Investment Advisor
Bartlett & Co.
Cincinnati, OH
Investment Sub-Adviser
Lombard Odier International Portfolio
Management Limited
London, England
Board of Trustees
Lorrence T. Kellar, Chairman
Dale H. Rabiner, President
A. John W. Campbell
Edmund J. Cashman, Jr.
Henri Deegenaar
Ian F. H. Grant
Alan R. Schriber
William P. Sheehan
Charles J. Swindells
Wolfgang E. Furst Ysenburg
Custodian
State Street Bank & Trust Company
Boston, MA
Sub-Custodian
The Chase Manhattan Bank, N.A.
Bournemouth, England
Transfer and Shareholder Servicing Agent
Boston Financial Data Services, Inc.
Boston, MA
Independent Accountants
Coopers & Lybrand L.L.P.
Baltimore, MD
Legal Counsel
Kirkpatrick & Lockhart LLP
Washington, D.C.
This report is not to be distributed unless preceded or accompanied by a
prospectus.
Bartlett & Co.
-----------------------------------------------------------
36 East Fourth Street
Cincinnati, Ohio 45202-3896
800 (bullet) 800 (bullet) 3609
BAR-002
Bartlett
Europe Fund
Report to Shareholders
For the Quarter Ended
September 30, 1997
<PAGE>
To Our Shareholders,
This is my second report to you as President of the Bartlett Capital Trust,
of which Bartlett Europe Fund is a part. The merger of Worldwide Value Fund into
Bartlett Europe Fund went very smoothly. We received many shareholder questions
and we hope they were answered satisfactorily. Our goal is to provide excellent
service to our shareholders and we continually strive to meet that goal.
In accordance with Internal Revenue Service requirements, in mid-December,
the Fund will distribute substantially all of its realized net capital gains and
ordinary income, if any. In January, we will send your tax form 1099-DIV,
reporting the amount and nature of the dividends and distributions paid by the
Fund in 1997.
On the following pages, the Fund's portfolio managers report on the Fund's
performance and the investment outlook.
We appreciate your support and we welcome your comments.
Sincerely,
/s/ Dale H. Rabiner
___________________________
Dale H. Rabiner, CFA
President,
Bartlett Capital Trust
November 14, 1997
<PAGE>
Investment Advisers' Comments
3rd Quarter 1997
MSCI European Index +7.8%
Bartlett Europe Fund +6.3%*
Market Review
The third quarter began with Europe in a euphoric mood. Encouraged by the
US market, which broke through the 8,000 level on the back of inflation figures
which showed that core CPI was at its lowest level since 1965, European bourses
followed suit and moved upwards into record territory. There was much discussion
of a "new paradigm" in the US economy--steady growth with no inflationary
pressure thanks to improved productivity. This appeared to be borne out by PPI
data which recorded a 7th consecutive monthly decline.
As the vacation month of August began, however, the bull market showed
signs of faltering. Concerns over interest rates both in Germany and the US sent
investors scrambling to lock-in their profits. This caused near unprecedented
volatility, exacerbated by action in the futures markets. The Dow fell 7.7%
during the month of August, its largest monthly decline in 7 years.
European markets also took fright and fell sharply with the larger, more
mature markets of Germany, Switzerland and the Netherlands faring the worst. The
recent spate of devaluations in Asia did not help matters as investors tried to
assess the implications for European companies with exposure to the Far East.
The Bundesbank was successful, however, in reversing the trend of a falling DEM
vs. the dollar, thus making the possibility of a German rate hike more unlikely.
Consequently, by September, European bourses had recovered their composure
and ended the period under review strongly. The best performing markets in
dollar terms over Q3 were Italy (+17.6%), driven by a very positive flow of
funds and speculation that Italy might join EMU at the first stage, followed by
the Scandinavian markets.
The UK market performed well, rising 9.0% in dollar terms, also boosted by
the "convergence theme", since the new government appears to be taking a more
favourable view of economic and monetary union. As a result, the spread between
Gilts and Bunds has narrowed to around 100 basis points (100 basis points = 1%)
and Sterling has weakened (having risen very sharply at the beginning of the
quarter to nearly 3.10 vs. the DEM) and is currently trading back around the
2.85 level. The UK economy remains in excellent health, buoyed by a high level
of consumer confidence and the lowest unemployment level (5.5%) in 17 years. The
Bank of England has thus been forced to raise interest rates (now 7.0%) to
restrain economic growth.
