ / on _______, 2000 pursuant to paragraph (a) of Rule 485
Registrant registered an indefinite number of shares under the Securities
Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act of 1940.
Registrant's Rule 24f-2 Notice for the fiscal year ended December 31, 1999 was
filed with the Commission on March 20, 2000.
<PAGE>
PROSPECTUS
May 1, 2000
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.
Minimum Investment:
Initial purchase - $10,000
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.
TABLE OF CONTENTS
================================================================================
Risk/Return Summary.......................................................
Expense Information.......................................................
Investment Objective, Principal Investment Strategies
and Principal Risk Considerations......................................
How to Purchase Shares....................................................
How to Redeem Shares......................................................
Dividends and Distributions...............................................
Taxes.....................................................................
Operation of the Fund.....................................................
Calculation of Share Price................................................
Financial Highlights......................................................
Application
For Information or Assistance in Opening An Account, Please Call Distributor:
Gregory J. Schwartz & Co. Inc., Bloomfield Hills, Michigan (248) 644-2701.
<PAGE>
RISK/RETURN SUMMARY
================================================================================
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The investment objective of the Fund is to seek long-term capital appreciation.
WHAT ARE THE FUND'S PRINCIPAL INVESTMENT STRATEGIES?
Under normal market conditions, the Fund will invest primarily in common stocks.
The Adviser uses fundamental security analysis to identify and purchase shares
of companies which it believes are selling below intrinsic value. The price of
shares in relation to cash flow, earnings, dividends, book value, and asset
value, both historical and prospective, are key determinants in the security
selection process. Emphasis is also placed on companies under going change in
operations, management, capital allocation, strategies, product transitions, and
other significant changes which the Adviser feels will significantly enhance
shareholder value in the future.
The prices of stocks held by the Fund are monitored in relation to the Adviser's
criteria for value. When a stock appreciates substantially and is no longer
undervalued, according to the Adviser's valuation criteria, it is sold.
Additionally, stocks are sold when an expected turnaround fails to be achieved
or economic factors or competitive developments adversely impair the enterprise
long-term intrinsic value.
The Adviser intends to hold securities for an average of 3 to 5 years. In the
Adviser's opinion, holding stocks purchased at bargain prices allows compounding
to work without the return-eroding effects of commissions and capital gains
taxes.
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 superior opportunities for capital appreciation.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
The return on and value of an investment in the Fund will fluctuate in response
to stock market movements. Stocks and other equity securities are subject to
market risks and fluctuations in value due to earnings, economic conditions and
other factors beyond the control of the Adviser. As a result, there is a risk
that you could lose money by investing in the Fund.
While smaller and mid-sized 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 and
mid-sized 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 and
medium sized companies may be subject to wider price fluctuations.
-3-
<PAGE>
PERFORMANCE SUMMARY
The bar chart and performance table shown below provide an indication of the
risks of investing in the Fund by showing the changes in the performance of the
Fund from year to year over the past 10 years and by showing how the average
annual returns of the Fund compare to those of a broad-based securities market
index. How the Fund has performed in the past is not necessarily an indication
of how the Fund will perform in the future.
The bar chart and performance table include performance of RCM Partners Limited
Partnership prior to July 20, 1993. It should be noted that: (1) the quoted
performance data includes performance for periods before the Securities Act
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 restrictions of Sub-Chapter M of the Internal Revenue Code; and (3) if
the Fund had been registered under the 1940 Act and subject to Sub-Chapter M of
the Internal Revenue Code during such periods, performance may have been
adversely affected.
8.3% -5.3% 32.0% 22.7% 20.5% -6.8% 16.9% 18.3% 28.0% -10.4%
[bar chart]
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
- -2.45%
1999
During the period shown in the bar chart, the highest return for a quarter was
15.62% during the quarter ended June 30, 1997 and the lowest return for a
quarter was -16.91% during the quarter ended September 30, 1998.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 1999
One Year Five Years Ten Years
-------- ---------- ---------
Schwartz Value Fund -2.45% 9.12% 10.30%
Russell 2000 Index
(dividends excluded)* 19.60% 15.05% 12.40%
* The Russell 2000 Index, representing approximately 11% of the U.S. equity
market, is an unmanaged index comprised of the 2,000 smallest U.S.
domiciled publicly-traded common stocks in the Russell 3000 Index (an
unmanaged index of the 3,000 largest U.S. domiciled publicly-traded common
stocks by market capitalization representing approximately 98% of the U.S.
publicly-traded equity market).
-4-
<PAGE>
EXPENSE INFORMATION
================================================================================
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU WILL PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
SHAREHOLDER FEES (fees paid directly from your investment) ....... None
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund assets)
Management Fees .............................................. 1.50%
Other Expenses ............................................... 0.55%
-----
Total Annual Fund Operating Expenses ......................... 2.05%
=====
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. It assumes that you invest
$10,000 in the Fund for the time periods indicated and them redeem all of your
shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year $208
3 Years 643
5 Years 1,103
10 Years 2,379
-5-
<PAGE>
INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES AND PRINCIPAL RISK
CONSIDERATIONS
================================================================================
The investment objective of the Fund is to seek long-term capital appreciation.
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. 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 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. 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. Emphasis
is also placed on companies under going change in operations, management,
capital allocation, strategies, product transitions, and other significant
changes which the Adviser feels will significantly enhance shareholder value in
the future.
The prices of stocks held by the Fund are monitored in relation to the Adviser's
criteria for value. When a stock appreciates substantially and is no longer
undervalued, according to the Adviser's valuation criteria, it is sold.
Additionally, stocks are sold when an expected turnaround fails to be achieved
or economic factors or competitive developments adversely impair the enterprise
long-term intrinsic value.
The Fund will typically invest a substantial portion of its assets in small and
mid capitalization companies. While small and mid-cap 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 and mid-sized 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.
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.
For temporary defensive purposes, the Fund may from time to time have a
significant portion, and possibly all, of its assets in U.S. Government
obligations or money market instruments. "U.S. Government obligations" include
securities which are issued or guaranteed by the United
-6-
<PAGE>
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. 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. When the Fund invests in U.S Government
obligations or money market instruments for temporary defensive purposes, it may
not achieve its investment objective.
HOW TO PURCHASE SHARES
================================================================================
Your initial investment in the Fund ordinarily must be at least $10,000. The
Fund may, in the Adviser's sole discretion, accept certain accounts with less
than the stated minimum initial investment. Shares of the Fund are sold on a
continuous basis at the net asset value ("NAV") next determined after receipt of
a purchase order by the Fund. Purchase orders received by the Fund's transfer
agent, Integrated Fund Services, Inc. (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 Integrated Fund Services,
Inc., P.O. Box 5354, Cincinnati, Ohio 45201-5354. Checks should be made payable
to the "Schwartz Value Fund." Third party checks will not be accepted. 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 Marketplace(tm) and through other brokerage firms or financial
institutions. These organizations are authorized to accept purchase orders on
behalf of the Fund. 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.
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,
-7-
<PAGE>
losses resulting from unauthorized shareholder transactions) relating to the
various services made available to investors.
If an order to purchase shares is 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.
Provided the Trust has received a completed account application form, you may
also purchase shares of the Fund by bank wire. Please telephone the Transfer
Agent (Nationwide call toll-free 800-543-0407) 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 Transfer Agent 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 must 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 30 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 Integrated 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 account name
and number to permit proper crediting. 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, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations.
If the name(s) or the address on your account has been changed within 30 days of
your redemption request, you will be required to request the redemption in
writing with your signature guaranteed, regardless of the value of the shares
being redeemed.
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
as designated on your application.
-8-
<PAGE>
There is currently no charge for processing wire redemptions. However, the
Transfer Agent reserves the right, upon 30 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 (or other agents of the Fund) of your redemption request in
the form described above. Payment is normally made within 3 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 15 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 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 $10,000 (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 60 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 3 business days under unusual circumstances as
determined by the Securities and Exchange Commission. The Fund reserves the
right to make payment for shares redeemed in liquid portfolio securities of the
Fund taken at current price.
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.
-9-
<PAGE>
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 in all prior years 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 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 are taxable to you as
capital gains, without regard to the length of time you have held your Fund
shares. Capital gains distributions may be taxable at different rates depending
on the length of time the Fund holds its assets. Redemptions of shares of the
Fund are taxable events on which you may realize a gain or loss. The Fund
expects most distributions to be in the form of capital gains.
The Fund will mail a statement to you annually indicating the amount and federal
income tax status of all distributions made during the year. The Fund's
distributions may be subject to federal income tax whether received in cash or
reinvested in additional shares. In addition to federal taxes, you may be
subject to state and local taxes on distributions.
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. The Board of
Trustees supervises the business activities of the Fund. Like other mutual
funds, various organizations are retained to perform
-10-
<PAGE>
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 $250 million of assets
under management as of December 31, 1999. 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.
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.
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 (normally 4:00 p.m., Eastern time).
The Fund is open for business on each day the New York Stock Exchange is open
for business. 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. The
price at which a purchase or redemption of Fund shares is effected is based on
the next calculation of net asset value after the order is placed.
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
-11-
<PAGE>
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.
FINANCIAL HIGHLIGHTS
================================================================================
The financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned or lost on an investment
in the Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by Deloitte & Touche LLP, whose report, along with
the Fund's financial statements, are included in the Statement of Additional
Information, which is available upon request.
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>
-12-
<PAGE>
SCHWARTZ
VALUE FUND
SCHWARTZ INVESTMENT TRUST
PROSPECTUS
MAY 1, 2000
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, and Secretary
Timothy S. Schwartz, Treasurer
Tina D. Hosking, Assistant Secretary
Brian J. Manley, Assistant Secretary
Theresa M. Samocki, 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
INTERGRATED FUND SERVICES, INC.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
<PAGE>
Additional information about the Fund is included in the Statement of Additional
Information, which is incorporated by reference in its entirety. Additional
information about the Fund's investments is available in the Fund's annual and
semiannual reports to shareholders. In the Fund's annual report, you will find a
discussion of the market conditions and strategies that significantly affected
the Fund's performance during its last fiscal year.
To obtain a free copy of the SAI, the annual and semiannual reports or other
information about the Fund, or to make inquiries about the Fund, please call
1-248-644-8500.
Information about the Fund, including the SAI, can be reviewed and copied at the
Securities and Exchange Commission's Public Reference Room in Washington, D.C.
Information about the operation of the public reference room can be obtained by
calling the Commission at 1-202-942-8090. Reports and other information about
the Fund are available on the Commission's Internet site at http://www.sec.gov.
Copies of information on the Commission's Internet site may be obtained, upon
payment of a duplicating fee, by electronic request at the following e-mail
address: [email protected], or by writing to: Securities and Exchange
Commission, Public Reference Section, Washington, D.C. 20549-0102.
File No. 811-7148
<PAGE>
SCHWARTZ INVESTMENT TRUST
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 2000
SCHWARTZ VALUE FUND
This Statement of Additional Information is not a prospectus. It should be
read in conjunction with the Prospectus of the Schwartz Value Fund dated May 1,
2000. A copy of the Fund's Prospectus can be obtained by writing the Fund at
3707 W. Maple Road, Bloomfield Hills, Michigan 48301, or by calling the Fund at
248-644-8500.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Schwartz Investment Trust
3707 W. Maple Road
Bloomfield Hills, Michigan 48301
TABLE OF CONTENTS
-----------------
PAGE
----
THE FUND.......................................................................3
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS..................................3
QUALITY RATINGS OF CORPORATE BONDS AND PREFERRED STOCKS........................8
INVESTMENT LIMITATIONS........................................................12
TRUSTEES AND OFFICERS.........................................................14
THE INVESTMENT ADVISER........................................................15
THE DISTRIBUTOR...............................................................16
SECURITIES TRANSACTIONS.......................................................16
PORTFOLIO TURNOVER............................................................17
CALCULATION OF SHARE PRICE....................................................18
TAXES.........................................................................18
REDEMPTION IN KIND............................................................19
HISTORICAL PERFORMANCE INFORMATION............................................19
PRINCIPAL SECURITY HOLDERS....................................................21
CUSTODIAN.....................................................................21
AUDITORS......................................................................22
INTEGRATED FUND SERVICES, INC.................................................22
ANNUAL REPORT.................................................................22
-2-
<PAGE>
THE FUND
- --------
Schwartz Investment Trust (the "Trust"), an open-end, diversified
management investment company, was organized as an Ohio business trust on August
31, 1992. The Trust currently offers one series of shares to investors, the
Schwartz Value Fund (the "Fund"). Prior to June 1, 1994, the name of the Fund
was The RCM Fund.
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.
Each share of the Fund represents an equal proportionate interest in the
assets and liabilities belonging to the Fund with each other share of the Fund
and is entitled to such dividends and distributions out of the income belonging
to the Fund as are declared by the Trustees. The shares do not have cumulative
voting rights or any preemptive or conversion rights, and the Trustees have the
authority from time to time to divide or combine the shares of the Fund into a
greater or lesser number of shares of the Fund so long as the proportionate
beneficial interest in the assets belonging to the Fund are in no way affected.
In case of any liquidation of the Fund, the holders of shares of the Fund will
be entitled to receive as a class a distribution out of the assets, net of the
liabilities, belonging to the Fund. No shareholder is liable to further calls or
to assessment by the Fund without his express consent.
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS
- ---------------------------------------------
A more detailed discussion of some of the terms used and investment policies
described in the Prospectus (see "Investment Objective, Investment Strategies
and Risk Considerations") appears below:
MAJORITY. As used in the Prospectus and this Statement of Additional
Information, the term "majority" of the outstanding shares of the Fund means the
lesser of (1) 67% or more of the outstanding shares of the Fund present at a
meeting, if the holders of more than 50% of the outstanding shares of the Fund
are present or represented at such meeting or (2) more than 50% of the
outstanding shares of the Fund.
COMMERCIAL PAPER. Commercial paper consists of short-term (usually from one
to two hundred seventy days) unsecured promissory notes issued by corporations
in order to finance their current operations. The Fund will only invest in
commercial paper rated A-1 by Standard & Poor's Ratings Group ("Standard &
Poor's") or Prime-1 by Moody's Investors Service, Inc. ("Moody's") or unrated
paper of issuers who have outstanding unsecured debt rated AA or better by
Standard & Poor's or Aa or better by Moody's. Certain notes may have floating or
variable rates. Variable and floating rate notes with a demand notice period
exceeding seven days will be
-3-
<PAGE>
subject to the Fund's policy with respect to illiquid investments (see
"Investment Limitations") unless, in the judgment of the Adviser, such note is
liquid.
