Bartlett & Co.
------------------------------
REGISTERED INVESTMENT ADVISORS
BARTLETT
MUTUAL
FUNDS
ANNUAL
REPORT
FOR THE YEAR ENDED
MARCH 31, 1997
BARTLETT
VALUE INTERNATIONAL FUND
BARTLETT
BASIC VALUE FUND
<PAGE>
BARTLETT & CO.
PROFILE
Bartlett & Co., headquartered in Cincinnati, Ohio, is an asset
[PICTURE] management firm which manages over $2 billion for individuals, family
groups and institutions. Established in 1898, Bartlett & Co. has
built a reputation among individual and institutional investors of strong
performance and superior client service for nearly a century.
Bartlett & Co. offers its clients a diversity of services through four business
divisions:
(bullet) Mutual Funds
(bullet) Institutional Client Services
(bullet) Private Client Services
(bullet) Real Estate Programs
Our tradition of excellence, the breadth of our services and the depth of our
experience give Bartlett & Co. the capabilities to serve as your financial
advisor.
<PAGE>
CONTENTS
Pages
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Bartlett & Co. Profile Inside Cover
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Chairman's Letter 2
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Reports to Shareholders
Bartlett Value International Fund Report 3
Bartlett Basic Value Fund Report 4
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Growth of a $10,000 Investment
Bartlett Value International Fund 6
Bartlett Basic Value Fund 6
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Results of Special Meeting of Shareholders 7
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Portfolios of Investments
Bartlett Value International Fund 8
Bartlett Basic Value Fund 10
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Statements of Assets and Liabilities 12
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Statements of Operations 13
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Statements of Changes in Net Assets 14
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Financial Highlights
Bartlett Value International Fund 15
Bartlett Basic Value Fund 15
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Notes To Financial Statements 16
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Report of Independent Public Accountants 19
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Trustees and Officers Back Cover
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This report is for the information of shareholders of the Bartlett Mutual
Funds. It may be used as sales literature if preceded or accompanied by a
current prospectus of the Bartlett Mutual Funds.
1
<PAGE>
CHAIRMAN'S LETTER
[PICTURE]
/s/ Dale H. Rabiner
- --------------------
Dale H. Rabiner, CFA
Chairman
Bartlett
Capital Trust
Dear Fellow Shareholder,
The "irrational exuberance" that Alan Greenspan, Chairman of the Federal Reserve
Board, has expressed concerns about over the past four months, seems to have
lost some of its exuberance as investors have become somewhat more rational in
their expectations toward the equity market. Indeed, investors who were pursuing
so-called "momentum strategies" have learned the painful lesson that momentum is
not a unidirectional notion, i.e., that which rises spectacularly, can also fall
spectacularly. Over the past year, it has not been unusual to witness price
declines in excess of fifty percent in hot concept stocks found in such
industries as computer networking and software. We are encouraged that a healthy
respect for downside risk is being embraced by at least some market
participants. As we have stated in previous communications, ultimately a stock's
price can be driven by only two things: 1) the growth rate in a company's
earnings per share and, 2) a change in the discount rate that is applied to
those earnings per share. With interest rates rising over the past six months,
for equities to maintain, or increase in value, it is necessary for earnings to
increase at a rate that would offset the increase in the discount rate. We
believe that treasury bonds, yielding north of seven percent, may prove to be
stiff competition for common stocks going forward. As the Portfolio Managers'
Reviews contained elsewhere in this report discuss, a significant discrepancy in
valuation currently exists between large capitalization equities and
small-to-medium capitalization equities, as well as between U.S. stock market
valuations and that of international markets. While some portion of these
discrepancies may be due to differences in earnings growth, it seems quite
evident that a considerable amount of the discrepancy can be attributed to the
continuing indexation trend, which is prompting more and more money to flow into
fewer and fewer large companies. We do not believe that we are embarking upon a
new era of valuation, and, accordingly, believe that, as has been the case in
prior market cycles, this aberration will fall of its own weight in the not too
distant future. When this occurs, small and medium capitalization domestic
stocks and foreign company stocks should be in for a protracted period of
significant outperformance. This should serve investors in our funds quite well
given our significant commitment to these out-of-favor sectors.
Enclosed with this report is a proxy to vote on a number of important items. The
first proposal is to elect additional trustees who will help provide an enhanced
global perspective. Second, we solicit your approval of a redesigned
distribution system to improve shareholder servicing as well as to potentially
bring growth and economies of scale to the Funds. With this proposal, each Fund
will offer three classes of shares, each targeting a separate distribution
channel. Lastly, we solicit your approval of changes to the investment
management arrangements for each Fund.
We believe these proposed items will serve our investors well in the years ahead
as increased assets in the Bartlett Capital Trust, from both increased sales and
the addition of the new Bartlett Europe Fund to our Trust, create economies of
scale and result in lower expenses for each Fund.
In closing, we wish to thank you, our loyal shareholders, for your continued
support. We assure you that we continue to strive to provide you with attractive
investment returns as well as an enhanced array of investor services.
Dale H. Rabiner, CFA
Chairman
2
<PAGE>
BARTLETT
VALUE INTERNATIONAL
FUND REPORT
Concern about inflation and coordinated global growth have begun to
[PICTURE] weigh on the US market, and fears of catching the "growth disease"
have also cooled the recovery hopes in overseas markets. The Europe,
Australia and Far East (EAFE)* index fell by 1.6% in the first quarter of 1997,
dragged down by a very weak performance in Asian markets, most notably Japan. A
broader, more representative index of international market performance, the
Morgan Stanley All Country ex US (AC ex US) index, fell .5% in the first
quarter. Pacific markets are suffering from serious concerns about the overall
stability of Asia's financial institutions, brought on by the continuing banking
problems in Japan, and aggravated by high-profile stumbles for both Thai and
Korean financial institutions. In contrast, European markets continued to motor
on, rising about 5% in the quarter, surpassing even the US market performance.
For the year ending March 31, 1997, the EAFE index increased by 1.5% and the AC
ex US rose 1.4%, as good performance in European stocks was negated by the
ongoing weakness in Asian markets. This divergence in performance has been a
feature of both indices for the last several quarters.
The strength of the US dollar over the past year has affected the EAFE index's
performance. Currency weakness in both the yen and the core European currencies
has shaved about 10% off the index's return in dollar terms over a twelve month
period, and about 6% over the last quarter. The yen's fall has raised concerns
on both sides of the Pacific, and European currencies are now caught up in a
wave of speculation over the European Monetary Union that is scheduled to take
place in two years.
Bartlett Value International's total return was 3.3% in the first quarter of
1997, and 15.5% for the year ending March 31, 1997. The Fund benefited from good
performance in several individual stocks and minimal damage from currency
weakness. Regional exposure in the portfolio is fairly close to that of the EAFE
index, although the country weightings are quite different, including a
below-index exposure to Japan and a greater weighting in non-Japan Asia, as well
as France, Norway and Spain.
