As filed with the Securities and Exchange Commission on May 15, 1997.
1933 Act File No. 2-80648
1940 Act File No. 811-03613
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
------
Post-Effective Amendment No. 23 [X]
------
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 24 [X]
------
BARTLETT CAPITAL TRUST
(formerly Midwest Group Capital Trust)
(Exact Name of Registrant as Specified in Charter)
36 East Fourth Street, Cincinnati, Ohio 45202
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (513) 621-4612
Copies to:
MARIE K. KARPINSKI ARTHUR J. BROWN, ESQ.
7 East Redwood Street Kirkpatrick & Lockhart LLP
Baltimore, Maryland 21202 1800 Massachusetts Ave., N.W.
(Name and Address of Second Floor
Agent for Service) Washington, D.C. 20036
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to Rule 485(b)
[ ] on __________, 1997 pursuant to Rule 485(b)
[ ] 60 days after filing pursuant to Rule 485(a)(i)
[ ] on __________, 1997 pursuant to Rule 485(a)(i)
[X] 75 days after filing pursuant to Rule 485(a)(ii)
[ ] on __________, 1997 pursuant to Rule 485(a)(ii)
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has filed a declaration pursuant to Rule 24f-2 under the Investment
Company Act of 1940 and filed the notice required by such Rule for its most
recent fiscal year on May 30, 1996.
<PAGE>
Bartlett Capital Trust
Contents of Registration Statement
This registration statement consists of the following papers and documents.
Cover Sheet
Table of Contents
Cross Reference Sheets
Bartlett Basic Value Fund
Bartlett Value International Fund
Bartlett Europe Fund
Class A and Class C Shares
- --------------------------
Part A - Prospectus
Bartlett Basic Value Fund
Bartlett Value International Fund
Bartlett Europe Fund
Class Y Shares
- --------------
Part A - Prospectus
Bartlett Basic Value Fund
Bartlett Value International Fund
Bartlett Europe Fund
Class A, Class C and Class Y Shares
- -----------------------------------
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
<PAGE>
Bartlett Capital Trust
Class A and Class C Shares Prospectus
Form N-1A Cross Reference Sheet
Part A. Item No. Prospectus Caption
- ---------------- ------------------
1 Cover Page
2 Prospectus Highlights; Fund Expenses
3 Investment Performance; Financial Highlights
4 Description of the Trust; Investment Objectives and Policies;
Investment Techniques and Risk Considerations
5 Description of the Trust; Financial Highlights; Fund Expenses
5a (In Registrant's Annual Report)
6 Prospectus Highlights; Cover Page;
Dividends and Distributions;
Taxes
7 Purchase of Shares; Calculation of Share Price
8 Redemption of Shares
9 None
<PAGE>
Bartlett Capital Trust
Class Y Shares Prospectus
Form N-1A Cross Reference Sheet
Part A. Item No. Prospectus Caption
- ---------------- ------------------
1 Cover Page
2 Prospectus Highlights; Fund Expenses
3 Investment Performance; Financial Highlights
4 Description of the Trust; Investment Objectives and Policies;
Investment Techniques and Risk Considerations
5 Description of the Trust; Financial Highlights; Fund Expenses
5a (In Registrant's Annual Report)
6 Prospectus Highlights; Cover Page;
Dividends and Distributions;
Taxes
7 Purchase of Shares; Calculation of Share Price
8 Redemption of Shares
9 None
<PAGE>
Bartlett Capital Trust
Class A, Class C and Class Y Shares
Form N-1A Cross Reference Sheet
Statement of Additional
Part B. Item No. Information Caption
- ---------------- -------------------
10 Cover Page
11 Table of Contents
12 Description of the Trust
13 Investment Limitations; Additional Information about Fund
Investments; Portfolio Transaction and Brokerage
14 The Funds' Investment Adviser and Sub-Adviser;
Trustees and Officers
15 Description of the Trust
16 The Funds' Investment Adviser and Sub-Adviser; Custodian;
Accountants; Transfer Agent; The Trust's Distributor
17 Portfolio Transactions and Brokerage
18 Description of the Trust
19 Calculation of Share Price; Additional Purchase and
Redemption Information
20 Additional Tax Information; Tax-Deferred Retirement Plans
21 Portfolio Transactions and Brokerage; The Trust's Distributor
22 Investment Performance
23 Financial Statements
<PAGE>
BARTLETT CAPITAL TRUST
PROSPECTUS
July [ ], 1997
Table of Contents
Prospectus Highlights Redemption of Shares
Fund Expenses Calculation of Share Price
Financial Highlights Dividends and Other Distributions
Investment Objectives and Policies Taxes
Investment Techniques and Risk Investment Performance
Considerations Management of the Trust
Purchase of Shares Description of the Trust
Bartlett Capital Trust ("Trust") is an open-end management investment
company which currently offers three series: Bartlett Value International Fund,
Bartlett Basic Value Fund and Bartlett Europe Fund (each separately referred to
as a "Fund" and collectively referred to as the "Funds").
BARTLETT VALUE INTERNATIONAL FUND ("Value International") seeks capital
appreciation by investing primarily in foreign equity securities believed by its
adviser, Bartlett & Co. ("Bartlett" or "Adviser"), to be attractively priced
relative to their intrinsic value. Income is a secondary consideration.
BARTLETT BASIC VALUE FUND ("Basic Value") seeks capital appreciation by
investing primarily in common stocks or securities convertible into common
stocks that are believed by the Adviser to be attractively priced relative to
their intrinsic value. Income is a secondary consideration.
BARTLETT EUROPE FUND ("Europe Fund") seeks long-term growth of capital by
investing primarily in equity securities of European issuers which Lombard Odier
International Portfolio Management Limited ("Lombard Odier"), investment
sub-adviser to Europe Fund, believes are undervalued and thus may offer
above-average potential for capital appreciation.
This Prospectus sets forth concisely the information about the Funds
that you ought to know before investing. Please read and retain this Prospectus
for future reference. A Statement of Additional Information for the Funds dated
July [ ], 1997 has been filed with the Securities and Exchange Commission
("SEC") and, as amended or supplemented from time to time, is incorporated
herein by reference. The Statement of Additional Information is available
without charge upon request by calling BFP Financial Partners, Inc. ("BFP"), the
Funds' distributor, at 1-800-822-5544.
