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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-07148
--------------------------------------------
Schwartz Investment Trust
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
3707 West Maple Road Bloomfield Hills, Michigan 48301
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
George P. Schwartz
Schwartz Investment Counsel, Inc.
3707 W. Maple Road Bloomfield Hills, MI 48301
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (248) 644-8500
----------------------------
Date of fiscal year end: December 31, 2003
-------------------------------------------
Date of reporting period: December 31, 2003
-------------------------------------------
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
SHAREHOLDER ACCOUNTS CORPORATE OFFICES
c/o Ultimus Fund 3707 W. Maple Road
Solutions, LLC Bloomfield Hills, MI 48301
P.O. Box 46707 (248) 644-8500
Cincinnati, OH 45246 Fax (248) 644-4250
1-888-726-0753
[LOGO]
SCHWARTZ VALUE FUND
Dear Fellow Shareowner:
What a difference a year makes! Last year at this time, the most grisly bear
market since the Great Depression was in its third year. The economy was in the
doldrums, corporate layoffs were mounting, deflationary fears were running high,
and the looming war in Iraq had consumers and businesses fittingly distressed.
Pessimism was widespread, stock prices were depressed, and many investors were
relentlessly dumping stocks. But guess what? That was precisely the wrong thing
to do! The confluence of negative events had created a truly outstanding buying
opportunity. As always, when prospects seem grim, the future returns from equity
investments can be dazzling. That was certainly true in 2003, as a broad-based
stock market rally unfolded. For the year, the Dow Jones Industrial Average rose
28.3%, the S&P 500 gained 28.7%, while the Russell 2000 advanced 47.3%. Unlike
rallies of the late `90's, when just a few large-cap growth stocks spearheaded
the market gains, nearly everything worked last year. More than 450 stocks in
the S&P 500 recorded gains for the year, which had not occurred since the early
`80s, as the Dow regained the 10,000 level. Schwartz Value Fund shareholders
experienced a 39.3% gain, the Fund's best annual performance in its 20-year
history.
Early last year, we accumulated positions in several excellent companies at
beaten-down prices. Two such stocks were Brookstone, Inc. and Craftmade
International, Inc., both financially powerful companies that sell proprietary
products, have strong managements, excellent earnings growth prospects, and no
debt. Importantly, both stocks were bargains in early 2003, selling at below
market P-E multiples. During 2003, these stocks were among the best performers
in the Fund. Brookstone appreciated 123% and Craftmade was up 73%.
As the year unfolded and equity markets blazed upward, pessimism and fear were
replaced by hope and optimism. With an improving economic outlook, the year
ended with investors more confident and stock prices higher. This brings to mind
a poorly understood truism about common stocks. Most investors have an
irrational attitude toward stocks - the more expensive stocks get, the more
investors want to buy them. Stocks are often erroneously perceived to be safer
and more attractive for purchase after they've increased a great deal in price.
Most investors don't realize that there is a very direct relationship between
the price paid for an investment and its future rate of return. The higher the
price paid, the lower the rate of return will be in the future. Currently, most
stock valuations are not deeply depressed. As such, outsized gains like 2003's
will be harder to come by in 2004, based solely on today's higher prices.
However, 2004 could still be a very good year. You almost couldn't write a
better script for a recovery than that which is unfolding in the U.S. economy.
There is little doubt powerful momentum is building. GDP growth should
approximate a healthy 4% to 5% in 2004. Consumers should remain amply liquid due
to more tax refunds in the first half, an improving job market, rising personal
incomes and low interest rates. In addition, after a three-year coma, the
manufacturing sector is showing signs of life. A resurgence in capital spending
to replace outdated equipment and restore depleted inventories is occurring.
Meanwhile, corporate profits continue to accelerate at a 15 to 20% rate driven
by astonishing productivity gains and strong operating leverage. Flush with
cash, corporations are making capital investments, paying down debt, boosting
payrolls, and using excess cash flow to raise dividends and repurchase shares.
1
In managing the portfolio, one investment theme we are emphasizing currently is
to buy leading companies with bulletproof balance sheets, exceptional quality,
that are cash rich and are paying dividends. Part of President Bush's economic
stimulus package last year lowered the tax rate on corporate dividends to 15%.
As a result, many companies initiated a dividend or raised their payouts.
Ironically, dividend-paying stocks underperformed non-dividend payers last year.
The 370 stocks in the S&P 500 that paid dividends in 2003 gained an average of
33.5% vs. a 61.7% average gain for the non-payers. This has set the stage for
the dividend-paying stocks to catch up and therefore outperform in 2004. Current
Fund holdings that have attractive dividend yields, besides significant
appreciation potential, include Comerica, Inc., H&R Block, Inc., and Washington
Real Estate Investment Trust.
The year-end distribution of $2.2950 per share was composed of $2.1739 per share
of long-term capital gains and $0.1211 per share of short-term capital gains,
and was paid on December 31, 2003. The Fund finished the year with a net asset
value of $25.84 per share.
Best Regards,
SCHWARTZ VALUE FUND
/s/ George P. Schwartz
George P. Schwartz, CFA
President
January 31, 2004
2
SCHWARTZ VALUE FUND
PERFORMANCE (UNAUDITED)
================================================================================
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT
IN THE SCHWARTZ VALUE FUND AND THE RUSSELL 2000 INDEX
[GRAPHIC OMITTED]
SCHWARTZ VALUE FUND: RUSSELL 2000 INDEX:
- -------------------- -------------------
DATE BALANCE DATE BALANCE
- ---- ------- ---- -------
12/31/93 $ 10,000 12/31/93 $ 10,000
12/31/94 9,323 12/31/94 9,682
12/31/95 10,897 12/31/95 12,220
12/31/96 12,888 12/31/96 14,023
12/31/97 16,501 12/31/97 16,901
12/31/98 14,789 12/31/98 16,318
12/31/99 14,426 12/31/99 19,516
12/31/00 15,763 12/31/00 18,927
12/31/01 20,190 12/31/01 19,398
12/31/02 17,180 12/31/02 15,425
12/31/03 23,928 12/31/03 22,713
Past performance is not predictive of future performance.
- -----------------------------------------------
Schwartz Value Fund
Average Annual Total Returns(a)
1 Year 5 Years 10 Years
------ ------- --------
38.28%(b) 10.10% 9.12%
- -----------------------------------------------
(a) The returns shown do not reflect the deduction of taxes a shareholder would
pay on Fund distributions or the redemption of Fund shares.
(b) The return shown reflects a 1% contingent deferred sales load.
3
SCHWARTZ VALUE FUND
ANNUAL TOTAL RATES OF RETURN
COMPARISON WITH MAJOR INDICES (UNAUDITED)
================================================================================================================
SCHWARTZ RUSSELL RUSSELL RUSSELL CONSUMER
VALUE 2000 2000 VALUE 2000 GROWTH NASDAQ VALUE LINE S&P 500 PRICE
FUND(a) INDEX INDEX INDEX COMPOSITE(b) COMPOSITE(b) INDEX INDEX
- ----------------------------------------------------------------------------------------------------------------
1984 11.1% -7.3% 2.3% -15.8% -11.2% -8.4% 6.1% 4.3%
1985 21.7% 31.1% 31.0% 31.0% 31.4% 20.7% 31.6% 3.5%
1986 16.4% 5.7% 7.4% 3.6% 7.4% 5.0% 18.7% 1.1%
1987 -0.6% -8.8% -7.1% -10.5% -5.3% -10.6% 5.3% 4.4%
1988 23.1% 24.9% 29.5% 20.4% 15.4% 15.4% 16.8% 4.4%
1989 8.3% 16.2% 12.4% 20.2% 19.3% 11.2% 31.6% 4.6%
1990 -5.3% -19.5% -21.8% -17.4% -17.8% -24.3% -3.2% 6.1%
1991 32.0% 46.1% 41.7% 51.2% 56.8% 27.2% 30.4% 3.1%
1992 22.7% 18.4% 29.1% 7.8% 15.5% 7.0% 7.6% 2.9%
1993 20.5% 18.9% 23.8% 13.4% 14.7% 10.7% 10.1% 2.7%
1994 -6.8% -1.8% -1.6% -2.4% -3.2% -6.0% 1.3% 2.7%
1995 16.9% 28.4% 25.8% 31.0% 39.9% 19.3% 37.5% 2.6%
1996 18.3% 16.5% 21.4% 11.3% 22.7% 13.4% 22.9% 3.3%
1997 28.0% 22.4% 31.8% 13.0% 21.6% 21.1% 33.4% 1.7%
1998 -10.4% -2.5% -6.5% 1.2% 39.6% -3.8% 28.6% 1.5%
1999 -2.5% 21.3% -1.5% 43.1% 85.6% -1.4% 21.0% 2.7%
2000 9.3% -3.0% 22.8% -22.4% -39.3% -8.7% -9.1% 3.4%
2001 28.1% 2.5% 14.0% -9.2% -21.0% -6.1% -11.9% 1.6%
2002 -14.9% -20.5% -11.4% -30.3% -31.6% -28.6% -22.1% 2.4%
2003 39.3% 47.3% 46.0% 48.5% 50.0% 37.4% 28.7% 1.9%
AVERAGE ANNUAL TOTAL RETURNS - AS OF DECEMBER 31, 2003
================================================================================================================
SCHWARTZ RUSSELL RUSSELL RUSSELL CONSUMER
VALUE 2000 2000 VALUE 2000 GROWTH NASDAQ VALUE LINE S&P 500 PRICE
FUND(a) INDEX INDEX INDEX COMPOSITE(b) COMPOSITE(b) INDEX INDEX
- ----------------------------------------------------------------------------------------------------------------
3 Years 14.9% 6.3% 13.8% -2.0% -6.7% -2.7% -4.1% 2.0%
5 Years 10.1% 7.1% 12.3% 0.9% -1.8% -3.7% -0.6% 2.4%
10 Years 9.1% 9.5% 12.7% 5.4% 9.9% 2.1% 11.1% 2.4%
20 Years 11.8% 10.2% 12.9% 7.0% 10.4% 3.2% 13.0% 3.0%
(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) Excluding dividends
4
SCHWARTZ VALUE FUND
TEN LARGEST EQUITY HOLDINGS
DECEMBER 31, 2003 (UNAUDITED)
================================================================================
SHARES COMPANY VALUE
- --------------------------------------------------------------------------------
50,000 H&R Block, Inc. ............................ $ 2,768,500
180,000 Concord EFS, Inc. .......................... 2,671,200
45,000 Comerica, Inc. ............................. 2,522,700
42,000 MBIA, Inc. ................................. 2,487,660
65,000 Jones Apparel Group, Inc. .................. 2,289,950
20,000 Pulte Homes, Inc. .......................... 1,872,400
70,000 Ross Stores, Inc. .......................... 1,850,100
67,800 Craftmade International, Inc. .............. 1,779,072
100,000 Maxwell Shoe Company, Inc. ................. 1,697,000
70,000 National Dentex Corporation ................ 1,680,000
5
SCHWARTZ VALUE FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003
================================================================================
SHARES COMMON STOCKS -- 95.3% VALUE
- --------------------------------------------------------------------------------
AEROSPACE/DEFENSE -- 3.3%
10,000 Esterline Technologies Corporation* ............ $ 266,700
7,500 General Dynamics Corporation ................... 677,925
15,000 Harris Corporation ............................. 569,250
15,000 Rockwell Collins, Inc. ......................... 450,450
------------
1,964,325
------------
APPAREL & TEXTILES-- 4.2%
65,000 Jones Apparel Group, Inc. ...................... 2,289,950
8,000 K-Swiss, Inc. - Class A ........................ 192,480
------------
2,482,430
------------
BUILDING MATERIALS & CONSTRUCTION-- 5.0%
85,000 Champion Enterprises, Inc.* .................... 595,000
50,000 Fleetwood Enterprises, Inc.* ................... 513,000
20,000 Pulte Homes, Inc. .............................. 1,872,400
------------
2,980,400
------------
BUSINESS & INDUSTRIAL PRODUCTS-- 0.8%
15,000 Genuine Parts Company .......................... 498,000
------------
BUSINESS SERVICES-- 8.7%
17,500 Automatic Data Processing, Inc. ................ 693,175
180,000 Concord EFS, Inc.* ............................. 2,671,200
5,000 Convergys Corporation * ........................ 87,300
5,000 First Data Corporation ......................... 205,450
3,750 Kronos, Inc.* .................................. 148,538
55,000 Neogen Corporation* ............................ 1,362,350
------------
5,168,013
------------
COMMUNICATION EQUIPMENT & SERVICES-- 1.5%
60,000 Hector Communications Corporation* ............. 841,200
5,000 Universal Electronics, Inc.* ................... 63,700
------------
904,900
------------
CONSUMER PRODUCTS-- DURABLES-- 4.8%
67,800 Craftmade International, Inc. .................. 1,779,072
5,000 Ethan Allen Interiors, Inc. .................... 209,400
7,500 Furniture Brands International, Inc. ........... 219,975
30,000 Leggett & Platt, Inc. .......................... 648,900
------------
2,857,347
------------
CONSUMER PRODUCTS-- NONDURABLES-- 7.4%
5,000 Chattem, Inc.* ................................. 89,500
10,000 Coach, Inc.* ................................... 377,500
4,000 Fortune Brands, Inc. ........................... 285,960
100,000 Maxwell Shoe Company, Inc.* .................... 1,697,000
100,000 Velcro Industries N.V .......................... 1,225,000
22,500 Weyco Group, Inc. .............................. 757,103
------------
4,432,063
------------
6
SCHEDULE OF INVESTMENTS (CONTINUED)
================================================================================
SHARES COMMON STOCKS -- 95.3% (CONTINUED) VALUE
- --------------------------------------------------------------------------------
EDUCATION -- 0.6%
50,000 Nobel Learning Communities, Inc.* .............. $ 269,000
1,000 Strayer Education, Inc. ........................ 108,830
------------
377,830
------------
ELECTRONICS -- 0.9%
55,125 Sparton Corporation* ........................... 554,006
------------
ENERGY & MINING-- 7.0%
50,000 Diamond Offshore Drilling, Inc. ................ 1,025,500
125,000 Input/Output, Inc.* ............................ 563,750
30,000 Patterson-UTI Energy, Inc.* .................... 987,600
13,500 Prima Energy Corporation * ..................... 474,660
40,000 XTO Energy, Inc. ............................... 1,132,000
------------
4,183,510
------------
ENVIRONMENTAL SERVICES-- 1.0%
50,000 Layne Christensen Company* ..................... 587,500
------------
FINANCE-- BANKS & THRIFTS-- 5.7%
45,000 Comerica, Inc. ................................. 2,522,700
30,000 Synovus Financial Corporation .................. 867,600
------------
3,390,300
------------
FINANCE-- INSURANCE-- 5.9%
42,000 MBIA, Inc. ..................................... 2,487,660
182,700 Unico American Corporation ..................... 1,019,466
------------
3,507,126
------------
FINANCE-- MISCELLANEOUS-- 5.1%
50,000 H&R Block, Inc. ................................ 2,768,500
15,000 Investment Technology Group, Inc.* ............. 242,250
------------
3,010,750
------------
HEALTHCARE -- 7.2%
20,000 Manor Care, Inc. ............................... 691,400
70,000 National Dentex Corporation* ................... 1,680,000
10,000 NDCHealth Corporation .......................... 256,200
30,000 STERIS Corporation* ............................ 678,000
75,000 Theragenics Corporation* ....................... 410,250
17,500 Waters Corporation* ............................ 580,300
------------
4,296,150
------------
HOLDING COMPANIES-- 1.2%
45,000 PICO Holdings, Inc.* ........................... 705,150
------------
INDUSTRIAL PRODUCTS & SERVICES-- 6.0%
39,200 Balchem Corporation ............................ 893,760
10,000 Dover Corporation .............................. 397,500
7,500 Graco, Inc. .................................... 300,750
35,000 Maritrans, Inc. ................................ 584,850
15,000 Simpson Manufacturing Company, Inc. * .......... 762,900
20,000 Snap-on, Inc. .................................. 644,800
------------
3,584,560
------------
7
SCHEDULE OF INVESTMENTS (CONTINUED)
================================================================================
SHARES COMMON STOCKS -- 95.3% (CONTINUED) VALUE
- --------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT-- 1.0%
25,000 Monaco Coach Corporation* ...................... $ 595,000
------------
MISCELLANEOUS -- 0.2%
5,000 Matthews International Corporation ............. 147,950
------------
PRINTING & PUBLISHING-- 2.2%
18,750 Courier Corporation ............................ 721,331
20,000 ProQuest Company* .............................. 589,000
------------
1,310,331
------------
REAL ESTATE-- 3.8%
50,000 Arlington Hospitality, Inc.* ................... 188,000
25,000 Health Care Property Investors, Inc. ........... 1,270,000
16,499 I. Gordon Realty Corporation* .................. 199,019
20,000 Washington Real Estate Investment Trust ........ 584,000
------------
2,241,019
------------
RETAIL -- 11.4%
50,000 Brookstone, Inc. * ............................. 1,065,500
40,000 Darden Restaurants, Inc. ....................... 841,600
15,000 Dollar Tree Stores, Inc.* ...................... 450,900
30,000 Hibbett Sporting Goods, Inc.* .................. 894,000
10,000 Hot Topic, Inc.* ............................... 294,600
70,000 Ross Stores, Inc. .............................. 1,850,100
30,000 Ryan's Family Steak Houses, Inc.* .............. 454,200
7,500 Sears, Roebuck and Company ..................... 341,175
15,000 Tractor Supply Company* ........................ 583,350
------------
6,775,425
------------
TECHNOLOGY -- 0.4%
5,000 ScanSource, Inc.* .............................. 228,100
------------
TOTAL COMMON STOCK (Cost $41,022,873) .......... $ 56,782,185
------------
================================================================================
SHARES PREFERRED STOCKS -- 0.1% VALUE
- --------------------------------------------------------------------------------
500 Andrew Corporation, 7.75%, convertible
until 02/15/14 (Cost $21,756) .................. $ 62,510
------------
================================================================================
SHARES OPEN-END FUNDS-- 0.0% VALUE
- --------------------------------------------------------------------------------
40 Sequoia Fund (Cost $5,027) ..................... $ 5,963
------------
8
SCHEDULE OF INVESTMENTS (CONTINUED)
================================================================================
FACE AMOUNT REPURCHASE AGREEMENTS (1)-- 6.8% VALUE
- --------------------------------------------------------------------------------
$4,052,148 Fifth Third Bank, 0.50%, dated 12/31/03,
due 01/02/04, repurchase proceeds:
$4,052,261 (Cost $4,052,148) ................. $ 4,052,148
------------
TOTAL INVESTMENTS-- 102.2% (Cost $45,101,804) .. $ 60,902,806
LIABILITIES IN EXCESS OF OTHER ASSETS-- (2.2%) . (1,310,917)
------------
NET ASSETS-- 100.0% ............................ $ 59,591,889
============
* Non-income producing security.