The tailwind of economic recovery, lower inflation and a strong bond market that
has pushed the US market along in the last two years seems to be weakening. Both
European and Asian economies have lagged the US in economic performance, and are
better placed to show non-inflationary growth in the next several quarters.
Currency depreciation of the magnitude that has dragged down dollar-based
international market returns over the last year seems unlikely to continue,
especially regarding the yen. While European markets have been reasonably
competitive with US market returns over the last couple of years, Asian markets
have lagged badly. In 1993, there was nearly universal agreement that Asia was a
growth area destined to dominate the world economy in the next millennium. The
outlook now is considerably more gloomy, reflecting both highly publicized
corporate scandals and financial problems. Logic says, however, that the bright
future envisioned for Asia just two years ago, while based on a serious dose of
over-optimism, has not completely changed for the worse, as market performance
would indicate. Europe's outlook is good, based on an increased focus on
shareholder value and competitiveness, but Asia's is certainly at least as good,
based on recovery in its developed economies and continued growth in the
emerging areas, and should provide a good hunting ground for attractively
valued, fundamentally sound stock investments.
Portfolio Composition
Bartlett Value International Fund vs
Europe, Australia, Far East (EAFE) Index
March 31, 1997
[Graph appears here-see plot points below]
Percent of Total Portfolio
Fund EAFE Index
Americas 10% (3% Latin America, 0%
5% Canada, 2%
Cash Equivalents)
Europe 57% 60%
Pacific 33% (13% Japan) 40% (29% Japan)
/s/ Madelynn M. Matlock
------------------------
Madelynn M. Matlock, CFA
Portfolio Manager
*The EAFE Index is an unmanaged index of common stocks of foreign companies. The
returns for the Index do not include any expenses or transaction costs. The
returns for the Fund include such expenses.
3
<PAGE>
BARTLETT
BASIC VALUE
FUND REPORT
People are more anxious regarding the level of the stock market than
[PICTURE] they have been in quite a while. We have all read articles about
people who are worried about the gains that they have given up during
the last two months. This seems rather odd since most of us were counting our
blessings only three months ago, especially given the largesse that had been
bestowed upon us by the market. Because the market is certain to endure setbacks
from time to time, one should not feel too uncomfortable when the market sheds
some of its gains rather than deliriously adding to them on a week to week
basis. The best perspective that we can offer is that a good investment program
is measured by its performance over an extended period of time, rather than
vis-a-vis a peak level of valuation that it achieved only a few months ago.
Very high stock prices, interest rate jitters, and anxieties about corporate
earnings have been the primary ingredients in the stock market giving up almost
all of the gains that were produced in January and February. Then again, it
should be emphasized that only the biggest, not necessarily the best, stocks
produced compelling results at the beginning of the year.
During 1996, 25% of the return produced by the S&P 500 Index was generated by
only five stocks -- Coca Cola, Merck, Intel, Microsoft, and General Electric. In
fact, had each of the five hundred stocks in the S&P Index been weighted
equally, this particular benchmark would have generated a 13% gain, as opposed
to the 23% gain that was enjoyed last year. January was a month in which this
particular phenomenon was never more visible. While companies such as Philip
Morris, Merck, and Procter & Gamble increased by 20% during the first two months
of the year, smaller companies tended to languish.
During the first quarter of 1997, the Russell 2000 Index, a broader index which
is comprised of small capitalization issues, actually posted a 5.2% decline. The
Dow Jones Industrial Average produced a 2.6% gain, while the S&P 500 produced a
2.7% gain. This is rather graphic evidence that the inclusion of small and
medium-sized companies would have worked against a portfolio manager for the
first quarter of the year. In fact, the valuation gap between large company
stocks and small company stocks has not been greater during the last twenty-five
years, in
- --------------------------------------------------------------------------------
Measuring Both Risk and Return
Bartlett Basic Value Fund vs Standard & Poor's 500 Index
May 1983 to March 1997
[Chart appears here--see plot points below]
Bartlett
Basic S&P
Value 500
Fund Index
Return 11.8% 15.4%
Risk 10.9% 14.1%
This chart compares the historical average annual total return and the risk
(as measured by the standard deviation) of the Bartlett Basic Value Fund and
the Standard & Poor's 500 Index from May 1983 to March 31, 1997. The S&P 500
Index is an unmanaged index of common stocks widely used as a measure of
stock market activity. The return for the Index does not include any expenses
or transaction costs. The return for the Fund includes such expenses and
costs.
Standard deviation is a statistical measure of volatility often used as a
measure of risk. In general, the greater the standard deviation, the greater
the tendency to vary from the average annual total return. By comparing the
magnitude of the standard deviations, the relative volatility of each
investment can be determined. A lower standard deviation reflects lower
volatility.
The average annual total return figures assume the reinvestment of dividends.
Of course, past performance is no guarantee of future results. The principal
value and investment returns of the Fund fluctuate so that upon redemption
you may receive more or less than your original investment.
- --------------------------------------------------------------------------------
4
<PAGE>
spite of the fact that small company stocks have generated higher total returns
to their shareholders since this data was collected in 1925 -- over seventy
years ago.
Some of the smaller companies in the portfolio have among the most profitable
operations. Kaydon Corporation has put together a string of 20% plus earnings
gains in the manufacture of ball bearings, rings, and metal castings. The
company has a tremendous amount of excess cash which it has been using to buy in
its shares. They would probably be using their free cash flow to pay off debt
if, of course, they had any debt. Other companies such as Washington Federal,
perhaps the most efficiently run savings and loan in the country, and York
International, one of the leading heating, ventilation, and air conditioning
equipment manufacturers, have watched their stocks languish during the first
quarter. Investors have ignored them in favor of virtually throwing money at the
great names of America. If the market falters, one would expect investors to
more assiduously analyze the value that they are getting for their investment
dollars. It will more than likely be found in companies that are not necessarily
the most visible.
The month of March was unkind to all money managers, although value managers had
slightly better performance -- i.e. lost less -- than the market in general last
month. Value managers would have fared much better had it not been for the large
exposure that such investors have in financial services companies. It should be
kept in mind that an increase in short-term rates does not necessarily affect
the profitability of regional banks, insurance companies, savings and loans, or
government-sponsored enterprises such as Fannie Mae. In fact, many of these
institutions are almost always able to report higher profits when short-term
rates rise. Nevertheless, perception seems to be greater than reality for such
issues during the short term and Mr. Greenspan's pre-emptive strike against
inflation -- i.e. the interest rate hike -- has played havoc with these very
reasonably priced issues.