INVESTORS SHOULD BE COGNIZANT OF THE UNIQUE RISKS OF INTERNATIONAL
INVESTING, INCLUDING EXPOSURE TO CURRENCY FLUCTUATIONS. BECAUSE OF THESE RISKS,
AN INVESTMENT IN VALUE INTERNATIONAL OR EUROPE FUND SHOULD NOT BE CONSIDERED A
COMPLETE INVESTMENT PROGRAM.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK OR OTHER DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY
THE FDIC, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
For further information, call (800) 822-5544 or contact your financial advisor.
<PAGE>
PROSPECTUS HIGHLIGHTS
Bartlett Value International Fund
Bartlett Basic Value Fund
Bartlett Europe Fund
The following summary is qualified in its entirety by the more detailed
information appearing in the body of this Prospectus and in the Statement of
Additional Information.
Investment Objectives
and Policies: Value International is a diversified,
professionally managed portfolio seeking to
provide capital appreciation. In attempting
to achieve the Fund's objective, the Fund
normally invests at least 65% of its total
assets in securities of non-U.S. issuers. At
least three different foreign countries will
normally be represented in the Fund's
portfolio.
Basic Value is a diversified, professionally
managed portfolio seeking to provide capital
appreciation. In attempting to achieve the
Fund's objective, the Fund invests primarily
in common stocks or securities convertible
into common stocks. The Fund seeks to
diversify its investments across industry
sectors.
Europe Fund is a diversified, professionally
managed portfolio seeking to provide
long-term growth of capital. In attempting
to achieve the Fund's objective, the Fund
normally invests at least 65% of its assets
in equity securities, including common
stock, preferred stock, convertible
securities and warrants, of European
issuers.
Investment Adviser: Bartlett & Co. has provided investment
advice to individuals, pension and
profit-sharing plans and trust accounts
since 1898.
Investment Sub-Adviser to
Europe Fund: Lombard Odier International Portfolio
Management Limited ("Lombard Odier"), a
subsidiary of one of the oldest and largest
private banks in Switzerland, specializes in
advising and managing investment portfolios
for institutional clients.
Purchase Plans: Investors may select Class A or Class C
Shares, each subject to different expenses
and a different sales charge structure.
Class A Shares: Offered at net asset value plus any
applicable sales charge (maximum is 4.75% of
public offering price) and subject to
service fees at an annualized rate of 0.25%
of the average daily net assets of each
Fund's Class A Shares. A contingent deferred
sales charge may be imposed under limited
circumstances.
Class C Shares: Offered at net asset value and subject to
service and distribution fees at an
annualized rate of 1.00% of the average
daily net assets of each Fund's Class C
Shares.
Shares Available Through: Many brokerage firms nationwide, or directly
through the Funds' distributor. See
"Purchase of Shares," page [ ].
Initial Purchase: $1,000 minimum, generally.
1
<PAGE>
Subsequent Purchases: $100 minimum, generally.
Exchange Privilege: Exchanges may be made for shares of the
corresponding class of shares of any other
Bartlett mutual fund and for shares of Legg
Mason Cash Reserve Trust, a money
market mutual fund. See "Exchange
Privilege," page [ ].
Redemption Fee: A temporary 2% redemption fee will apply
to redemptions or exchanges by all
Europe Fund shareholders as of July [ ],
1997 (effective date of the reorganization
of Worldwide Value Fund, Inc. into Europe
Fund) who redeem or exchange their shares
within six months.
Dividends and Other Distributions: Dividends from net investment income
declared and paid quarterly by Value
International and Basic Value and annually
by Europe Fund. Distributions of gains
declared and paid annually for each Fund.
See "Dividends and Other Distributions,"
page [ ]. All dividends and other
distributions are automatically reinvested
in Fund shares unless cash payments are
requested.
Risk Factors: There can be no assurance that any Fund will
achieve its investment objective. Each
Fund's net asset value will fluctuate,
reflecting fluctuations in the value of its
securities. The value of the equity and
other instruments held by the Funds are
subject to market risk. The market risk of
equity securities is generally perceived to
be higher than that of any other securities
of an issuer. The value of debt instruments
generally fluctuates inversely with
movements in market interest rates. The
values of longer-term debt securities
generally fluctuate more than those of
shorter-term securities.
Changes in economic conditions in, or
governmental policies of, foreign nations
may have a significant impact on the
performance of Value International and
Europe Fund. Foreign investment involves a
possibility of expropriation,
nationalization, confiscatory taxation,
limitations on the use or removal of funds
or other assets of a Fund, the withholding
of tax on interest or dividends, and
restrictions on the ownership of securities
by foreign entities such as the Funds.
Fluctuations in the value of foreign
currencies relative to the U.S. dollar will
affect the value of Fund holdings
denominated in such currencies.
Each Fund's participation in hedging and
option strategies also involves certain
investment risks and transaction costs. None
of the Funds should be considered a complete
investment program. See "Investment
Objectives and Policies" and "Investment
Techniques and Risk Considerations."
2
<PAGE>
FUND EXPENSES
The purpose of the following tables is to assist an investor in
understanding the various costs and expenses that an investor in Class A or
Class C shares of a Fund will bear directly or indirectly. For Value
International and Basic Value Class A shares, the expenses set forth in the
table below are based on average net assets and annual Fund operating expenses
relating to Value International and Basic Value shares, respectively, for the
year ended March 31, 1997, but have been restated to reflect current management
fees and estimated other expenses. Those shares were redesignated as Class A
shares on July [ ], 1997. For Value International and Basic Value Class C
shares, the expenses set forth in the table below have been similarly restated,
except that Fund expenses reflect different 12b-1 fees. For Class A and Class C
shares of Europe Fund, other expenses are based on estimates for the current
fiscal period. Fees are adjusted for current expense limits and fee waiver
levels for all three Funds.
Because each Fund pays a 12b-1 fee with respect to its Class A and
Class C Shares, long-term shareholders may pay more in distribution expenses
than the economic equivalent of the maximum front-end sales charge permitted by
the National Association of Securities Dealers, Inc. For further information
concerning Fund expenses, see "Operation of the Trust."
Class A Shares
<TABLE>
<CAPTION>
Value Basic Europe
Shareholder Transaction Expenses: International Value Fund
=======================================================================================================================
<S> <C>
Maximum sales charge on purchases (as a % of
offering price)(A): 4.75% 4.75% 4.75%
Deferred sales charges(B): None None None
Redemption or exchange fees: None None 2.00%(C)
Annual Fund Operating Expenses(D, E)
(as a % of average net assets):
- --------------------------------------------------------- ------------------- ------------------- -------------------
Management fees (after fee waivers) 1.20% 0.72% 0.69%
12b-1 fees 0.25% 0.25% 0.25%
Other expenses 0.35% 0.18% 0.81%
- --------------------------------------------------------- ------------------- ------------------- -------------------
Total operating expenses (after fee waivers) 1.80% 1.15% 1.75%
=======================================================================================================================
</TABLE>
(A) Sales charge waivers and reduced sales charge purchase plans are
available for Class A Shares. See "Purchase of Shares."