(1) Repurchase agreements are fully collateralized by U.S. Government
obligations.
See notes to financial statements.
9
SCHWARTZ VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2003
================================================================================
ASSETS
Investments, at value (cost of $45,101,804) (Note 1) ......... $ 60,902,806
Cash ......................................................... 538
Receivable for capital shares sold ........................... 472
Dividends and interest receivable ............................ 108,020
Other assets ................................................. 14,061
------------
TOTAL ASSETS .............................................. 61,025,897
------------
LIABILITIES
Distributions payable ........................................ 545,023
Payable for capital shares redeemed .......................... 223,207
Payable for investment securities purchased .................. 420,192
Accrued investment advisory fees (Note 2) .................... 215,829
Payable to affiliate (Note 2) ................................ 7,400
Other accrued expenses and liabilities ....................... 22,357
------------
TOTAL LIABILITIES ......................................... 1,434,008
------------
NET ASSETS ................................................... $ 59,591,889
============
NET ASSETS CONSIST OF:
Paid-in capital .............................................. $ 44,093,383
Distributions in excess of net
realized gains from security transactions .................... (302,496)
Net unrealized appreciation on investments ................... 15,801,002
------------
NET ASSETS ................................................... $ 59,591,889
============
Shares of beneficial interest outstanding
(unlimited number of shares authorized, no par value) ..... 2,306,474
============
Net asset value and offering price per share(a) .............. $ 25.84
============
(a) Redemption price varies based on length of time held (Note 1).
See notes to financial statements.
10
SCHWARTZ VALUE FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
================================================================================
INVESTMENT INCOME
Dividends ............................................... $ 561,038
Interest ................................................ 15,857
------------
TOTAL INCOME ......................................... 576,895
------------
EXPENSES
Investment advisory fees (Note 2) ....................... 743,893
Administration, accounting and
transfer agent fees (Note 2) ............................ 74,225
Trustees' fees and expenses ............................. 32,083
Legal and audit fees .................................... 24,782
Registration fees ....................................... 19,504
Custodian fees .......................................... 11,276
Reports to shareholders ................................. 10,836
Postage and supplies .................................... 10,548
Insurance expense ....................................... 9,965
Other expenses .......................................... 2,390
------------
TOTAL EXPENSES ....................................... 939,502
------------
NET INVESTMENT LOSS ........................................ (362,607)
------------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Net realized gains from security transactions ........... 5,874,835
Net change in unrealized
appreciation/(depreciation) on investments ............ 11,448,186
------------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS ........... 17,323,021
------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ................. $ 16,960,414
============
See notes to financial statements.
11
SCHWARTZ VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
======================================================================================
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2003 2002
- --------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment loss .............................. $ (362,607) $ (464,193)
Net realized gains/(losses) from
security transactions .......................... 5,874,835 (883,882)
Net change in unrealized
appreciation/(depreciation) on investments ..... 11,448,186 (6,787,710)
------------ ------------
Net increase/(decrease) in net assets from operations 16,960,414 (8,135,785)
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
From net realized gains on investments ........... (4,924,240) --
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ........................ 19,614,500 41,596,948
Reinvestment of distributions to shareholders .... 4,379,217 --
Payments for shares redeemed ..................... (20,699,160) (39,231,453)
------------ ------------
Net increase in net assets from
capital share transactions ........................ 3,294,557 2,365,495
------------ ------------
TOTAL INCREASE/(DECREASE) IN NET ASSETS ............. 15,330,731 (5,770,290)
NET ASSETS
Beginning of year ................................ 44,261,158 50,031,448
------------ ------------
End of year ...................................... $ 59,591,889 $ 44,261,158
============ ============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ...................................... 880,141 1,802,341
Shares issued in reinvestment of
distributions to shareholders .................... 169,474 --
Shares redeemed .................................. (934,379) (1,718,185)
------------ ------------
Net increase in shares outstanding ............... 115,236 84,156
Shares outstanding, beginning of year ............ 2,191,238 2,107,082
------------ ------------
Shares outstanding, end of year .................. 2,306,474 2,191,238
============ ============
See notes to financial statements.
12
SCHWARTZ VALUE FUND
FINANCIAL HIGHLIGHTS
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
================================================================================================================================
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
2003 2002 2001 2000 1999
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value at beginning of year ............. $ 20.20 $ 23.74 $ 20.62 $ 19.74 $ 21.50
---------- ---------- ---------- ---------- ----------
Income/(loss) from investment operations:
Net investment loss ........................... (0.16) (0.21) (0.12) (0.01) (0.15)
Net realized and unrealized
gains/(losses) on investments .............. 8.10 (3.33) 5.91 1.84 (0.38)
---------- ---------- ---------- ---------- ----------
Total from investment operations ................. 7.94 (3.54) 5.79 1.83 (0.53)
---------- ---------- ---------- ---------- ----------
Less distributions:
From net realized gains on investments ........ (2.30) -- (2.67) (0.92) (1.05)
In excess of net realized gains on investments -- -- (0.00) (0.03) (0.18)
---------- ---------- ---------- ---------- ----------
Total distributions .............................. (2.30) -- (2.67) (0.95) (1.23)
---------- ---------- ---------- ---------- ----------
Net asset value at end of year ................... $ 25.84 $ 20.20 $ 23.74 $ 20.62 $ 19.74
========== ========== ========== ========== ==========
Total return ..................................... 39.3% (14.9)% 28.1% 9.3% (2.5)%
========== ========== ========== ========== ==========
Ratios/Supplementary Data:
Net assets at end of year (000's) ................ $ 59,592 $ 44,261 $ 50,031 $ 35,949 $ 41,672
========== ========== ========== ========== ==========
Ratio of expenses to average net assets .......... 1.89% 1.95% 2.04% 2.10% 2.05%
Ratio of net investment loss to average net assets (0.73)% (0.98)% (0.62)% (0.06)% (0.61)%
Portfolio turnover rate .......................... 74% 103% 103% 70% 59%
See notes to financial statements.
13
SCHWARTZ VALUE FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003
================================================================================
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.
See the Prospectus for more detailed information regarding the investment
strategies of the Fund.
Shares of the Fund are sold at net asset value. To calculate the net asset
value, the Fund's assets are valued and totaled, liabilities are subtracted, and
the balance is divided by the number of shares outstanding. The offering price
and redemption price per share is equal to the net asset value per share, except
that shares of the Fund are subject to a 1% contingent deferred sales load if
redeemed within one year of their purchase.
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 closing sales price as
of the close of the regular session of trading on the New York Stock
Exchange (NYSE) on the day the securities are being valued, or, if not
traded on a particular day, at the closing bid price. 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
NYSE on the day of valuation. 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. Investments representing primarily
capital stock of other open-end investment companies are valued at their
net asset value as reported by such companies. Securities (and other
assets) for which market quotations are not readily available are valued at
their fair value as determined in good faith in accordance with
consistently applied procedures established by and under the general
supervision of the Board of Trustees.
(b) INCOME TAXES -- It is the Fund's policy to comply with the special
provisions of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies. As provided therein, in any fiscal year in
which the Fund so qualifies and distributes at least 90% of its taxable
income, the Fund (but not the shareholders) will be relieved of federal
income tax on the income distributed. Accordingly, no provision for income
taxes has been made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also the Fund's intention to declare as
dividends in each calendar year at least 98% of its net investment income
and 98% of its net realized capital gains plus undistributed amounts from
prior years.
For the year ended December 31, 2003, the Fund reclassified its net
investment loss of $362,607 against distributions in excess of net realized
gains from security transactions on the Statement of Assets and
Liabilities. Such reclassification, the result of permanent differences
between the financial statement and income tax reporting requirements, has
no effect on the Fund's net assets or net asset value per share.
14
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
The tax character of distributable earnings at December 31, 2003 was as
follows:
Undistributed gains ........................ $ 36
Unrealized appreciation .................... 15,498,470
------------
Total distributable earnings ............... $ 15,498,506
============
For federal income tax purposes, the cost of portfolio investments amounted
to $45,404,336 at December 31, 2003. The composition of unrealized
appreciation (the excess of value over tax cost) and unrealized
depreciation (the excess of tax cost over value) was as follows:
Gross unrealized appreciation .............. $ 15,877,016
Gross unrealized depreciation .............. (378,546)
------------
Net unrealized appreciation ................ $ 15,498,470
============
The difference between the federal income tax cost of portfolio investments
and the financial statement cost for the Fund is due to certain timing
differences in the recognition of capital losses under income tax
regulations and accounting principles generally accepted in the United
States of America (GAAP).
(c) SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions
are accounted for on the trade date. Dividend income is recorded on the
ex-dividend date. Interest income is recognized on the accrual basis.
Realized gains and losses on security transactions are determined on the
identified cost basis.
(d) DIVIDENDS AND DISTRIBUTIONS -- Dividends from net investment income and
net capital gains, if any, are declared and paid annually in December.
Dividends and distributions to shareholders are recorded on the ex-dividend
date. The tax character of distributions paid during the years ended
December 31, 2003 and December 31, 2002 were as follows:
Long-Term Long-Term
Ordinary Capital Capital Total
Year Ended Income Gains (20%) Gains (15%) Distributions
---------------------------------------------------------------------------
December 31, 2003 $ 259,837 $1,008,267 $3,656,136 $4,924,240
December 31, 2002 $ -- $ -- $ -- $ --
(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 may be deemed
to be loans by the Fund. The Fund's policy is to take possession of U.S.
Government obligations as collateral under a repurchase agreement and, on a
daily basis, mark-to-market such obligations to ensure that their value,
including accrued interest, is at least equal to the amount to be repaid to
the Fund under the repurchase 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.
15
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
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). Certain other trustees and
officers of the Fund are officers of the Adviser, or of Schwartz Fund
Distributors, Inc. (the Distributor), the Fund's principal underwriter, or of
Ultimus Fund Solutions, LLC (Ultimus), 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 its average daily net assets up to $75 million; 1.25% of such assets
from $75 million to $100 million; and 1% of such assets in excess of $100
million.
The Distributor serves as the principal underwriter for the distribution of
shares of the Fund. During the year ended December 31, 2003, the Distributor
collected $2,998 in contingent deferred sales loads on redemptions of Fund
shares.
Pursuant to a Mutual Fund Services Agreement between the Fund and Ultimus,
Ultimus 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 Ultimus a fee, payable monthly, at an annual rate of .15% of its
average daily net assets, subject to a minimum monthly fee of $4,000.
3. INVESTMENT TRANSACTIONS
During the year ended December 31, 2003, cost of purchases and proceeds from
sales and maturities of investment securities, excluding short-term investments
and U.S. government securities, amounted to $35,190,084 and $39,643,563,
respectively.
16
SCHWARTZ VALUE FUND
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, 2003, and 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 auditing standards generally accepted
in the United States of America. 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, 2003, 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, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Schwartz Value Fund
as of December 31, 2003, 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 accounting principles generally accepted in the
United States of America.