The rating of Prime-1 is the highest commercial paper rating assigned by
Moody's. Among the factors considered by Moody's in assigning ratings are the
following: valuation of the management of the issuer; economic evaluation of the
issuer's industry or industries and an appraisal of speculative-type risks which
may be inherent in certain areas; evaluation of the issuer's products in
relation to competition and customer acceptance; liquidity; amount and quality
of long-term debt; trend of earnings over a period of 10 years; financial
strength of the parent company and the relationships which exist with the
issuer; and recognition by the management of obligations which may be present or
may arise as a result of public interest questions and preparations to meet such
obligations. These factors are all considered in determining whether the
commercial paper is rated Prime-1. Commercial paper rated A-1 (highest quality)
by Standard & Poor's has the following characteristics: liquidity ratios are
adequate to meet cash requirements; long-term senior debt is rated "A" or
better, although in some cases "BBB" credits may be allowed; the issuer has
access to at least two additional channels of borrowing; basic earnings and cash
flow have an upward trend with allowance made for unusual circumstances;
typically, the issuer's industry is well established and the issuer has a strong
position within the industry; and the reliability and quality of management are
unquestioned. The relative strength or weakness of the above factors determines
whether the issuer's commercial paper is rated A-1.
BANK DEBT INSTRUMENTS. Bank debt instruments in which the Fund may invest
consist of certificates of deposit, bankers' acceptances and time deposits
issued by national banks and state banks, trust companies and mutual savings
banks, or by banks or institutions the accounts of which are insured by the
Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance
Corporation. Certificates of deposit are negotiable certificates evidencing the
indebtedness of a commercial bank to repay funds deposited with it for a
definite period of time (usually from fourteen days to one year) at a stated or
variable interest rate. Bankers' acceptances are credit instruments evidencing
the obligation of a bank to pay a draft which has been drawn on it by a
customer, which instruments reflect the obligation both of the bank and of the
drawer to pay the face amount of the instrument upon maturity. Time deposits are
non-negotiable deposits maintained in a banking institution for a specified
period of time at a stated interest rate. The Fund will not invest in time
deposits maturing in more than seven days if, as a result thereof, more than 15%
of the value of its net assets would be invested in such securities and other
illiquid securities.
WHEN-ISSUED SECURITIES. The Fund will only make commitments to purchase
securities on a when-issued basis with the intention of actually acquiring the
securities. In addition, the Fund may purchase securities on a when-issued basis
only if delivery and payment for the securities takes place within 120 days
after the date of the transaction. In connection with these investments, the
Fund will direct the Custodian to place cash or liquid securities in a
segregated account in an amount sufficient to make payment for the securities to
be purchased. When a segregated account is maintained because the Fund purchases
securities on a when-issued basis, the assets deposited in the segregated
account will be valued daily at market for the purpose of
-4-
<PAGE>
determining the adequacy of the securities in the account. If the market value
of such securities declines, additional cash or securities will be placed in the
account on a daily basis so that the market value of the account will equal the
amount of the Fund's commitments to purchase securities on a when-issued basis.
To the extent funds are in a segregated account, they will not be available for
new investment or to meet redemptions. Securities purchased on a when-issued
basis and the securities held in the Fund's portfolio are subject to changes in
market value based upon changes in the level of interest rates (which will
generally result in all of those securities changing in value in the same way,
i.e., all those securities experiencing appreciation when interest rates decline
and depreciation when interest rates rise). Therefore, if in order to achieve
higher returns, the Fund remains substantially fully invested at the same time
that it has purchased securities on a when-issued basis, there will be a
possibility that the market value of the Fund's assets will experience greater
fluctuation. The purchase of securities on a when-issued basis may involve a
risk of loss if the broker-dealer selling the securities fails to deliver after
the value of the securities has risen.
When the time comes for the Fund to make payment for securities purchased
on a when-issued basis, the Fund will do so by using then available cash flow,
by sale of the securities held in the segregated account, by sale of other
securities or, although it would not normally expect to do so, by directing the
sale of the securities purchased on a when-issued basis themselves (which may
have a market value greater or less than the Fund's payment obligation).
Although the Fund will only make commitments to purchase securities on a
when-issued basis with the intention of actually acquiring the securities, the
Fund may sell these securities before the settlement date if it is deemed
advisable by the Adviser as a matter of investment strategy. The Fund does not
currently intend to invest more than 5% of its net assets in debt securities on
a when-issued basis.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions by which the
Fund purchases a security and simultaneously commits to resell that security to
the seller at an agreed upon time and price, thereby determining the yield
during the term of the agreement. In the event of a bankruptcy or other default
by the seller of a repurchase agreement, the Fund could experience both delays
in liquidating the underlying security and losses. To minimize these
possibilities, the Fund intends to enter into repurchase agreements only with
its Custodian, with banks having assets in excess of $10 billion and with
broker-dealers who are recognized as primary dealers in U.S. Government
obligations by the Federal Reserve Bank of New York. 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. Collateral for repurchase agreements is held in
safekeeping in the customer-only account of the Fund's Custodian at the Federal
Reserve Bank. The Fund will not enter into a repurchase agreement not terminable
within seven days if, as a result thereof, more than 15% of the value of its net
assets would be invested in such securities and other illiquid securities.
Although the securities subject to a repurchase agreement might bear
maturities exceeding one year, settlement for the repurchase would never be more
than one year after the
-5-
<PAGE>
Fund's acquisition of the securities and normally would be within a shorter
period of time. The resale price will be in excess of the purchase price,
reflecting an agreed upon market rate effective for the period of time the
Fund's money will be invested in the securities, and will not be related to the
coupon rate of the purchased security. At the time the Fund enters into a
repurchase agreement, the value of the underlying security, including accrued
interest, will equal or exceed the value of the repurchase agreement, and, in
the case of a repurchase agreement exceeding one day, the seller will agree that
the value of the underlying security, including accrued interest, will at all
times equal or exceed the value of the repurchase agreement. The collateral
securing the seller's obligation must be of a credit quality at least equal to
the Fund's investment criteria for portfolio securities and will be held by the
Custodian or in the Federal Reserve Book Entry System.
For purposes of the Investment Company Act of 1940, a repurchase agreement
is deemed to be a loan from the Fund to the seller subject to the repurchase
agreement and is therefore subject to the Fund's investment restriction
applicable to loans. It is not clear whether a court would consider the
securities purchased by the Fund subject to a repurchase agreement as being
owned by the Fund or as being collateral for a loan by the Fund to the seller.
In the event of the commencement of bankruptcy or insolvency proceedings with
respect to the seller of the securities before repurchase of the security under
a repurchase agreement, the Fund may encounter delay and incur costs before
being able to sell the security. Delays may involve loss of interest or decline
in price of the security. If a court characterized the transaction as a loan and
the Fund has not perfected a security interest in the security, the Fund may be
required to return the security to the seller's estate and be treated as an
unsecured creditor of the seller. As an unsecured creditor, the Fund would be at
the risk of losing some or all of the principal and income involved in the
transaction. As with any unsecured debt obligation purchased for the Fund, the
Adviser seeks to minimize the risk of loss through repurchase agreements by
analyzing the creditworthiness of the obligor, in this case, the seller. Apart
from the risk of bankruptcy or insolvency proceedings, there is also the risk
that the seller may fail to repurchase the security, in which case the Fund may
incur a loss if the proceeds to the Fund of the sale of the security to a third
party are less than the repurchase price. However, if the market value of the
securities subject to the repurchase agreement becomes less than the repurchase
price (including interest), the Fund will direct the seller of the security to
deliver additional securities so that the market value of all securities subject
to the repurchase agreement will equal or exceed the repurchase price. It is
possible that the Fund will be unsuccessful in seeking to enforce the seller's
contractual obligation to deliver additional securities.
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
-6-
<PAGE>
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.
FOREIGN SECURITIES. Subject to the Fund's investment policies and quality
standards, the Fund may invest in the securities (payable in U.S. dollars) of
foreign issuers. Because the Fund may invest in foreign securities, investment
in the Fund involves risks that are different in some respects from an
investment in a fund which invests only in securities of U.S. domestic issuers.
Foreign investments may be affected favorably or unfavorably by changes in
currency rates and exchange control regulations. There may be less publicly
available information about a foreign company than about a U.S. company, and
foreign companies may not be subject to accounting, auditing and financial
reporting standards and requirements comparable to those applicable to U.S.
companies. There may be less governmental supervision of securities markets,
brokers and issuers of securities. Securities of some foreign companies are less
liquid or more volatile than securities of U.S. companies, and foreign brokerage
commissions and custodian fees are generally higher than in the United States.
Settlement practices may include delays and may differ from those customary in
United States markets. Investments in foreign securities may also be subject to
other risks different from those affecting U.S. investments, including local
political or economic developments, expropriation or nationalization of assets,
restrictions on foreign investment and repatriation of capital, imposition of
withholding taxes on dividend or interest payments, currency blockage (which
would prevent cash from being brought back to the United States), and difficulty
in enforcing legal rights outside the United States.
WARRANTS AND RIGHTS. Warrants are options to purchase equity securities at
a specified price and are valid for a specific time period. Rights are similar
to warrants, but normally have a short duration and are distributed by the
issuer to its shareholders. The Fund may purchase warrants and rights, provided
that the Fund does not invest more than 5% of its net assets at the time of
purchase in warrants and rights other than those that have been acquired in
units or attached to other securities. Of such 5%, no more than 2% of the Fund's
assets at the time of purchase may be invested in warrants which are not listed
on either the New York Stock Exchange or the American Stock Exchange.
BORROWING. The Fund may borrow from banks for the clearance of securities
transactions but only as a temporary measure 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.
INVESTMENT COMPANY SECURITIES. 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
-7-
<PAGE>
investment company.
SHORT-TERM TRADING. 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."
QUALITY RATINGS OF CORPORATE BONDS AND PREFERRED STOCKS
- -------------------------------------------------------
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.
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 RATINGS OF MOODY'S AND STANDARD & POOR'S FOR CORPORATE BONDS IN WHICH
THE FUND MAY INVEST ARE AS FOLLOWS:
Moody's Investors Service, Inc.
-------------------------------
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They
-8-
<PAGE>
are rated lower than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca - Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Standard & Poor's Ratings Group
-------------------------------
AAA - Bonds rated AAA have the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is extremely
strong.
AA - Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A - Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than bonds in higher rated
categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to
-9-
<PAGE>
pay interest and repay principal for bonds in this category than for bonds in
higher rated categories.
BB, B, CCC and CC - Bonds rated BB, B, CCC and CC are regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
C - The rating C is reserved for income bonds on which no interest is being
paid.
D - Bonds rated D are in default, and payment of interest and/or repayment
of principal is in arrears.
THE RATINGS OF MOODY'S AND STANDARD & POOR'S FOR PREFERRED STOCKS IN WHICH
THE FUND MAY INVEST ARE AS FOLLOWS:
Moody's Investors Service, Inc.
------------------------------
aaa - An issue which is rated aaa is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the least risk
of dividend impairment within the universe of preferred stocks.
aa - An issue which is rated aa is considered a high-grade preferred stock.
This rating indicates that there is reasonable assurance that earnings and asset
protection will remain relatively well maintained in the foreseeable future.
a - An issue which is rated a is considered to be an upper-medium grade
preferred stock. While risks are judged to be somewhat greater than in the "aaa"
and "aa" classifications, earnings and asset protection are, nevertheless,
expected to be maintained at adequate levels.
baa - An issue which is rated baa is considered to be medium grade, neither
highly protected nor poorly secured. Earnings and asset protection appear
adequate at present but may be questionable over any great length of time.
ba - An issue which is rated ba is considered to have speculative elements
and its future cannot be considered well assured. Earnings and asset protection
may be very moderate and not well safeguarded during adverse periods.
Uncertainty of position characterizes preferred stocks in this class.
b - An issue which is rated b generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and maintenance of other
terms of the issue over any long period of time may be small.
-10-
<PAGE>
caa - An issue which is rated caa is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the future status
of payments.
Standard & Poor's Ratings Group
-------------------------------
AAA - This is the highest rating that may be assigned by Standard & Poor's
to a preferred stock issue and indicates an extremely strong capacity to pay the
preferred stock obligations.
AA - A preferred stock issue rated AA also qualifies as a high-quality
fixed-income security. The capacity to pay preferred stock obligations is very
strong, although not as overwhelming as for issues rated AAA.
A - An issue rated A is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the diverse
effects of changes in circumstances and economic conditions.
BBB - An issue rated BBB is regarded as backed by an adequate capacity to
pay the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to make payments for a preferred
stock in this category than for issues in the A category.
BB, B and CCC - Preferred stock rated BB, B and CCC are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay preferred stock obligations. BB indicates the lowest degree of speculation
and CCC the highest degree of speculation. While such issues will likely have
some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
CC - The rating CC is reserved for a preferred stock issue in arrears on
dividends or sinking fund payments but that is currently paying.
C - A preferred stock rated C is a non-paying issue.
D - A preferred stock rated D is a non-paying issue with the issuer in
default on debt instruments.
General Risk Factors of Fixed-Income Securities
-----------------------------------------------
Investments in fixed-income securities are subject to inherent market risks
and fluctuations in value due to changes in earnings, economic conditions,
quality ratings and other factors beyond the control of the Adviser.
Fixed-income securities are also 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
-11-
<PAGE>
return and net asset value of a Fund will fluctuate.
Risk Factors of Lower-Rated Securities
--------------------------------------
Lower-rated debt securities (commonly called "junk bonds") may be subject
to certain risk factors to which other securities are not subject to the same
degree. An economic downturn tends to disrupt the market for lower-rated bonds
and adversely affect their values. Such an economic downturn may be expected to
result in increased price volatility of lower-rated bonds and of the value of
the Fund's shares, and an increase in issuers' defaults on such bonds.