(B) A contingent deferred sales charge of 1% of the net asset value of
Class A shares may be imposed on redemptions of shares purchased
pursuant to the front-end sales charge waiver on purchases of $1
million or more of Class A shares made within one year of the purchase
date. See "Purchase of Shares."
(C) A temporary 2% redemption fee will apply to redemptions or exchanges by
all Europe Fund shareholders as of July [ ], 1997 (effective date of
the reorganization of Worldwide Value Fund, Inc. into Europe Fund) who
redeem or exchange their shares within six months. This fee is paid
directly to Europe Fund, and not to Bartlett, BFP or Lombard Odier. See
"Redemption of Shares."
(D) Pursuant to voluntary expense limitations, the Adviser has agreed to
waive fees to the extent that Value International's Class A expenses
exceed 1.80%, Basic Value's Class A expenses exceed 1.15%, and Europe
Fund's Class A expenses exceed 1.75% of their respective average daily
net assets through July 31, 1998. In the absence of such waivers, the
expected management fee, 12b-1 fee, other expenses and total operating
expenses of Value International would be 1.25 %, 0.25%, 0.35% and
1.85%; of Basic Value would be 0.75%, 0.25%, 0.18% and 1.18%; and of
Europe Fund would be 1.00%, 0.25%, 0.81% and 2.06% of average daily net
assets, respectively.
(E) The expense information has been restated to reflect current fees and
expenses and a changed management fee.
3
<PAGE>
Example
The following example illustrates the expenses that you would pay on a
$1,000 investment in Class A Shares over various time periods assuming (1) a 5%
annual rate of return and (2) full redemption at the end of each time period.
With the limited exceptions noted above, the Funds charge no redemption fees of
any kind.
1 Year 3 Years 5 Years 10 Years
================================================================================
Value International $65 $101 $140 $249
Basic Value $59 $82 $108 $181
Europe Fund $64 $100 $138 $244
This example assumes that the maximum initial sales charge is deducted
at the time of purchase and that there is no deduction of the 1% contingent
deferred sales charge imposed on redemptions of shares purchased pursuant to the
front-end sales charge waiver of purchases of $1 million or more made within one
year of the purchase date. THE ASSUMED 5% ANNUAL RETURN IS NOT A PREDICTION OF,
AND DOES NOT REPRESENT, THE PROJECTED OR ACTUAL PERFORMANCE OF CLASS A SHARES OF
THE FUNDS. THE ABOVE TABLES AND EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN. The actual expenses attributable to Class A Shares will
depend upon, among other things, the level of average net assets, the levels of
sales and redemptions of shares, the extent to which Bartlett or Lombard Odier
waive their fees and the extent to which Class A Shares incur variable expenses,
such as transfer agency costs.
Class C Shares
<TABLE>
<CAPTION>
Value Basic Europe
Shareholder Transaction Expenses: International Value Fund
==============================================================================================================
<S> <C>
Maximum sales charge on purchases: None None None
Deferred sales charges: None None None
Redemption or exchange fees: None None None
Annual Fund Operating Expenses(A, B)
(as a % of average net assets):
- ------------------------------------------------ ------------------- ------------------- -------------------
Management fees (after fee waivers) 1.20% 0.72% 0.69%
12b-1 fees 1.00% 1.00% 1.00%
Other expenses 0.35% 0.18% 0.81%
- ------------------------------------------------ ------------------- ------------------- -------------------
Total operating expenses (after fee waivers) 2.55% 1.90% 2.50%
==============================================================================================================
</TABLE>
(A) Pursuant to voluntary expense limitations, the Adviser has agreed to
waive fees to the extent that Value International's Class C expenses
exceed 2.55%, Basic Value's Class C expenses exceed 1.90%, and Europe
Fund's Class C expenses exceed 2.50%, of their respective average daily
net assets through July 31, 1998. In the absence of such waivers, the
expected management fee, 12b-1 fee, other expenses and total operating
expenses of Value International would be 1.25 %, 1.00%, 0.35% and
2.60%; of Basic Value would be 0.75%, 1.00%, 0.18% and 1.93%; and of
Europe Fund would be 1.00%, 1.00%, 0.81% and 2.81% of average daily net
assets, respectively.
(B) The expense information has been restated to reflect current fees and
expenses and a changed management fee.
4
<PAGE>
Example
The following example illustrates the expenses that you would pay on a
$1,000 investment in Class C Shares over various time periods assuming (1) a 5%
annual rate of return and (2) full redemption at the end of each time period.
The Funds charge no redemption fees of any kind with respect to Class C shares.
1 Year 3 Years 5 Years 10 Years
================================================================================
Value International $26 $79 $136 $289
Basic Value $19 $60 $103 $222
Europe Fund $25 $78 $133 $284
THE ASSUMED 5% ANNUAL RETURN IS NOT A PREDICTION OF, AND DOES NOT
REPRESENT, THE PROJECTED OR ACTUAL PERFORMANCE OF CLASS C SHARES OF THE FUNDS.
THE ABOVE TABLES AND EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
actual expenses attributable to Class C Shares will depend upon, among other
things, the level of average net assets, the levels of sales and redemptions of
shares, the extent to which Bartlett or Lombard Odier waive their fees and
reimburse all or a portion of each Fund's expenses and the extent to which Class
C Shares incur variable expenses, such as transfer agency costs.
FINANCIAL HIGHLIGHTS
Each Fund offers three classes of shares. Prior to July [ ], 1997,
Value International and Basic Value each offered only a single class of shares,
which have been redesignated as Class A Shares. The financial information in the
tables that follow with respect to Value International and Basic Value is for
their respective shares that have been redesignated as Class A shares and has
been audited by Arthur Andersen LLP, independent accountants. The financial
statements for Value International and Basic Value for the year ended March 31,
1997 and the report of Arthur Andersen LLP thereon are included in the combined
annual report to shareholders for the Bartlett Mutual Funds and are incorporated
by reference into the Statement of Additional Information. The annual report for
the Bartlett Mutual Funds is available to shareholders without charge by calling
BFP at 1-800-822-5544. No information is presented for the Funds' Class C shares
because no such shares were outstanding prior to July [ ], 1997.