DELOITTE & TOUCHE LLP
February 16, 2004
Chicago, Illinois
17
SCHWARTZ VALUE FUND
BOARD OF TRUSTEES AND EXECUTIVE OFFICERS (UNAUDITED)
================================================================================
Overall responsibility for management of the Trust rests with the Board of
Trustees. The Trustees serve during the lifetime of the Trust and until its
termination, or until death, resignation, retirement or removal. The Trustees,
in turn, elect the officers of the Trust to actively supervise its day-to-day
operations. The officers have been elected for an annual term. The following are
the Trustees and executive officers of the Trust:
Length of
Trustee Address Age Position Held with the Trust Time Served
- ------------------------------------------------------------------------------------------------------------------------------------
*Gregory J. Schwartz 3707 W. Maple Road, Bloomfield Hills, MI 62 Chairman of the Board/Trustee Since 1993
*George P. Schwartz, CFA 3707 W. Maple Road, Bloomfield Hills, MI 59 President/Trustee Since 1993
Peter F. Barry 3707 W. Maple Road, Bloomfield Hills, MI 76 Trustee Since 2004
Donald J. Dawson, Jr. 333 W. Seventh Street, Royal Oak, MI 56 Trustee Since 1993
Fred A. Erb 800 Old North Woodward, Birmingham, MI 80 Trustee Since 1994
**Bowie K. Kuhn 136 Teal Pointe Lane, Ponta Vedra Beach, FL 77 Trustee Since 2001
John J. McHale 2014 Royal Fern Court, Palm City, FL 82 Trustee Emeritus Since 1993
Sidney F. McKenna 1173 Banbury Circle, Bloomfield Hills, MI 81 Trustee Since 1993
*Richard L. Platte, Jr., CFA 3707 W. Maple Road, Bloomfield Hills, MI 52 Vice President and Secretary Since 1993
*Timothy S. Schwartz 3707 W. Maple Road, Bloomfield Hills, MI 32 Treasurer Since 2000
* Gregory J. Schwartz, George P. Schwartz, Richard L. Platte, Jr. and Timothy S.
Schwartz, as affiliated persons of Schwartz Investment Counsel, Inc., the Fund's
investment adviser, are "interested persons" of the Trust within the meaning of
Section 2(a)(19) of the Investment Company Act of 1940. Gregory J. Schwartz and
George P. Schwartz are brothers, and Timothy S. Schwartz is the son of George P.
Schwartz and the nephew of Gregory J. Schwartz.
** Bowie K. Kuhn is an "interested person" of the Trust by virtue of his
membership on the Catholic Advisory Board, a committee of individuals whose
responsibilities relate to the Ave Maria Mutual Funds, which are other series of
the Trust.
Each Trustee oversees four portfolios of the Trust: the Ave Maria Catholic
Values Fund, Ave Maria Growth Fund, Ave Maria Bond Fund and the Schwartz Value
Fund. The principal occupations of the Trustees and executive officers of the
Trust during the past five years and public directorships held by the Trustees
are set forth below:
Gregory J. Schwartz is Chairman of Schwartz Investment Counsel, Inc., the Fund's
investment adviser.
George P. Schwartz, CFA is President and Chief Investment Officer of Schwartz
Investment Counsel, Inc. and is the portfolio manager of the Fund.
Peter F. Barry is retired President of Cadillac Rubber & Plastics Company (a
manufacturer of rubber and plastics components).
Donald J. Dawson, Jr. is Chairman of Payroll 1, Inc. (a payroll processing
company).
Fred A. Erb is the Chairman and Chief Executive Officer of Edgemere Enterprises,
Inc. (a real estate investment, development and management company) and Chairman
of D.I.Y. Home Warehouse (a retail building supplies company).
Bowie K. Kuhn is President of The Kent Group (business, sports and financial
consultant), and is the former Commissioner of Major League Baseball.
John J. McHale is retired as the President of the Montreal Expos (a major league
baseball team).
18
BOARD OF TRUSTEES AND EXECUTIVE OFFICERS (CONTINUED)
================================================================================
Sidney F. McKenna is retired Senior Vice President of United Technologies
Corporation (a major manufacturer of aircraft engines and other industrial
products).
Richard L. Platte, Jr., CFA is Executive Vice President, Secretary and Treasurer
of Schwartz Investment Counsel, Inc.
Timothy S. Schwartz is Vice President of Schwartz Investment Counsel, Inc.
Additional information about members of the Board of Trustees and executive
officers is available in the Statement of Additional Information (SAI). To
obtain a free copy of the SAI, please call 1-888-726-0753.
FEDERAL TAX INFORMATION (UNAUDITED)
================================================================================
In accordance with federal tax requirements, the following provides shareholders
with information concerning distributions from net realized gains made by the
Fund during the year ended December 31, 2003. On December 31, 2003, the Fund
declared and paid a short-term capital gain distribution of $0.1211 per share
and a long-term capital gain distribution of $2.1739 per share. As provided by
the Jobs and Growth Tax Relief Reconciliation Act of 2003, 100% of the
short-term capital gain distribution of $0.1211 per share and $1.703986 per
share of the long-term capital gain distribution of $2.1739 may be subject to a
maximum tax rate of 15%. As required by federal regulations, shareholders
received notification of their portion of the Fund's taxable capital gain
distribution, if any, paid during the 2003 calendar year early in 2004.
RESULTS OF SPECIAL MEETING OF SHAREHOLDERS OF
SCHWARTZ INVESTMENT TRUST
JANUARY 16, 2004 (UNAUDITED)
================================================================================
On January 16, 2004, a Special Meeting of Shareholders of the Schwartz
Investment Trust (the Trust), which includes the Fund, was held (1) to elect
seven Trustees, and (2) to ratify the selection of Deloitte & Touche LLP as the
Trust's independent public accountants. The total number of shares of the Trust
present in person or by proxy represented 87.74% of the shares entitled to vote
at the meeting. All nominees for Trustee were elected and Deloitte & Touche was
ratified as independent public accountants.
The results of the voting to elect the nominees for Trustee were as follows:
- --------------------------------------------------------------------------------
NUMBER OF SHARES
- --------------------------------------------------------------------------------
WITHHOLD
NOMINEE AFFIRMATIVE AUTHORITY
- --------------------------------------------------------------------------------
Donald J. Dawson, Jr ............... 15,391,924 4,281
Bowie K. Kuhn ...................... 15,392,656 3,549
Sidney F. McKenna .................. 15,390,600 5,605
George P. Schwartz ................. 15,392,698 3,507
Fred A. Erb ........................ 15,390,747 5,458
Peter F. Barry ..................... 15,390,701 5,504
Gregory J. Schwartz ................ 15,388,457 7,748
- --------------------------------------------------------------------------------
19
RESULTS OF SPECIAL MEETING OF SHAREHOLDERS OF
SCHWARTZ INVESTMENT TRUST (CONTINUED)
- --------------------------------------------------------------------------------
The results of the voting for or against the ratification of Deloitte & Touche
as independent public accountants were as follows:
NUMBER OF SHARES
-------------------------------------------
FOR AGAINST ABSTAIN
-------------------------------------------
15,374,906 6,319 14,980
-------------------------------------------
A description of the policies and procedures that the Fund uses to vote proxies
relating to portfolio securities is available without charge upon request by
calling toll-free 1-888-726-0753, or on the Securities and Exchange Commissions
website at http://www.sec.gov.
20
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
closely 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 provide a
consistently expanding stream of income. SVF 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.
21
THIS PAGE INTENTIONALLY LEFT BLANK.
THIS PAGE INTENTIONALLY LEFT BLANK.
SCHWARTZ
VALUE FUND
a series of
SCHWARTZ
INVESTMENT
TRUST
[LOGO]
ANNUAL REPORT
for the year ended
DECEMBER 31, 2003
Ticker Symbol: RCMFX
SCHWARTZ VALUE FUND
a series of
Schwartz Investment Trust
3707 W. Maple Road
Bloomfield Hills, Michigan 48301
(248) 644-8500
BOARD OF TRUSTEES
Peter F. Barry
Donald J. Dawson, Jr.
Fred A. Erb
Bowie K. Kuhn
John J. McHale, Emeritus
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
Timothy S. Schwartz, Treasurer
Robert G. Dorsey, Assistant Secretary
John F. Splain, Assistant Secretary
Mark J. Seger, CPA, Assistant Treasurer
Theresa M. Bridge, CPA, Assistant Treasurer
Craig J. Hunt, Assistant Vice President
INVESTMENT ADVISER
SCHWARTZ INVESTMENT COUNSEL, INC.
3707 W. Maple Road
Bloomfield Hills, Michigan 48301
DISTRIBUTOR
SCHWARTZ FUND DISTRIBUTORS, INC.
3707 W. Maple Road
Bloomfield Hills, Michigan 48301
PRIMARY SELLING AGENT
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
ULTIMUS FUND SOLUTIONS, LLC
P.O. Box 46707
Cincinnati, Ohio 45246
AUDITORS
DELOITTE & TOUCHE LLP
180 N. Stetson Ave
Chicago, IL 60606
LEGAL COUNSEL
SULLIVAN & WORCESTER LLP
1666 K Street, NW, Suite 700
Washington, D.C. 20006
SHAREHOLDER ACCOUNTS CORPORATE OFFICES
c/o Ultimus Fund 3707 W. Maple Road
Solutions, LLC Bloomfield Hills, MI 48301
P.O. Box 46707 (248) 644-8500
Cincinnati, OH 45246 Fax (248) 644-4250
1-888-726-9331
[LOGO]
Ave Maria Mutual Funds
Dear Shareowners of:
Ave Maria Catholic Values Fund (AVEMX)
Ave Maria Growth Fund (AVEGX)
Ave Maria Bond Fund (AVEFX)
One of my college professors said many years ago, "The U.S. economy is amazingly
resilient." I never realized how right he was until recently. When one looks
back over the past few years and totals up the devastating shocks this economy
has been through, it truly is astonishing - the stock market collapse following
the tech bubble of the `90s, September 11, two wars, corporate accounting
frauds, crooked investment bankers, and a major mutual fund scandal. Through it
all, consumers remained confident, productivity skyrocketed and corporate
profits roared back with a vengeance. With capital expenditures and employment
now rising again, the U.S. economy appears to be hitting on all eight cylinders
and leading a synchronized global recovery. All with almost no inflation. My
college professor was right - the U.S. economy is amazingly resilient.
Amidst the collapsing equity markets of early 2001, a group of Catholic laymen
led by Bowie Kuhn and Tom Monaghan set out to start a Catholic mutual fund. This
fund, to become known as Ave Maria Catholic Values Fund, was geared to Catholics
who were fed up with mutual funds that regularly invested in companies that
support abortion. This group felt that for too long, Catholics had left
capitalism to the secularists and hedonists. I was greatly honored when Schwartz
Investment Counsel, Inc. was selected to manage the Fund which, since its May 1,
2001 launch, has become the largest and fastest growing Catholic mutual fund in
the country. On May 1, 2003, exactly two years after starting the Ave Maria
Catholic Values Fund (AVEMX), we launched our second and third Catholic funds -
the Ave Maria Growth Fund (AVEGX) and the Ave Maria Bond Fund (AVEFX).
All three funds screen out companies that our Catholic Advisory Board has
determined violate core teachings of the Roman Catholic Church. As you may know,
our Catholic Advisory Board has made abortion the number one issue for us to
screen out in managing the three Funds. Eliminated from consideration for the
portfolios are all companies that support the culture of death, either directly
or through contributions to Planned Parenthood. Also screened out are producers
and distributors of pornography, and companies which offer their employees
non-marital partner benefits. After eliminating the offenders (approximately 400
public companies), we are still left with thousands of issues from which to
choose in assembling the three investment portfolios.
Our pro-life and pro-family message really seems to be resonating with Catholics
across the country. Over 1,700 investors (not all Catholics) from 48 states have
over $190 million invested in the Ave Maria Mutual Funds. The Funds are managed
for investors with long term investment goals. The above average investment
performance of the Funds so far has been gratifying. Some say we've been
blessed. Be that as it may, the only promise I can make about the future is that
my staff and I will do our best to adhere to the moral principles outlined while
striving to achieve desirable investment results.
Thanks for placing your trust in us. We won't let you down.
With best wishes,
/s/ George P. Schwartz
George P. Schwartz, CFA
President
January 31, 2004
AVE MARIA MUTUAL FUNDS
TABLE OF CONTENTS
================================================================================
Ave Maria Catholic Values Fund:
Portfolio Manager Commentary............................ 1
Performance ............................................ 3
Ten Largest Equity Holdings............................. 4
Schedule of Investments ................................ 5
Ave Maria Growth Fund:
Portfolio Manager Commentary ........................... 9
Performance ............................................ 10
Ten Largest Equity Holdings............................. 11
Schedule of Investments................................. 12
Ave Maria Bond Fund:
Portfolio Manager Commentary............................ 14
Performance............................................. 15
Ten Largest Holdings ................................... 16
Schedule of Investments................................. 17
Statements of Assets and Liabilities........................ 19
Statements of Operations.................................... 20
Statements of Changes in Net Assets:
Ave Maria Catholic Values Fund.......................... 21
Ave Maria Growth Fund .................................. 22
Ave Maria Bond Fund..................................... 23
Financial Highlights:
Ave Maria Catholic Values Fund.......................... 24
Ave Maria Growth Fund .................................. 25
Ave Maria Bond Fund - Class I........................... 26
Ave Maria Bond Fund - Class R........................... 27
Notes to Financial Statements............................... 28
Independent Auditors' Report................................ 33
Board of Trustees and Executive Officers.................... 34
Catholic Advisory Board..................................... 35
Federal Tax Information..................................... 36
Results of Special Meeting of Shareholders.................. 36
AVE MARIA CATHOLIC VALUES FUND
PORTFOLIO MANAGER COMMENTARY
================================================================================
Dear Fellow Shareowner:
In 2003, the Ave Maria Catholic Values Fund (AVEMX) continued to produce
above-market returns. For the year, the Fund returned 35.6% vs. 28.7% for the
S&P 500. Since the inception of the Fund on May 1, 2001 the Fund's investment
performance has been noteworthy. The comparison to the S&P 400 Mid-Cap index is
increasingly relevant, since about half of the Fund's assets are invested in
that segment of the market.
Since 5-01-01 Inception
Through 12-31-03
--------------------------
Total Return
--------------------------
Cumulative Annualized
AVEMX 28.7% 9.9%
S&P 500 -8.3% -3.2%
S&P 400 Mid-Cap 15.4% 5.5%
This favorable investment performance is the result of the solid execution of
our disciplined, value-oriented investment philosophy. It would not be
reasonable to assume that this portfolio will consistently outperform the market
so decisively.
The outlook for stocks in general remains positive. Many of the same factors
that shaped our bullish opinion last year should continue to provide a favorable
backdrop for the markets in 2004: low inflation and interest rates, improving
corporate profits, and favorable tax policies. Signs of economic recovery are
apparent not only in the U.S., but internationally as well.
The portfolio is composed of attractively priced stocks that do not violate the
core teachings of the Catholic Church. Our focus on high-quality companies with
solid balance sheets, strong cash flow and good growth prospects has led to
recent purchases of Harley Davidson, Inc., First Data Corporation, and North
Fork Bancorporation, Inc. Positions have been increased in the healthcare sector
including Steris Corporation, Lincare Holdings, Inc., and Baxter International,
Inc. XTO Energy, Inc. and Patterson - UTI Energy, Inc. were purchased due to the
favorable long-term outlook for natural gas. Eliminated were Toys R Us at a
substantial profit and First Health Group Corporation at a small loss, as a
result of both companies losing their competitive edge.