Also, many issuers of lower-rated bonds are substantially leveraged, which
may impair their ability to meet their obligations. In some cases, the
securities in which the Fund invests are subordinated to the prior payment of
senior indebtedness, thus potentially limiting the Fund's ability to recover
full principal or to receive payments when senior securities are in default.
The credit rating of a security does not necessarily address its market
value risk. Also, ratings may, from time to time, be changed to reflect
developments in the issuer's financial condition. Lower-rated securities held by
the Fund have speculative characteristics which are apt to increase in number
and significance with each lower rating category.
When the secondary market for lower-rated bonds becomes increasingly
illiquid, or in the absence of readily available market quotations for
lower-rated bonds, the relative lack of reliable, objective data makes the
responsibility of the Trustees to value such securities more difficult, and
judgment plays a greater role in the valuation of portfolio securities. Also,
increased illiquidity of the market for lower-rated bonds may affect the Fund's
ability to dispose of portfolio securities at a desirable price.
In addition, if the Fund experiences unexpected net redemptions, it could
be forced to sell all or a portion of its lower-rated bonds without regard to
their investment merits, thereby decreasing the asset base upon which the Fund's
expenses can be spread and possibly reducing the Fund's rate of return. Also,
prices of lower-rated bonds have been found to be less sensitive to interest
rate changes and more sensitive to adverse economic changes and individual
corporate developments than more highly rated investments. Certain laws or
regulations may have a material effect on the Fund's investments in lower-rated
bonds.
INVESTMENT LIMITATIONS
- ----------------------
The Fund has adopted certain fundamental investment limitations designed to
reduce the risk of an investment in the Fund. These limitations may not be
changed without the affirmative vote of a majority of the outstanding shares of
the Fund. The Fund may not:
1. Borrow amounts in excess of 5% of the Fund's total assets, except as a
temporary measure for extraordinary or emergency purposes.
2. Underwrite securities issued by other persons, except insofar as the
Fund may
-12-
<PAGE>
technically be deemed an underwriter under the Securities Act of 1933 in selling
a portfolio security.
3. Invest 25% or more of the Fund's total assets in any one industry.
4. Purchase or sell real estate, mineral leases, futures contracts or
commodities in the ordinary course of business.
5. Make loans; however, the Fund may enter into repurchase agreements and
may purchase corporate and debt obligations for investment purposes.
6. Purchase the securities of an issuer (other than the United States
Government, its agencies or instrumentalities) if such purchase, at the time
thereof, would cause more than 5% of the Fund's total assets taken at market
value to be invested in the securities of such issuer.
7. Purchase voting securities of any issuer if such purchase, at the time
thereof, would cause more than 10% of the outstanding voting securities of such
issuer to be held by the Fund.
8. Invest for the purpose of exercising control of management.
9. Issue senior securities as defined in the Investment Company Act of
1940 or mortgage, pledge, hypothecate or in any way transfer as security for
indebtedness any securities owned or held by the Fund except as may be necessary
in connection with permissible borrowings, and then not exceeding 5% of the
Fund's total assets, taken at the lesser of cost or market value.
10. Purchase any securities on margin; however, the Fund may obtain such
short-term credit as may be necessary for the clearance of purchases and sales
of securities.
11. Sell any securities short unless, by virtue of the Fund's ownership of
other securities, the Fund has at the time of sale a right to obtain securities,
without payment of further consideration, equivalent in kind and amount to the
securities sold and provided that if such right is conditional, the sale is made
upon the same conditions.
12. Purchase or sell any put or call options or any combination thereof,
provided that this shall not prevent the purchase, ownership, holding or sale of
warrants where the grantor of the warrants is the issuer of the underlying
securities.
13. Invest more than 10% of its total assets in securities of unseasoned
issuers or in securities which are subject to legal or contractual restrictions
on resale.
With respect to the percentages adopted by the Fund as maximum limitations
on the Fund's investment policies and restrictions, an excess above the fixed
percentage (except for the percentage limitations relative to the borrowing of
money) will not be a violation of the policy or restriction unless the excess
results immediately and directly from the acquisition of any security or the
action taken.
-13-
<PAGE>
The Fund has never made, nor does it presently intend to make, short sales
of securities "against the box" as described in investment limitation 11. This
statement of intention reflects a nonfundamental policy which may be changed by
the Board of Trustees without shareholder approval.
TRUSTEES AND OFFICERS
- ---------------------
The following is a list of the Trustees and executive officers of the Fund
and their aggregate compensation from the Fund for the fiscal year ended
December 31, 1999. Each Trustee who is an "interested person" of the Fund, as
defined by the Investment Company Act of 1940, is indicated by an asterisk.
Gregory J. Schwartz and George P. Schwartz are brothers.
<TABLE>
<CAPTION>
NAME AGE POSITION HELD COMPENSATION
- ---- --- ------------------------------- ------------
<S> <C> <C> <C>
*Gregory J. Schwartz 58 Chairman of the Board/Trustee $ 0
*George P. Schwartz, CFA 55 President/Trustee 0
+Donald J. Dawson, Jr. 53 Trustee 7,000
+Fred A. Erb 77 Trustee 7,000
+John J. McHale 78 Trustee 7,000
+Sidney F. McKenna 77 Trustee 7,000
Richard L. Platte, Jr., CFA 49 Vice President and Secretary 0
Timothy S. Schwartz 28 Treasurer 0
</TABLE>
* Gregory J. Schwartz and George P. Schwartz, as affiliated persons of
Schwartz Investment Counsel, Inc., the Fund's investment adviser, are
"interested persons" of the Fund within the meaning of Section 2(a)(19) of
the Investment Company Act of 1940.
+ Member of Audit Committee.
The principal occupations of the Trustees and executive officers of the
Fund during the past five years are set forth below:
GREGORY J. SCHWARTZ, 3707 W. Maple Road, Bloomfield Hills, Michigan, is
Chairman of Schwartz Investment Counsel, Inc., the Fund's investment manager,
and is President and Chief Executive Officer of Gregory J. Schwartz & Co., Inc.,
an investment banking firm which serves as the Fund's distributor. He is also
President of Bloomfield Town Center, a real estate management company.
GEORGE P. SCHWARTZ, CFA, 3707 W. Maple Road, Bloomfield Hills, Michigan, is
President and Chief Investment Officer of Schwartz Investment Counsel, Inc. and
is the portfolio manager of the Fund.
DONALD J. DAWSON, JR., 333 West Seventh Street, Royal Oak, Michigan, is
President of Payroll 1, Inc. (a payroll processing company).
FRED A. ERB, 44 East Long Lake Road, Bloomfield Hills, Michigan, is the
Chairman and Chief Executive Officer of Edgemere Enterprises, Inc. (a real
estate investment, development and management company). He is also the Chairman
of D.I.Y. Home Warehouse (a retail building supplies company).
-14-
<PAGE>
JOHN J. McHALE, 2014 Royal Fern Court, Palm City, Florida, is retired as
the President of the Montreal Expos (a major league baseball team). He is
President of Japan Sports System, Inc. (owners and operators of professional
baseball franchises). He is also a director of Perini Corp. (a construction and
real estate company).
SIDNEY F. McKENNA, 3707 W. Maple Road, Bloomfield Hills, Michigan, is
retired Senior Vice President of United Technologies Corporation (a major
manufacturer of aircraft engines and other industrial products).
RICHARD L. PLATTE, JR., CFA, 3707 W. Maple Road, Bloomfield Hills,
Michigan, is Executive Vice President, Secretary and Treasurer of Schwartz
Investment Counsel, Inc.
TIMOTHY S. SCHWARTZ 3707 W. Maple Road, Bloomfield Hills, Michigan, is a
member of Schwartz Investment Counsel, Inc. He assists the Adviser in the
day-to-day operations of the Fund.
THE INVESTMENT ADVISER
- ----------------------
Schwartz Investment Counsel, Inc. (the "Adviser"), 3707 W. Maple Road,
Bloomfield Hills, Michigan, is the Fund's investment manager. George P. Schwartz
and Gregory J. Schwartz, as the controlling shareholders of the Adviser, may
directly or indirectly receive benefits from the advisory fees paid to the
Adviser. Under the terms of the investment advisory agreement between the Fund
and the Adviser, the Adviser manages the Fund's investments. The Fund pays the
Adviser a fee computed and accrued daily and paid quarterly at an annual rate of
1.5% of its average daily net assets up to $75,000,000, 1.25% of such assets
from $75,000,000 to $100,000,000 and 1% of such assets in excess of
$100,000,000. For the fiscal years ended December 31, 1999, 1998 and 1997, the
Fund paid advisory fees of $796,035, $1,024,114, and $940,830, respectively.
The Fund is responsible for the payment of all expenses incurred in
connection with the registration of shares and operations of the Fund, including
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, such as litigation to which the Fund may be a party. The Fund may have an
obligation to indemnify the Fund's officers and Trustees with respect to such
litigation, except in instances of willful misfeasance, bad faith, gross
negligence or reckless disregard by such officers and Trustees in the
performance of their duties. The compensation and expenses of any officer,
Trustee or employee of the Fund who is an officer, director or employee of the
Adviser are paid by the Adviser, except that the Fund reimburses all officers
and Trustees, including those who may be officers, directors or employees of the
Adviser, for actual reasonable out-of-pocket costs related to attending meetings
of the Fund's Trustees.
-15-
<PAGE>
By its terms, the Fund's investment advisory agreement will remain in force
until January 28, 2001 and from year to year thereafter, subject to annual
approval by (a) the Board of Trustees or (b) a vote of the majority of the
fund's outstanding voting securities; provided that in either event continuance
is also approved by a majority of the Trustees who are not interested persons of
the Fund, by a vote cast in person at a meeting called for the purpose of voting
such approval. The Fund's investment advisory agreement may be terminated at any
time, on sixty days' written notice, without the payment of any penalty, by the
Board of Trustees, by a vote of the majority of the Fund's outstanding voting
securities, or by the Adviser. The investment advisory agreement automatically
terminates in the event of its assignment, as defined by the Investment Company
Act of 1940 and the rules thereunder.
THE DISTRIBUTOR
- ---------------
Gregory J. Schwartz & Co., Inc. (the "Distributor") is the principal
underwriter of shares of the Fund. The Distributor is obligated to sell the
shares on a best efforts basis only against purchase orders for the shares.
Shares of the Fund are offered to the public on a continuous basis. The
Distributor pays from its own resources promotional expenses in connection with
the distribution of the Fund's shares and any other expenses incurred by it in
the performance of its obligations under the Underwriting Agreement with the
Fund.
Gregory J. Schwartz is principal owner of the Distributor. The Adviser
pays, out of its legitimate profits, commissions to the Distributor which are
based on gross proceeds of Fund shares purchased for which the Distributor is
responsible for recommending for investment in the Fund. Such commissions are
equal to 4%. Upon redemption of Fund shares for any reason at any time prior to
the one-year anniversary of the applicable subscription date of such shares, the
Distributor refunds to the Adviser 75% of the commission paid upon the original
purchase of such shares. Upon redemption of Fund shares after the one-year
anniversary of the applicable subscription date of such shares, but prior to the
two-year anniversary, the Distributor refunds to the Adviser 37.5% of the
commission paid upon the original purchase of such shares. For the fiscal
periods ended December 31, 1999, 1998 and 1997, the Adviser paid the Distributor
compensation of $84,936, $167,426 and $209,234, respectively, in respect to
sales of shares of the Fund to the Distributor's clients.
SECURITIES TRANSACTIONS
- -----------------------
Decisions to buy and sell securities for the Fund and the placing of the
Fund's securities transactions and negotiation of commission rates where
applicable are made by the Adviser and are subject to review by the Board of
Trustees of the Fund. In the purchase and sale of portfolio securities, the
Adviser seeks best execution for the Fund, taking into account such factors as
price (including the applicable brokerage commission or dealer spread), the
execution capability, financial responsibility and responsiveness of the broker
or dealer and the brokerage and research services provided by the broker or
dealer. The Adviser generally seeks favorable prices and commission rates that
are reasonable in relation to the benefits received. For the fiscal years ended
December 31, 1999, 1998 and 1997, the Fund paid brokerage commissions of
$193,191, $186,705 and $122,882, respectively.
Generally, the Fund attempts to deal directly with the dealers who make a
market in the
-16-
<PAGE>
securities involved unless better prices and execution are available elsewhere.
Such dealers usually act as principals for their own account. On occasion,
portfolio securities for the Fund may be purchased directly from the issuer.
The Adviser is specifically authorized to select brokers who also provide
brokerage and research services to the Fund and/or other accounts over which the
Adviser exercises investment discretion and to pay such brokers a commission in
excess of the commission another broker would charge if the Adviser determines
in good faith that the commission is reasonable in relation to the value of the
brokerage and research services provided. The determination may be viewed in
terms of a particular transaction or the Adviser's overall responsibilities with
respect to the Fund and to accounts over which it exercises investment
discretion.
Research services include securities and economic analyses, reports on
issuers' financial conditions and future business prospects, newsletters and
opinions relating to interest trends, general advice on the relative merits of
securities for the Fund and statistical services and information with respect to
the availability of securities or purchasers or sellers of securities. Although
this information is useful to the Fund and the Adviser, it is not possible to
place a dollar value on it. Research services furnished by brokers through whom
the Fund effects securities transactions may be used by the Adviser in servicing
all of its accounts and not all such services may be used by the Adviser in
connection with the Fund.
The Fund has no obligation to deal with any broker or dealer in the
execution of securities transactions. Over-the-counter transactions will be
placed either directly with principal market makers or with broker-dealers.
Although the Fund does not anticipate any ongoing arrangements with any
brokerage firms, brokerage business may be transacted from time to time with
various firms. Neither the Distributor nor affiliates of the Fund, the Adviser
or the Distributor will receive reciprocal brokerage business as a result of the
brokerage business transacted by the Fund with any brokers.
CODE OF ETHICS. The Fund, the Adviser and the Distributor have each adopted a
Code of Ethics under Rule 17j-1 of the Investment Company Act of 1940. The Codes
significantly restricts the personal investing activities of all employees of
the Fund, the Adviser and the Distributor and, as described below, imposes
additional, more onerous, restrictions on investment personnel. No employee may
purchase or sell any security which at the time is being purchased or sold (as
the case may be), or to the knowledge of the employee is being considered for
purchase or sale, by the Fund. Furthermore, the Codes each provide for trading
"blackout periods" which prohibit trading by investment personnel within periods
of trading by the Fund in the same (or equivalent) security.