The financial information in the table below with respect to Worldwide
Value Fund, Inc. (Europe Fund's predecessor)has been audited by Coopers &
Lybrand L.L.P., independent accountants. Prior to July [ ], 1997, Worldwide
Value Fund, Inc. was a closed-end registered investment company whose single
class of shares traded on the New York Stock Exchange. On July [ ], 1997, Europe
Fund, which had no previous operating history, acquired the assets of Worldwide
Value Fund, Inc.
Value International
<TABLE>
<CAPTION>
==================================================================================================
Years Ended March 31, 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period $11.64 $12.46 $10.08 $9.93
- --------------------------------------------------------------------------------------------------
Income from Investment Operations:
- --------------------------------------------------------------------------------------------------
Net Investment Income .13 .09 .07 .12
- --------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gains
(Losses) on Securities 1.33 (.21) 2.38 .15
- --------------------------------------------------------------------------------------------------
Total from Investment Operations 1.46 (.12) 2.45 .27
- --------------------------------------------------------------------------------------------------
Less Distributions:
==================================================================================================
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================================
Years Ended March 31, 1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------
<S> <C>
Dividends from Net Investment
Income (.13) (.09) (.07) (.10)
- -----------------------------------------------------------------------------------------------------------
In Excess of Net Investment
Income (.01) -- -- --
- -----------------------------------------------------------------------------------------------------------
Distributions from Realized Gains (.37) (.61) -- (.02)
- -----------------------------------------------------------------------------------------------------------
Total Distributions (.51) (.70) (.07) (.12)
- -----------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $12.59 $11.64 $12.46 $10.08
- -----------------------------------------------------------------------------------------------------------
Total Return 12.76% (1.18%) 24.42% 2.71%
- -----------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
- -----------------------------------------------------------------------------------------------------------
Net Assets, End of Period $72,041 $57,664 $49,607 $29,572
- -----------------------------------------------------------------------------------------------------------
Ratios Net of Fees Waived by Adviser(B):
- -----------------------------------------------------------------------------------------------------------
Ratio of Net Expenses to Average Net
Expenses 1.83% 1.83% 1.88% 2.00%
- -----------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to
Average Net Assets 1.06% .80% .55% 1.13%
- -----------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 38% 24% 19% 19%
===========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
=======================================================================================
Years Ended March 31, 1992 1991 1990(A)
- ---------------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period $9.09 $9.79 $10.00
- ---------------------------------------------------------------------------------------
Income from Investment Operations:
- ---------------------------------------------------------------------------------------
Net Investment Income .18 .30 .08
- ---------------------------------------------------------------------------------------
Net Realized and Unrealized Gains
(Losses) on Securities .88 (.70) (.05)
- ---------------------------------------------------------------------------------------
Total from Investment Operations 1.06 (.40) .03
- ---------------------------------------------------------------------------------------
Less Distributions:
- ---------------------------------------------------------------------------------------
Dividends from Net Investment
Income (.22) (.28) (.08)
- ---------------------------------------------------------------------------------------
In Excess of Net Investment
Income -- -- --
- ---------------------------------------------------------------------------------------
Distributions From Realized Gains -- (.02) (.16)
- ---------------------------------------------------------------------------------------
Total Distributions (.22) (.30) (.24)
- ---------------------------------------------------------------------------------------
Net Asset Value, End of Period $9.93 $9.09 $9.79
- ---------------------------------------------------------------------------------------
Total Return 11.88% (3.84%) 0.59%(C)
- ---------------------------------------------------------------------------------------
Ratios/Supplemental Data:
- ---------------------------------------------------------------------------------------
Net Assets, End of Period $22,042 $23,661 $20,557
- ---------------------------------------------------------------------------------------
Ratios Net of Fees Waived by Adviser(B):
- ---------------------------------------------------------------------------------------
Ratio of Net Expenses to Average Net
Expenses 2.00% 1.99% 1.41%(C)
- ---------------------------------------------------------------------------------------
Ratio of Net Investment Income to
Average Net Assets 1.79% 3.31% 1.80%(C)
=======================================================================================
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
=======================================================================================
Years Ended March 31, 1992 1991 1990(A)
- ---------------------------------------------------------------------------------------
<S> <C>
Portfolio Turnover Rate 27% 39% 155%(C)
=======================================================================================
(A) From the date of the public offering of Value International (October 6,
1989) through March 31, 1990.
(B) The Adviser has periodically absorbed expenses of the Fund through
management fee waivers. If the Adviser had not waived any fees, the ratios
of net expenses to average net assets would have been 1.94% and 2.14%, and
the ratios of net investment income to average net assets would have been
.49% and 1.07%, for the years ended March 31, 1994 and 1990, respectively.
(C) Annualized.