During 2003, we eliminated four stocks from the Fund when they became violators
of our Catholic screens: H&R Block, Inc., Northrop Grumman, Sears Roebuck & Co.,
and SunTrust Banks. Each began offering non-marital partner benefits to their
employees, undermining the sacrament of marriage. In January 2004, Eli Lilly &
Company was sold for the same reason. In each case, we wrote to the Board of
Directors to tell them why we sold their stock and asked them to reverse their
policy, to no avail. Perhaps someday our Catholic Fund will be big enough to get
corporate boards' attention.
In the case of the aforementioned Harley Davidson, we actually sold the stock
during the year, when we were misinformed about the company offering non-marital
partner benefits to their employees. After writing to the Board of Directors, we
received a call from the head of the company's legal department informing us
that the company did not offer such "benefits" and indeed the company was a
strong supporter of the sanctity of marriage. Since we as portfolio managers
continued to believe Harley Davidson, Inc. was a good investment, we immediately
repurchased a sizeable block of stock for the Fund. It's worth emphasizing that
the investment professionals at Schwartz
1
AVE MARIA CATHOLIC VALUES FUND
PORTFOLIO MANAGER COMMENTARY (CONTINUED)
================================================================================
Investment Counsel, Inc. are analysts and portfolio managers, not theologians
nor experts on Catholic Church doctrine. Although many of us are Catholics, we
rely on and are blessed to have the advice of the Catholic Advisory Board in
screening out certain types of companies.
During 2003, Schwartz Investment Counsel, Inc. was fortunate to hire Gregory R.
Heilman, CFA as Senior Vice President and Co-Portfolio Manager of the AVEMX. A
veteran analyst and portfolio manager, Greg has made an immediate positive
contribution to the firm and especially in management of this Fund.
Thanks for being a shareowner in 2003. It's a privilege to be managing the Fund
for you.
Sincerely,
/s/ George P. Schwartz /s/ Gregory R. Heilman
George P. Schwartz, CFA Gregory R. Heilman, CFA
Co-Portfolio Manager Co-Portfolio Manager
2
AVE MARIA CATHOLIC VALUES FUND
PERFORMANCE (UNAUDITED)
================================================================================
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT
IN THE AVE MARIA CATHOLIC VALUES FUND, THE S&P 500 INDEX,
AND THE S&P 400 MID CAP INDEX
[GRAPHIC OMITTED]
AVE MARIA
CATHOLIC VALUES FUND S&P 500 INDEX: S&P 400 MID CAP INDEX
- -------------------- -------------- ---------------------
DATE BALANCE DATE BALANCE DATE BALANCE
- ---- ------- ---- ------- ---- -------
05/01/01 $ 10,000 05/01/01 $ 10,000 05/01/01 $ 10,000
06/30/01 10,370 06/30/01 9,690 06/30/01 10,110
09/30/01 9,360 09/30/01 8,268 09/30/01 8,435
12/31/01 10,529 12/31/01 9,151 12/31/01 9,952
03/31/02 11,201 03/31/02 9,177 03/31/02 10,622
06/30/02 10,970 06/30/02 7,947 06/30/02 9,633
09/30/02 9,236 09/30/02 6,574 09/30/02 8,039
12/31/02 9,496 12/31/02 7,128 12/31/02 8,508
03/31/03 8,904 03/31/03 6,904 03/31/03 8,131
06/30/03 10,649 06/30/03 7,967 06/30/03 9,564
09/30/03 11,552 09/30/03 8,177 09/30/03 10,194
12/31/03 12,872 12/31/03 9,173 12/31/03 11,538
Past performance is not predictive of future performance.
- ------------------------------------
Ave Maria Catholic Values Fund
Average Annual Total Returns(a)
Since
1 Year Inception(b)
------- ------------
34.55%(c) 9.92%
- ------------------------------------
(a) The returns shown do not reflect the deduction of taxes a shareholder
would pay on Fund distributions or the redemption of Fund shares.
(b) Represents the period from the commencement of operations (May 1, 2001)
through December 31, 2003.
(c) The return shown reflects a 1% contingent deferred sales load.
3
AVE MARIA CATHOLIC VALUES FUND
TEN LARGEST EQUITY HOLDINGS
DECEMBER 31, 2003 (UNAUDITED)
================================================================================
SHARES COMPANY VALUE
- --------------------------------------------------------------------------------
200,000 Ross Stores, Inc. .............................. $ 5,286,000
70,000 American International Group, Inc. ............. 4,639,600
175,000 Craftmade International, Inc. .................. 4,592,000
90,000 Harley-Davidson, Inc. .......................... 4,277,700
120,000 Jones Apparel Group, Inc. ...................... 4,227,600
85,000 Exxon Mobil Corporation ........................ 3,485,000
160,000 Brookstone, Inc. ............................... 3,409,600
100,000 Genuine Parts Company .......................... 3,320,000
100,000 Waters Corporation ............................. 3,316,000
35,000 General Dynamics Corporation ................... 3,163,650
4
AVE MARIA CATHOLIC VALUES FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003
================================================================================
SHARES COMMON STOCKS -- 98.3% VALUE
- --------------------------------------------------------------------------------
AEROSPACE/DEFENSE -- 4.1%
50,000 Esterline Technologies Corporation * ........... $ 1,333,500
35,000 General Dynamics Corporation ................... 3,163,650
40,000 Harris Corporation ............................. 1,518,000
------------
6,015,150
------------
APPAREL & TEXTILES-- 3.9%
120,000 Jones Apparel Group, Inc. ...................... 4,227,600
20,000 Mohawk Industries, Inc.* ....................... 1,410,800
------------
5,638,400
------------
BUILDING MATERIALS & CONSTRUCTION-- 3.6%
200,000 Champion Enterprises, Inc.* .................... 1,400,000
100,000 Fleetwood Enterprises, Inc.* ................... 1,026,000
30,000 Pulte Homes, Inc. .............................. 2,808,600
------------
5,234,600
------------
BUSINESS & INDUSTRIAL PRODUCTS-- 3.5%
20,000 3M Company ..................................... 1,700,600
100,000 Genuine Parts Company .......................... 3,320,000
------------
5,020,600
------------
BUSINESS SERVICES-- 5.9%
75,000 Automatic Data Processing, Inc. ................ 2,970,750
50,000 Concord EFS, Inc.* ............................. 742,000
45,000 First Data Corporation ......................... 1,849,050
120,000 Neogen Corporation* ............................ 2,972,400
------------
8,534,200
------------
COMMUNICATION EQUIPMENT & SERVICES-- 3.6%
35,000 Alltel Corporation ............................. 1,630,300
75,000 CenturyTel, Inc. ............................... 2,446,500
85,000 Hector Communications Corporation* ............. 1,191,700
------------
5,268,500
------------
CONSUMER PRODUCTS - DURABLES-- 10.7%
75,000 Brunswick Corporation .......................... 2,387,250
175,000 Craftmade International, Inc. .................. 4,592,000
50,000 Furniture Brands International, Inc. ........... 1,466,500
90,000 Harley-Davidson, Inc. .......................... 4,277,700
130,000 Leggett & Platt, Inc. .......................... 2,811,900
------------
15,535,350
------------
CONSUMER PRODUCTS - NONDURABLES-- 4.0%
50,000 Chattem, Inc.* ................................. 895,000
20,000 Coach, Inc. * .................................. 755,000
30,000 Fortune Brands, Inc. ........................... 2,144,700
115,000 Maxwell Shoe Company, Inc.* .................... 1,951,550
------------
5,746,250
------------
5
AVE MARIA CATHOLIC VALUES FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
================================================================================
SHARES COMMON STOCKS -- 98.3% (CONTINUED) VALUE
- --------------------------------------------------------------------------------
ELECTRONICS -- 1.1%
20,000 Gentex Corporation ............................. $ 883,200
71,442 Sparton Corporation* ........................... 717,992
------------
1,601,192
------------
ENERGY & MINING-- 7.5%
35,000 Anadarko Petroleum Corporation ................. 1,785,350
100,000 Diamond Offshore Drilling, Inc. ................ 2,051,000
85,000 Exxon Mobil Corporation ........................ 3,485,000
210,200 Input/Output, Inc.* ............................ 948,002
35,000 Patterson-UTI Energy, Inc.* .................... 1,152,200
20,000 Prima Energy Corporation* ...................... 703,200
25,000 XTO Energy, Inc. ............................... 707,500
------------
10,832,252
------------
ENVIRONMENTAL SERVICES-- 0.6%
75,000 Layne Christensen Company* ..................... 881,250
------------
FINANCE - BANKS & THRIFTS-- 4.3%
65,000 BB&T Corporation ............................... 2,511,600
50,000 North Fork Bancorporation, Inc. ................ 2,023,500
60,000 Synovus Financial Corporation* ................. 1,735,200
------------
6,270,300
------------
FINANCE - INSURANCE-- 4.3%
70,000 American International Group, Inc. ............. 4,639,600
282,945 Unico American Corporation* .................... 1,578,833
------------
6,218,433
------------
FINANCE-- MISCELLANEOUS - 0.8%
75,000 Investment Technology Group, Inc.* ............. 1,211,250
------------
HEALTHCARE -- 13.2%
35,000 Baxter International, Inc. ..................... 1,068,200
50,000 Beckman Coulter, Inc. .......................... 2,541,500
25,000 Boston Scientific Corporation* ................. 919,000
20,000 Eli Lilly & Company ............................ 1,406,600
47,500 Hillenbrand Industries, Inc. ................... 2,947,850
70,000 Lincare Holdings, Inc.* ........................ 2,102,100
60,000 Manor Care, Inc. ............................... 2,074,200
120,000 STERIS Corporation* ............................ 2,712,000
100,000 Waters Corporation* ............................ 3,316,000
------------
19,087,450
------------
6
AVE MARIA CATHOLIC VALUES FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
================================================================================
SHARES COMMON STOCKS -- 98.3% (CONTINUED) VALUE
- --------------------------------------------------------------------------------
INDUSTRIAL PRODUCTS & SERVICES-- 8.3%
41,700 Balchem Corporation ............................ $ 950,760
50,000 Dover Corporation .............................. 1,987,500
35,000 Graco, Inc. .................................... 1,403,500
40,000 Kaydon Corporation ............................. 1,033,600
25,000 Simpson Manufacturing Company, Inc.* ........... 1,271,500
50,000 Snap-On, Inc. .................................. 1,612,000
35,000 Stanley Works (The) ............................ 1,325,450
50,000 Teleflex, Inc. ................................. 2,416,500
------------
12,000,810
------------
LEISURE & ENTERTAINMENT-- 3.8%
100,000 Monaco Coach Corporation* ...................... 2,380,000
35,000 Polaris Industries, Inc. ....................... 3,100,300
------------
5,480,300
------------
PRINTING & PUBLISHING-- 1.8%
18,750 Courier Corporation ............................ 721,331
65,000 ProQuest Company* .............................. 1,914,250
------------
2,635,581
------------
REAL ESTATE-- 1.3%
25,000 Health Care Property Investors, Inc. ........... 1,270,000
20,000 Washington Real Estate Investment Trust ........ 584,000
------------
1,854,000
------------
RETAIL -- 9.2%
160,000 Brookstone, Inc. * ............................. 3,409,600
60,000 Dollar Tree Stores, Inc.* ...................... 1,803,600
40,000 Hibbett Sporting Goods, Inc.* .................. 1,192,000
15,000 Hot Topic, Inc.* ............................... 441,900
200,000 Ross Stores, Inc. .............................. 5,286,000
40,000 TJX Companies, Inc. (The) ...................... 882,000
10,000 Tractor Supply Company* ........................ 388,900
------------
13,404,000
------------
TECHNOLOGY -- 2.8%
55,000 Cable Design Technology Corporation * .......... 494,450
10,000 ScanSource, Inc.* .............................. 456,200
110,000 Sungard Data Systems, Inc.* .................... 3,048,100
------------
3,998,750
------------
TOTAL COMMON STOCKS (Cost $109,698,866) ........ $142,468,618
------------
7
AVE MARIA CATHOLIC VALUES FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
================================================================================
FACE
AMOUNT REPURCHASE AGREEMENTS (1)-- 2.2% VALUE
- --------------------------------------------------------------------------------
$3,272,305 Fifth Third Bank, 0.50%, dated 12/31/03,
due 01/02/04, repurchase proceeds:
$3,272,396 (Cost $3,272,305) ................. $ 3,272,305
------------
TOTAL INVESTMENTS-- 100.5% (Cost $112,971,171) . $145,740,923
LIABILITIES IN EXCESS OF OTHER ASSETS-- (0.5%) . (785,221)
------------
NET ASSETS-- 100.0% ............................ $144,955,702
============
* Non-income producing security.
(1) Repurchase agreements are fully collateralized by U.S. Government
obligations.
See notes to financial statements.
8
AVE MARIA GROWTH FUND
PORTFOLIO MANAGER COMMENTARY
================================================================================
Dear Fellow Shareholders:
The Ave Maria Growth Fund commenced operations on May 1, 2003. Although it was
not apparent then, it turned out to be a fortuitous time to launch a new mutual
fund. For the eight months ended December 31, 2003, the total return for the
Fund was 23.4% compared to 22.8% for the S&P 500. The Fund's top performing
stocks were represented by a wide variety of industries and included: Patterson
Dental Company (medical equipment), KB Home (homebuilding), Johnson Controls,
Inc. (automotive supply), and Garmin Ltd. (technology).
In managing the portfolio, emphasis is placed on large and mid-size,
well-managed companies, which are industry leaders. These companies typically
have great business characteristics, including above average profit margins,
loads of free cash flow, exceptional returns on equity, and rapid growth, which
makes them self financing with little need for debt on their balance sheets. In
2003, small caps and more speculative issues had a terrific rebound off their
lows. In 2004, we expect investors will turn increasingly to higher quality and
larger companies, which should put this portfolio in good stead.
The Fund closed out 2003 with 242 shareholders, net assets of $15 million, and a
net asst value of $12.34 per share.
With best regards,
/s/ James L. Bashaw
James L. Bashaw, CFA
Portfolio Manager
9
AVE MARIA GROWTH FUND
PERFORMANCE (UNAUDITED)
================================================================================
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT
IN THE AVE MARIA GROWTH FUND AND THE S&P 500 INDEX
[GRAPHIC OMITTED]
AVE MARIA GROWTH FUND: S&P 500 INDEX:
- ---------------------- --------------
DATE BALANCE DATE BALANCE
- ---- ------- ---- -------
05/01/03 $ 10,000 05/01/03 $ 10,000
05/31/03 10,470 05/31/03 10,532
06/30/03 10,660 06/30/03 10,667
07/31/03 11,070 07/31/03 10,855
08/31/03 11,440 08/31/03 11,066
09/30/03 10,980 09/30/03 10,949
10/31/03 11,900 10/31/03 11,568
11/30/03 12,160 11/30/03 11,670
12/31/03 12,240 12/31/03 12,282
Past performance is not predictive of future performance.