PORTFOLIO TURNOVER
- ------------------
The Fund's portfolio turnover rate is calculated by dividing the lesser of
purchases or sales of portfolio securities for the fiscal year by the monthly
average of the value of the portfolio securities owned by the Fund during the
fiscal year. High portfolio turnover involves
-17-
<PAGE>
correspondingly greater brokerage commissions and other transaction costs, which
will be borne directly by the Fund. The Adviser anticipates that the portfolio
turnover rate for the Fund normally will not exceed 100%. A 100% turnover rate
would occur if all of the Fund's portfolio securities were replaced once within
a one year period.
Generally, the Fund intends to invest for long-term purposes. However, the
rate of portfolio turnover will depend upon market and other conditions, and it
will not be a limiting factor when the Adviser believes that portfolio changes
are appropriate. For the fiscal years ended December 31, 1999 and 1998, the
Fund's portfolio turnover rate was 59% and 54%, respectively.
CALCULATION OF SHARE PRICE
- --------------------------
The share price (net asset value) of the shares of the Fund is determined
as of the close of the regular session of trading on the New York Stock Exchange
(currently 4:00 p.m., Eastern time), on each day the Fund is open for business.
The Fund is open for business on every day except Saturdays, Sundays and the
following holidays: New Year's Day, Martin Luther King, Jr. Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas. The Fund may also be open for business on other days in which there
is sufficient trading in the Fund's portfolio securities that its net asset
value might be materially affected. For a description of the methods used to
determine the share price, see "Calculation of Share Price" in the Prospectus.
TAXES
- -----
The Prospectus describes generally the tax treatment of distributions by
the Fund. This section of the Statement of Additional Information includes
additional information concerning federal taxes.
The Fund has qualified and intends to qualify annually for the special tax
treatment afforded a "regulated investment company" under Subchapter M of the
Internal Revenue Code so that it does not pay federal taxes on income and
capital gains distributed to shareholders. To so qualify the Fund must, among
other things, (1) derive at least 90% of its gross income in each taxable year
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stock, securities or foreign currency, or
certain other income (including but not limited to gains from options, futures
and forward contracts) derived with respect to its business of investing in
stock, securities or currencies; and (2) diversify its holdings so that at the
end of each quarter of its taxable year the following two conditions are met:
(a) at least 50% of the value of the Fund's total assets is represented by cash,
U.S. Government securities, securities of other regulated investment companies
and other securities (for this purpose such other securities will qualify only
if the Fund's investment is limited in respect to any issuer to an amount not
greater than 5% of the Fund's assets and 10% of the outstanding voting
securities of such issuer) and (b) not more than 25% of the value of the Fund's
assets is invested in securities of any one issuer (other than U.S. Government
securities or securities of other regulated investment companies).
-18-
<PAGE>
On July 19, 1993, prior to the offering of Fund shares to the public, the
Fund exchanged its shares for portfolio securities of RCM Partners Limited
Partnership, a Michigan limited partnership (the "Partnership"), after which the
Partnership dissolved and distributed the Fund shares received pro rata to its
partners. 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.
The Fund's net realized capital gains from securities transactions will be
distributed only after reducing such gains by the amount of any available
capital loss carryforwards. Capital losses may be carried forward to offset any
capital gains for eight years, after which any undeducted capital loss remaining
is lost as a deduction. As of December 31, 1999, the Fund had no capital loss
carryforwards for federal income tax purposes.
A federal excise tax at the rate of 4% will be imposed on the excess, if
any, of the Fund's "required distribution" over actual distributions in any
calendar year. Generally the "required distribution" is 98% of the Fund's
ordinary income for the calendar year plus 98% of its net capital gains
recognized during the one year period ending on October 31 of the calendar year
plus undistributed amounts from prior years. The Fund intends to make
distributions sufficient to avoid imposition of the excise tax.
The Fund is required to withhold and remit to the U.S. Treasury a portion
(31%) of dividend income on any account unless the shareholder provides a
taxpayer identification number and certifies that such number is correct and
that the shareholder is not subject to backup withholding.
REDEMPTION IN KIND
- ------------------
The Fund, when it is deemed to be in the shareholders best interests, may
make payment for shares repurchased or redeemed in whole or in part in
securities of the Fund taken at current value. If any such redemption in kind is
to be made, the Fund intends to make an election pursuant to Rule 18f-1 under
the Investment Company Act of 1940. This election will require the Fund to
redeem shares solely in cash up to the lesser of $250,000 or 1% of the net asset
value of the Fund during any 90 day period for any one shareholder. Should
payment be made in securities, the redeeming shareholder will generally incur
brokerage costs in converting such securities to cash. Portfolio securities
which are issued in an in-kind redemption will be readily marketable.
-19-
<PAGE>
HISTORICAL PERFORMANCE INFORMATION
- ----------------------------------
From time to time, the Fund may advertise average annual total return.
Average annual total return quotations will be computed by finding the average
annual compounded rates of return over 1, 5 and 10 year periods that would
equate the initial amount invested to the ending redeemable value, according to
the following formula:
n
P (1 + T) = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the 1, 5 and 10 year periods at the end of the 1, 5 or 10
year periods (or fractional portion thereof)
The calculation of average annual total return assumes the reinvestment of all
dividends and distributions and will include performance of the Partnership
prior to July 20, 1993. It should be noted that: (1) the quoted performance data
includes performance for periods before the Fund's registration statement became
effective; (2) the Fund was not registered under the Investment Company Act of
1940 (the "1940 Act") during such periods and therefore was not subject to
certain investment restrictions imposed by the 1940 Act; and (3) if the Fund had
been registered under the 1940 Act during such periods, performance may have
been adversely affected. The average annual total returns of the Fund for the
periods ended December 31, 1999 are as follows:
1 Year -2.45%
5 Years 9.12%
10 Years 10.30%
The Fund may also advertise total return (a "nonstandardized quotation")
which is calculated differently from average annual total return. A
nonstandardized quotation of total return may be a cumulative return which
measures the percentage change in the value of an account between the beginning
and end of a period, assuming no activity in the account other than reinvestment
of dividends and capital gains distributions. The Fund may also show, for
comparative purposes and as information to Fund shareholders who previously were
partners in the Partnership, the return data for the Partnership, and may
combine such data for the year of combination. If so, such depiction will be
clearly noted in text accompanying such depiction. The Fund's total returns as
calculated in this manner for each of the past ten fiscal years are as follows:
Year Ended
----------
December 31, 1989 8.3%
December 31, 1990 -5.3%
December 31, 1991 32.0%
December 31, 1992 22.7%
December 31, 1993 20.5%
December 31, 1994 -6.8%
-20-
<PAGE>
December 31, 1995 16.9%
December 31, 1996 18.3%
December 31, 1997 28.0%
December 31, 1998 -10.4%
December 31, 1999 -2.45%
A nonstandardized quotation may also indicate average annual compounded rates of
return over periods other than those specified for average annual total return.
For example, the Fund's average annual compounded rate of return for the three
years ended December 31, 1999 was 3.83%. A nonstandardized quotation of total
return will always be accompanied by the Fund's average annual total return as
described above.
The performance quotations described above are based on historical earnings
and are not intended to indicate future performance.
From time to time the Funds may advertise their 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 Funds may also compare
their performance to that of other selected mutual funds, averages of the other
mutual funds within their categories as determined by Lipper, or recognized
indicators such as the Dow Jones Industrial Average, the Standard & Poor's 500
Stock Index, the Russell 2000 Index, the NASDAQ Composite Index and the Value
Line Composite Index. In connection with a ranking, the Funds 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 Funds may also present their 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.
In assessing such comparisons of performance an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to the Fund's portfolio, that the averages are
generally unmanaged and that the items included in the calculations of such
averages may not be identical to the formula used by the Fund to calculate its
performance. In addition, there can be no assurance that the Fund will continue
this performance as compared to such other averages.
PRINCIPAL SECURITY HOLDERS
- --------------------------
As of April 14, 2000, Community Support Corporation, 958 Western Avenue,
Joliet, Illinois 60435, owns, beneficially, 5.79% of the outstanding shares of
the Fund.
As of April 14, 2000, the Trustees and officers of the Fund as a group
owned of record or beneficially 4.16% of the outstanding shares of the Fund.
CUSTODIAN
- ---------
The Fifth Third Bank, 38 Fountain Square Plaza, Cincinnati, Ohio, has been
retained to act as
-21-
<PAGE>
Custodian for the Fund's investments. The Fifth Third Bank acts as the Fund's
depository, safekeeps its portfolio securities, collects all income and other
payments with respect thereto, disburses funds as instructed and maintains
records in connection with its duties.
AUDITORS
- --------
The firm of Deloitte & Touche LLP has been selected as independent public
accountants for the Fund for the fiscal year ending December 31, 2000. Deloitte
& Touche LLP, 1700 Courthouse Plaza Northeast, Dayton, Ohio, performs an annual
audit of the Fund's financial statements and advises the Fund as to certain
accounting matters.
INTEGRATED FUND SERVICES, INC.
- ----------------------------
The Fund's transfer agent, Integrated Fund Services, Inc. ("Integrated"),
312 Walnut Street, Cincinnati, Ohio, maintains the records of each shareholder's
account, processes purchases and redemptions of the Fund's shares and acts as
dividend and distribution disbursing agent. Integrated also provides
administrative services to the Fund, calculates daily net asset value per share
and maintains such books and records as are necessary to enable Integrated to
perform its duties. For the performance of these services, the Fund pays
Integrated a fee at the annual rate of .22% of the average value of its daily
net assets up to $25,000,000, .2% of such assets from $25,000,000 to
$100,000,000 and .15% of such assets in excess of $100,000,000; provided,
however, that the minimum fee is $6,000 per month. In addition, the Fund pays
out-of-pocket expenses, including but not limited to, postage, stationery,
checks, drafts, forms, reports, record storage, communication lines and the
costs of external pricing services. For the fiscal years ended December 31,
1999, 1998 and 1997, the Fund paid Integrated compensation of $111,129, $141,478
and $130,486, respectively.
Integrated Fund Services, Inc. is a wholly-owned indirect subsidiary of The
Western and Southern Life Insurance Company, a company principally engaged in
the business of providing a variety of life insurance products.
ANNUAL REPORT
- -------------
The Fund's financial statements as of December 31, 1999 appear in the
Fund's annual report which is attached to this Statement of Additional
Information.
<PAGE>
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.
16
<PAGE>
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.
17
<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, 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
18
<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.
19
<PAGE>
[ 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.
<PAGE>
SCHWARTZ INVESTMENT TRUST
PART C. OTHER INFORMATION
-----------------
Item 23. Exhibits
(a) Agreement and Declaration of Trust*
(b) Bylaws*
(c) Incorporated by reference to Agreement and Declaration of
Trust and Bylaws
(d) Advisory Agreement with Schwartz Investment Counsel, Inc.*
(e) Underwriting Agreement with Gregory J. Schwartz & Co., Inc.*
(f) Inapplicable
(g) Custody Agreement with The Fifth Third Bank*
(h) Administration, Accounting and Transfer Agency Agreement
with Countrywide Fund Services, Inc.*
(i) Opinion and Consent of Counsel relating to Issuance of
Shares*
(j) Consent of Independent Public Accountants
(k) Inapplicable
(l) Agreement Relating to Initial Capital*
(m) Inapplicable
(n) Financial Data Schedule - Previously Filed with Registrant's
Form N-SAR
(o) Inapplicable
(p) Codes of Ethics
- --------------------------------------
* Incorporated by reference to Registration Statement on Form N-1A previously
filed.
<PAGE>
Item 24. Persons Controlled by or Under Common Control with Registrant.
- ------- -------------------------------------------------------------
No person is directly or indirectly controlled by or under common
control with the Registrant.
Item 25. Indemnification
---------------
Article VI of the Registrant's Agreement and Declaration of Trust
provides for indemnification of officers and Trustees as follows:
"Section 6.4 INDEMNIFICATION OF TRUSTEES, OFFICERS, ETC. The Trust
shall indemnify each of its Trustees and officers, including persons
who serve at the Trust's request as directors, officers or trustees of
another organization in which the Trust has any interest as a
shareholder, creditor or otherwise (hereinafter referred to as a
"Covered Person") against all liabilities, including but not limited
to amounts paid in satisfaction of judgments, in compromise or as
fines and penalties, and expenses, including reasonable accountants'
and counsel fees, incurred by any Covered Person in connection with
the defense or disposition of any action, suit or other proceeding,
whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been
involved as a party or otherwise or with which such person may be or
may have been threatened, while in office or thereafter, by reason of
being or having been such a Trustee or officer, director or trustee,
and except that no Covered Person shall be indemnified against any
liability to the Trust or its Shareholders to which such Covered
Person would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such Covered Person's office.
Section 6.5 ADVANCES OF EXPENSES. The Trust shall advance attorneys'
fees or other expenses incurred by a Covered Person in defending a
proceeding to the full extent permitted by the Securities Act of 1933,
as amended, the 1940 Act, and Ohio Revised Code Chapter 1707, as
amended. In the event any of these laws conflict with Ohio Revised
Code Section 1701.13(E), as amended, these laws, and not Ohio Revised
Code Section 1701.13(E), shall govern.
Section 6.6 INDEMNIFICATION NOT EXCLUSIVE, ETC. The right of
indemnification provided by this Article VI shall not be exclusive of
or affect any other rights to which any such Covered Person may be
entitled. As used in this Article VI, "Covered Person" shall include
such person's heirs, executors and administrators. Nothing contained
in this article shall affect any rights to indemnification to which
-2-
<PAGE>
personnel of the Trust, other than Trustees and officers, and other
persons may be entitled by contract or otherwise under law, nor the
power of the Trust to purchase and maintain liability insurance on
behalf of any such person."
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to Trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a Trustee, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Trustee, officer or controlling person
in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The Registrant maintains a standard mutual fund and investment
advisory professional and directors and officers liability policy. The
policy provides coverage to the Registrant, its Trustees and officers,
its Adviser and its Underwriter. Coverage under the policy includes
losses by reason of any act, error, omission, misstatement, misleading
statement, neglect or breach of duty.