Although the market is sure to be bumpy along the way, we have not been reaching
for the brass ring by buying fledgling companies with a new concept (but no
earnings or assets) or familiar names that have been bid up to ridiculously high
price levels. We have, instead, sought a margin of safety by paying attention to
what a share of common stock represents in relation to the earnings, cash flow,
dividends, and assets that are standing behind it. Aside from being tried and
true, this approach will allow us to hold onto the gains that have been
accumulated, while putting us in a position to participate in any meaningful new
advances that occur.
Thank you for your continued support of our investment style and for your
partronage of the Bartlett Basic Value Fund.
Sincerely,
/s/ James A. Miller /s/ Woodrow H. Uible
------------------- --------------------
James A. Miller, CFA Woodrow H. Uible, CFA
Portfolio Manager Portfolio Manager
The average annual total returns of the Bartlett Basic Value Fund for the one,
three, five and ten year periods ended March 31, 1997 were 11.3%, 15.9%, 12.9%
and 10.1%, respectively.
Largest Industry Allocations
Bartlett Basic Value Fund vs Standard & Poor's 500 Index
March 31, 1997
[Graph appears here--see plot points below]
Percent of Total Equity Portfolio
Fund S&P 500
Financial 22% 16%
Consumer Cyclical 20% 12%
Basic Industry 14% 12%
Technology/Defense 9% 17%
Energy 8% 8%
Consumer Staples 8% 13%
5
<PAGE>
GROWTH OF A
$10,000
INVESTMENT
The following graphs compare each Fund's total return against that of
[PICTURE] the most closely matched broad-based securities market index.
The lines illustrate the cumulative total return of an initial $10,000
investment for the period indicated. The line for each Bartlett Mutual Fund
represents the total return after deducting all Fund investment management
expenses and the transaction costs of buying and selling securities. The line
representing the securities market index (which is, in each case, an unmanaged
index) does not include any transaction costs associated with buying and selling
securities in the index or other administrative expenses. The average annual
total return numbers and line graphs represent only past performance and are not
a guarantee of future results. As the graphs illustrate, the share price of the
Funds fluctuate and, upon redemption, you may receive more or less than your
original investment.
Growth of a $10,000 Investment
Bartlett Value International Fund
October 31, 1989 through March 31, 1997
Average Annual Total Returns*
For periods ended March 31, 1997
-----------------------------------------------
1 Year 3 Years 5 Years Life of the Fund
(since 10/06/89)
-----------------------------------------------
15.5% 8.8% 10.5% 8.0%
Bartlett Value International Fund
vs
Europe, Australia, Far East Index
[Graph appears here--see plot points below]
Bartlett Value
International EAFE
Fund Index
Mar-97 $19,092 $13,675
Dec-96 18,490 13,893
Sep-96 17,352 13,634
Jun-96 17,443 13,659
Mar-96 16,537 13,436
Dec-95 15,933 13,062
Sep-95 15,928 12,556
Jun-95 15,271 12,048
Mar-95 14,666 11,960
Dec-94 14,597 11,741
Sep-94 15,331 11,862
Jun-94 14,555 11,844
Mar-94 14,841 11,266
Dec-93 14,674 10,886
Sep-93 13,413 10,793
Jun-93 12,153 10,121
Mar-93 11,929 9,196
Dec-92 11,172 8,212
Sep-92 11 426 8,541
Jun-92 12,351 8,414
Mar-92 11,614 8,241
Dec-91 11,380 9,350
Sep-91 10,972 9,195
Jun-91 9,970 8,469
Mar-91 10,381 8,958
Dec-90 9,367 8,337
Sep-90 9,074 7,543
Jun-90 11,226 9,572
Mar-90 10,796 8,737
Dec-89 10,958 10,891
Oct-89 10,000 10,000
The Europe, Australia, Far East (EAFE) Index is a broad-based index administered
by Morgan Stanley Capital International and is composed of select common
stocks of companies based outside the United States and including Europe,
Australia, and the Far East. It is often used to measure international stock
market activity. The index does not include any expenses or transaction costs
associated with buying and selling stocks within the index. The total returns
for the Bartlett Value International Fund are quoted after deducting Fund
expenses and transaction costs, and assume the reinvestment of all
distributions. The performance figures reflect the periodic absorption of
some expenses of the Fund through the waiver of management fees. Had a portion
of these fees not been waived, the Fund's total returns would have been slightly
lower.
The Standard & Poor's 500 Index is a broad-based unmanaged index of common
stocks commonly used to measure general stock market activity. The index does
not include any expenses or transaction costs associated with buying and selling
stocks within the index. The total returns for the Bartlett Basic Value Fund are
quoted after deducting Fund expenses and transaction costs, and assume the
reinvestment of all distributions.
Growth of a $10,000 Investment
Bartlett Basic Value Fund
May 31, 1983 through March 31, 1997
Average Annual Total Returns*
For periods ended March 31, 1997
----------------------------------------------------------
1 Year 3 Years 5 Years 10 Years Life of the Fund
(since 05/05/83)
----------------------------------------------------------
11.3% 15.9% 12.9% 10.1% 11.8%
Bartlett Basic Value Fund
vs
Standard and Poors 500 Index
[Graph appears here--see plot points below]
Bartlett Basic S&P 500
Value Fund Index
Mar-97 $47,110 $72,907
Dec-96 48,373 70,991
Sep-96 43,892 65,540
Jun-96 43,699 63,562
Mar-96 42,262 60,837
Dec-95 40,849 57,740
Sep-95 38,838 54,461
Jun-95 36,480 50,450
Mar-95 34,068 46,052
Dec-94 31,051 41,966
Sep-94 31,950 41,972
Jun-94 30,542 40,015
Mar-94 30,237 39,848
Dec-93 30,926 41,417
Sep-93 29,978 40,476
Jun-93 28,882 39,458
Mar-93 29,239 39,268
Dec-92 27,698 37,624
Sep-92 26,912 35,795
Jun-92 26,548 34,715
Mar-92 25,598 34,056
Dec-91 25,125 34,948
Sep-91 24,149 32,248
Jun-91 22,769 30,610
Mar-91 23,286 30,674
Dec-90 19,946 26,776
Sep-90 18,441 24,568
Jun-90 22,707 28,502
Mar-90 21,908 26,812
Dec-89 22,066 27,656
Sep-89 22,680 27,113
Jun-89 21,555 24,503
Mar-89 20,572 22,524
Dec-88 19,761 21,047
Sep-88 19,202 20,429
Jun-88 18,667 20,355
Mar-88 17,795 19,105
Dec-87 15,649 18,067
Sep-87 19,596 23,360
Jun-87 18,811 21,913
Mar-87 18,018 20,840
Dec-86 16,259 17,178
Sep-86 16,259 16,300
Jun-86 16,793 17,518
Mar-86 16,177 16,572
Dec-85 14,304 14,529
Sep-85 12,987 12,400
Jun-85 12,705 12,935
Mar-85 12,189 12,059
Dec-84 11,419 11,042
Sep-84 11,078 10,847
Jun-84 10,636 9,892
Mar-84 10,657 10,156
Dec-83 10,534 10,407
Sep-83 10,250 10,362
Jun-83 10,100 10,379
May-83 10,000 10,000
6
<PAGE>
RESULTS OF SPECIAL MEETING OF SHAREHOLDERS
On December 13, 1996, Special Meetings of the Shareholders of Bartlett
Management Trust and Bartlett Capital Trust were held to approve an Agreement
and Plan of Reorganization and Termination. Under this plan, Legg Mason Cash
Reserve Trust would acquire the assets and assume the liabilities of Bartlett
Cash Reserves Fund and Legg Mason U.S. Government Intermediate-Term Portfolio
would acquire the assets and assume the liabilities of Bartlett Fixed Income
Fund and Bartlett Short Term Bond Fund.