- --------------------------------------
Ave Maria Growth Fund
Total Return(a)
Since
Inception(b)(c)
---------------
22.40%(d)
- --------------------------------------
(a) The return shown does not reflect the deduction of taxes a shareholder
would pay on Fund distributions or the redemption of Fund shares.
(b) Represents the period from the commencement of operations (May 1, 2003)
through December 31, 2003.
(c) Not annualized.
(d) The return shown reflects a 1% contingent deferred sales load.
10
AVE MARIA GROWTH FUND
TEN LARGEST EQUITY HOLDINGS
DECEMBER 31, 2003 (UNAUDITED)
================================================================================
SHARES COMPANY VALUE
- --------------------------------------------------------------------------------
9,300 Alliant Techsystems, Inc. ...................... $ 537,168
5,900 General Dynamics Corporation ................... 533,301
9,700 Garmin Ltd. .................................... 528,456
7,200 KB Home ........................................ 522,144
12,200 Mettler-Toledo International, Inc. ............. 514,962
13,500 Kellogg Company ................................ 514,080
10,100 Beckman Coulter, Inc. .......................... 513,383
15,400 Waters Corporation ............................. 510,664
4,350 Johnson Controls, Inc. ......................... 505,122
15,500 Arthur J. Gallagher & Company .................. 503,595
11
AVE MARIA GROWTH FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003
================================================================================
SHARES COMMON STOCKS -- 97.8% VALUE
- --------------------------------------------------------------------------------
AEROSPACE/DEFENSE -- 7.1%
9,300 Alliant Techsystems, Inc.* ..................... $ 537,168
5,900 General Dynamics Corporation ................... 533,301
------------
1,070,469
------------
BUILDING MATERIALS & CONSTRUCTION-- 3.5%
7,200 KB Home ........................................ 522,144
------------
BUSINESS SERVICES-- 2.3%
9,100 FactSet Research Systems, Inc. ................. 347,711
------------
CONSUMER PRODUCTS - DURABLES-- 3.3%
4,350 Johnson Controls, Inc. ......................... 505,122
------------
EDUCATION -- 3.3%
17,600 Integrated Circuit Systems, Inc.* .............. 501,424
------------
ELECTRONICS -- 3.5%
9,700 Garmin Ltd. .................................... 528,456
------------
FINANCE - BANKS & THRIFTS-- 6.6%
14,700 National City Corporation ...................... 498,918
12,400 North Fork Bancorporation, Inc. ................ 501,828
------------
1,000,746
------------
FINANCE - MISCELLANEOUS-- 6.6%
15,500 Arthur J. Gallagher & Company .................. 503,595
15,900 SEI Investments Company ........................ 484,473
------------
988,068
------------
FOOD & TOBACCO-- 9.8%
13,500 Kellogg Company ................................ 514,080
16,500 McCormick & Company, Inc. ...................... 496,650
9,950 PepsiCo, Inc. .................................. 463,869
------------
1,474,599
------------
HEALTHCARE -- 19.9%
10,100 Beckman Coulter, Inc. .......................... 513,383
13,800 Biomet, Inc. ................................... 502,458
6,900 Eli Lilly & Company ............................ 485,277
8,300 Guidant Corporation ............................ 499,660
7,800 Patterson Dental Company* ...................... 500,448
15,400 Waters Corporation* ............................ 510,664
------------
3,011,890
------------
12
AVE MARIA GROWTH FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
================================================================================
SHARES COMMON STOCKS -- 97.8% (CONTINUED) VALUE
- --------------------------------------------------------------------------------
INDUSTRIAL PRODUCTS & SERVICES-- 19.6%
10,200 AMETEK, Inc. ................................... $ 492,252
10,700 CLARCOR, Inc. .................................. 471,870
8,300 Donaldson Company, Inc. ........................ 491,028
13,000 Expeditors International of Washington, Inc. ... 489,580
12,500 Graco, Inc. .................................... 501,250
12,200 Mettler-Toledo International, Inc.* ............ 514,962
------------
2,960,942
------------
LEISURE & ENTERTAINMENT-- 3.3%
5,600 Polaris Industries, Inc. ....................... 496,048
------------
RETAIL -- 9.0%
11,500 Bed Bath & Beyond, Inc.* ....................... 498,525
19,200 Christopher & Banks Corporation ................ 374,976
18,400 Ross Stores, Inc. .............................. 486,312
------------
1,359,813
------------
TOTAL COMMON STOCKS (Cost $12,899,741) ......... $ 14,767,432
------------
================================================================================
FACE
AMOUNT REPURCHASE AGREEMENTS (1)-- 1.1% VALUE
- --------------------------------------------------------------------------------
$ 174,887 Fifth Third Bank, 0.50%, dated 12/31/03,
due 01/02/04, repurchase proceeds:
$174,892 (Cost $174,887) ..................... $ 174,887
------------
TOTAL INVESTMENTS-- 98.9% (Cost $13,074,628) ... $ 14,942,319
OTHER ASSETS IN EXCESS OF LIABILITIES-- 1.1% ... 162,439
------------
NET ASSETS-- 100.0% ............................ $ 15,104,758
============
* Non-income producing security.
(1) Repurchase agreements are fully collateralized by U.S. Government
obligations.
See notes to financial statements.
13
AVE MARIA BOND FUND
PORTFOLIO MANAGER COMMENTARY
================================================================================
Dear Fellow Shareholders:
The Ave Maria Bond Fund began operations on May 1, 2003. For the eight months
ended December 31, 2003, Class R shares of the Fund had a 2.4% return, which
compares favorably with the 1.9% return of the Lehman Brothers Intermediate U.S.
Government/Credit Index. The portfolio has been managed conservatively with
particular focus on minimizing interest rate risk given our conviction that
interest rates are unsustainably low. That has meant keeping the average
maturity of the bonds in the portfolio very short, which will mitigate the
negative effects of rising interest rates.
At December 31, 2003, 11.3% of the portfolio was invested in dividend paying
common stocks of financially powerful companies, with attractive dividend yields
and excellent prospects for future dividend increases. In fact, half of the
stocks in the Fund have already increased their dividends since being purchased.
With the recent reduction in taxes on dividends to 15%, there is increased
incentive for boards to boost dividend payments. This trend will probably
escalate as 2004 unfolds.
Given the prospects for accelerating economic growth and eventual tightening on
the part of the Fed, it is likely interest rates will rise during 2004.
Therefore, we will continue to focus on protecting principal by investing in
only short and intermediate maturity fixed income securities of investment
grade.
With best regards,
/s/ Richard L. Platte
Richard L. Platte, Jr., CFA
Portfolio Manager
14
AVE MARIA BOND FUND
PERFORMANCE (UNAUDITED)
================================================================================
COMPARISON OF THE CHANGE IN VALUE OF A $10,000 INVESTMENT
IN THE AVE MARIA BOND FUND(a) AND THE LEHMAN BROTHERS
U.S. GOVERNMENT /CREDIT INDEX
[GRAPHIC OMITTED]
AVE MARIA GROWTH FUND: LEHMAN BROTHERS U.S. GOVERNMENT/CREDIT INDEX
- ---------------------- --------------------------------------------
DATE BALANCE DATE BALANCE
- ---- ------- ---- -------
05/01/03 $ 10,000 05/01/03 $ 10,000
05/31/03 10,165 05/31/03 10,195
06/30/03 10,163 06/30/03 10,188
07/31/03 9,941 07/31/03 9,911
08/31/03 9,962 08/31/03 9,934
09/30/03 10,174 09/30/03 10,186
10/31/03 10,145 10/31/03 10,090
11/30/03 10,158 11/30/03 10,104
12/31/03 10,256 12/31/03 10,192
Past performance is not predictive of future performance.
- ------------------------------
Ave Maria Bond Fund
Total Returns(b)
Since
Inception(c)(d)
- ------------------------------
Class I 2.56%
Class R 1.36%(e)
- ------------------------------
(a) The line graph above represents performance of Class I shares only, which
will vary from the performance of Class R shares based on the difference
in fees paid by shareholders in the different classes.
(b) The returns shown does not reflect the deduction of taxes a shareholder
would pay on Fund distributions or the redemption of Fund shares.
(c) Represents the period from the commencement of operations (May 1, 2003)
through December 31, 2003.
(d) Not annualized.
(e) The return shown reflects a 1% contingent deferred sales load.
15
AVE MARIA BOND FUND
TEN LARGEST HOLDINGS
DECEMBER 31, 2003 (UNAUDITED)
================================================================================
PAR COMPANY VALUE
- --------------------------------------------------------------------------------
$4,000,000 U.S. Treasury Note, 2.625%, due 05/15/08 ....... $ 3,939,844
2,256,180 U.S. Treasury Inflation-Protection
Notes, 3.875%, due 01/15/09 .................. 2,547,721
2,000,000 U.S. Treasury Note, 1.625%, due 04/30/05 ....... 2,006,016
2,000,000 U.S. Treasury Note, 1.250%, due 05/31/05 ....... 1,994,688
2,000,000 Federal Home Loan Bank, 4.500%, due 11/15/12 ... 1,991,752
1,000,000 American General Corporation, 7.500%,
due 08/11/10 ................................. 1,196,176
1,000,000 Regions Financial Corporation, 7.000%,
due 03/01/11 ................................. 1,127,328
1,000,000 United Technologies
Corporation, 6.350%, due 03/01/11 ............ 1,117,203
1,000,000 Alcoa, Inc., 6.000%, due 01/15/12 .............. 1,086,758
1,000,000 National Rural Utilities Cooperative
Finance Corporation, 6.000%, due 05/15/06 .... 1,078,418
16
AVE MARIA BOND FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2003
================================================================================
PAR VALUE U.S. GOVERNMENT AND AGENCY OBLIGATIONS-- 54.3% VALUE
- --------------------------------------------------------------------------------
U.S. TREASURIES -- 38.7%
$1,000,000 U.S. Treasury Note, 1.625%, due 01/31/05 ....... $ 1,003,867
2,000,000 U.S. Treasury Note, 1.625%, due 04/30/05 ....... 2,006,016
2,000,000 U.S. Treasury Note, 1.250%, due 05/31/05 ....... 1,994,688
1,000,000 U.S. Treasury Note, 3.000%, due 02/15/08 ....... 1,004,648
4,000,000 U.S. Treasury Note, 2.625%, due 05/15/08 ....... 3,939,844
2,256,180 U.S. Treasury Inflation-Protection
Notes, 3.875%, due 01/15/09 .................. 2,547,721
------------
12,496,784
------------
U.S. AGENCIES -- 15.6%
1,000,000 Federal Farm Credit Bank, 4.600%, due 12/27/12 . 1,000,793
1,000,000 Federal Home Loan Bank, 4.375%, due 02/04/10 ... 1,004,563
2,000,000 Federal Home Loan Bank, 4.500%, due 11/15/12 ... 1,991,752
1,000,000 Private Export Funding Corporation,
6.310%, due 09/30/04 ........................... 1,037,277
------------
5,034,385
------------
TOTAL U.S. GOVERNMENT AND
AGENCY OBLIGATIONS (Cost $17,520,552) .......... $ 17,531,169
------------
================================================================================
PAR VALUE CORPORATE BONDS-- 27.1% VALUE
- --------------------------------------------------------------------------------
BUSINESS SERVICES-- 3.3%
$1,000,000 First Data Corporation, 4.700%, due 11/01/06 ... $ 1,054,447
------------
FINANCE -- 10.3%
1,000,000 American General Corporation, 7.500%,
due 08/11/10 ................................. 1,196,176
1,000,000 Caterpillar Financial Services Corporation,
2.650%, due 01/30/06 ........................... 1,007,654
1,000,000 Regions Financial Corporation, 7.000%,
due 03/01/11 ................................. 1,127,328
------------
3,331,158
------------
INDUSTRIALS -- 10.1%
1,000,000 Alcoa, Inc., 6.000%, due 01/15/12 .............. 1,086,758
1,000,000 Snap-On, Inc., 6.625%, due 10/01/05 ............ 1,067,895
1,000,000 United Technologies Corporation,
6.350%, due 03/01/11 ......................... 1,117,203
------------
3,271,856
------------
UTILITIES -- 3.4%
1,000,000 National Rural Utilities Cooperative
Finance Corporation, 6.000%, due 05/15/06 .... 1,078,418
------------
TOTAL CORPORATE BONDS (Cost $8,759,393) ........ $ 8,735,879
------------
17
AVE MARIA BOND FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
================================================================================
SHARES COMMON STOCKS -- 11.3% VALUE
- --------------------------------------------------------------------------------
BUSINESS & INDUSTRIAL PRODUCTS - 1.0%
10,000 Genuine Parts Company .......................... $ 332,000
------------
COMMUNICATION EQUIPMENT & SERVICES - 0.6%
4,200 Alltel Corporation ............................. 195,636
------------
ENERGY AND MINING - 1.0%
7,500 Exxon Mobil Corporation ........................ 307,500
------------
FINANCE - BANKS & THRIFTS - 3.3%
8,800 BB&T Corporation ............................... 340,032
10,000 Huntington Bancshares, Inc. .................... 225,000
7,500 National City Corporation ...................... 254,550
6,000 North Fork Bancorporation, Inc. ................ 242,820
------------
1,062,402
------------
INDUSTRIAL PRODUCTS & SERVICES - 0.8%
7,000 Stanley Works (The) ............................ 265,090
------------
REAL ESTATE - 0.9%
10,000 Washington Real Estate Investment Trust ........ 292,000
------------
UTILITIES - 3.7%
4,500 Dominion Resources, Inc. ....................... 287,235
3,500 Exelon Corporation ............................. 232,260
3,200 FPL Group, Inc. ................................ 209,344
5,500 Pinnacle West Capital Corporation .............. 220,110
8,000 Southern Company (The) ......................... 242,000
------------
1,190,949
------------
TOTAL COMMON STOCKS (Cost $3,334,574) .......... $ 3,645,577
------------
================================================================================
FACE
AMOUNT REPURCHASE AGREEMENTS (1)--- 7.5% VALUE
- --------------------------------------------------------------------------------
$2,409,816 Fifth Third Bank, 0.50%, dated 12/31/03,
due 01/02/04, repurchase proceeds:
$2,409,883 (Cost $2,409,816) ................. $ 2,409,816
------------
TOTAL INVESTMENTS-- 100.2% (Cost $32,024,335) .. $ 32,322,441
LIABILITIES IN EXCESS OF OTHER ASSETS -- (0.2%) (47,577)
------------
NET ASSETS-- 100.0% ............................ $ 32,274,864
============
(1) Repurchase agreements are fully collateralized by U.S. Government
obligations.
See notes to financial statements.