The Advisory Agreement with Schwartz Investment Counsel, Inc. (the
"Adviser") provides that the Adviser shall not be liable for any
action taken, omitted or suffered to be taken by it in its reasonable
judgment, in good faith and believed by it to be authorized or within
the discretion or rights or powers conferred upon it by the Agreement,
or in accordance with (or in the absence of) specific directions or
instructions from Registrant, provided, however, that such acts or
omissions shall not have resulted from Adviser's willful misfeasance,
bad faith or gross negligence, a violation of the standard of care
established by and applicable to the Adviser in its actions under the
Agreement or breach of its duty or of its obligations thereunder.
The Underwriting Agreement with Gregory J. Schwartz &
-3-
<PAGE>
Co., Inc. (the "Distributor") provides that the Distributor, its
directors, officers, employees, partners, shareholders and control
persons shall not be liable for any error of judgment or mistake of
law or for any loss suffered by Registrant in connection with the
matters to which the Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of any
of such persons in the performance of Distributor's duties or from the
reckless disregard by any of such persons of Distributor's obligations
and duties under the Agreement. Registrant will advance attorneys'
fees or other expenses incurred by any such person in defending a
proceeding, upon the undertaking by or on behalf of such person to
repay the advance if it is ultimately determined that such person is
not entitled to indemnification.
Notwithstanding any provisions to the contrary in Registrant's
Agreement and Declaration of Trust, in Ohio law or in the Advisory
Agreement and the Underwriting Agreement, Registrant will not
indemnify its Trustees and officers, the Adviser or the Distributor
for any liability to the Registrant or its shareholders to which such
persons would otherwise be subject unless (1) a final decision on the
merits is made by a court or other body before whom the proceeding was
brought that the person to be indemnified ("indemnitee") was not
liable by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of duties ("disabling conduct") or (2) in the
absence of such a decision, a reasonable determination is made, based
upon a review of the facts, that the indemnitee was not liable by
reason of disabling conduct, by (a) the vote of a majority of a quorum
of Trustees who are neither "interested persons" of Registrant as
defined in the Investment Company Act of 1940 nor parties to the
proceeding ("disinterested, non-party Trustees"), or (b) an
independent legal counsel in a written opinion. Registrant may advance
attorneys' fees or other expenses incurred by the indemnitee in
defending a proceeding, upon the undertaking by or on behalf of the
indemnitee to repay the advance unless it is ultimately determined
that he is entitled to indemnification, so long as one of the
following conditions is met: (1) the indemnitee shall provide a
security for his undertaking, (2) the Registrant shall be insured
against losses arising by reason of any lawful advances, or (3) a
majority of a quorum of the disinterested, non-party Trustees, or an
independent legal counsel in a written opinion, shall determine, based
on a review of readily available facts (as opposed to a full
trial-type inquiry), that there is reason to believe that the
indemnitee ultimately will be found entitled to indemnification.
-4-
<PAGE>
Item 26. Business and Other Connections of the Investment Adviser
- ------- --------------------------------------------------------
(a) The Adviser was organized in 1980 and has assets under management
of approximately $250 million as of December 31, 1999. The
Adviser served as the investment adviser to RCM Partners Limited
Partnership, the predecessor entity to the Fund.
(b) The directors and officers of the Adviser and any other business,
profession, vocation or employment of a substantial nature
engaged in at any time during the past two years:
(i) Gregory J. Schwartz -- President and Chief Executive
Officer of Gregory J. Schwartz & Co., Inc. (an investment
banking firm and the Registrant's principal underwriter).
(ii) George P. Schwartz
(iii) Richard L. Platte, Jr.
(iv) Robert M. Dailey
The business address of each director and officer of the Adviser
is 3707 W. Maple Road, Bloomfield Hills, Michigan 48301.
Item 27. Principal Underwriters
- -------- ----------------------
(a) Inapplicable
Position Position
with with
(b) Name Distributor Registrant
---- ----------- ----------
Gregory J. Schwartz President/ Chairman of
Director the Board
Judith M. Schwartz Director None
Stella Z. Pappas Vice President None
Joseph E. Schwartz Treasurer None
Walter G. Schwartz Director None
Gregory J. Schwartz, Jr. Director None
Edward A. Schwartz Secretary None
The address of all of the above-named persons is 3707 W. Maple Road,
Bloomfield Hills, Michigan 48301.
(c) Inapplicable
-5-
<PAGE>
Item 28. Location of Accounts and Records
- -------- --------------------------------
Accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules
promulgated thereunder will be maintained by the Registrant at its
offices located at 3707 W. Maple Road, Bloomfield Hills, Michigan
48301 or at the offices of the Registrant's transfer agent located at
312 Walnut Street, Cincinnati, Ohio 45202.
Item 29. Management Services Not Discussed in Parts A or B
- ------- -------------------------------------------------
Inapplicable
Item 30. Undertakings
- -------- ------------
Inapplicable
-6-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of the Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed below on its behalf by the undersigned,
thereunto duly authorized, in the City of Bloomfield Hills and State of Michigan
on the 1st day of May, 2000.
SCHWARTZ INVESTMENT TRUST
By: /s/ George P. Schwartz
-------------------------
George P. Schwartz
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ Gregory J. Schwartz Chairman of May 1, 2000
- ----------------------------- the Board
Gregory J. Schwartz and Trustee
/s/ George P. Schwartz President May 1, 2000
- ----------------------------- and Trustee
George P. Schwartz
/s/ Richard L. Platte, Jr. Vice President, May 1, 2000
- ----------------------------- Secretary and
Richard L. Platte, Jr. Treasurer
Trustee /s/ George P. Schwartz
- ----------------------------- ----------------------
Donald J. Dawson, Jr.* George P. Schwartz
Attorney-in-fact*
May 1, 2000
Trustee
- -----------------------------
Fred A. Erb*
Trustee
- -----------------------------
Sidney F. McKenna*
Trustee
- -----------------------------
John J. McHale*
<PAGE>
INDEX TO EXHIBITS
-----------------
(a) Agreement and Declaration of Trust*
(b) Bylaws*
(c) Incorporated by reference to Agreement and Declaration of Trust and
Bylaws
(d) Advisory Agreement*
(e) Underwriting Agreement*
(f) Inapplicable
(g) Custody Agreement*
(h) Administration, Accounting and Transfer Agency Agreement*
(i) Opinion and Consent of Counsel Relating to Issuance of Shares*
(j) Consent of Independent Public Accountants
(k) Inapplicable
(l) Agreement Relating to Initial Capital*
(m) Inapplicable
(n) Financial Data Schedule - Previously Filed with Registrant's Form
N-SAR
(o) Inapplicable
(p) Codes of Ethics
- --------------------
* Incorporated by reference to Registration Statement on Form N-1A previously
filed.
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 9 to a Registration
Statement on Form N-1A under the Securities Act of 1933, filed under No.
33-51626 relating to Schwartz Value Fund of our report dated January 21, 2000,
appearing in the annual report to shareholders of Schwartz Value Fund for
December 31, 1999, and to the references to us under the captions "Financial
Highlights" and "Auditors" in such Registration Statement.
DELOITTE & TOUCHE LLP
Dayton, Ohio
April 25, 2000
CODE OF ETHICS
SCHWARTZ INVESTMENT TRUST
I. STATEMENT OF GENERAL PRINCIPLES
This Code of Ethics has been adopted by Schwartz Investment Trust (the
"Trust") for the purpose of instructing all employees, officers, directors
and trustees of the Trust, its investment adviser, Schwartz Investment
Counsel, Inc. (the "Adviser"), and/or its principal underwriter, Gregory J.
Schwartz & Co., Inc. (the "Underwriter"), in their ethical obligations and
to provide rules for their personal securities transactions. All such
employees, officers, directors and trustees owe a fiduciary duty to the
Trust and its shareholders. A fiduciary duty means a duty of loyalty,
fairness and good faith towards the Trust and its shareholders, and the
obligation to adhere not only to the specific provisions of this Code but
to the general principles that guide the Code. These general principles
are:
o The duty at all times to place the interests of the Trust and its
shareholders first;
o The requirement that all personal securities transactions be conducted
in a manner consistent with the Code of Ethics and in such a manner as
to avoid any actual or potential conflict of interest or any abuse of
any individual's position of trust and responsibility; and
<PAGE>
o The fundamental standard that employees, officers, directors and
trustees should not take inappropriate advantage of their positions,
or of their relationship with the Trust or its shareholders.
It is imperative that the personal trading activities of the employees,
officers, directors and trustees of the Trust, the Adviser and the
Underwriter, respectively, be conducted with the highest regard for these
general principles in order to avoid any possible conflict of interest, any
appearance of a conflict, or activities that could lead to disciplinary
action. This includes executing transactions through or for the benefit of
a third party when the transaction is not in keeping with the general
principles of this Code.
All personal securities transactions must also comply with the Securities
and Exchange Commission's Rule 17j-1. Under this rule, no Employee may:
o employ any device, scheme or artifice to defraud the Trust or any its
shareholders;
o make to the Trust or any of its shareholders any untrue statement of a
material fact or omit to state to such client a material fact
necessary in order to make the statements made, in light of the
circumstances under which they are made, not misleading;
- 2 -
<PAGE>
o engage in any act, practice, or course of business which operates or
would operate as a fraud or deceit upon the Trust or any of its
shareholders; or
o engage in any manipulative practice with respect to the Trust or any
of its shareholders.
II. DEFINITIONS
A. ADVISORY EMPLOYEES: Employees who participate in or make recommendations
with respect to the purchase or sale of securities including fund portfolio
managers and assistant fund portfolio managers. The Compliance Officer will
maintain a current list of all Advisory Employees.
B. BENEFICIAL INTEREST: ownership or any benefits of ownership, including
the opportunity to directly or indirectly profit or otherwise obtain
financial benefits from any interest in a security.
C. COMPLIANCE OFFICER: George P. Schwartz or, in his absence, the alternate
Compliance Officer, Cynthia M. Dickinson, or their successors in such
positions.
D. EMPLOYEE ACCOUNT: each account in which an Employee or a member of his
or her family has any direct or indirect Beneficial Interest or over which
such person exercises control or influence, including, but not limited to,
any joint account, partnership, corporation, trust or estate. An Employee's
family members include the Employee's spouse, minor children, any person
living in the home of the Employee, and any relative of the Employee
(including in-
- 3 -
<PAGE>
laws) to whose support an Employee directly or indirectly contributes.
E. EMPLOYEES: the employees, officers, and trustees of the Trust, the
employees, officers and directors of the Adviser and the officers and
directors of the Underwriter, including Advisory Employees. The Compliance
Officer will maintain a current list of all Employees.
F. EXEMPT TRANSACTIONS: transactions which are 1) effected in an amount or
in a manner over which the Employee has no direct or indirect influence or
control, 2) pursuant to a systematic dividend reinvestment plan, systematic
cash purchase plan or systematic withdrawal plan, 3) in connection with the
exercise or sale of rights to purchase additional securities from an issuer
and granted by such issuer pro-rata to all holders of a class of its
securities, 4) in connection with the call by the issuer of a preferred
stock or bond, 5) pursuant to the exercise by a second party of a put or
call option, 6) closing transactions no more than five business days prior
to the expiration of a related put or call option, 7) with respect to
affiliated registered open-end investment companies, 8) with respect to
fixed- income securities of investment grade with an outstanding issue size
of $100,000,000 or more, 9) with respect to a security for which the
purchase or sale price, when aggregated with purchases or sales of the same
security within 15 days before or after such transaction, is less than
$5,000, 10) with respect to an equity security traded
- 4 -
<PAGE>
on the New York Stock Exchange, the American Stock Exchange or the NASDAQ
Quotation System if the number of shares purchased or sold, when aggregated
with purchases or sales of the same security within 15 days before or after
such transaction, is 500 shares or less, or 11) subject to the advance
approval by a Designated Supervisory Person (as defined below), with
respect to purchases or sales which are only remotely potentially harmful
to the Funds because such purchases or sales would be unlikely to affect a
highly institutional market, or because such purchases or sales are clearly
not related economically to the securities held, purchased or sold by the
Funds.
G. SCHWARTZ FUNDS: the Schwartz Value Fund and any future series of
Schwartz Investment Trust.
H. RECOMMENDED LIST: the list of those Securities which the Advisory
Employees currently are recommending for purchase or sale on behalf of the
Schwartz Funds.
I. RELATED SECURITIES: securities issued by the same issuer or issuer under
common control, or when either security gives the holder any contractual
rights with respect to the other security, including options, warrants or
other convertible securities.
J. SECURITIES: any note, stock, treasury stock, bond, debenture, evidence
of indebtedness, certificate of interest or participation in any
profit-sharing agreement, collateral-trust certificate, pre-organization
certificate
- 5 -
<PAGE>
or subscription, transferable share, investment contract, voting-trust
certificate, certificate of deposit for a security, fractional undivided
interest in oil, gas or other mineral rights, or, in general, any interest
or instrument commonly known as a "security," or any certificate or
interest or participation in temporary or interim certificate for, receipt
for, guarantee of, or warrant or right to subscribe to or purchase
(including options) any of the foregoing; except for the following: 1)
securities issued by the government of the United States, 2) bankers'
acceptances, 3) bank certificates of deposit, 4) commercial paper, 5) debt
securities, provided that (a) the security has a credit rating of Aa or Aaa
from Moody's Investor Services, AA or AAA from Standard & Poor's Ratings
Group, or an equivalent rating from another rating service, or is unrated
but comparably creditworthy, (b) the security matures within twelve months
of purchase, (c) the market is very broad so that a large volume of
transactions on a given day will have relatively little effect on yields,
and (d) the market for the instrument features highly efficient machinery
permitting quick and convenient trading in virtually any volume, and 6)
shares of unaffiliated registered open-end investment companies.
K. SECURITIES TRANSACTION: the purchase or sale, or any action to
accomplish the purchase or sale, of a Security for an Employee Account.
- 6 -
<PAGE>
III. PERSONAL INVESTMENT GUIDELINES
A. Personal Accounts and Pre-Clearance
1. Employees must obtain prior written permission from the
Compliance Officer to open or maintain a margin account, or a
joint or partnership account with persons other than the
Employee's spouse, parent, or child (including custodial
accounts).