The results of the voting by each Fund, in shares, were as follows:
For Against
Approval Approval Abstain
-------------------------------------------
Bartlett Fixed Income Fund 3,645,203 46,735 150,447
Bartlett Short Term Bond Fund 718,034 -- 95,143
Bartlett Cash Reserves Fund 24,060,370 306,392 224,740
7
<PAGE>
PORTFOLIOS OF INVESTMENTS
Bartlett Value International Fund
As of March 31, 1997
Market
Shares Value
- ---------------------------------------------------------
Common Stock--97.65%
- ---------------------------------------------------------
Argentina--2.61%
YPF Sociedad Anonima SA (ADR)
(Energy, Oil & Gas) 82,600 $ 2,188,900
- ---------------------------------------------------------
Australia--6.78%
Brambles Industries Ltd.
(Transport Services) 94,600 1,555,160
Burns Philp &Company Ltd.
(Food, Manufacturing) 1,540,908 2,573,012
National Australia Bank (ADR)
(Banking) 25,300 1,565,437
-----------
5,693,609
- ---------------------------------------------------------
Canada--4.75%
Hudson's Bay Co.
(Retailing) 121,800 2,357,703
Potash Corporation of
Saskatchewan Inc. (ADR)
(Mining) 21,500 1,634,000
-----------
3,991,703
- ---------------------------------------------------------
Finland--2.02%
Metra Oy B Shares
(Engineering/Construction) 29,000 1,695,092
- ---------------------------------------------------------
France--9.33%
Alcatel Althsom (ADR)
(Capital Goods) 73,600 1,748,000
Michelin
(Rubber) 38,000 2,263,959
St. Gobain
(Glass/Building Materials) 13,934 2,114,484
Total Co. Francaise Petrole-B
(Energy) 3,000 260,166
Total SA (ADR)
(Energy) 34,100 1,444,987
-----------
7,831,596
- ---------------------------------------------------------
Germany--2.81%
Deutsche Lufthansa AG
(Transportation) 163,000 2,359,982
- ---------------------------------------------------------
HongKong--2.31%
Swire Pacific Ltd.-B
(Diversified) 246,000 1,936,583
- ---------------------------------------------------------
India--2.68%
Morgan Stanley India Investment
Fund (Closed-End Mutual Fund)* 231,200 $ 2,254,200
- ---------------------------------------------------------
Ireland--2.10%
Allied Irish Banks PLC (ADR)
(Banking) 43,800 1,768,425
- ---------------------------------------------------------
Italy--4.79%
Istituto Mobiliare SpA (ADR)
(Banking) 82,000 2,152,500
Sasib SpA - Savings Shares
(Capital Goods) 1,007,000 1,872,365
-----------
4,024,865
- ---------------------------------------------------------
Japan--14.74%
Canon Inc.
(Visual Image Equipment) 86,000 1,842,807
Fujitsu Ltd.
(Computers) 192,000 1,956,174
Ito-Yokado (ADR)
(Retailing) 11,800 2,103,350
Matsushita Electric Industries*
(Consumer Electronics Equip.) 130,000 2,028,786
Rohm Company
(Electronics) 32,000 2,359,829
Sumitomo Warehouse
(Storage) 416,000 2,085,550
-----------
12,376,496
- ---------------------------------------------------------
Korea--2.35%
Korea Fund Inc.
(Closed-End Mutual Fund) 137,234 1,972,739
- ---------------------------------------------------------
Malaysia--2.49%
Perlis Plantations Bhd
(Diversified) 687,500 2,091,213
- ---------------------------------------------------------
Norway--7.91%
Elkem ASA
(Metal-Diversified) 119,000 2,239,286
Kvaerner ASA
(Shipbuilding) 43,200 2,346,971
Norsk Hydro ASA (ADR)
(Chemicals) 42,000 2,052,750
-----------
6,639,007
- ---------------------------------------------------------
8
<PAGE>
Bartlett Value International Fund (Cont.)
As of March 31, 1997
Market
Shares Value
- ---------------------------------------------------------
Portugal--1.99%
Portugal Fund Inc.
(Closed-End Mutual Fund) 112,500 $ 1,673,438
- ---------------------------------------------------------
Singapore--1.71%
Dairy Farm International
Holdings Ltd. (ADR)
(Retail-Grocery) 1,896,000 1,431,480
- ---------------------------------------------------------
Spain--6.69%
Banco Santander SA
(Banking) 15,856 1,094,291
Banco Santander SA (ADR)
(Banking) 15,600 1,060,800
Repsol SA (ADR)
(Energy) 60,800 2,477,600
Telefonica de Espana SA(ADR)
(Communications) 13,750 986,563
-----------
5,619,254
- ---------------------------------------------------------
Sweden--4.90%
AssiDoman AB
(Forest Products & Paper) 80,500 2,136,412
Cardo AB
(Engineering/Construction) 61,200 1,977,468
-----------
4,113,880
- ---------------------------------------------------------
Switzerland--1.18%
Ciba Specialty Chemicals AG*
(Chemicals) 750 62,022
Novartis AG
(Medical-Drugs) 750 930,855
-----------
992,877
- ---------------------------------------------------------
Taiwan--2.41%
Taiwan Fund Inc.