18
AVE MARIA MUTUAL FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2003
===========================================================================================================
AVE MARIA
CATHOLIC AVE MARIA AVE MARIA
VALUES FUND GROWTH FUND BOND FUND
- -----------------------------------------------------------------------------------------------------------
ASSETS
Investment securities:
At amortized cost ............................... $ 112,971,171 $ 13,074,628 $ 32,024,335
============== ============== ==============
At market value (Note 1) ........................ $ 145,740,923 $ 14,942,319 $ 32,322,441
Receivable for capital shares sold ................. 291,485 170,236 914
Dividends and interest receivable .................. 124,706 9,852 276,423
Receivable from Adviser (Note 2) ................... -- -- 4,166
Other assets ....................................... 14,479 9,593 10,789
-------------- -------------- --------------
TOTAL ASSETS .................................... 146,171,593 15,132,000 32,614,733
-------------- -------------- --------------
LIABILITIES
Dividends payable .................................. -- -- 863
Distributions payable .............................. 3,702 -- 210
Payable for capital shares redeemed ................ 20,961 -- --
Payable for investment securities purchased ........ 768,441 -- 319,676
Accrued investment advisory fees (Note 2) .......... 346,032 6,578 --
Accrued distribution fees (Note 2) ................. 30,110 3,033 239
Payable to affiliate (Note 2) ...................... 17,700 4,000 4,000
Other accrued expenses ............................. 28,945 13,631 14,881
-------------- -------------- --------------
TOTAL LIABILITIES ............................... 1,215,891 27,242 339,869
-------------- -------------- --------------
NET ASSETS ......................................... $ 144,955,702 $ 15,104,758 $ 32,274,864
============== ============== ==============
NET ASSETS CONSIST OF:
Paid-in capital .................................... $ 112,975,695 $ 13,237,067 $ 31,995,067
Distributions in excess of net realized
gains from security transactions ................ (789,745) -- (18,309)
Net unrealized appreciation on investments ......... 32,769,752 1,867,691 298,106
-------------- -------------- --------------
NET ASSETS ......................................... $ 144,955,702 $ 15,104,758 $ 32,274,864
============== ============== ==============
Shares of beneficial interest outstanding
(unlimited number of shares
authorized, no par value) ....................... 11,369,589 1,224,445
============== ==============
Net asset value, offering price
and redemption price per share (Note 1) (a) ..... $ 12.75 $ 12.34
============== ==============
PRICING OF CLASS I SHARES
Net assets applicable to Class I shares ............ $ 30,773,240
==============
Shares of beneficial interest outstanding
(unlimited number of shares
authorized, no par value) ....................... 3,049,301
==============
Net asset value, offering price and redemption price
per share (Note 1) .............................. $ 10.09
==============
PRICING OF CLASS R SHARES
Net assets applicable to Class R shares ............ $ 1,501,624
==============
Shares of beneficial interest outstanding
(unlimited number of shares
authorized, no par value) ....................... 148,876
==============
Net asset value, offering price and redemption
price per share (Note 1) (a) .................... $ 10.09
==============
(a) Except with respect to Class I shares of the Ave Maria Bond Fund,
redemption price varies based on length of time held (Note 1).
See notes to financial statements.
19
AVE MARIA MUTUAL FUNDS
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003(a)
================================================================================================
AVE MARIA
CATHOLIC AVE MARIA AVE MARIA
VALUES FUND GROWTH FUND BOND FUND
- ------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividend ................................... $ 1,275,872 $ 69,562 $ 63,036
Interest ................................... 31,819 4,003 489,026
------------ ------------ ------------
TOTAL INCOME ............................. 1,307,691 73,565 552,062
------------ ------------ ------------
EXPENSES
Investment advisory fees (Note 2) .......... 1,071,620 64,637 61,977
Distribution fees (Note 2) ................. 267,904 16,159 942
Administration, accounting
and transfer agent fees (Note 2) ......... 160,424 32,000 32,000
Legal and audit fees ....................... 24,449 13,942 13,942
Trustees' fees and expenses ................ 37,212 6,327 6,327
Registration fees - Common ................. 23,644 11,039 4,031
Registration fees - Class I ................ -- -- 2,708
Registration fees - Class R ................ -- -- 5,895
Postage and supplies ....................... 22,904 3,042 3,488
Organization expense ....................... -- 12,225 12,225
Custodian fees ............................. 16,499 3,964 2,068
Insurance expense .......................... 14,719 392 1,379
Advisory board fees and expenses ........... 12,131 2,131 2,131
Reports to shareholders .................... 13,019 88 48
Other expenses ............................. 9,741 3,912 5,149
------------ ------------ ------------
TOTAL EXPENSES ........................... 1,674,266 169,858 154,310
Less: Fees waived and/or expenses reimbursed
by the Adviser (Note 2)
Common ................................... (66,849) (72,903) (82,789)
Class I .................................. -- -- (2,708)
Class R .................................. -- -- (5,330)
------------ ------------ ------------
NET EXPENSES ............................. 1,607,417 96,955 63,483
------------ ------------ ------------
NET INVESTMENT INCOME/(LOSS) ................. (299,726) (23,390) 488,579
------------ ------------ ------------
REALIZED AND UNREALIZED GAINS/(LOSSES)
ON INVESTMENTS
Net realized gains/(losses)
from security transactions ................. 5,135,575 -- (2,359)
Net change in unrealized appreciation/
(depreciation) on investments ............ 34,051,696 1,867,691 298,106
------------ ------------ ------------
NET REALIZED AND UNREALIZED
GAINS ON INVESTMENTS ....................... 39,187,271 1,867,691 295,747
------------ ------------ ------------
NET INCREASE IN NET ASSETS FROM OPERATIONS ... $ 38,887,545 $ 1,844,301 $ 784,326
============ ============ ============
(a) Except for the Ave Maria Growth Fund and the Ave Maria Bond Fund, which
represents the period from the commencement of operations (May 1, 2003)
through December 31, 2003.
See notes to financial statements.
20
AVE MARIA CATHOLIC VALUES FUND
STATEMENTS OF CHANGES IN NET ASSETS
===============================================================================================
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
2003 2002
- -----------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment loss ................................... $ (299,726) $ (76,344)
Net realized gains/(losses) from security transactions 5,135,575 (4,937,741)
Net change in unrealized
appreciation/(depreciation) on investments ......... 34,051,696 (2,301,756)
-------------- --------------
Net increase/(decrease) in net assets from operations .... 38,887,545 (7,315,841)
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
From net realized gains on investments ................ (977,801) --
-------------- --------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ............................. 51,860,406 46,588,060
Reinvestment of distributions to shareholders ......... 974,099 --
Payments for shares redeemed .......................... (7,590,330) (1,423,248)
-------------- --------------
Net increase in net assets from capital share transactions 45,244,175 45,164,812
-------------- --------------
TOTAL INCREASE IN NET ASSETS ............................. 83,153,919 37,848,971
NET ASSETS
Beginning of year ..................................... 61,801,783 23,952,812
-------------- --------------
End of year ........................................... $ 144,955,702 $ 61,801,783
============== ==============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ........................................... 5,539,156 4,381,372
Shares issued in reinvestment
of distributions to shareholders ................... 76,400 --
Shares redeemed ....................................... (768,714) (139,989)
-------------- --------------
Net increase in shares outstanding .................... 4,846,842 4,241,383
Shares outstanding, beginning of year ................. 6,522,747 2,281,364
-------------- --------------
Shares outstanding, end of year ....................... 11,369,589 6,522,747
============== ==============
See notes to financial statements.
21
AVE MARIA GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
================================================================================
PERIOD ENDED
DECEMBER 31,
2003(a)
- --------------------------------------------------------------------------------
FROM OPERATIONS
Net investment loss ....................................... $ (23,390)
Net change in unrealized
appreciation/(depreciation) on investments .............. 1,867,691
------------
Net increase in net assets from operations ................... 1,844,301
------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ................................. 13,264,851
Payments for shares redeemed .............................. (4,394)
------------
Net increase in net assets from capital share transactions ... 13,260,457
------------
TOTAL INCREASE IN NET ASSETS ................................. 15,104,758
NET ASSETS
Beginning of period ....................................... --
------------
End of period ............................................. $ 15,104,758
============
SUMMARY OF CAPITAL SHARE ACTIVITY
Shares sold ............................................... 1,224,821
Shares redeemed ........................................... (376)
------------
Net increase in shares outstanding ........................ 1,224,445
Shares outstanding, beginning of period ................... --
------------
Shares outstanding, end of period ......................... 1,224,445
============
(a) Represents the period from the commencement of operations (May 1, 2003)
through December 31, 2003.
See notes to financial statements.
22
AVE MARIA BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
======================================================================================
PERIOD ENDED
DECEMBER 31,
2003(a)
- --------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income ............................................. $ 488,579
Net realized losses from security transactions .................... (2,359)
Net change in unrealized appreciation/(depreciation) on investments 298,106
------------
Net increase in net assets from operations ........................... 784,326
------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
From net investment income, Class I ............................... (479,401)
From net investment income, Class R ............................... ( 9,648)
From net realized gains on investments, Class I.................... (15,207)
From net realized gains on investments, Class R.................... (743)
------------
Net decrease in net assets from distributions to shareholders ........ (504,999)
------------
FROM CAPITAL SHARE TRANSACTIONS
CLASS I
Proceeds from shares sold ......................................... 30,000,000
Reinvestment of distributions to shareholders ..................... 494,608
------------
Net increase in net assets from Class I capital share transactions ... 30,494,608
------------
CLASS R
Proceeds from shares sold ......................................... 1,504,260
Reinvestment of distributions to shareholders ..................... 5,698
Payments for shares redeemed ...................................... (9,029)
------------
Net increase in net assets from Class R capital share transactions ... 1,500,929
------------
TOTAL INCREASE IN NET ASSETS ......................................... 32,274,864
NET ASSETS
Beginning of period ............................................... --
------------
End of period ..................................................... $ 32,274,864
============
SUMMARY OF CAPITAL SHARE ACTIVITY
CLASS I
Shares sold ....................................................... 3,000,000
Shares issued in reinvestment of distributions to shareholders .... 49,301
------------
Net increase in shares outstanding ................................ 3,049,301
Shares outstanding, beginning of period ........................... --
------------
Shares outstanding, end of period ................................. 3,049,301
============
CLASS R
Shares sold ....................................................... 149,207
Shares issued in reinvestment of distributions to shareholders .... 568
Shares redeemed ................................................... (899)
------------
Net increase in shares outstanding ................................ 148,876
Shares outstanding, beginning of period ........................... --
------------
Shares outstanding, end of period ................................. 148,876
============
(a) Represents the period from the commencement of operations (May 1, 2003)
through December 31, 2003.
See notes to financial statements.
23
AVE MARIA CATHOLIC VALUES FUND
FINANCIAL HIGHLIGHTS
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
==========================================================================================================
YEAR YEAR PERIOD
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
2003 2002 2001(a)
- ----------------------------------------------------------------------------------------------------------
Net asset value at beginning of period ..................... $ 9.47 $ 10.50 $ 10.00
---------- ---------- ----------
Income/(loss) from investment operations:
Net investment income/(loss) ............................ (0.03) (0.01) 0.02
Net realized and unrealized gains/(losses) on investments 3.40 (1.02) 0.51
---------- ---------- ----------
Total from investment operations ........................... 3.37 (1.03) 0.53
---------- ---------- ----------
Less distributions:
From net investment income .............................. -- -- (0.02)
From net realized gains on investments .................. (0.09) -- (0.01)
In excess of net realized gains on investments .......... -- -- (0.00)
---------- ---------- ----------
Total distributions ........................................ (0.09) -- (0.03)
---------- ---------- ----------
Net asset value at end of period ........................... $ 12.75 $ 9.47 $ 10.50
========== ========== ==========
Total return ............................................... 35.6% (9.8)% 5.3%(c)
========== ========== ==========
Ratios/Supplementary Data:
Net assets at end of period (000's) ........................ $ 144,956 $ 61,802 $ 23,953
========== ========== ==========
Ratio of net expenses to average net assets (b) ............ 1.50% 1.50% 1.50%(d)
Ratio of net investment income/(loss) to average net assets (0.28)% (0.14)% 0.39%(d)
Portfolio turnover rate .................................... 58% 86% 44%(d)
(a) Represents the period from the initial public offering (May 1, 2001)
through December 31, 2001.
(b) Absent investment advisory fees waived by the Adviser, the ratio of
expenses to average net assets would have been 1.56%, 1.69%, and 2.09%(d)
for the periods ended December 31, 2003, 2002, and 2001, respectively.
(c) Not annualized.
(d) Annualized.
See notes to financial statements.
24
AVE MARIA GROWTH FUND
FINANCIAL HIGHLIGHTS
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
================================================================================
PERIOD
ENDED
DECEMBER 31,
2003(a)
- --------------------------------------------------------------------------------
Net asset value at beginning of period ...................... $ 10.00
----------
Income/(loss) from investment operations:
Net investment loss ...................................... (0.02)
Net realized and unrealized gains on investments ......... 2.36
----------
Total from investment operations ............................ 2.34
----------
Net asset value at end of period ............................ $ 12.34
==========
Total return ................................................ 23.4%(c)
==========
Ratios/Supplementary Data:
Net assets at end of period (000's) ......................... $ 15,105
==========
Ratio of net expenses to average net assets (b) ............. 1.49%(d)
Ratio of net investment loss to average net assets .......... (0.36)%(d)
Portfolio turnover rate ..................................... 0%
(a) Represents the period from the initial public offering (May 1, 2003)
through December 31, 2003.
(b) Absent fee waivers and expense reimbursements by the Adviser, the ratio of
expenses to average net assets would have been 2.61%(d).
(c) Not annualized.
(d) Annualized.
See notes to financial statements.
25
AVE MARIA BOND FUND - CLASS I
FINANCIAL HIGHLIGHTS
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
================================================================================
PERIOD
ENDED
DECEMBER 31,
2003(a)
- --------------------------------------------------------------------------------
Net asset value at beginning of period ...................... $ 10.00
----------
Income from investment operations:
Net investment income .................................... 0.16
Net realized and unrealized gains on investments ......... 0.10
----------
Total from investment operations ............................ 0.26
----------
Less distributions:
From net investment income ............................... (0.16)
From net realized gains on investments ................... (0.01)
----------
Total distributions ......................................... (0.17)
----------
Net asset value at end of period ............................ $ 10.09
==========
Total return ................................................ 2.6%(c)
==========
Ratios/Supplementary Data:
Net assets at end of period (000's) ......................... $ 30,773
==========
Ratio of net expenses to average net assets (b) ............. 0.30%(d)
Ratio of net investment income to average net assets ........ 2.36%(d)
Portfolio turnover rate ..................................... 50%(d)
(a) Represents the period from the initial public offering (May 1, 2003)
through December 31, 2003.
(b) Absent fee waivers and expense reimbursements by the Adviser, the ratio of
expenses to average net assets would have been 0.71%(d).
(c) Not annualized.
(d) Annualized.
See notes to financial statements.