2. No Employee may execute a Securities Transaction without first
obtaining Pre-Clearance from the Compliance Officer. Prior to
execution the Employee must submit the Pre-Clearance form to the
Compliance Officer, or in the case of a Pre- Clearance request by
the Compliance Officer, to the alternate Compliance Officer. An
Employee may not submit a Pre-Clearance request if, to the
Employee's knowledge at the time of the request, the same
Security or a Related Security is being actively considered for
purchase or sale, or is being purchased or sold, by a Schwartz
Fund.
3. Advisory Employees may not execute a Securities Transaction while
at the same time recommending contrary action to a Schwartz Fund.
4. Settlement of Securities Transactions must be made on or before
settlement date. Extensions and pre- payments are not permitted.
- 7 -
<PAGE>
5. The Personal Investment Guidelines in this Section III do not
apply to Exempt Transactions. Employees must remember that
regardless of the transaction's status as exempt or not exempt,
the Employee's fiduciary obligations remain unchanged.
6. While trustees of the Trust are subject at all times to the
fiduciary obligations described in this Code, the Personal
Investment Guidelines and Compliance Procedures in Sections III
and IV of this Code apply to trustees whose affiliation with the
Trust is solely by reason of being a trustee of the Trust only if
the trustee knew, or in the ordinary course of fulfilling the
duties of that position, should have known, that during the
fifteen days immediately preceding or after the date of the
trustee's transaction that the same Security or a Related
Security was or was to be purchased or sold for a Schwartz Fund
or that such purchase or sale for a Schwartz Fund was being
considered, in which case such Sections apply only to such
transaction.
B. Limitations on Pre-Clearance
1. After receiving a Pre-Clearance request, the Compliance Officer
will promptly review the request and will deny the request if the
Securities Transaction will violate this Code.
- 8 -
<PAGE>
2. Employees may not execute a Securities Transactions on a day
during which a purchase or sell order in that same Security or a
Related Security is pending for, or is being actively considered
on behalf of, a Schwartz Fund. In order to determine whether a
Security is being actively considered on behalf of a Schwartz
Fund, the Compliance Officer will consult the current Recommended
List and/or consult each Advisory Employee responsible for
investing in Securities for any Schwartz Fund. Unless the Board
of Trustees of the Schwartz Funds determines that alternative
measures are appropriate, Securities Transactions executed in
violation of this prohibition shall be unwound or, if not
possible or practical, the Employee must disgorge to the
appropriate Schwartz Fund or Funds the value received by the
Employee due to any favorable price differential received by the
Employee. For example, if the Employee buys 100 shares at $10 per
share, and a Schwartz Fund buys 1000 shares at $11 per share, the
Employee would pay $100 (100 shares x $1 differential) to the
Schwartz Fund.
3. An Advisory Employee may not execute a Securities Transaction
within seven (7) calendar days after a transaction in the same
Security or a Related
- 9 -
<PAGE>
Security has been executed on behalf of a Schwartz Fund unless
the Schwartz Fund's entire position in the Security has been sold
prior to the Advisory Employee's Securities Transaction and the
Advisory Employee is also selling the Security. If the Compliance
Officer determines that a transaction has violated this
prohibition, the transaction shall be unwound or, if not possible
or practical, the Advisory Employee must disgorge to the
appropriate Schwartz Fund or Funds the value received by the
Advisory Employee due to any favorable price differential
received by the Advisory Employee (unless the Board of Trustees
of the Schwartz Funds determines that alternative measures are
appropriate).
4. Pre-Clearance requests involving a Securities Transaction by an
Employee within fifteen calendar days after any Schwartz Fund has
traded in the same Security or a Related Security will be
evaluated by the Compliance Officer to ensure that the proposed
transaction by the Employee is consistent with this Code and that
all contemplated Schwartz Fund activity in the Security has been
completed. It is wholly within the Compliance Officer's
discretion to determine when Pre-Clearance will or will not be
given to an
- 10 -
<PAGE>
Employee if the proposed transaction falls within the fifteen day
period.
5. Employees are generally not permitted to purchase and sell, or
sell and purchase, the same Securities or Related Securities
within sixty calendar days. Profits made in violation of this
prohibition must be disgorged by the Employee to the appropriate
Schwartz Fund, as determined by the Compliance Officer or, if
disgorgement to a Schwartz Fund is inappropriate, to a charity
chosen by the Compliance Officer. Notwithstanding the foregoing
provision, an Employee, subject to advance approval of the
Compliance Oficer on a case-by-case basis, may profit from the
purchase and sale, or sale and purchase, of the same Securities
or Related Securities within sixty calendar days.
6. Pre-Clearance procedures apply to any Securities Transactions in
a private placement. In connection with a private placement
acquisition, the Compliance Officer will take into account, among
other factors, whether the investment opportunity should be
reserved for a Schwartz Fund, and whether the opportunity is
being offered to the Employee by virtue of the Employee's
position with the Trust, the Adviser or the
- 11 -
<PAGE>
Underwriter. Employees who have been authorized to acquire
securities in a private placement will, in connection therewith,
be required to disclose that investment if and when the Employee
takes part in any subsequent investment in the same issuer. In
such circumstances, the determination to purchase Securities of
that issuer on behalf of a Schwartz Fund will be subject to an
independent review by personnel of the Adviser with no personal
interest in the issuer.
7. Employees are prohibited from acquiring any Securities in an
initial public offering. This restriction is imposed in order to
preclude any possibility of an Employee profiting improperly from
the Employee's position with the Trust, the Adviser or the
Underwriter, and applies only to the Securities offered for sale
by the issuer, either directly or through an underwriter, and not
to Securities purchased on a securities exchange or in connection
with a secondary distribution.
C. Other Restrictions
1. If a Securities Transaction is executed on behalf of a Schwartz
Fund within seven (7) calendar days after an Advisory Employee
executed a transaction in the same Security or a Related
Security, the Compliance Officer will review the Advisory
- 12 -
<PAGE>
Employee's and the Schwartz Fund's transactions to determine
whether the Advisory Employee did not meet his or her fiduciary
duties to the Trust and its shareholders in violation of this
Code. If the Compliance Officer determines that the Advisory
Employee's transaction violated this Code, the transaction shall
be unwound or, if not possible or practical, the Advisory
Employee must disgorge to the appropriate Schwartz Fund or Funds
the value received by the Advisory Employee due to any favorable
price differential received by the Advisory Employee (unless the
Board of Trustees of the Schwartz Funds determines that
alternative measures are appropriate).
2. Employees are prohibited from serving on the boards of directors
of publicly traded companies, absent prior authorization in
accord with the general procedures of this Code. The
consideration of prior authorization will be based upon a
determination that the board service will be consistent with the
interests of the Trust and its shareholders. In the event that
board service is authorized, Employees serving as directors will
be isolated from other Employees making investment decisions with
respect to the securities of the company in question.
- 13 -
<PAGE>
3. No Employee may accept from a customer or vendor an amount in
excess of $50 per year in the form of gifts or gratuities, or as
compensation for services. If there is a question regarding
receipt of a gift, gratuity or compensation, it is to be reviewed
by the Compliance Officer.
IV. COMPLIANCE PROCEDURES
A. Employee Disclosure and Certification
1. At the commencement of employment with the Trust, the Adviser or
the Underwriter, each Employee must certify that he or she has
read and understands this Code and recognizes that he or she is
subject to it, and must disclose all personal Securities
holdings.
2. The above disclosure and certification is also required annually,
along with an additional certification that the Employee has
complied with the requirements of this Code and has disclosed or
reported all personal Securities Transactions required to be
disclosed or reported pursuant to the requirements of this Code.
B. Pre-Clearance
1. Advisory Employees will maintain an accurate and current
Recommended List at all times, updating the list as necessary.
The Advisory Employees will submit all Recommended Lists to the
- 14 -
<PAGE>
Compliance Officer as they are generated, and the Compliance
Officer will retain the Recommended Lists for use when reviewing
Employee compliance with this Code. Upon receiving a
Pre-Clearance request, the Compliance Officer will contact all
Advisory Employees to determine whether the Security the Employee
intends to purchase or sell is or was owned within the past
fifteen (15) days by a Schwartz Fund, and whether there are any
pending purchase or sell orders for the Security. The Compliance
Officer will determine whether the Employee's request violates
any prohibitions or restrictions set out in this Code.
2. If authorized, the Pre-Clearance is valid for orders placed by
the close of business on the second trading day after the
authorization is granted. If during the two day period the
Employee becomes aware that the trade does not comply with this
Code or that the statements made on the request form are no
longer true, the Employee must immediately notify the Compliance
Officer of that information and the Pre-Clearance may be
terminated. If during the two day period the Compliance Officer
is notified that a purchase or sell order for the same Security
or Related Security is pending, or is being considered on
- 15 -
<PAGE>
behalf of a Schwartz Fund, the Compliance Officer will notify the
Employee that the Pre-Clearance is terminated.
C. Compliance
1. All Employees must direct their broker, dealer or bank to send
duplicate copies of all confirmations and periodic account
statements directly to the Compliance Officer. Each Employee must
report, no later than ten (10) days after the close of each
calendar quarter, on the Securities Transaction Report form
provided by the Trust or the Adviser, all transactions in which
the Employee acquired any direct or indirect Beneficial Interest
in a Security, including Exempt Transactions, and certify that he
or she has reported all transactions required to be disclosed
pursuant to the requirements of this Code.
2. The Compliance Officer will spot check the trading confirmations
provided by brokers to verify that the Employee obtained any
necessary Pre-Clearance for the transaction. On a quarterly basis
the Compliance Officer will compare all confirmations with the
Pre-Clearance records, to determine, among other things, whether
any Schwartz Fund owned the Securities at the time of the
transaction or purchased or sold the security
- 16 -
<PAGE>
within fifteen (15) days of the transaction. The Employee's
annual disclosure of Securities holdings will be reviewed by the
Compliance Officer for compliance with this Code, including
transactions that reveal a pattern of trading inconsistent with
this Code.
3. If an Employee violates this Code, the Compliance Officer will
report the violation to the management personnel of the Trust,
the Adviser and/or the Underwriter, as appropriate, for
appropriate remedial action which, in addition to the actions
specifically delineated in other sections of this Code, may
include a reprimand of the Employee, or suspension or termination
of the Employee's relationship with the Trust, the Adviser and/or
the Underwriter.
4. The management personnel of the Adviser will prepare an annual
report to the Trust's board of trustees that summarizes existing
procedures and any changes in the procedures made during the past
year. The report will identify any violations of this Code, any
significant remedial action during the past year and any
instances when a Securities Transaction was executed on behalf of
a Schwartz Fund within seven (7) calendar days after an Advisory
Employee executed a transaction but no
- 17 -
<PAGE>
remedial action was taken. The report will also identify any
recommended procedural or substantive changes to this Code based
on management's experience under this Code, evolving industry
practices, or legal developments.
- 18 -
<PAGE>
CODE OF ETHICS
SCHWARTZ INVESTMENT COUNSEL, INC.
I. STATEMENT OF GENERAL PRINCIPLES
This Code of Ethics has been adopted by Schwartz Investment Counsel, Inc.
(the "Adviser") for the purpose of instructing all employees, officers and
directors in their ethical obligations and to provide rules for their
personal securities transactions. All employees, officers and directors owe
a fiduciary duty to the clients of the Adviser. A fiduciary duty means a
duty of loyalty, fairness and good faith towards clients, and the
obligation to adhere not only to the specific provisions of this Code but
to the general principles that guide the Code. These general principles
are:
o The duty at all times to place the interests of clients first;
o The requirement that all personal securities transactions be
conducted in a manner consistent with the Code of Ethics and in
such a manner as to avoid any actual or potential conflict of
interest or any abuse of any individual's position of trust and
responsibility; and
o The fundamental standard that employees, officers and directors
should not take inappropriate advantage of their positions, or of
their relationship with clients.
<PAGE>
It is imperative that the personal trading activities of the employees,
officers and directors of the Adviser be conducted with the highest regard
for these general principles in order to avoid any possible conflict of
interest, any appearance of a conflict, or activities that could lead to
disciplinary action. This includes executing transactions through or for
thebenefit of a third party when the transaction is not in keeping with the
general principles of this Code.
All personal securities transactions must also comply with our Insider
Trading Policy and Procedures and the Securities and Exchange Commission's
Rule 17j-1. Under this rule, no Employee may:
o employ any device, scheme or artifice to defraud any client of
the Adviser;
o make to any client of the Adviser any untrue statement of a
material fact or omit to state to such client a material fact
necessary in order to make the statements made, in light of the
circumstances under which they are made, not misleading;
o engage in any act, practice, or course of business which operates
or would operate as a fraud or deceit upon any client of the
Adviser; or
o engage in any manipulative practice with respect to any client of
the Adviser.
- 2 -
<PAGE>
II. DEFINITIONS
A. ADVISORY CLIENTS: all Schwartz Funds and all privately managed advisory
accounts of the Adviser.
B. ADVISORY EMPLOYEES: Employees who participate in or make recommendations
with respect to the purchase or sale of securities including fund portfolio
managers and assistant fund portfolio managers. The Compliance Officer will
maintain a current list of all Advisory Employees.
C. BENEFICIAL INTEREST: ownership or any benefits of ownership, including
the opportunity to directly or indirectly profit or otherwise obtain
financial benefits from any interest in a security.
D. COMPLIANCE OFFICER: George P. Schwartz or, in his absence, the alternate
Compliance Officer, Cynthia M. Dickinson, or their successors in such
positions.
E. EMPLOYEE ACCOUNT: each account in which an Employee or a member of his
or her family has any direct or indirect Beneficial Interest or over which
such person exercises control or influence, including, but not limited to,
any joint account, partnership, corporation, trust or estate. An Employee's
family members include the Employee's spouse, minor children, any person
living in the home of the Employee, and any relative of the Employee
(including in-laws) to whose support an Employee directly or indirectly
contributes.
- 3 -
<PAGE>
F. EMPLOYEES: the employees, officer, and directors of the Adviser,
including Advisory Employees. The Compliance Officer will maintain a
current list of all Employees.