(Closed-End Mutual Fund) 82,125 2,022,328
- ---------------------------------------------------------
United Kingdom--11.10%
ADT Ltd. (ADR)*
(Protection/Safety) 114,000 2,850,000
Cadbury Schweppes PLC (ADR)
(Beverages) 68,172 2,445,670
Grand Metropolitan PLC (ADR)
(Consumer Goods) 52,289 1,666,712
Tomkins PLC (ADR)
(Diversified) 127,600 2,360,600
-----------
9,322,982
- ---------------------------------------------------------
Total Common Stock $82,000,649
- ---------------------------------------------------------
(Cost-$70,531,075)
- ---------------------------------------------------------
Face Market
Amount Value
- ---------------------------------------------------------
Repurchase Agreement--2.20%
- ---------------------------------------------------------
State Street Bank,
4.00% dated 3/31/97, to be
repurchased at $1,847,205 on
4/1/97 (Collateral: $1,885,000
U.S. Treasury Note, 6.125% due
3/31/98, value $1,888,207) $1,847,000 $ 1,847,000
- ---------------------------------------------------------
Total Repurchase Agreement $ 1,847,000
- ---------------------------------------------------------
(Cost-$1,847,000)
- ---------------------------------------------------------
Total Investments
At Value--99.85% $83,847,649
- ---------------------------------------------------------
(Cost-$72,378,075)
- ---------------------------------------------------------
Other Assets Less Liabilities--0.15% 125,739
- ---------------------------------------------------------
Net Assets--100.00% $83,973,388
=========================================================
See accompanying notes to financial statements.
9
<PAGE>
Bartlett Basic Value Fund
As of March 31, 1997
Market
Shares Value
- ---------------------------------------------------------
Common Stock--94.69%
- ---------------------------------------------------------
Aerospace/Defense -- 4.91%
Lockheed Martin Corp. 30,812 $ 2,588,208
Martin Marietta Materials 33,927 873,620
Raytheon Co. 53,000 2,391,625
-----------
5,853,453
- ---------------------------------------------------------
Air Transportation -- 2.46%
AMR Corp.* 35,550 2,932,875
- ---------------------------------------------------------
Apparel -- 1.60%
Kellwood Co. 76,100 1,902,500
- ---------------------------------------------------------
Automobiles &
Auto Parts -- 5.36%
Ford Motor Co. 35,000 1,098,125
General Motors Corp. 62,275 3,448,478
Stewart & Stevenson
Services, Inc. 92,100 1,842,000
-----------
6,388,603
- ---------------------------------------------------------
Broadcasting -- 2.21%
Time Warner, Inc. 61,000 2,638,250
- ---------------------------------------------------------
Chemicals -- 1.46%
Ferro Corporation 58,000 1,740,000
- ---------------------------------------------------------
Diversified -- 5.21%
Canadian Pacific Ltd. (ADR) 107,050 2,569,200
Loews Corp. 41,000 3,643,875
-----------
6,213,075
- ---------------------------------------------------------
Electronics -- 2.69%
Pioneer Standard
Electronics, Inc. 252,000 3,213,000
- ---------------------------------------------------------
Energy -- 7.69%
Cabot Oil & Gas Corp., Class A 125,700 2,199,750
Phillips Petroleum Corp. 67,500 2,759,062
Southwestern Energy Co. 150,000 2,006,250
Total SA (ADR) 52,000 2,203,500
-----------
9,168,562
- ---------------------------------------------------------
Financial Services -- 14.08%
Fannie Mae 100,000 3,612,500
First America Bank Corp. 16,650 994,837
First Tennessee National Corp. 25,438 1,074,756
MBIA, Inc. 11,500 1,102,562
Regions Financial Corp. 19,685 1,092,517
Salomon, Inc. 60,000 2,992,500
State Auto Financial Corp. 108,700 1,861,488
U.S. Trust Corp. 40,000 1,680,000
Washington Federal Savings
& Loan, Inc. 104,600 2,379,650
-----------
16,790,810
- ---------------------------------------------------------
Food & Beverage -- 4.79%
Archer-Daniels-Midland Co. 154,065 $ 2,753,912
Universal Foods Corp. 89,000 2,959,250
-----------
5,713,162
- ---------------------------------------------------------
Health Care -- 1.29%
Bristol Myers-Squibb Co. 26,000 1,534,000
- ---------------------------------------------------------
Housewares -- 1.81%
National Presto Ind., Inc. 60,000 2,152,500
- ---------------------------------------------------------
Insurance -- 1.34%
ITT Hartford Group, Inc. 22,125 1,595,766
- ---------------------------------------------------------
Machinery -- 5.16%
Kaydon Corp. 67,500 2,826,563
York International 79,300 3,320,687
-----------
6,147,250
- ---------------------------------------------------------
Manufactured Housing -- 2.70%
Fleetwood Enterprises, Inc. 129,000 3,225,000
- ---------------------------------------------------------
Metals & Mining -- 2.21%
Potash Corporation of
Saskatchewan Inc. (ADR) 34,600 2,629,600
- ---------------------------------------------------------
Paper -- 1.18%
Wausau Paper Mills Co. 77,151 1,412,828
- ---------------------------------------------------------
Railroad -- 4.51%
GATX Corporation 43,000 2,101,625
Kansas City Southern Inds. Inc. 65,500 3,275,000
-----------
5,376,625
- ---------------------------------------------------------
Retailing -- 5.09%
Federated Dept. Stores, Inc.* 85,000 2,794,375
Jostens, Inc. 144,500 3,269,313
-----------
6,063,688
- ---------------------------------------------------------
Security Services -- 2.52%
ADT, Ltd. (ADR)* 120,000 3,000,000
- ---------------------------------------------------------
Technology -- 1.36%
Zilog, Inc.* 77,400 1,625,400
- ---------------------------------------------------------
Toys -- 2.36%
Toys `R' Us, Inc.* 100,300 2,808,400
- ---------------------------------------------------------
Utilities -- 4.80%
KUEnergy, Inc. 112,600 3,363,925
NIPSCO Ind., Inc. 60,000 2,355,000
-----------
5,718,925
- ---------------------------------------------------------
10
<PAGE>
Bartlett Basic Value Fund (Cont.)
As of March 31, 1997
Market
Shares Value
- ---------------------------------------------------------
Other Common Stock -- 5.90%
Chateau Properties, Inc. (REIT) 67,730 $ 1,752,514
Royce Value Trust, Inc.
(Closed-End Mutual Fund) 293,537 3,449,060
United Dominion Trust
Realty (REIT) 125,000 1,828,125
------------
7,029,699
- ---------------------------------------------------------
Total Common Stock $112,873,971
- ---------------------------------------------------------
(Cost $81,583,452)
- ---------------------------------------------------------
Preferred Stock--2.41%
- ---------------------------------------------------------
J.P. Morgan Co.,
Adj. Rate Pfd. "A" 12,000 924,000
RJR Nabisco Holdings Corp.