Switzerland, where the domestic economy is still struggling with recession,
was the worst performing major market, climbing just 2.9% in dollars over the
period.
Companies in both France and the UK bore the brunt of tax increases from
their respective new governments. Chancellor Brown's abolition of ACT (Advanced
Corporation Tax) more than negated any benefits from lowering the corporate tax
rate to 31%, while in France an audit into the State's finances revealed a
spending overshoot that equated to a deficit circa 3.5%-3.7% of GDP. To
compensate, the corporate tax rate in France was raised to 42% for the next 2
years.
Merger activity continued apace. The greatest surprise was caused by the
merger of the two Bavarian banks--Bayerische Hypo and Bayerische Vereinsbank.
The news gave a fillip to the whole sector on the expectation that the
long-overdue rationalisation of the German banking sector had finally begun.
Also in Germany, Adidas announced the takeover of French sporting goods
manufacturer, Salomon, in a deal which could realise large synergies on a
marketing level for the new, enlarged group. Volkswagen surprised the market
too, but in a rather negative sense, by announcing a DEM 7bn capital increase.
This exercise appears opportunistic rather than strategic.
2
<PAGE>
Elsewhere, ING strengthened its position in the US with the acquisition of
Equitable of Iowa. CSHolding stated its intention to merge with Winterthur, a
move which should realise significant cost savings. Philips reported excellent
results for the second successive quarter with increasing evidence that the core
businesses are starting to live up to expectations. Ericsson and Nokia rose to
new high levels on the back of booming handset sales and rapidly expanding order
books.
Investment Strategy
We continue to maintain our overweight position in the Netherlands where
our exposure is focused on quality growth companies with excellent management
teams and also the financial sector, which we believe is the best in Europe.
Geographical allocation was broadly unchanged as our strategy is concentrated on
bottom-up individual stock ideas, but the banking weighting was increased with
the purchase of Societe Generale in France, and the strong price appreciation of
this sector in the UK.
In terms of stocks, Alcatel was switched into Nokia, because of its leading
position in the fast-growing mobile telephone business. Swiss stock, Saurer,
which is benefiting from restructuring was added while Axa, Vendex and Gideon
Richter were all sold.
Outlook
The Fund remains invested in high quality, high conviction stocks with
solid management. We believe that despite the strong performance of the markets,
the outlook for European equities is still very positive.
European economies are only beginning to recover, which is positive for
profit margins, while the theme of restructuring/reorganisation continues to
gather pace. In addition, there is little sign of "speculative froth."
Furthermore, Europe needs to encourage increased private savings for
retirement. The European equity markets will be a major beneficiary of this
trend, particularly if EMU takes place since this would remove both currency
risk and the regulatory hurdles of "cross-border" investing.
We believe the Bartlett Europe Fund is ideally positioned in Europe's top
stocks to reap the benefits from such an environment.
Ronnie Armist
November 14, 1997
- ----------
*Total return measures investment performance in terms of appreciation in net
asset value per share plus dividends and any capital gain distributions. It
assumes that dividends and distributions were reinvested at the time they were
paid. Reflects return information on Class A shares excluding the 4.75% sales
charge which became effective July 21, 1997. This Fund assesses a 2% redemption
fee on the proceeds of shares redeemed or exchanged through January 20, 1998.
Past performance is no indication of future results.