G. EXEMPT TRANSACTIONS: transactions which are 1) effected in an amount or
in a manner over which the Employee has no direct or indirect influence or
control, 2) pursuant to a systematic dividend reinvestment plan, systematic
cash purchase plan or systematic withdrawal plan, 3) in connection with the
exercise or sale of rights to purchase additional securities from an issuer
and granted by such issuer pro-rata to all holders of a class of its
securities, 4) in connection with the call by the issuer of a preferred
stock or bond, 5) pursuant to the exercise by a second party of a put or
call option, 6) closing transactions no more than five business days prior
to the expiration of a related put or call option, 7) with respect to
affiliated registered open-end investment companies, 8) with respect to
fixed- income securities of investment grade with an outstanding issue size
of $100,000,000 or more, 9) with respect to a security for which the
purchase or sale price, when aggregated with purchases or sales of the same
security within 15 days before or after such transaction, is less than
$5,000, 10) with respect to an equity security traded on the New York Stock
Exchange, the American Stock Exchange or the NASDAQ Quotation System if the
number of shares purchased or sold, when aggregated with purchases or sales
- 4 -
<PAGE>
of the same security within 15 days before or after such transaction, is
500 shares or less, or 11) subject to the advance approval by a Designated
Supervisory Person (as defined below), with respect to purchases or sales
which are only remotely potentially harmful to the Funds because such
purchases or sales would be unlikely to affect a highly institutional
market, or because such purchases or sales are clearly not related
economically to the securities held, purchased or sold by the Funds.
H. RECOMMENDED LIST: the list of those Securities which the Adviser
currently is recommending to Advisory Clients for purchase or sale.
I. RELATED SECURITIES: securities issued by the same issuer or issuer under
common control, or when either security gives the holder any contractual
rights with respect to the other security, including options, warrants or
other convertible securities.
J. SCHWARTZ FUNDS: the Schwartz Value Fund and any future series of
Schwartz Investment Trust.
K. SECURITIES: any note, stock, treasury stock, bond, debenture, evidence
of indebtedness, certificate of interest or participation in any
profit-sharing agreement, collateral-trust certificate, pre-organization
certificate or subscription, transferable share, investment contract,
voting-trust certificate, certificate of deposit for a
- 5 -
<PAGE>
security, fractional undivided interest in oil, gas or other mineral
rights, or, in general, any interest or instrument commonly known as a
"security," or any certificate or interest or participation in temporary or
interim certificate for, receipt for, guarantee of, or warrant or right to
subscribe to or purchase (including options) any of the foregoing; except
for the following: 1) securities issued by the government of the United
States, 2) bankers' acceptances, 3) bank certificates of deposit, 4)
commercial paper, 5) debt securities, provided that (a) the security has a
credit rating of Aa or Aaa from Moody's Investor Services, AA or AAA from
Standard & Poor's Ratings Group, or an equivalent rating from another
rating service, or is unrated but comparably creditworthy, (b) the security
matures within twelve months of purchase, (c) the market is very broad so
that a large volume of transactions on a given day will have relatively
little effect on yields, and (d) the market for the instrument features
highly efficient machinery permitting quick and convenient trading in
virtually any volume, and 6) shares of unaffiliated registered open-end
investment companies.
L. SECURITIES TRANSACTION: the purchase or sale, or any action to
accomplish the purchase or sale, of a Security for an Employee Account.
- 6 -
<PAGE>
III. PERSONAL INVESTMENT GUIDELINES
A. Personal Accounts and Pre-Clearance
1. Employees must obtain prior written permission from the
Compliance Officer to open or maintain a margin account, or a
joint or partnership account with persons other than the
Employee's spouse, parent, or child (including custodial
accounts).
2. No Employee may execute a Securities Transaction without first
obtaining Pre-Clearance from the Compliance Officer. Prior to
execution the Employee must submit the Pre-Clearance form to the
Compliance Officer, or in the case of a Pre- Clearance request by
the Compliance Officer, to the alternate Compliance Officer. An
Employee may not submit a Pre-Clearance request if, to the
Employee's knowledge at the time of the request, the same
Security or a Related Security is being actively considered for
purchase or sale, or is being purchased or sold, by an Advisory
Client.
3. Advisory Employees may not execute a Securities Transaction while
at the same time recommending contrary action to clients.
4. Settlement of Securities Transactions must be made on or before
settlement date. Extensions and pre- payments are not permitted.
- 7 -
<PAGE>
5. The Personal Investment Guidelines in this section III do not
apply to Exempt Transactions. Employees must remember that
regardless of the transaction's status as exempt or not exempt,
the Employee's fiduciary obligations remain unchanged.
B. Limitations on Pre-Clearance
1. After receiving a Pre-Clearance request, the Compliance Officer
will promptly review the request and will deny the request if the
Securities Transaction will violate this Code.
2. Employees may not execute a Securities Transactions on a day
during which a purchase or sell order in that same Security or a
Related Security is pending for, or is being actively considered
on behalf of, an Advisory Client. In order to determine whether a
Security is being actively considered on behalf of an Advisory
Client, the Compliance Officer will consult the current
Recommended List and/or consult each Advisory Employee
responsible for investing in Securities for any Advisory Client.
Unless the Board of Trustees of the Schwartz Funds determines
that alternative measures are appropriate, Securities
Transactions executed in violation of this prohibition shall be
unwound or, if not possible or practical, the Employee must
disgorge
- 8 -
<PAGE>
to the appropriate Schwartz Fund, as determined by the Compliance
Officer (or, if disgorgement to a Schwartz Fund is inappropriate,
to a charity chosen by the Compliance Officer), the value
received by the Employee due to any favorable price differential
received by the Employee. For example, if the Employee buys 100
shares at $10 per share, and a Schwartz Fund buys 1000 shares at
$11 per share, the Employee would pay $100 (100 shares x $1
differential) to the Schwartz Fund.
3. An Advisory Employee may not execute a Securities Transaction
within seven (7) calendar days after a transaction in the same
Security or a Related Security has been executed on behalf of a
Schwartz Fund unless the Schwartz Fund's entire position in the
Security has been sold prior to the Advisory Employee's
Securities Transaction and the Advisory Employee is also selling
the Security. If the Compliance Officer determines that a
transaction has violated this prohibition, the transaction shall
be unwound or, if not possible or practical, the Advisory
Employee must disgorge to the appropriate Schwartz Fund or Funds
the value received by the Advisory Employee due to any favorable
price differential received by the Advisory Employee (unless the
Board of Trustees of
- 9 -
<PAGE>
the Schwartz Funds determines that alternative measures are
appropriate).
4. Pre-Clearance requests involving a Securities Transaction by an
Employee within fifteen calendar days after any Advisory Client
has traded in the same Security or a Related Security will be
evaluated by the Compliance Officer to ensure that the proposed
transaction by the Employee is consistent with this Code and that
all contemplated Advisory Client activity in the Security has
been completed. It is wholly within the Compliance Officer's
discretion to determine when Pre-Clearance will or will not be
given to an Employee if the proposed transaction falls within the
fifteen day period.
5. Employees are generally not permitted to purchase and sell, or
sell and purchase, the same Securities or Related Securities
within sixty calendar days. Profits made in violation of this
prohibition must be disgorged by the Employee to the appropriate
Schwartz Fund, as determined by the Compliance Officer or, if
disgorgement to a Schwartz Fund is inappropriate, to a charity
chosen by the Compliance Officer. Notwithstanding the foregoing
provision, an Employee, subject to advance approval of the
Compliance Oficer on a
- 10 -
<PAGE>
case-by-case basis, may profit from the purchase and sale, or
sale and purchase, of the same Securities or Related Securities
within sixty calendar days.
6. Pre-Clearance procedures apply to any Securities Transactions in
a private placement. In connection with a private placement
acquisition, the Compliance Officer will take into account, among
other factors, whether the investment opportunity should be
reserved for Advisory Clients, and whether the opportunity is
being offered to the Employee by virtue of the Employee's
position with the Adviser. Employees who have been authorized to
acquire securities in a private placement will, in connection
therewith, be required to disclose that investment if and when
the Employee takes part in any subsequent investment in the same
issuer. In such circumstances, the determination by an Advisory
Client to purchase Securities of that issuer will be subject to
an independent review by personnel of the Adviser with no
personal interest in the issuer.
7. Employees are prohibited from acquiring any Securities in an
initial public offering. This restriction is imposed in order to
preclude any
- 11 -
<PAGE>
possibility of an Employee profiting improperly from the
Employee's position with the Adviser, and applies only to the
Securities offered for sale by the issuer, either directly or
through an underwriter, and not to Securities purchased on a
securities exchange or in connection with a secondary
distribution.
C. Other Restrictions
1. If a Securities Transaction is executed on behalf of a Schwartz
Fund within seven (7) calendar days after an Advisory Employee
executed a transaction in the same Security or a Related
Security, the Compliance Officer will review the Advisory
Employee's and the Schwartz Fund's transactions to determine
whether the Advisory Employee did not meet his or her fiduciary
duties to Advisory Clients in violation of this Code. If the
Compliance Officer determines that the Advisory Employee's
transaction violated this Code, the transaction shall be unwound
or, if not possible or practical, the Advisory Employee must
disgorge to the appropriate Schwartz Fund or Funds the value
received by the Advisory Employee due to any favorable price
differential received by the Advisory Employee (unless the Board
of Trustees of
- 12 -
<PAGE>
the Schwartz Funds determines that alternative measures are
appropriate).
2. Employees are prohibited from serving on the boards of directors
of publicly traded companies, absent prior authorization in
accord with the general procedures of this Code. The
consideration of prior authorization will be based upon a
determination that the board service will be consistent with the
interests of Advisory Clients. In the event that board service is
authorized, Employees serving as directors will be isolated from
other Employees making investment decisions with respect to the
securities of the company in question.
3. No Employee may accept from a customer or vendor an amount in
excess of $50 per year in the form of gifts or gratuities, or as
compensation for services. If there is a question regarding
receipt of a gift, gratuity or compensation, it is to be reviewed
by the Compliance Officer.
IV. COMPLIANCE PROCEDURES
A. Employee Disclosure and Certification
1. At the commencement of employment with the Adviser, each Employee
must certify that he or she has read and understands this Code
and recognizes
- 13 -
<PAGE>
that he or she is subject to it, and must disclose all personal
Securities holdings.
2. The above disclosure and certification is also required annually,
along with an additional certification that the Employee has
complied with the requirements of this Code and has disclosed or
reported all personal Securities Transactions required to be
disclosed or reported pursuant to the requirements of this Code.
B. Pre-Clearance
1. Advisory Employees will maintain an accurate and current
Recommended List at all times, updating the list as necessary.
The Advisory Employees will submit all Recommended Lists to the
Compliance Officer as they are generated, and the Compliance
Officer will retain the Recommended Lists for use when reviewing
Employee compliance with this Code. Upon receiving a
Pre-Clearance request, the Compliance Officer will contact all
Advisory Employees to determine whether the Security the Employee
intends to purchase or sell is or was owned within the past
fifteen (15) days by an Advisory Client, and whether there are
any pending purchase or sell orders for the Security. The
Compliance Officer will determine whether the
- 14 -
<PAGE>
Employee's request violates any prohibitions or restrictions set
out in this Code.
2. If authorized, the Pre-Clearance is valid for orders placed by
the close of business on the second trading day after the
authorization is granted. If during the two day period the
Employee becomes aware that the trade does not comply with this
Code or that the statements made on the request form are no
longer true, the Employee must immediately notify the Compliance
Officer of that information and the Pre-Clearance may be
terminated. If during the two day period the Compliance Officer
is notified that a purchase or sell order for the same Security
or Related Security is pending, or is being considered on behalf
of an Advisory Client, the Compliance Officer will notify the
Employee that the Pre- Clearance is terminated.
C. Compliance
1. All Employees must direct their broker, dealer or bank to send
duplicate copies of all confirmations and periodic account
statements directly to the Compliance Officer. Each Employee must
report, no later than ten (10) days after the close of each
calendar quarter, on the Securities Transaction Report form
provided by the Adviser, all
- 15 -
<PAGE>
transactions in which the Employee acquired any direct or
indirect Beneficial Interest in a Security, including Exempt
Transactions, and certify that he or she has reported all
transactions required to be disclosed pursuant to the
requirements of this Code.
2. The Compliance Officer will spot check the trading confirmations
provided by brokers to verify that the Employee obtained any
necessary Pre-Clearance for the transaction. On a quarterly basis
the Compliance Officer will compare all confirmations with the
Pre-Clearance records, to determine, among other things, whether
any Advisory Client owned the Securities at the time of the
transaction or purchased or sold the security within fifteen (15)
days of the transaction. The Employee's annual disclosure of
Securities holdings will be reviewed by the Compliance Officer
for compliance with this Code, including transactions that reveal
a pattern of trading inconsistent with this Code.
3. If an Employee violates this Code, the Compliance Officer will
report the violation to the management personnel of the Adviser
for appropriate remedial action which, in addition to the actions
specifically delineated in other
- 16 -
<PAGE>
sections of this Code, may include a reprimand of the Employee,
or suspension or termination of the Employee's relationship with
the Adviser.
4. The management personnel of the Adviser will prepare an annual
report to the board of directors of the Adviser that summarizes
existing procedures and any changes in the procedures made during
the past year. The report will identify any violations of this
Code, any significant remedial action during the past year and
any instances when a Securities Transaction was executed on
behalf of a Schwartz Fund within seven (7) calendar days after an
Advisory Employee executed a transaction but no remedial action
was taken. The report will also identify any recommended
procedural or substantive changes to this Code based on
management's experience under this Code, evolving industry
practices, or legal developments.
- 17 -
<PAGE>
CODE OF ETHICS
GREGORY J. SCHWARTZ & CO., INC.
I. STATEMENT OF GENERAL PRINCIPLES
This Code of Ethics has been adopted by Gregory J. Schwartz & Co., Inc.
(the "Underwriter"), the principal underwriter of Schwartz Investment Trust
(the "Trust"), for the purpose of instructing officers and directors in
their ethical obligations and to provide rules for their personal
securities transactions. The Underwriter's officers and directors owe a
fiduciary duty to the Trust and its shareholders. A fiduciary duty means a
duty of loyalty, fairness and good faith towards clients, and the
obligation to adhere not only to the specific provisions of this Code but
to the general principles that guide the Code. These general principles
are:
o The duty at all times to place the interests of the Trust and its
shareholders first;
o The requirement that all personal securities transactions be
conducted in a manner consistent with the Code of Ethics and in
such a manner as to avoid any actual or potential conflict of
interest or any abuse of any individual's position of trust and
responsibility; and
o The fundamental standard that officers and directors should not
take inappropriate advantage of their positions, or of their
relationship with the Trust or its shareholders.