Basic Value
</TABLE>
<TABLE>
<CAPTION>
=======================================================================================================================
Years Ended March 31, 1997 1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Year $15.39 $14.89 $14.76 $13.47 $12.60
- -----------------------------------------------------------------------------------------------------------------------
Income from Investment Operations:
- -----------------------------------------------------------------------------------------------------------------------
Net Investment Income .30 .27 .22 .30 .36
- -----------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gains
(Losses) on Securities 3.32 1.53 .28 1.57 .87
- -----------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 3.62 1.80 .50 1.87 1.23
- -----------------------------------------------------------------------------------------------------------------------
Less Distributions:
- -----------------------------------------------------------------------------------------------------------------------
Dividends from Net Investment
Income (.24) (.27) (.23) (.30) (.36)
- -----------------------------------------------------------------------------------------------------------------------
Distributions from Realized Gains (.83) (1.03) (.14) (.28) --
- -----------------------------------------------------------------------------------------------------------------------
Total Distributions (1.07) (1.30) (.37) (.58) (.36)
- -----------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $17.94 $15.39 $14.89 $14.76 $13.47
- -----------------------------------------------------------------------------------------------------------------------
Total Return 24.05% 12.67% 3.42% 14.22% 9.91%
- -----------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
- -----------------------------------------------------------------------------------------------------------------------
Net Assets, End of Year $125,636 $102,721 $94,289 $103,507 $88,536
- -----------------------------------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net
Expenses 1.17% 1.20% 1.20% 1.21% 1.22%
- -----------------------------------------------------------------------------------------------------------------------
Ratio of Net Investment Income to
Average Net Assets 1.79% 1.81% 1.48% 2.14% 2.77%
- -----------------------------------------------------------------------------------------------------------------------
Portfolio Turnover Rate 25% 26% 33% 43% 49%
=======================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
==========================================================================================
Years Ended March 31, 1991 1990 1989 1988
- ------------------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Year $12.34 $12.56 $12.44 $12.96
- ------------------------------------------------------------------------------------------
Income from Investment Operations:
- ------------------------------------------------------------------------------------------
Net Investment Income .46 .62 .57 .35
- ------------------------------------------------------------------------------------------
Net Realized and Unrealized Gains
(Losses) on Securities .26 .21 1.20 (.51)
- ------------------------------------------------------------------------------------------
Total from Investment Operations .72 .83 1.77 (.16)
- ------------------------------------------------------------------------------------------
Less Distributions:
==========================================================================================
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================
Years Ended March 31, 1991 1990 1989 1988
- -------------------------------------------------------------------------------------------
<S> <C>
Dividends from Net Investment
Income (.46) (.62) (.56) (.36)
- -------------------------------------------------------------------------------------------
Distributions from Realized Gains -- (.43) (1.09) --
- -------------------------------------------------------------------------------------------
Total Distributions (.46) (1.05) (1.65) (.36)
- -------------------------------------------------------------------------------------------
Net Asset Value, End of Year $12.60 $12.34 $12.56 $12.44
- -------------------------------------------------------------------------------------------
Total Return 6.29% 6.49% 15.61% (1.24%)
- -------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
- -------------------------------------------------------------------------------------------
Net Assets, End of Period $96,165 $105,842 $100,333 $80,583
- -------------------------------------------------------------------------------------------
Ratio of Expenses to Average Net
Expenses 1.21% 1.19% 1.23% 1.57%
- -------------------------------------------------------------------------------------------
Ratio of Net Investment Income to
Average Net Assets 3.87% 4.81% 4.57% 2.75%
- -------------------------------------------------------------------------------------------
Portfolio Turnover Rate 92% 77% 99% 97%
- -------------------------------------------------------------------------------------------
</TABLE>
Worldwide Value (For the entire period shown, the Fund operated as a closed-end
investment company with its shares traded on the New York Stock Exchange.)
<TABLE>
<CAPTION>
===================================================================================================================
Years Ended December 31, 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $21.13 $17.68 $18.46 $14.29 $15.44
- -------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .02 .01 (.03) .14 .08
- -------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments, options and currency
transactions 6.34 3.50 (.75) 4.13 (1.19)
- -------------------------------------------------------------------------------------------------------------------
Total from investment operations 6.36 3.51 (.78) 4.27 (1.11)
- -------------------------------------------------------------------------------------------------------------------
Dividends and other distributions paid:
- -------------------------------------------------------------------------------------------------------------------
Net investment income -- (.06) -- (.05) (.04)
- -------------------------------------------------------------------------------------------------------------------
Net realized gains (3.25) -- -- -- --
- -------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- -- -- (.05) --
- -------------------------------------------------------------------------------------------------------------------
Total dividends and other distributions (3.25) (.06) -- (.10) (.04)
- -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $24.24 $21.13 $17.68 $18.46 $14.29
- -------------------------------------------------------------------------------------------------------------------
Market value per share, end of period $22.00 $16.88 $14.25 $16.63 $12.00
- -------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:
- -------------------------------------------------------------------------------------------------------------------
Based on market value per share 49.5% 18.8% (14.3%) 39.3% (3.7%)
- -------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
- -------------------------------------------------------------------------------------------------------------------
Expenses 2.0% 2.1% 2.1% 2.1% 2.2%
- -------------------------------------------------------------------------------------------------------------------
Net investment income 0.1% 0.1% -- 0.9% 0.5%
- -------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 109.0% 147.7% 75.0% 66.8% 148.4%
- -------------------------------------------------------------------------------------------------------------------
Average commission rate paid(A) $.0313 -- -- -- --
- -------------------------------------------------------------------------------------------------------------------
Net assets at end of period $70,991 $62,249 $53,135 $55,486 $42,930
(in thousands)
===================================================================================================================
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
========================================================================================================================
Years Ended December 31, 1991 1990 1989 1988 1987(C) 1987(B)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $14.65 $20.14 $19.53 $16.46 $21.98 $20.00
- ------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) .08 .19 .03 .03 -- .16
- ------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments, options and currency
transactions .92 (4.30) 2.19 4.04 (4.41) 3.39
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.00 (4.11) 2.22 4.07 (4.41) 3.55
- ------------------------------------------------------------------------------------------------------------------------
Dividends and other distributions paid:
- ------------------------------------------------------------------------------------------------------------------------
Net investment income (.21) (.08) (.19) -- (.09) --
- ------------------------------------------------------------------------------------------------------------------------
Net realized gains -- (.85) (1.42) (1.00) (1.02) --
- ------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- (.45) -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Total dividends and other distributions (.21) (1.38) (1.61) (1.00) (1.11) --
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.44 $14.65 $20.14 $19.53 $16.46 $21.98
- ------------------------------------------------------------------------------------------------------------------------
Market value per share, end of period $12.50 $12.125 $19.00 $16.125 $12.00 $17.875
- ------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN:
- ------------------------------------------------------------------------------------------------------------------------
Based on market value per share (3.71%) .84% n/a n/a n/a n/a
- ------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------------------------
Ratios to average net assets:
- ------------------------------------------------------------------------------------------------------------------------
Expenses 2.3% 2.4% 2.2% 2.2% 2.1%(D) 2.2%(D)
- ------------------------------------------------------------------------------------------------------------------------
Net investment income 0.5% 1.1% 0.1% 0.2% -- 0.9%(D)
- ------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 91.9% 84.3% 121.5% 95.6% 110.5%(D) 117.0%(D)
- ------------------------------------------------------------------------------------------------------------------------
Average commission rate paid(A) -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Net assets at end of period $46,405 $44,026 $60,522 $58,684 $49,463 $66,040
(in thousands)
========================================================================================================================
</TABLE>
(A) Pursuant to SEC regulations adopted for fiscal years beginning after
September 1, 1995, this is the average commission rate paid on securities
purchased and sold by the Fund.
(B) For the period August 19, 1986 (commencement of operations) to June 30,
1987.
(C) For the six months ended December 31, 1987.
(D) Annualized.
INVESTMENT PERFORMANCE
From time to time each Fund may quote the TOTAL RETURN of each class of
shares in advertisements or in reports or other communications to shareholders.