Depositary Shares 300,000 1,950,000
- ---------------------------------------------------------
Total Preferred Stock $ 2,874,000
- ---------------------------------------------------------
(Cost $2,673,000)
- ---------------------------------------------------------
Face Market
Amount Value
- ---------------------------------------------------------
Repurchase Agreement -- 1.69%
- ---------------------------------------------------------
State Street Bank,
4.25%, dated 3/31/97, to be
repurchased at $2,017,000 on
4/1/97 (Collateral: $2,060,238
U.S. Treasury Note, 6.125%
due 3/31/98, value $2,061,000)
$2,017,000 $ 2,017,000
- ---------------------------------------------------------
Total Repurchase Agreement $ 2,017,000
- ---------------------------------------------------------
Total Investments
At Value-- 98.79% $117,764,971
- ---------------------------------------------------------
(Cost $86,273,452)
- ---------------------------------------------------------
All Other Assets
Less Liabilities --1.21% 1,443,101
- ---------------------------------------------------------
Net Assets--100.00% $119,208,072
=========================================================
*Non-dividend paying investment.
See accompanying notes to financial statements.
11
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
As of March 31, 1997
<TABLE>
<CAPTION>
Bartlett Bartlett
Value Basic
International Value
Fund Fund
- ----------------------------------------------------------------------------------------------------------
<S> <C>
Assets:
- ----------------------------------------------------------------------------------------------------------
Investments securities, at cost $72,378,075 $ 86,273,452
==========================================================================================================
Investments securities, at value (Note 1) $83,847,649 $117,764,971
Dividends and interest receivable 249,562 98,640
Receivable for securities sold -- 1,608,561
Cash 46,804 154
Shareholder subscriptions receivable 26,339 61,380
- ----------------------------------------------------------------------------------------------------------
Total Assets 84,170,354 119,533,706
- ----------------------------------------------------------------------------------------------------------
Liabilities:
- ----------------------------------------------------------------------------------------------------------
Shareholder redemptions payable 68,177 202,344
Management fee payable (Note 3) 128,789 123,290
- ----------------------------------------------------------------------------------------------------------
Total Liabilities 196,966 325,634
- ----------------------------------------------------------------------------------------------------------
Net Assets $83,973,388 $119,208,072
==========================================================================================================
Net Assets Consist of:
- ----------------------------------------------------------------------------------------------------------
Capital shares $69,173,011 $ 78,570,033
Accumulated undistributed net investment income -- 209,571
Accumulated net realized gains from security transactions 3,333,354 8,936,987
Net unrealized appreciation on investments
and foreign currency transactions 11,467,023 31,491,481
- ----------------------------------------------------------------------------------------------------------
Net Assets $83,973,388 $119,208,072
==========================================================================================================
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value) (Note 4) 6,155,483 6,503,987
Net asset value, offering price and redemption price per share (Note 1) $13.64 $18.33
==========================================================================================================
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
STATEMENTS OF OPERATIONS
For the year ended March 31, 1997
<TABLE>
<CAPTION>
Bartlett Bartlett
Value Basic
International Value
Fund Fund
- -----------------------------------------------------------------------------------------------------------
<S> <C>
Investment Income:
- -----------------------------------------------------------------------------------------------------------
Interest $ 189,947 $ 422,237
Dividends 1,970,080 2,586,222
Less foreign taxes withheld (243,630) (38,935)
- -----------------------------------------------------------------------------------------------------------
Total Investment Income 1,916,397 2,969,524
- -----------------------------------------------------------------------------------------------------------
Expenses:
- -----------------------------------------------------------------------------------------------------------
Management Fee (Note 3) 1,430,591 1,468,801
- -----------------------------------------------------------------------------------------------------------
Total Expenses 1,430,591 1,468,801
- -----------------------------------------------------------------------------------------------------------
Net Investment Income 485,806 1,500,723
- -----------------------------------------------------------------------------------------------------------
Realized and Unrealized Gains (Losses) on Investments:
Net realized gains from security transactions 5,034,699 14,218,555
Net change in net unrealized appreciation (depreciation)
of investments and foreign currency transactions 5,827,351 (1,663,068)
- -----------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gains
(Losses) on Investments 10,862,050 12,555,487
- -----------------------------------------------------------------------------------------------------------
Net Increase in Net Assets
from Operations $11,347,856 $14,056,210
===========================================================================================================
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Bartlett Bartlett
Value International Fund Basic Value Fund
Year Year Year Year
Ended Ended Ended Ended
3/31/97 3/31/96 3/31/97 3/31/96
- -------------------------------------------------------------------------------------------------------------
<S> <C>
From Operations:
- -------------------------------------------------------------------------------------------------------------
Net investment income $ 485,806 $ 705,670 $ 1,500,723 $ 2,085,006
Net realized gains from
security transactions 5,034,699 5,091,672 14,218,555 7,904,641
Net change in net unrealized
appreciation (depreciation)
of investments 5,827,351 1,971,930 (1,663,068) 14,980,193
- -------------------------------------------------------------------------------------------------------------
Net increase in net assets
from operations 11,347,856 7,769,272 14,056,210 24,969,840
- -------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:
- -------------------------------------------------------------------------------------------------------------
From net investment income (485,806) (709,685) (1,780,551) (1,617,770)
In excess of net investment income (47,035) (56,680) -- --
From net realized gains from
security transactions (4,402,999) (2,033,031) (8,971,516) (5,714,691)
- -------------------------------------------------------------------------------------------------------------
Decrease in net assets from
distributions to shareholders (4,935,840) (2,799,396) (10,752,067) (7,332,461)
- -------------------------------------------------------------------------------------------------------------
From Fund Share Transactions (Note 4):
- -------------------------------------------------------------------------------------------------------------
Proceeds from shares sold 37,234,561 24,745,866 38,456,739 111,024,402
Net asset value of shares issued
in reinvestment of shareholder
distributions 3,770,092 2,116,443 10,364,400 7,149,025
Payment for shares redeemed (35,483,885) (17,455,294) (58,553,595) (112,895,339)
- -------------------------------------------------------------------------------------------------------------
Net increase (decrease) from Fund
share transactions 5,520,768 9,407,015 (9,732,456) 5,278,088
- -------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets 11,932,784 14,376,891 (6,428,313) 22,915,467
Net Assets:
Beginning of year 72,040,604 57,663,713 125,636,385 102,720,918
- -------------------------------------------------------------------------------------------------------------
End of year $ 83,973,388 $ 72,040,604 $119,208,072 $ 125,636,385
=============================================================================================================
Accumulated under distributed
net investment income $ -- $ -- $ 209,571 $ 489,399
=============================================================================================================
</TABLE>
See accompanying notes to financial statements.