26
AVE MARIA BOND FUND - CLASS R
FINANCIAL HIGHLIGHTS
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
================================================================================
PERIOD
ENDED
DECEMBER 31,
2003(a)
- --------------------------------------------------------------------------------
Net asset value at beginning of period ...................... $ 10.00
----------
Income from investment operations:
Net investment income .................................... 0.14
Net realized and unrealized gains on investments ......... 0.10
----------
Total from investment operations ............................ 0.24
----------
Less distributions:
From net investment income ............................... (0.14)
From net realized gains on investments ................... (0.01)
----------
Total distributions ......................................... (0.15)
----------
Net asset value at end of period ............................ $ 10.09
==========
Total return ................................................ 2.4%(c)
==========
Ratios/Supplementary Data:
Net assets at end of period (000's) ......................... $ 1,502
==========
Ratio of net expenses to average net assets (b) ............. 0.69%(d)
Ratio of net investment income to average net assets ........ 1.96%(d)
Portfolio turnover rate ..................................... 50%(d)
(a) Represents the period from the initial public offering (May 1, 2003)
through December 31, 2003.
(b) Absent fee waivers and expense reimbursements by the Adviser, the ratio of
expenses to average net assets would have been 2.49%(d).
(c) Not annualized.
(d) Annualized.
See notes to financial statements.
26
AVE MARIA MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
The Ave Maria Catholic Values Fund, the Ave Maria Growth Fund, and the Ave Maria
Bond Fund (the Funds) are each a series of the Schwartz Investment Trust, a
diversified open-end management investment company registered under the
Investment Company Act of 1940 and established as an Ohio business trust under a
Declaration of Trust dated August 31, 1992. The Ave Maria Catholic Values Fund
commenced the public offering of its shares on May 1, 2001. The public offering
of shares of the Ave Maria Growth Fund and the Ave Maria Bond Fund commenced on
May 1, 2003. The Funds determine and make available for publication the net
asset value of each of its shares on a daily basis.
The investment objective of the Ave Maria Catholic Values Fund is to seek
long-term capital appreciation from equity investments in companies that operate
in a way that is consistent with the core values and teachings of the Roman
Catholic Church. The investment objective of the Ave Maria Growth Fund is to
seek long-term capital appreciation, using the growth style, from equity
investments in companies that do not violate the core values and teachings of
the Roman Catholic Church. The investment objective of the Ave Maria Bond Fund
is to seek preservation of principal with a reasonable level of current income.
See the Prospectus for more detailed information regarding the investment
strategies of each Fund.
The Ave Maria Bond Fund offers two classes of shares: Class I shares (sold
subject to a distribution fee of up to 0.10% of the average daily net assets
attributable to Class I shares) and Class R shares (sold subject to a
distribution fee of up to 0.25% of the average daily net assets attributable to
Class R shares). Each class of shares represents an interest in the same assets
of the Fund, has the same rights and is identical in all material respects
except that (1) Class R bears the expenses of higher distribution fees; (2)
certain other class specific expenses will be borne solely by the class to which
such expenses are attributable; (3) Class I shares are not subject to the
contingent deferred sales load described below; and (4) each class has exclusive
voting rights with respect to matters relating to its own distribution
arrangements.
Shares of each Fund are sold at net asset value. To calculate the net asset
value, each Fund's assets are valued and totaled, liabilities are subtracted,
and the balance is divided by the number of shares outstanding. The offering
price and redemption price per share is equal to the net asset value per share,
except that shares of each Fund (except for Class I shares of the Ave Maria Bond
Fund) are subject to a 1% contingent deferred sales load if redeemed within one
year of their purchase.
The following is a summary of significant accounting policies followed by the
Funds:
(a) VALUATION OF INVESTMENTS - Securities which are traded on stock
exchanges or are quoted by NASDAQ are valued at the closing sales price as
of the close of the regular session of trading on the New York Stock
Exchange (NYSE) on the day the securities are being valued, or, if not
traded on a particular day, at the closing bid price. 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
NYSE on the day of valuation. 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. Securities (and other assets) for
which market quotations are not readily available are valued at their fair
value as determined in good faith in accordance with consistently applied
procedures established by and under the general supervision of the Board of
Trustees.
28
AVE MARIA MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
(b) INCOME TAXES - It is each Fund's policy to comply with the special
provisions of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies. As provided therein, in any fiscal year in
which the Fund so qualifies and distributes at least 90% of its taxable
income, the Fund (but not the shareholders) will be relieved of federal
income tax on the income distributed. Accordingly, no provision for income
taxes has been made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also each Fund's intention to declare as
dividends in each calendar year at least 98% of its net investment income
and 98% of its net realized capital gains plus undistributed amounts from
prior years.
For the period ended December 31, 2003, the Ave Maria Catholic Values Fund,
the Ave Maria Growth Fund and the Ave Maria Bond Fund reclassified net
investment losses of $299,726, $23,390 and $470, respectively, against
paid-in-capital on the Statements of Assets and Liabilities. Such
reclassifications, the result of permanent differences between the
financial statement and income tax reporting requirements, have no effect
on the Funds' net assets or net asset value per share.
The tax character of distributable earnings at December 31, 2003 was as
follows:
- ------------------------------------------------------------------------------------
AVE MARIA
CATHOLIC AVE MARIA AVE MARIA
VALUES FUND GROWTH FUND BOND FUND
- ------------------------------------------------------------------------------------
Distributions in excess of ordinary income $ -- $ -- $ (559)
Undistributed gains ...................... 214 -- --
Unrealized appreciation .................. 31,979,793 1,867,691 279,886
----------- ----------- -----------
Total distributable earnings ............. $31,980,007 $ 1,867,691 $ 279,327
=========== =========== ===========
- ------------------------------------------------------------------------------------
The following information is based upon the federal income tax cost of the
investment securities as of December 31, 2003:
- ------------------------------------------------------------------------------------
AVE MARIA
CATHOLIC AVE MARIA AVE MARIA
VALUES FUND GROWTH FUND BOND FUND
- ------------------------------------------------------------------------------------
Gross unrealized appreciation.......... $ 33,087,563 $ 2,047,751 $ 390,899
Gross unrealized depreciation.......... (1,107,770) (180,260) (111,013)
------------ ------------ ------------
Net unrealized appreciation............ $ 31,979,793 $ 1,867,691 $ 279,886
============ ============ ============
Federal income tax cost................ $113,761,130 $ 13,074,628 $ 32,042,555
============ ============ ============
- ------------------------------------------------------------------------------------
The difference between the federal income tax cost of portfolio investments
and the financial statement cost for the Ave Maria Catholic Values Fund and
the Ave Maria Bond Fund is due to certain timing differences in the
recognition of capital losses under income tax regulations and accounting
principles generally accepted in the United States of America (GAAP).
(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 fixed-income securities
purchased are amortized using the interest method.
29
AVE MARIA MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
(d) DIVIDENDS AND DISTRIBUTIONS - Dividends from net investment income, if
any, are declared and paid annually in December for the Ave Maria Catholic
Values Fund and the Ave Maria Growth Fund and are declared and paid monthly
for the Ave Maria Bond Fund. Each Fund expects to distribute any net
realized capital gains annually. Dividends and distributions to
shareholders are recorded on the ex-dividend date. The tax character of
distributions paid during the periods ended December 31, 2003 and December
31, 2002 were as follows:
- ---------------------------------------------------------------------------------------------------
ORDINARY LONG-TERM TOTAL
PERIOD ENDED INCOME CAPITAL GAINS (15%) DISTRIBUTIONS
- ---------------------------------------------------------------------------------------------------
AVE MARIA CATHOLIC VALUES FUND:
December 31, 2003 .................... $ -- $977,801 $977,801
December 31, 2002 .................... $ -- $ -- $ --
AVE MARIA BOND FUND - CLASS I:
December 31, 2003 .................... $494,608 $ -- $494,608
AVE MARIA BOND FUND - CLASS R:
December 31, 2003 .................... $ 10,391 $ -- $ 10,391
- ---------------------------------------------------------------------------------------------------
(e) REPURCHASE AGREEMENTS - The Funds 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 may be deemed
to be loans by the Funds. It is each Fund's policy to take possession of
U.S. Government obligations as collateral under a repurchase agreement and,
on a daily basis, mark-to-market such obligations to ensure that their
value, including accrued interest, is at least equal to the amount to be
repaid to the Fund under the repurchase 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 Funds is also the President and Chief Investment Officer of
Schwartz Investment Counsel, Inc. (the Adviser). Certain other trustees and
officers of the Funds are officers of the Adviser, or of Schwartz Fund
Distributors, Inc. (the Distributor), the Funds' principal underwriter, or of
Ultimus Fund Solutions, LLC (Ultimus), the administrative, accounting and
transfer agent for the Funds.
Pursuant to an Investment Advisory Agreement between the Funds and the Adviser,
the Adviser is responsible for the management of each Fund and provides
investment advice along with the necessary personnel, facilities, equipment and
certain other services necessary to the operations of the Funds. For such
services, each of the Ave Maria Catholic Values Fund and the Ave Maria Growth
Fund pay the Adviser a quarterly fee equal to the annual rate of 1.00% of its
average daily net assets. The Ave Maria Bond Fund pays the Adviser a quarterly
fee at the annual rate of 0.30% of the average value of its daily net assets.
The Adviser has contractually agreed to waive a portion of its advisory fees or
reimburse a portion of operating expenses so that the net expenses of the Ave
Maria Catholic Values Fund do not exceed 1.50% until at least May 1, 2004. The
Adviser has contractually agreed to waive a portion of its advisory fees or
reimburse a portion of
30
AVE MARIA MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
operating expenses so that the net expenses of the Ave Maria Growth Fund do not
exceed 1.50% and the net expenses of Class I and Class R shares of the Ave Maria
Bond Fund do not exceed 0.30% and 0.70%, respectively, until at least May 1,
2007. For the period ended December 31, 2003, the Adviser waived investment
advisory fees of $66,849 with respect to the Ave Maria Catholic Values Fund;
waived all of its investment advisory fees of $64,637 and reimbursed $8,266 of
other operating expenses with respect to the Ave Maria Growth Fund; and waived
all of its investment advisory fees of $61,977 and reimbursed $28,850 of other
operating expenses (including $20,812 of common expenses, $2,708 of Class I
expenses and $5,330 of Class R expenses) with respect to the Ave Maria Bond
Fund.
Any fee waivers or expense reimbursements by the Adviser are subject to
repayment by the Funds for a period of three years from the end of the fiscal
year during which such waivers or reimbursements occurred, provided the Funds
are able to effect such repayment and remain in compliance with the undertaking
by the Adviser to limit expenses of the Funds. As of December 31, 2003, the
amount of fee waivers and expense reimbursements available for reimbursement to
the Adviser are as follows:
- --------------------------------------------------------------------------------
Ave Maria Catholic Values Fund ................................. $ 223,889
Ave Maria Growth Fund .......................................... $ 72,903
Ave Maria Bond Fund ............................................ $ 90,827
- --------------------------------------------------------------------------------
As of December 31, 2003, the Advisor may recapture a portion of the above
amounts no later than the dates as stated below:
- --------------------------------------------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
2004 2005 2006
- --------------------------------------------------------------------------------
Ave Maria Catholic Values Fund .... $ 57,270 $ 99,770 $ 66,849
Ave Maria Growth Fund ............. $ -- $ -- $ 72,903
Ave Maria Bond Fund ............... $ -- $ -- $ 90,827
- --------------------------------------------------------------------------------
The Distributor serves as the principal underwriter for the distribution of
shares of the Funds. During the period ended December 31, 2003, the Distributor
collected $8,422, $20, and $63 in contingent deferred sales loads on redemptions
of shares of the Ave Maria Catholic Values Fund, Ave Maria Growth Fund, and
Class R shares of the Ave Maria Bond Fund, respectively.
Each Fund has adopted a Shareholder Servicing Plan (the Plan), which allows the
Funds to make payments to financial organizations for providing account
administration and personal and account maintenance services to Fund
shareholders. The annual service fee may not exceed an amount equal to 0.25% of
each Fund's daily net assets (except that the service fee is limited to 0.10% of
the average net assets of the Ave Maria Bond Fund allocable to Class I shares).
During the period ended December 31, 2003, the total expenses incurred pursuant
to the Plan were $267,904, $16,159, and $942 for the Ave Maria Catholic Values
Fund, the Ave Maria Growth Fund, and Class R shares of the Ave Maria Bond Fund,
respectively.
31
AVE MARIA MUTUAL FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
Pursuant to a Mutual Fund Services Agreement between the Funds and Ultimus,
Ultimus supplies regulatory and compliance services, calculates the daily net
asset value per share, maintains the financial books and records of the Funds,
maintains the records of each shareholder's account, and processes purchases and
redemptions of each Fund's shares. For the performance of these services, the
Ave Maria Bond Fund pays Ultimus a monthly fee at an annual rate of 0.10% of its
average daily net assets and each of the Ave Maria Catholic Values Fund and the
Ave Maria Growth Fund pays Ultimus a monthly fee at an annual rate of 0.15% of
its average daily net assets. The fee payable by each Fund is subject to a
minimum monthly fee of $4,000.
3. INVESTMENT TRANSACTIONS
During the year ended December 31, 2003, cost of purchases and proceeds from
sales and maturities of investment securities, excluding short-term investments
and U.S. government securities, were as follows:
- ----------------------------------------------------------------------------------------------
AVE MARIA
CATHOLIC AVE MARIA AVE MARIA
VALUES FUND GROWTH FUND BOND FUND
- ----------------------------------------------------------------------------------------------
Purchases of investment securities .............. $101,884,193 $ 12,899,741 $ 15,951,180
============ ============ ============
Proceeds from sales of investment securities..... $ 60,268,195 $ -- $ 3,783,300
============ ============ ============
- ----------------------------------------------------------------------------------------------
32
AVE MARIA MUTUAL FUNDS
INDEPENDENT AUDITORS' REPORT
================================================================================
To the Shareholders and Trustees of Ave Maria Catholic Values Fund,
Ave Maria Growth Fund and Ave Maria Bond Fund:
We have audited the accompanying statements of assets and liabilities of Ave
Maria Catholic Values Fund, Ave Maria Growth Fund and Ave Maria Bond Fund (the
"Funds"), including the schedules of investments, as of December 31, 2003, and
the related statements of operations, changes in net assets, and the financial
highlights for the periods presented. These financial statements and financial
highlights are the responsibility of the Funds' 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 auditing standards generally accepted
in the United States of America. 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, 2003, by correspondence with the Funds'
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, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Ave Maria Catholic
Values Fund, Ave Maria Growth Fund and Ave Maria Bond Fund as of December 31,
2003, the results of their operations, their changes in net assets, and their
financial highlights for the periods presented, in conformity with accounting
principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
February 16, 2004
Chicago, Illinois
33
AVE MARIA MUTUAL FUNDS
BOARD OF TRUSTEES AND EXECUTIVE OFFICERS (UNAUDITED)
- --------------------------------------------------------------------------------
Overall responsibility for management of the Trust rests with the Board of
Trustees. The Trustees serve during the lifetime of the Trust and until its
termination, or until death, resignation, retirement or removal. The Trustees,
in turn, elect the officers of the Trust to actively supervise its day-to-day
operations. The officers have been elected for an annual term. The following are
the Trustees and executive officers of the Trust:
Length of
Trustee Address Age Position Held with the Trust Time Served
- --------------------------------------------------------------------------------------------------------------------------------
* Gregory J. Schwartz 3707 W. Maple Road, Bloomfield Hills, MI 62 Chairman of the Board/Trustee Since 1993
* George P. Schwartz, CFA 3707 W. Maple Road, Bloomfield Hills, MI 59 President/Trustee Since 1993
Peter F. Barry 3707 W. Maple Road, Bloomfield Hills, MI 76 Trustee Since 2004
Donald J. Dawson, Jr. 333 W. Seventh Street, Royal Oak, MI 56 Trustee Since 1993
Fred A. Erb 800 Old North Woodward, Birmingham, MI 80 Trustee Since 1994
**Bowie K. Kuhn 136 Teal Pointe Lane, Ponta Vedra Beach, FL 77 Trustee Since 2001
John J. McHale 2014 Royal Fern Court, Palm City, FL 82 Trustee Emeritus Since 1993
Sidney F. McKenna 1173 Banbury Circle, Bloomfield Hills, MI 81 Trustee Since 1993
* Richard L. Platte, Jr., CFA 3707 W. Maple Road, Bloomfield Hills, MI 52 Vice President and Secretary Since 1993
* Timothy S. Schwartz 3707 W. Maple Road, Bloomfield Hills, MI 32 Treasurer Since 2000
* Gregory J. Schwartz, George P. Schwartz, Richard L. Platte, Jr. and Timothy S.