A mutual fund's total return is a measurement of the overall change in value,
including changes in share price and assuming reinvestment of dividends and
capital gain distributions, of an investment in the fund. CUMULATIVE TOTAL
RETURN shows the fund's performance over a specific period of time. AVERAGE
ANNUAL TOTAL RETURN is the average annual compounded return that would have
produced the same cumulative total return if the fund's performance had been
constant over the entire period. Average annual returns, which differ from
actual year-by-year results, tend to smooth out variations in a fund's return.
No adjustment will be made for any income taxes payable by shareholders.
Total returns of Basic Value and Value International shares
(redesignated as Class A shares) as of March 31, 1997 are shown below. The
returns shown below for Europe Fund as of December 31, 1996 are those of
Worldwide Value Fund, Inc. and are based on net asset value. Sales charges have
not been deducted from total returns. None of the Funds imposed such charges
through the periods shown.
9
<PAGE>
<TABLE>
<CAPTION>
Cumulative Total Return Basic Value Value International Europe Fund
- ----------------------- ----------- ------------------- -----------
<S> <C>
One Year 11.36% 15.45% 31.53%
Three Years 55.64% 28.65% 51.05%
Five Years 83.85% 64.39% 82.15%
Ten Years 161.19% n/a 124.09%
Life of Class 371.10%(A) 77.37%(B) 95.07%(C)
<CAPTION>
Average Annual Total Return
- ---------------------------
<S> <C>
One Year 11.36% 15.45% 31.53%
Three Years 15.89% 8.76% 14.74%
Five Years 12.95% 10.45% 12.74%
Ten Years 10.08% n/a 8.40%
Life of Class 11.79%(A) 7.95%(B) 6.65%(C)
</TABLE>
- ----------------
(A) Inception of Basic Value - May 5, 1983
(B) Inception of Value International - October 6, 1989
(C) Inception of Worldwide Value Fund, Inc. (which was reorganized into Europe
Fund on July [ ], 1997) - August 19, 1986
Total return information reflects past performance and is not a
prediction or guarantee of future results. Investment return and share price
will fluctuate, and the value of an investors shares, when redeemed, may be
worth more or less than their original cost. Further information about each
Fund's performance is contained in the combined annual report to shareholders,
which may be obtained without charge by calling BFP at 1-800-822-5544.
10
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of Basic Value and Value International may be
changed without shareholder approval; however, shareholders of these two Funds
will be given a minimum of 30 days' prior written notice before any change in
investment objective becomes effective. Europe Fund's investment objective may
not be changed without shareholder approval. Except as otherwise noted, the
investment policies of each Fund described below may be changed by the Trust's
Board of Trustees without a shareholder vote. There can be no assurance that any
Fund will achieve its investment objective. Each Fund's net asset value
fluctuates based upon changes in the value of its portfolio securities.
BARTLETT VALUE INTERNATIONAL FUND
The investment objective of Value International is to seek capital
appreciation. The Fund seeks its objective by investing primarily in foreign
equity securities believed by Bartlett to be attractively priced relative to
their intrinsic value. Income is a secondary consideration.
The Fund invests primarily in equity securities of non-U.S. issuers
generally consisting of common stocks, common stock equivalents and preferred
stocks. The Fund also may invest indirectly in foreign equity securities by
purchasing American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs") or other similar securities and by purchasing shares of closed-end
investment companies that hold foreign equity securities in their portfolios.
However, there is no requirement that the Fund invest exclusively in
foreign equity securities. The Fund may invest in other types of foreign
securities such as debt obligations of foreign companies, foreign governments,
foreign governmental agencies and international organizations. In addition, the
Fund may invest a portion of its assets in U.S. government obligations, debt and
equity obligations of U.S. issuers, and repurchase agreements, and may hold a
portion of its assets in cash and U.S. dollar-denominated time deposits.
In seeking its objective, the Fund intends to diversify its investments
among issuers representing various countries. Under normal circumstances, at
least 65% of the Fund's total assets will be invested in non-U.S. issuers and at
least three different foreign countries will be represented in the Fund's
portfolio. The Fund may invest in countries in Western Europe, the Far East,
Canada, Australia and other geographic regions. The Fund may, from time to time,
have more than 25% of its assets invested in any major industrial or developed
country which in the view of Bartlett poses no unique investment risk. If
circumstances warrant, for temporary defensive purposes, the Fund may invest
substantially all of its assets in one or two countries.
The Fund may employ several investment techniques, including the use of
options, hedging programs, currency transactions, repurchase agreements, lending
of portfolio securities, short sales "against the box" and forward commitment
transactions. For temporary defensive purposes, the Fund may hold all or a
portion of its assets in money market instruments, cash equivalents, short-term
government and corporate obligations or repurchase agreements.
Bartlett selects portfolio securities on the basis of what it considers
to be the intrinsic value of each security. In analyzing the intrinsic value of
a specific security, particular emphasis is given to such characteristics as
relative price/earnings ratio, dividend yield, and price/book value ratio. In
making investment decisions, Bartlett considers all other pertinent factors
affecting the intrinsic value of a security, including financial, tax, social,
political and national conditions.
Although the Fund provides a means for individuals and institutional
investors to invest a portion of their assets outside the U.S., it should not be
considered a complete investment program. In addition, investments in foreign
securities may be subject to risks not typically associated with investments in
domestic securities. See "Foreign Securities" for a more complete discussion of
certain risks associated with investments in foreign securities.
See "Investment Techniques and Risk Considerations" beginning at page
[ ] for a more detailed
11
<PAGE>
discussion of risks associated with the securities and investment techniques
discussed above.
BARTLETT BASIC VALUE FUND
The investment objective of Basic Value is to seek capital
appreciation. The Fund seeks its objective by investing primarily in common
stocks or securities convertible into common stocks that Bartlett believes to be
selling at attractive prices relative to their intrinsic value. Income is a
secondary consideration. In determining whether a specific security represents
investment value, particular emphasis is given to such characteristics as low
debt, relative price/earnings ratio, dividend yield, and price/book ratio. The
Fund seeks to diversify its investments across industry sectors. The Fund's
investments may include foreign securities.
In seeking its objective, Basic Value invests only in securities of
companies with at least three years of operating history. Due to the Fund's
disciplined investment methodology, and the cyclical nature of the economy and
investment markets, there will be times when Bartlett is unable to purchase
reasonably valued common stocks and common stock equivalents. At these times,
the Fund may hold all or a portion of its assets in fixed income securities.
The Fund may employ several investment techniques, including the use of
options, hedging programs, currency transactions, repurchase agreements, reverse
repurchase agreements and dollar rolls, lending of portfolio securities, short
sales, short sales "against the box", structured securities and forward
commitment transactions. For temporary defensive purposes, the Fund may hold all
or a portion of its assets in money market instruments, cash equivalents,
short-term government and corporate obligations or repurchase agreements.