<PAGE>
It is imperative that the personal trading activities of the officers and
directors of the Underwriter be conducted with the highest regard for these
general principles in order to avoid any possible conflict of interest, any
appearance of a conflict, or activities that could lead to disciplinary
action. This includes executing transactions through or for the benefit of
a third party when the transaction is not in keeping with the general
principles of this Code. All personal securities transactions must also
comply with the Securities and Exchange Commission's Rule 17j-1. Under this
rule, persons affiliated with the Underwriter may not:
o employ any device, scheme or artifice to defraud the Trust or any
of its shareholders;
o make to the Trust or any of its shareholders any untrue statement
of a material fact or omit to state to such client a material
fact necessary in order to make the statements made, in light of
the circumstances under which they are made, not misleading;
o engage in any act, practice, or course of business which operates
or would operate as a fraud or deceit upon the Trust or any of
its shareholders; or
o engage in any manipulative practice with respect to the Trust or
any of its shareholders.
- 2 -
<PAGE>
II. DEFINITIONS
A. ACCESS PERSONS: Directors, officers or general partners of the
Underwriter who in the ordinary course of business make, participate in or
obtain information regarding the purchase or sale of securities for the
Trust or whose functions or duties as part of the ordinary course of
business relate to the making of any recommendation to the Trust regarding
the purchase or sale of securities. The Compliance Officer will maintain a
current list of all Access Persons.
B. BENEFICIAL INTEREST: ownership or any benefits of ownership, including
the opportunity to directly or indirectly profit or otherwise obtain
financial benefits from any interest in a security.
C. COMPLIANCE OFFICER: Gregory J. Schwartz or his successor in such
position.
D. EMPLOYEE ACCOUNT: each account in which an Access Person or a member of
his or her family has any direct or indirect Beneficial Interest or over
which such person exercises control or influence, including, but not
limited to, any joint account, partnership, corporation, trust or estate.
An Access Person's family members include the Access Person's spouse, minor
children, any person living in the home of the Access Person, and any
relative of the Access Person (including in-laws) to whose support an
Access Person directly or indirectly contributes.
- 3 -
<PAGE>
E. EXEMPT TRANSACTIONS: transactions which are 1) effected in an amount or
in a manner over which the Access Person has no direct or indirect
influence or control, 2) pursuant to a systematic dividend reinvestment
plan, systematic cash purchase plan or systematic withdrawal plan, 3) in
connection with the exercise or sale of rights to purchase additional
securities from an issuer and granted by such issuer pro-rata to all
holders of a class of its securities, 4) in connection with the call by the
issuer of a preferred stock or bond, 5) pursuant to the exercise by a
second party of a put or call option, 6) closing transactions no more than
five business days prior to the expiration of a related put or call option,
7) with respect to affiliated registered open-end investment companies, 8)
with respect to fixed- income securities of investment grade with an
outstanding issue size of $100,000,000 or more, 9) with respect to a
security for which the purchase or sale price, when aggregated with
purchases or sales of the same security within 15 days before or after such
transaction, is less than $5,000, 10) with respect to an equity security
traded on the New York Stock Exchange, the American Stock Exchange or the
NASDAQ Quotation System if the number of shares purchased or sold, when
aggregated with purchases or sales of the same security within 15 days
before or after such transaction, is 500 shares or less, or 11) subject to
the advance approval by a Designated Supervisory Person (as
- 4 -
<PAGE>
defined below), with respect to purchases or sales which are only remotely
potentially harmful to the Funds because such purchases or sales would be
unlikely to affect a highly institutional market, or because such purchases
or sales are clearly not related economically to the securities held,
purchased or sold by the Funds.
F. RELATED SECURITIES: securities issued by the same issuer or issuer under
common control, or when either security gives the holder any contractual
rights with respect to the other security, including options, warrants or
other convertible securities.
G. SCHWARTZ FUNDS: the Schwartz Value Fund and any future series of
Schwartz Investment Trust.
H. SECURITIES: any note, stock, treasury stock, bond, debenture, evidence
of indebtedness, certificate of interest or participation in any
profit-sharing agreement, collateral-trust certificate, pre-organization
certificate or subscription, transferable share, investment contract,
voting-trust certificate, certificate of deposit for a security, fractional
undivided interest in oil, gas or other mineral rights, or, in general, any
interest or instrument commonly known as a "security," or any certificate
or interest or participation in temporary or interim certificate for,
receipt for, guarantee of, or warrant or right to subscribe to or purchase
(including options) any of
- 5 -
<PAGE>
the foregoing; except for the following: 1) securities issued by the
government of the United States, 2) bankers' acceptances, 3) bank
certificates of deposit, 4) commercial paper, 5) debt securities, provided
that (a) the security has a credit rating of Aa or Aaa from Moody's
Investor Services, AA or AAA from Standard & Poor's Ratings Group, or an
equivalent rating from another rating service, or is unrated but comparably
creditworthy, (b) the security matures within twelve months of purchase,
(c) the market is very broad so that a large volume of transactions on a
given day will have relatively little effect on yields, and (d) the market
for the instrument features highly efficient machinery permitting quick and
convenient trading in virtually any volume, and 6) shares of unaffiliated
registered open-end investment companies.
I. SECURITIES TRANSACTION: the purchase or sale, or any action to
accomplish the purchase or sale, of a Security for an Employee Account.
III. PERSONAL INVESTMENT GUIDELINES
A. Personal Accounts and Pre-Clearance
1. Access Persons must conduct all securities transactions for
Employee Accounts through an account with the Underwriter, unless
the Access Person gives prior written notice to the Compliance
Officer of an account with another brokerage firm.
- 6 -
<PAGE>
2. Access Persons must obtain prior written permission from the
Compliance Officer to open or maintain a margin account, or a
joint or partnership account with persons other than the Access
Person's spouse, parent, or child (including custodial accounts).
3. No Access Person may execute a Securities Transaction without
first obtaining Pre-Clearance from the Compliance Officer. Prior
to execution the Access Person must submit the Pre-Clearance form
to the Compliance Officer, or in the case of a Pre-Clearance
request by the Compliance Officer, to the alternate Compliance
Officer. An Access Person may not submit a Pre-Clearance request
if, to the Access Person's knowledge at the time of the request,
the same Security or a Related Security is being actively
considered for purchase or sale, or is being purchased or sold,
by a Schwartz Fund.
4. Settlement of Securities Transactions must be made on or before
settlement date. Extensions and pre- payments are not permitted.
5. The Personal Investment Guidelines in this section III do not
apply to Exempt Transactions. Access Persons must remember that
regardless of the transaction's status as exempt or not exempt,
the
- 7 -
<PAGE>
Access Person's fiduciary obligations remain unchanged.
B. Limitations on Pre-Clearance
1. After receiving a Pre-Clearance request, the Compliance Officer
will promptly review the request and will deny the request if the
Securities Transaction will violate this Code.
2. Access Persons may not execute a Securities Transactions on a day
during which a purchase or sell order in that same Security or a
Related Security is pending for, or is being actively considered
on behalf of, a Schwartz Fund. In order to determine whether a
Security is being actively considered on behalf of a Schwartz
Fund, the Compliance Officer will consult each person responsible
for investing in Securities for any Schwartz Fund. Unless the
Board of Trustees of the Schwartz Funds determines that
alternative measures are appropriate, Securities Transactions
executed in violation of this prohibition shall be unwound or, if
not possible or practical, the Access Person must disgorge to the
appropriate Schwartz Fund, as determined by the Compliance
Officer (or, if disgorgement to a Schwartz Fund is inappropriate,
to a charity chosen by the Compliance Officer), the value
received by the
- 8 -
<PAGE>
Access Person due to any favorable price differential received by
the Access Person. For example, if the Access Person buys 100
shares at $10 per share, and a Schwartz Fund buys 1000 shares at
$11 per share, the Access Person would pay $100 (100 shares x $1
differential) to the Schwartz Fund.
3. Pre-Clearance requests involving a Securities Transaction by an
Access Person within fifteen calendar days after any Schwartz
Fund has traded in the same Security or a Related Security will
be evaluated by the Compliance Officer to ensure that the
proposed transaction by the Access Person is consistent with this
Code and that all contemplated Schwartz Fund activity in the
Security has been completed. It is wholly within the Compliance
Officer's discretion to determine when Pre-Clearance will or will
not be given to an Access Person if the proposed transaction
falls within the fifteen day period.
4. Access Persons are generally not permitted to purchase and sell,
or sell and purchase, the same Securities or Related Securities
within sixty calendar days. Profits made in violation of this
prohibition must be disgorged by the Access Person to the
appropriate Schwartz Fund, as determined by
- 9 -
<PAGE>
the Compliance Officer or, if disgorgement to a Schwartz Fund is
inappropriate, to a charity chosen by the Compliance Officer.
Notwithstanding the foregoing provision, an Employee, subject to
advance approval of the Compliance Oficer on a case-by-case
basis, may profit from the purchase and sale, or sale and
purchase, of the same Securities or Related Securities within
sixty calendar days.
5. Pre-Clearance procedures apply to any Securities Transactions in
a private placement. In connection with a private placement
acquisition, the Compliance Officer will take into account, among
other factors, whether the investment opportunity should be
reserved for a Schwartz Fund, and whether the opportunity is
being offered to the Access Person by virtue of the Access
Person's position with the Underwriter. Access Persons who have
been authorized to acquire securities in a private placement
will, in connection therewith, be required to disclose that
investment if and when the Access Person takes part in any
subsequent investment in the same issuer. In such circumstances,
the determination to purchase Securities of that issuer on behalf
of a Schwartz Fund will be subject to an independent
- 10 -
<PAGE>
review by personnel of the Underwriter with no personal interest
in the issuer.
6. Access Persons are prohibited from acquiring any Securities in an
initial public offering. This restriction is imposed in order to
preclude any possibility of an Access Person profiting improperly
from the Employee's position with the Underwriter, and applies
only to the Securities offered for sale by the issuer, either
directly or through an underwriter, and not to Securities
purchased on a securities exchange or in connection with a
secondary distribution.
C. Other Restrictions
1. Access Persons are prohibited from serving on the boards of
directors of publicly traded companies, absent prior
authorization in accord with the general procedures of this Code.
The consideration of prior authorization will be based upon a
determination that the board service will be consistent with the
interests of the Schwartz Funds. In the event that board service
is authorized, Access Persons serving as directors will be
isolated from other persons making investment decisions with
respect to the securities of the company in question.
- 11 -
<PAGE>
2. No Access Person may accept from a customer or vendor an amount
in excess of $50 per year in the form of gifts or gratuities, or
as compensation for services. If there is a question regarding
receipt of a gift, gratuity or compensation, it is to be reviewed
by the Compliance Officer.
IV. COMPLIANCE PROCEDURES
A. Disclosure and Certification
1. At the commencement of employment with the Underwriter, each
Access Person must certify that he or she has read and
understands this Code and recognizes that he or she is subject to
it, and must disclose all personal Securities holdings.
2. The above disclosure and certification is also required annually,
along with an additional certification that the Access Person has
complied with the requirements of this Code and has disclosed or
reported all personal Securities Transactions required to be
disclosed or reported pursuant to the requirements of this Code.
B. Pre-Clearance
1. Upon receiving a Pre-Clearance request, the Compliance Officer
will consult each person responsible for investing in Securities
for any Schwartz Fund to determine whether the Security the
Access Person intends to purchase or sell is
- 12 -
<PAGE>
or was owned within the past fifteen (15) days by a Schwartz
Fund, and whether there are any pending purchase or sell orders
for the Security. The Compliance Officer will determine whether
the Access Person's request violates any prohibitions or
restrictions set out in this Code.
2. If authorized, the Pre-Clearance is valid for orders placed by
the close of business on the second trading day after the
authorization is granted. If during the two day period the Access
Person becomes aware that the trade does not comply with this
Code or that the statements made on the request form are no
longer true, the Access Person must immediately notify the
Compliance Officer of that information and the Pre-Clearance may
be terminated. If during the two day period the Compliance
Officer is notified that a purchase or sell order for the same
Security or Related Security is pending, or is being considered
on behalf of a Schwartz Fund, the Compliance Officer will notify
the Access Person that the Pre- Clearance is terminated. C.
Compliance
1. All Access Persons must direct their broker, dealer or bank
to send duplicate copies of all confirmations and periodic
account statements
- 13 -
<PAGE>
directly to the Compliance Officer. Each Access Person must
report, no later than ten (10) days after the close of each
calendar quarter, on the Securities Transaction Report form
provided by the Underwriter, all transactions in which the
Access Person acquired any direct or indirect Beneficial
Interest in a Security, including Exempt Transactions, and
certify that he or she has reported all transactions
required to be disclosed pursuant to the requirements of
this Code.
2. The Compliance Officer will spot check the trading
confirmations provided by brokers to verify that the Access
Person obtained any necessary Pre- Clearance for the
transaction. On a quarterly basis the Compliance Officer
will compare all confirmations with the Pre-Clearance
records, to determine, among other things, whether a
Schwartz Fund owned the Securities at the time of the
transaction or purchased or sold the Security within fifteen
(15) days of the transaction. The Access Person's annual
disclosure of Securities holdings will be reviewed by the
Compliance Officer for compliance with this Code, including
transactions that reveal a pattern of trading inconsistent
with this Code.
- 14 -
<PAGE>
3. If an Access Person violates this Code, the Compliance
Officer will report the violation to the management
personnel of the Underwriter for appropriate remedial action
which, in addition to the actions specifically delineated in
other sections of this Code, may include a reprimand of the
Access Person, or suspension or termination of the Access
Person's relationship with the Underwriter.
4. The management personnel of the Underwriter will prepare an
annual report to its board of directors that summarizes
existing procedures and any changes in the procedures made
during the past year. The report will identify any
violations of this Code, any significant remedial action
during the past year and any recommended procedural or
substantive changes to this Code based on management's
experience under this Code, evolving industry practices, or
legal developments.
- 15 -