Schwartz, as affiliated persons of Schwartz Investment Counsel, Inc., the Fund's
investment adviser, are "interested persons" of the Trust within the meaning of
Section 2(a)(19) of the Investment Company Act of 1940. Gregory J. Schwartz and
George P. Schwartz are brothers, and Timothy S. Schwartz is the son of George P.
Schwartz and the nephew of Gregory J. Schwartz.
** Bowie K. Kuhn is an "interested person" of the Trust by virtue of his
membership on the Catholic Advisory Board.
Each Trustee oversees four portfolios of the Trust: the Ave Maria Catholic
Values Fund, Ave Maria Growth Fund, Ave Maria Bond Fund and the Schwartz Value
Fund. The principal occupations of the Trustees and executive officers of the
Trust during the past five years and public directorships held by the Trustees
are set forth below:
Gregory J. Schwartz is Chairman of Schwartz Investment Counsel, Inc., the Fund's
investment adviser.
George P. Schwartz, CFA is President and Chief Investment Officer of Schwartz
Investment Counsel, Inc. and is the co-portfolio manager of the Ave Maria
Catholic Values Fund.
Peter F. Barry is retired President of Cadillac Rubber & Plastics Company (a
manufacturer of rubber and plastics components).
Donald J. Dawson, Jr. is Chairman of Payroll 1, Inc. (a payroll processing
company).
Fred A. Erb is the Chairman and Chief Executive Officer of Edgemere Enterprises,
Inc. (a real estate investment, development and management company) and Chairman
of D.I.Y. Home Warehouse (a retail building supplies company).
Bowie K. Kuhn is President of The Kent Group (business, sports and financial
consultant), and is the former Commissioner of Major League Baseball.
John J. McHale is retired as the President of the Montreal Expos (a major league
baseball team).
Sidney F. McKenna is retired Senior Vice President of United Technologies
Corporation (a major manufacturer of aircraft engines and other industrial
products).
Richard L. Platte, Jr., CFA is Executive Vice President, Secretary and Treasurer
of Schwartz Investment Counsel, Inc. and is the portfolio manager of the Ave
Maria Bond Fund.
Timothy S. Schwartz is Vice President of Schwartz Investment Counsel, Inc.
34
AVE MARIA MUTUAL FUNDS
CATHOLIC ADVISORY BOARD (UNAUDITED)
================================================================================
The Catholic Advisory Board reviews the companies selected by the Adviser to
ensure that the companies operate in a way that is consistent with the teachings
and core values of the Roman Catholic Church. The Catholic Advisory Board
evaluates companies using publicly available information, information from the
Adviser, and information from shareholders and other sources in making its
recommendations. The following are the members of the Catholic Advisory Board,
each of whom has held office since his or her appointment on April 26, 2001.
Member Address Age
- --------------------------------------------------------------------------------
Bowie K. Kuhn 136 Teal Pointe Lane, Ponta Vedra Beach, FL 77
Thomas S. Monaghan One Ave Maria Drive, Ann Arbor, MI 66
Michael J. Novak 1150 17th Street, NW, Suite 1100, Washington, DC 70
Paul R. Roney One Ave Maria Drive, Ann Arbor, MI 46
Phyllis S. Schlafly 7800 Bonhomme, St. Louis, MO 79
Thomas J. Sullivan 401 Washington Avenue, Avon-by-the-Sea, NJ 68
Bowie K. Kuhn is President of The Kent Group (business, sports and financial
consultant), and is the former Commissioner of Major League Baseball.
Thomas S. Monaghan is Chairman of the Ave Maria Foundation (a non-profit
foundation supporting Roman Catholic organizations) and Chairman of Domino's
Farms Corporation. Prior to December 1998, he was Chairman and Chief Executive
Officer of Domino's Pizza, Inc.
Michael J. Novak is a theologian, author, columnist and former U.S. ambassador.
He is Director of Social and Political Studies of the American Enterprise
Institute.
Paul R. Roney is Executive Director of the Ave Maria Foundation and President of
Domino's Farms Corporation. Prior to December 1998, he was Treasurer of Domino's
Pizza, Inc.
Phyllis S. Schlafly is an author, columnist and radio commentator. She is
President of Eagle Forum (an organization promoting conservative and pro-family
values).
Thomas J. Sullivan is retired Executive Vice President of The McGraw-Hill
Companies.
Additional information regarding the Funds' Trustees, executive officers and
Catholic Advisory Board members may be found in the Funds' Statement of
Additional Information and is available without charge upon request by calling
1-888-726-9331.
35
FEDERAL TAX INFORMATION (UNAUDITED)
================================================================================
In accordance with federal tax requirements, the following provides shareholders
with information concerning distributions from net realized gains made by the
Ave Maria Catholic Values Fund and certain ordinary income dividends paid by the
Ave Maria Bond Fund during the fiscal year ended December 31, 2003. On December
31, 2003, the Ave Maria Catholic Values Fund declared and paid a long-term
capital gain distribution of $0.0866 per share. Periodically throughout the
year, the Ave Maria Bond Fund paid ordinary income dividends totaling $0.1587
per share for Class I and $0.1388 per share for Class R. As provided by the Jobs
and Growth Tax Relief Reconciliation Act of 2003, 100% of the long-term capital
gain distribution of $0.0866 per share for the Ave Maria Catholic Values Fund
and a portion (12.9%) of the ordinary income dividends paid for the Ave Maria
Bond Fund may be subject to a maximum tax rate of 15%. As required by federal
regulations, shareholders received notification of their portion of the Fund's
taxable capital gain distribution, if any, paid during the 2003 calendar year
early in 2004.
RESULTS OF SPECIAL MEETING OF SHAREHOLDERS OF THE
SCHWARTZ INVESTMENT TRUST
JANUARY 16, 2004 (UNAUDITED)
================================================================================
On January 16, 2004, a Special Meeting of Shareholders of the Schwartz
Investment Trust (the Trust), which includes the Funds, was held (1) to elect
seven Trustees, and (2) to ratify the selection of Deloitte & Touche LLP as the
Trust's independent public accountants. The total number of shares of the Trust
present in person or by proxy represented 87.74% of the shares entitled to vote
at the meeting. All nominees for Trustee were elected and Deloitte & Touche LLP
was ratified as independent public accountants.
The results of the voting to elect the nominees for Trustee were as follows:
- --------------------------------------------------------------------------------
NUMBER OF SHARES
- --------------------------------------------------------------------------------
WITHHOLD
NOMINEE AFFIRMATIVE AUTHORITY
- --------------------------------------------------------------------------------
Donald J. Dawson, Jr ............................ 15,391,924 4,281
Bowie K. Kuhn ................................... 15,392,656 3,549
Sidney F. McKenna ............................... 15,390,600 5,605
George P. Schwartz .............................. 15,392,698 3,507
Fred A. Erb ..................................... 15,390,747 5,458
Peter F. Barry .................................. 15,390,701 5,504
Gregory J. Schwartz ............................. 15,388,457 7,748
- --------------------------------------------------------------------------------
The results of the voting for or against the ratification of Deloitte & Touche
LLP as independent public accountants were as follows:
NUMBER OF SHARES
----------------------------------------------
FOR AGAINST ABSTAIN
----------------------------------------------
15,374,906 6,319 14,980
A description of the policies and procedures that the Fund uses to vote proxies
relating to portfolio securities is available without charge upon request by
calling toll-free 1-888-726-0753, or on the Securities and Exchange Commissions
website at http://www.sec.gov.
36
THIS PAGE INTENTIONALLY LEFT BLANK.
AVE MARIA CATHOLIC
VALUES FUND
AVE MARIA
GROWTH FUND
AVE MARIA
BOND FUND
[LOGO]
ANNUAL REPORT
for the year ended
DECEMBER 31, 2003
Ticker Symbols:
AVEMX - AVEGX - AVEFX
AVE MARIA MUTUAL FUNDS
series of
Schwartz Investment Trust
3707 W. Maple Road
Bloomfield Hills, Michigan 48301
(248) 644-8500
BOARD OF TRUSTEES
Peter F. Barry
Donald J. Dawson, Jr.
Fred A. Erb
Bowie K. Kuhn
John J. McHale, Emeritus
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
Timothy S. Schwartz, Treasurer
Robert G. Dorsey, Assistant Secretary
John F. Splain, Assistant Secretary
Mark J. Seger, CPA, Assistant Treasurer
Theresa M. Bridge, CPA, Assistant Treasurer
Craig J. Hunt, Assistant Vice President
CATHOLIC ADVISORY BOARD
Bowie K. Kuhn, Chairman
Thomas S. Monaghan
Michael Novak
Paul R. Roney
Phyllis S. Schlafly
Thomas J. Sullivan
INVESTMENT ADVISER
SCHWARTZ INVESTMENT COUNSEL, INC.
3707 W. Maple Road
Bloomfield Hills, Michigan 48301
DISTRIBUTOR
SCHWARTZ FUND DISTRIBUTORS, INC.
3707 W. Maple Road
Bloomfield Hills, Michigan 48301
PRIMARY SELLING AGENT
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
ULTIMUS FUND SOLUTIONS, LLC
P.O. Box 46707
Cincinnati, Ohio 45246
AUDITORS
DELOITTE & TOUCHE LLP
180 N. Stetson Ave.
Chicago, IL 60606
LEGAL COUNSEL
SULLIVAN & WORCESTER LLP
1666 K Street, NW, Suite 700
Washington, D.C. 20006
ITEM 2. CODE OF ETHICS.
As of the end of the period covered by this report, the registrant has adopted a
code of ethics that applies to the registrant's principal executive officer,
principal financial officer, principal accounting officer or controller, or
persons performing similar functions, regardless of whether these individuals
are employed by the registrant or a third party. Pursuant to Item 10(a)(1), a
copy of registrant's code of ethics is filed as an exhibit to this Form N-CSR.
During the period covered by this report, the code of ethics has not been
amended, and the registrant has not granted any waivers, including implicit
waivers, from the provisions of the code of ethics.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's board of trustees has determined that the registrant has at
least one audit committee financial expert serving on its audit committee. The
name of the audit committee financial expert is Sidney F. McKenna. Mr. McKenna
is "independent" for purposes of this Item.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) AUDIT FEES. The aggregate fees billed for professional services
rendered by the principal accountant for the audit of the registrant's
annual financial statements or for services that are normally provided
by the accountant in connection with statutory and regulatory filings
or engagements were $57,750 and $34,250 with respect to the
registrant's fiscal years ended December 31, 2003 and 2002,
respectively.
(b) AUDIT-RELATED FEES. No fees were billed in either of the last two
fiscal years for assurance and related services by the principal
accountant that are reasonably related to the performance of the audit
of the registrant's financial statements and are not reported under
paragraph (a) of this Item.
(c) TAX FEES. The aggregate fees billed for professional services rendered
by the principal accountant for tax compliance, tax advice, and tax
planning were $7,000 and $3,500 with respect to the registrant's
fiscal years ended December 31, 2003 and 2002, respectively. The
services comprising these fees are the preparation of the registrant's
federal income and excise tax returns.
(d) ALL OTHER FEES. No fees were billed in either of the last two fiscal
years for products and services provided by the principal accountant,
other than the services reported in paragraphs (a) through (c) of this
Item.
(e)(1) The audit committee has not adopted pre-approval policies and
procedures described in paragraph (c)(7) of Rule 2-01 of
Regulation S-X.
(e)(2) None of the services described in paragraph (b) through (d) of
this Item were approved by the audit committee pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Less than 50% of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most
recent fiscal year were attributed to work performed by persons other
than the principal accountant's full-time, permanent employees.
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and rendered to the registrant's
investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen
by another investment adviser), and any entity controlling, controlled
by, or under common control with the adviser that provides ongoing
services to the registrant were $7,000 and $3,500 with respect to the
registrant's fiscal years ended December 31, 2003 and 2002,
respectively.
(h) The registrant's audit committee has not considered whether the
provision of non-audit services to the registrant's investment adviser
(not including any sub-adviser whose role is primarily portfolio
management and is subcontracted with or overseen by another investment
adviser), and any entity controlling, controlled by, or under common
control with the investment adviser that provides ongoing services to
the registrant, that were not pre-approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X, is compatible with
maintaining the principal accountant's independence.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) Based on their evaluation of the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company Act of
1940) as of a date within 90 days of the filing date of this report, the
registrant's principal executive officer and principal financial officer have
concluded that such disclosure controls and procedures are reasonably designed
and are operating effectively to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to them
by others within those entities, particularly during the period in which this
report is being prepared, and that the information required in filings on Form
N-CSR is recorded, processed, summarized, and reported on a timely basis.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940)
that occurred during the registrant's most recent fiscal half-year (the
registrant's second fiscal half-year in the case of an annual report) that have
materially affected, or are reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEM 10. EXHIBITS.
File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Attached hereto
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2(a) under
the Act (17 CFR 270.30a-2(a)): Attached hereto
(b) Certifications required by Rule 30a-2(b) under the Act (17CFR 270.30a-2(b)):
Attached hereto
Exhibit 99.CODE ETH Code of Ethics
Exhibit 99.CERT Certifications pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
Exhibit 99.906CERT Certifications pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Schwartz Investment Trust
-----------------------------------------------------------------
By (Signature and Title)* /s/ George P. Schwartz
------------------------------------------------------
George P. Schwartz, President
Date March 5, 2004
---------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ George P. Schwartz
------------------------------------------------------
George P. Schwartz, President
Date March 5, 2004
---------------------
By (Signature and Title)* /s/ Timothy S. Schwartz
------------------------------------------------------
Timothy S. Schwartz, Treasurer
Date March 5, 2004
---------------------
* Print the name and title of each signing officer under his or her signature.