3
<PAGE>
================================================================================
INDUSTRY DIVERSIFICATION
Bartlett Europe Fund / September 30, 1997
================================================================================
% of Net Market
Assets Value
--------- --------
(000)
Banking 13.9% $ 9,637
Retail Sales 11.9 8,278
Pharmaceuticals and Health Care 10.2 7,113
Oil and Gas 8.6 5,974
Finance 8.5 5,916
Telecommunications 7.5 5,227
Insurance 3.6 2,488
Publishing 3.3 2,317
Leisure 3.3 2,259
Electrical Equipment 2.8 1,917
Aerospace/Defense 2.6 1,834
Utilities 2.4 1,690
Automotive 2.2 1,502
Chemicals 2.1 1,437
Engineering 1.9 1,308
Consumer Durable Goods 1.7 1,179
Consumer Non-Durable Goods 1.6 1,130
Manufacturing 1.6 1,110
Miscellaneous Services 1.5 1,072
Transportation 1.5 1,049
Metals 1.4 995
Multi-Industry 1.4 964
Construction 0.8 540
----- -------
Total Investment Portfolio 96.3 66,936
Other Assets Less Liabilities 3.7 2,603
----- -------
Net Assets 100.0% $69,539
===== =======
4
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS / Unaudited
Bartlett Europe Fund / September 30, 1997 / Amounts in Thousands
================================================================================
Shares Value
------ -----
COMMON STOCKS AND
EQUITY INTERESTS--92.5%
Austria--3.3%
Voest-Alpine Stahl AG 21 $ 995
VA Technologie AG 6 1,308
-------
2,303
-------
Finland--2.3%
Oy Nokia Ab 16 1,564
-------
France--14.6%
Accor SA 8 1,461
Christian Dior SA 8 1,130
Compagnie Bancaire SA 9 1,121
Compagnie Bancaire SA - Rights 9 32
Guilbert SA 8 1,072
Pinault-Printemps-Redoute SA 4 1,642
Societe Generale 11 1,558
Total SA 18 2,113
-------
10,129
-------
Germany--11.2%
Adidas AG 9 1,179
Daimler-Benz AG 18 1,502
Dresdner Bank AG 37 1,683
Gehe AG 17 891
Hoechst AG 32 1,437
Metro AG 24 1,104
-------
7,796
-------
Greece--0.8%
Hellenic Telecommunication
Organization S.A. GDR 46 563(A)
-------
Italy--2.7%
ENI 300 1,886
-------
Netherlands--15.2%
ABN Amro Holding NV 70 1,416
Aegon N.V. 20 1,610
ING Groep N.V. 36 1,653
Koninklijke Ahold NV 62 1,673
Philips Electronics N.V. 23 1,917
VNU-Verenigde Nederlandse
Uitgeversbedrijven Verenigd
Bezit 55 1,281
Wolters Kluwer NV 8 1,036
-------
10,586
-------
Shares Value
------ -----
Spain--4.5%
Centros Comerciales Pryca, SA 75 $ 1,406
Telefonica de Espana 54 1,703
-------
3,109
-------
Sweden--2.0%
Telefonaktiebolaget LM Ericsson 29 1,397
-------
Switzerland--8.6%
Credit Suisse Group 9 1,230
Novartis 2 2,847
Roche Holding AG N.M. 807
Saurer AG 1 1,110(A)
-------
5,994
-------
United Kingdom--27.3%
BBA Group plc 110 748
Barclays PLC 77 2,072
The Berkeley Group plc 45 540
British Aerospace PLC 41 1,086
British Petroleum Company plc 131 1,975
Granada Group plc 57 798
HSBCHoldings plc 47 1,668
Halifax plc 122 1,442(A)
Independent Insurance Group plc 48 878
Lloyds TSB Group plc 125 1,678
Next Plc 133 1,547
PizzaExpress PLC 70 906
Stagecoach Holdings plc 95 1,049
Wassall PLC 173 964
Zeneca Group plc 51 1,649
-------
19,000
-------
Total Common Stocks and Equity
Interests
(Identified Cost--$50,537) 64,327
-------
5
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS / Continued
Bartlett Europe Fund / September 30, 1997 / Amounts in Thousands
================================================================================
Shares Value
------ -----
PREFERRED STOCK--3.8%
Germany--1.3%
Fresenius AG 5 $ 919
-------
Italy--2.5%
Telecom Italia Mobile SpA 810 1,690
-------
Total Preferred Stock
(Identified Cost--$2,127) 2,609
-------
Total Investments--96.3%
(Identified Cost--$52,664) 66,936
Other Assets Less Liabilities--3.7% 2,603
-------
NET ASSETS--100.0% $69,539
=======
CLASS A NET ASSET VALUE AND
REDEMPTION PRICE PER SHARE $27.10
======
CLASS A MAXIMUM OFFERING
PRICE PER SHARE $28.45
======
CLASS C NET ASSET VALUE AND
REDEMPTION PRICE PER SHARE $27.03
======
CLASS Y NET ASSET VALUE AND
REDEMPTION PRICE PER SHARE $27.10
======
- ----------
(A) Non-income producing
N.M. Not meaningful
6
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