14
<PAGE>
FINANCIAL HIGHLIGHTS
Bartlett Value International Fund
For a Share Outstanding Throughout Each Year Ended March 31,
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
===========================================================================================================================
<S> <C>
Net Asset Value, Beginning of Year $12.59 $11.64 $12.46 $10.08 $9.93
- ---------------------------------------------------------------------------------------------------------------------------
Income From Investment Operations:
Net Investment Income .08 .13 .09 .07 .12
Net Realized and Unrealized Gains
(Losses) on Securities 1.81 1.33 (.21) 2.38 .15
- ---------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations 1.89 1.46 (.12) 2.45 .27
- ---------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Dividends From Net Investment
Income (.08) (.13) (.09) (.07) (.10)
In Excess of Net Investment Income (.01) (.01) -- -- --
Distributions From Realized Gains (.75) (.37) (.61) -- (.02)
- ---------------------------------------------------------------------------------------------------------------------------
Total Distributions (.84) (.51) (.70) (.07) (.12)
- ---------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $13.64 $12.59 $11.64 $12.46 $10.08
===========================================================================================================================
Total Return 15.45% 12.76% (1.18%) 24.42% 2.71%
===========================================================================================================================
Ratios / Supplemental Data:
- ---------------------------
Net Assets, End of Year (000's) $83,973 $72,041 $57,664 $49,607 $29,572
Ratio of Net Expenses to Average
Net Assets (a) 1.81% 1.83% 1.83% 1.88% 2.00%
Ratio of Net Investment Income
to Average Net Assets (a) .62% 1.06% .80% .55% 1.13%
Portfolio Turnover Rate 31% 38% 24% 19% 19%
Average commission rate paid (b) $.0296 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Bartlett Basic Value Fund
===========================================================================================================================
Net Asset Value, Beginning of Year $17.94 $15.39 $14.89 $14.76 $13.47
- ---------------------------------------------------------------------------------------------------------------------------
Income From Investment Operations:
Net Investment Income .22 .30 .27 .22 .30
Net Realized and Unrealized Gains
on Securities 1.82 3.32 1.53 .28 1.57
- ---------------------------------------------------------------------------------------------------------------------------
Total From Investment Operations 2.04 3.62 1.80 .50 1.87
- ---------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Dividends From Net Investment
Income (.26) (.24) (.27) (.23) (.30)
Distributions From Realized Gains (1.39) (.83) (1.03) (.14) (.28)
- ---------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.65) (1.07) (1.30) (.37) (.58)
- ---------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Year $18.33 $17.94 $15.39 $14.89 $14.76
===========================================================================================================================
Total Return 11.30% 24.05% 12.67% 3.42% 14.22%
===========================================================================================================================
Ratios / Supplemental Data:
- ---------------------------
Net Assets, End of Year (000's) $119,208 $125,636 $102,721 $94,289 $103,507
Ratio of Expenses to Average
Net Assets 1.16% 1.17% 1.20% 1.20% 1.21%
Ratio of Net Investment Income
to Average Net Assets 1.18% 1.79% 1.81% 1.48% 2.14%
Portfolio Turnover Rate 23% 25% 26% 33% 43%
Average commission rate paid (b) $.0655 -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The Advisor has periodically absorbed expenses of the Bartlett Value
International Fund through management fee waivers. If the Advisor had not waived
any fees, the ratio of net expenses to average net assets would have been 1.94%
and the ratio of net investment income to average net assets would have been
.49% for the period ended March 31, 1994.
(b) Pursuant to SECregulations effective for fiscal years beginning after
September 1, 1995, this is the average commission rate paid on securities
purchased and sold by the fund.
See accompanying notes to financial statements.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
As of March 31, 1997
1 Significant Accounting Policies
Bartlett Capital Trust is registered under the Investment Company Act of
1940, as amended, as a no-load, diversified, open-end management investment
company. Bartlett Capital Trust was established as a Massachusetts business
trust under a Declaration of Trust dated October 31, 1982. The Declaration
of Trust, as amended, permits the Trustees to issue an unlimited number of
shares of the Bartlett Value International Fund and Bartlett Basic Value Fund.
The following is a summary of the investment objectives followed by the
Funds:
Bartlett Value International Fund seeks capital appreciation by investing
primarily in foreign equity securities believed by its Advisor, Bartlett & Co.,
to be attractively priced relative to their intrinsic value. Income is a
secondary consideration.
Bartlett Basic Value Fund seeks capital appreciation by investing primarily
in common stocks or securities convertible into common stocks that are believed
by its Advisor, Bartlett & Co., to be attractively priced relative to their
intrinsic value. Income is a secondary consideration.
The following is a summary of the significant accounting policies of
Bartlett Capital Trust:
Security Valuation - Equity securities, options and commodities listed on
exchanges are valued at the last sale price as of the close of business on the
day the securities are being valued. Listed securities not traded on a
particular day and securities traded in the over-the-counter market are valued
at the mean between closing bid and ask prices quoted by brokers or dealers that
make markets in the securities. Portfolio securities which are traded both in
the over-the-counter market and on an exchange are valued according to the
broadest and most representative market.
The values of international securities are generally based upon market
quotations converted to U.S. dollar equivalents at 4:00 p.m. Eastern Standard
time which, depending upon the exchange or market, may be last sale price, last
bid price, or the mean between the last bid and asked prices as of, in each
case, the close of the appropriate exchange or another designated time. Trading
in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed at various times before the close
of business on each day the New York Stock Exchange (NYSE) is open. Trading of
these securities may not take place on every NYSE business day. In addition,
trading may take place in various foreign markets on Saturdays or on other days
when the NYSE is not open and on which the Fund's share price is not calculated.
Therefore, the value of Bartlett Value International Fund's portfolio may be
significantly affected on days when shares may not be purchased or redeemed.
Repurchase agreements are valued at cost which approximates market. It is
the policy of each of the Funds that its custodian take possession of the
underlying collateral securities. Collateral is marked-to-market daily to ensure
that the market value of the underlying assets equals or exceeds the value of
the seller's repurchase obligation. In the event of a bankruptcy or other
default of the seller of a repurchase agreement, a Fund could experience both
delays in liquidating the underlying securities and losses. The loss would equal
the amount by which the carrying value of the repurchase agreement(s) exceeded
the proceeds received in liquidation of the underlying collateral securities. To
minimize the possibility of loss, the Funds enter into repurchase agreements
only with institutions deemed to be creditworthy by the Advisor, including banks
that serve as custodian for the Funds, banks having assets in excess of $1
billion or primary government securities dealers.
Foreign Currency Translation - The books and records of each Fund are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars on the following basis:
(i) market value of investment securities, other assets and liabilities--at
the daily rate of exchange as reported by the custodian at 12:00 p.m.
Eastern Standard time;
(ii) purchases and sales of investment securities, income and expenses--at
the rate of exchange prevailing on the respective dates of such
transactions.
Share Valuation - The net asset value per share is calculated daily by
dividing the total value of each Fund's investments and other assets, less
liabilities, by the total number of shares outstanding.
16
<PAGE>
Investment Income and Distributions to Shareholders - Interest income is
accrued as earned. Dividend income is recorded on the ex-dividend date.