For a further discussion of the risks associated with these securities
and techniques, see "Investment Techniques and Risk Considerations," beginning
on page [ ].
BARTLETT EUROPE FUND
The investment objective of Europe Fund is to seek long-term growth of
capital. The Fund seeks to achieve its investment objective by investing, under
normal market conditions, at least 65% of its total assets in equity securities
of European issuers that Lombard Odier believes are undervalued and thus may
offer above-average potential for capital appreciation.
The Fund invests primarily in equity securities, including common
stock, preferred stock, convertible securities, rights and warrants, but may
also invest in bonds, notes and other fixed income securities. The Fund will
normally invest at least 65% of its total assets in equity securities and may
invest up to 35% of its total assets in fixed income securities. When conditions
warrant, for temporary defensive purposes, the Fund may invest over 35% and as
much as 100% of its total assets in fixed income securities. The fixed income
securities in which the Fund may invest generally include obligations of foreign
or domestic governments, government agencies or municipalities, and obligations
of foreign or domestic companies. The Fund may invest in fixed income securities
without regard to rating, although Lombard Odier does not anticipate that more
than 5% of the Fund's total assets will be invested in fixed income securities
rated lower than "investment grade" (that is, Baa by Moody's Investors Service,
Inc. ("Moody's") or BBB by Standard & Poor's ("S&P")), or, if unrated, deemed by
Lombard Odier to be of comparable quality. Most fixed income securities of
foreign issuers are not rated by Moody's or S&P. Generally, the fixed income
securities in which the Fund will invest will be those which Lombard Odier
believes offer potential for capital appreciation, either because of anticipated
changes in the general level of interest rates, or because of anticipated
improvement in the issuer's credit rating.
For temporary defensive purposes, the Fund may hold all or a portion of
its assets in money market instruments, cash equivalents, short-term government
and corporate obligations. The Fund may also enter into repurchase agreements.
The Fund may purchase securities both on recognized stock exchanges and
in over-the-counter markets. Most of the Fund's portfolio transactions will be
effected in the primary trading market for the given security.
12
<PAGE>
The Fund may also invest in depositary receipts and securities of other
investment companies, and may enter into when-issued and delayed-delivery
transactions. The Fund is authorized to invest in options, futures and options
on futures contracts and may enter into foreign currency transactions and
forward foreign currency exchange contracts ("forward contracts"). The Fund may
invest up to 15% of its total assets in illiquid or restricted securities.
INVESTMENT TECHNIQUES AND RISK CONSIDERATIONS
The following investment techniques and risks apply to each Fund unless
otherwise stated.
Equity Securities
Equity securities include common stock, preferred stock and other
similar securities such as convertible preferred stock, convertible debentures,
rights and warrants. Convertible preferred stock is preferred stock that can be
converted into common stock pursuant to its terms. Convertible debentures are
debt instruments that can be converted into common stock pursuant to their
terms. Warrants are options to purchase equity securities at a specified price
valid for a specific time period. Rights are similar to warrants, but normally
have a short duration and are distributed by the issuer to its shareholders.
Foreign Securities
Each Fund may invest, without limitation, in foreign equity securities.
Value International and Europe Fund are expected normally to invest at least 65%
of their respective assets in foreign securities. In addition, Value
International and Europe Fund each may invest in any closed-end investment
company that holds foreign equity securities in its portfolio.
American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs") and other similar securities convertible into securities of foreign
companies provide a means for investing indirectly in foreign equity securities.
ADRs are receipts typically issued by a U.S. bank evidencing ownership of the
underlying foreign securities. EDRs are receipts typically issued by a European
bank evidencing ownership of the underlying foreign securities. To the extent an
ADR or EDR is issued by a bank unaffiliated with the foreign company issuer of
the underlying security, the bank has no obligation to disclose material
information about the foreign company issuer. Each Fund may invest in ADRs and
EDRs.
Foreign fixed income securities include corporate debt obligations
issued by foreign companies and debt obligations of foreign governments or
international organizations. This category may include floating rate
obligations, variable rate obligations, Yankee dollar obligations (U.S.
dollar-denominated obligations issued by foreign companies and traded on U.S.
markets) and Eurodollar obligations (U.S. dollar-denominated obligations issued
by foreign companies and traded on foreign markets).
Foreign government obligations generally consist of debt securities
supported by national, state or provincial governments or similar political
units or governmental agencies. Such obligations may or may not be backed by the
national government's full faith and credit and general taxing powers.
Investments in foreign securities also include obligations issued by
international organizations, which include entities designated or supported by
governmental entities to promote economic reconstruction or development as well
as international banking institutions and related governmental agencies.
Examples are the International Bank for Reconstruction and Development (the
World Bank), the European Coal and Steel Community, the Asian Development Bank
and the InterAmerican Development Bank. In addition, investments in foreign
securities may include debt securities denominated in multinational currency
units of an issuer (including international issuers). An example of a
multinational currency unit is the European Currency Unit. A European Currency
Unit represents specified amounts of the currencies of certain member states of
the European Economic Community, more commonly known as the Common Market. Each
Fund may include foreign fixed income securities and foreign government
obligations in its portfolio.
Value International and Europe Fund under normal conditions will invest
at least 65% of their assets in foreign securities and European securities,
respectively. For purposes of this 65% test, foreign
13
<PAGE>
and European securities respectively include securities of issuers: (i) which
are organized under the laws of a foreign country or Europe; (ii) for which the
principal trading market is in a foreign country or Europe; or (iii) which
derive at least 50% of their revenues or profits from goods produced or sold,
investments made, or services performed in foreign countries or Europe or which
have at least 50% of their assets situated in foreign countries or Europe.
Purchases of foreign securities are usually made in foreign currencies
and, as a result, a Fund may incur currency conversion costs and may be affected
favorably or unfavorably by changes in the value of foreign currencies against
the U.S. dollar. In addition, there may be less information publicly available
about a foreign company than about a U.S. company, and foreign companies are not
generally subject to accounting, auditing and financial reporting standards and
practices comparable to those in the U.S. Other risks associated with
investments in foreign securities include changes in restrictions on foreign
currency transactions and rates of exchange, changes in the administrations or
economic and monetary policies of foreign governments, the imposition of
exchange control regulations, the possibility of expropriation decrees and other
adverse foreign governmental action, the imposition of confiscatory foreign
taxes, less liquid markets, less government supervision of exchanges, brokers
and issuers, difficulty in enforcing contractual obligations, delays in
settlement of securities transactions and greater price volatility. In addition,
investing in foreign securities will generally result in higher commissions than
investing in similar domestic securities.