Distributions to shareholders from net investment income are declared and paid
quarterly and are recorded on the ex-dividend date. Net realized capital gains,
if any, are distributed to shareholders at least once a year.
Security Transactions - Security transactions are accounted for on a trade
date basis, which is the date the order to buy or sell is executed. Securities
sold are valued on a specific identification basis.
Federal Income Taxes - It is each Fund's policy to comply with the special
provisions of the Internal Revenue Code available to regulated investment
companies. As provided therein, in any fiscal year in which a Fund so qualifies,
and distributes at least 90% of its taxable net income, the Fund (but not its
shareholders) will be relieved of federal income tax on the income distributed.
Accordingly, no provision for income taxes is made.
In order to avoid imposition of the excise tax created by the Tax Reform
Act of 1986, as amended by the Revenue Act of 1987, it is each Fund's intention
to declare as dividends in each calendar year at least 98% of its net investment
income (earned during the calendar year) and 98% of its net realized capital
gains (earned during the twelve months ended October 31 of the calendar year)
plus undistributed amounts from prior years.
The following amounts are based on cost for both financial reporting and
federal income tax purposes as of March 31, 1997:
Bartlett Bartlett
Value Basic
International Value
Fund Fund
================================================================================
Unrealized appreciation $14,613,744 $33,559,021
Unrealized depreciation (3,144,170) (2,067,502)
- --------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) $11,469,574 $31,491,519
================================================================================
Federal income tax cost of investments $72,378,075 $86,273,452
================================================================================
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires the Funds to make estimates
and assumptions that affect the reported amounts of assets and liabilites at the
date of the financial statements and the reported net changes in net assets from
operations during the reporting period.
2 Investment Transactions
Investment transactions (excluding short-term securities) are as follows for
the year ended March 31, 1997:
Bartlett Bartlett
Value Basic
International Value
Fund Fund
================================================================================
Purchases of investment securities $26,354,420 $26,615,207
================================================================================
Proceeds from sales and maturities
of investment securities $22,953,530 $38,786,658
================================================================================
3 Transactions with Affiliates and Related Parties
The officers of each of the Trusts are shareholders or employees of the
Advisor or Legg Mason Wood Walker, Incorporated (LMWW). LMWW is affiliated with
the Advisor through their common parent company, Legg Mason, Inc. The Advisor
became a wholly owned subsidiary of Legg Mason, Inc. in January 1996. Bartlett
Capital Trust's investments are managed by the Advisor under the terms of the
Management Agreement. Under the Management Agreement, the Advisor pays all of
the expenses of each Fund except brokerage, taxes, interest and extraordinary
expenses. As compensation for investment advisory services and agreement to pay
the above Fund expenses, each Fund pays the Advisor a fee computed and accrued
daily and paid monthly. The fee for Bartlett Basic Value Fund is computed at an
annual rate of 2% of the average daily net assets of Bartlett Basic Value Fund
up to and including $10,000,000, 1.50% of such assets from $10,000,000 up to and
including $30,000,000 and 1% of such assets in excess of $30,000,000. The fee
for Bartlett Value International Fund is computed at an annual rate of 2% of the
average daily net assets of Bartlett Value International Fund up to and
including $20,000,000, 1.75% of such assets from $20,000,000 up to and including
$200,000,000 and 1.25% of such assets in excess of $200,000,000.
States in which shares of each Fund are offered may impose an expense
limitation based upon net assets. The Management Agreement between Bartlett
Capital Trust and the Advisor allows for the accrual and payment of the
management fee that does not exceed the lowest of the applicable expense
limitations imposed.
17
<PAGE>
4 Fund Share Transactions
Proceeds and payments on shares of the Funds as shown in the Statements of
Changes in Net Assets are the result of the following share transactions:
Bartlett Value Bartlett Basic
International Fund Value Fund
Year Year Year Year
Ended Ended Ended Ended
3/31/97 3/31/96 3/31/97 3/31/96
================================================================================
Shares sold 2,833,243 2,030,782 2,065,947 6,663,901
Shares issued in
reinvestment of
distributions 292,770 173,445 557,595 424,930
- --------------------------------------------------------------------------------
3,126,013 2,204,227 2,623,542 7,088,831
Less shares
redeemed (2,692,355) (1,434,766) (3,123,012) (6,758,445)
- --------------------------------------------------------------------------------
Net increase
(decrease)
in shares
outstanding 433,658 769,461 (499,470) 330,386
- --------------------------------------------------------------------------------
18
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of the
Bartlett Capital Trust:
We have audited the accompanying statements of assets and liabilities of the
Bartlett Value International Fund and Bartlett Basic Value Fund of the Bartlett
Capital Trust (a Massachusetts business trust), including the portfolios of
investments, as of March 31, 1997, and the related statements of operations, the
statements of changes in net assets, and the financial highlights for the
periods indicated thereon. These financial statements and financial highlights
are the responsibility of the Trusts' management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 March
31, 1997, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Bartlett Value International Fund and Bartlett Basic Value Fund of the Bartlett
Capital Trust as of March 31, 1997, the results of their operations, the changes
in their net assets, and the financial highlights for the periods indicated
thereon in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Cincinnati, Ohio,
April 30, 1997
19
<PAGE>
TRUSTEES AND OFFICERS
================================================================================
Dale H. Rabiner, CFA Chairman of the Board, President and
Trustee of Bartlett Capital Trust
Lorrence T. Kellar Trustee
Vice President Real Estate
Kmart Corp.
Alan R. Schriber Trustee
President, ARS Broadcasting Corp.
William P. Sheehan Trustee
Member, State of Ohio
Employment Relations Board
Kathi D. Bair Secretary
R. Stuart Crickmer, CFA, CPA Vice President
Brian M. Eakes, CPA Assistant Secretary
Marie K. Karpinski, CPA Treasurer and Vice President
Madelynn M. Matlock, CFA Vice President
James A. Miller, CFA Vice President
Donna M. Prieshoff Vice President
Thomas A. Steele, CPA Assistant Treasurer and Assistant Secretary
Woodrow H. Uible, CFA Vice President
================================================================================
Investment Advisor Bartlett & Co.
Cincinnati, Ohio
Custodian State Street Bank & Trust Company
Boston, Massachusetts
Transfer Agent Boston Financial Data Services
Boston, Massachusetts
Auditors Arthur Andersen LLP
Cincinnati, Ohio
================================================================================
Bartlett & Co.
- --------------------------------------------------------------------------------
REGISTERED INVESTMENT ADVISORS
- --------------------------------------------------------------------------------
36 East Fourth Street, Cincinnati, OH 45202-3896 (bullet) 513-345-6212
(bullet) 800-800-3609 (bullet) FAX 513-621-6462