Emerging Markets
Value International and Europe Fund may invest in securities of issuers
based in emerging markets. Europe Fund may (but is not limited to) invest in
issuers based in Greece, Portugal, Hungary, Poland, Czech Republic, Slovakia or
Turkey. International Fund may (but is not limited to) invest in issuers based
in the countries in Latin America, Southeast Asia, the Far East and South
America. The risks of foreign investment, described above, are greater for
investments in emerging markets. Investors are strongly advised to consider
carefully the special risks involved in emerging markets, which are in addition
to the usual risks of investing in developed markets around the world. Many
emerging market countries have experienced substantial, and in some periods
extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had, and may continue to have, very
negative effects on the economies and securities markets of certain emerging
markets. Economies in emerging markets generally are heavily dependent upon
international trade and, accordingly, have been and may continue to be affected
adversely by economic conditions, trade barriers, exchange controls, managed
adjustments in relative currency values and other protectionist measures imposed
or negotiated by the countries with which they trade. In addition, many of the
currencies of emerging market countries have experienced steady devaluations
relative to the U.S. dollar, and major devaluations have occurred in certain
countries.
Fixed Income Securities
Fixed income securities include corporate debt securities, municipal
obligations, mortgage-related securities, asset-backed and receivable-backed
securities, U.S. government obligations and participation interests in such
securities. Certain fixed income securities are floating rate obligations or
variable rate obligations. Certain fixed income securities may carry demand
features that permit a Fund to sell the obligation back to the issuer or to a
third party at a specified price upon short notice at any time or prior to
specific dates. Preferred stock and convertible debt securities may also be
considered to be fixed income securities.
Corporate Debt Securities. Each Fund is permitted to invest in
corporate debt securities, i.e., long-term and short-term debt obligations
issued by companies (such as publicly issued and privately placed bonds, notes
and commercial paper.) Corporate debt securities include variable amount master
demand notes. These obligations permit the investment of fluctuating amounts at
varying rates of interest pursuant to direct arrangements between a Fund, as
lender, and the borrower. Variable amount master demand notes are direct lending
arrangements between the lender and borrower and are not generally transferable.
A Fund may invest in such notes only if the Board of Trustees believes that the
notes are of comparable quality to the other obligations in which the Fund may
invest. Variable amount master demand notes may be deemed illiquid under certain
circumstances, and a Fund's investment in such
14
<PAGE>
notes would be limited to the extent that it is not permitted to invest more
than 10% (15% for Europe Fund) of the value of its net assets in illiquid
investments.
Options, Futures and Forward Currency Exchange Contracts
Each Fund may engage in option transactions involving equity
securities, debt securities, futures contracts and stock indexes. Each Fund may
also engage in option transactions involving foreign currencies and foreign
stock indexes.
To cover the potential obligations involved in option transactions, a
Fund will own the underlying equity security, debt security, futures contract or
foreign currency or the Fund will segregate with its custodian (i) high grade
liquid debt assets sufficient to purchase the underlying equity security, debt
security, futures contract or foreign currency or (ii) high grade liquid debt
assets equal to the market value of the stock index. A Fund will engage in
options on futures contracts only for hedging purposes (see below). Option
transactions involve the following principal risks: (i) the loss of a greater
percentage of the Fund's investment than a direct investment in the underlying
instrument, (ii) the loss of opportunity to profit from price movements in the
underlying instrument, and (iii) the inability to effect a closing transaction
on a particular option.
There is no restriction on the percentage of a Fund's total assets
which may be committed to transactions in options (except options on futures
contracts as discussed below). However, the SEC considers over-the-counter
options to be illiquid. As long as the Commission maintains this position, a
Fund will not engage in an over-the-counter option transaction if such
transaction would cause the value of such options purchased by the Fund and the
assets used to cover such options written (sold) by the Fund, together with the
value of other illiquid securities held by the Fund, to exceed 10% (15% for
Europe Fund) of its net assets. The policy of Basic Value and Value
International with respect to options is fundamental, although the particular
practices followed with respect to options, such as the procedures used to cover
or secure options which a Fund writes, are not deemed fundamental and may be
changed by the Board of Trustees without shareholder vote.
Each Fund may hedge all or a portion of its portfolio investments
through the use of options, futures contracts and options on futures contracts.
Each Fund may hedge currency risks associated with investments in foreign
securities and in particular may hedge its portfolio through the use of forward
contracts as described below. The objective of a hedging program is to protect a
profit or offset a loss in a portfolio security from future price erosion or to
assure a definite price for a security, stock index, futures contract or
currency. There are transactional costs connected with a hedging program.
The principal risks associated with hedging transactions are: (i)
possible imperfect correlation between the prices of the options and futures
contracts and the market value of a Fund's portfolio securities, (ii) possible
lack of a liquid secondary market for closing out an option or futures contract
transaction, (iii) the need for additional skills and techniques beyond normal
portfolio management, and (iv) losses resulting from market movements not
anticipated by Bartlett and/or Lombard Odier.
No Fund may purchase or sell futures contracts or purchase related
options if, immediately thereafter, more than one-third of its net assets would
be hedged. In addition, no Fund may enter into transactions involving futures
contracts and related options if such transactions would result in more than 5%
of the fair market value of the Fund's assets being deposited as initial margin
for such transactions. A Fund's ability to engage in the hedging transactions
and strategies described above may be limited by the requirement for federal
income tax purposes that a Fund derive less than 30% of its gross income from
the sale or other disposition of stock, or securities or certain options,
futures, forward contracts or foreign currencies held for less than three
months.
When a Fund purchases or sells a security denominated in a foreign
currency, it may be required to settle the purchase transaction in the relevant
foreign currency or to receive the proceeds of the sale in the relevant foreign
currency. In either event, the Fund will be obligated to acquire or dispose of
the foreign currency by selling or buying an equivalent amount of U.S. dollars.
To effect the conversion of the amount of foreign currency involved in the
purchase or sale of a foreign security, the Fund may purchase or sell such
foreign currency on a "spot" (i.e., cash) basis.
15
<PAGE>
In addition, a Fund may wish to lock in the U.S. dollar value of the
transaction at or near the time of the purchase or sale at the exchange rate or
rates then prevailing between the U.S. dollar and the currency in which the
foreign security is denominated. Therefore, a Fund may enter into a forward
contract. A forward contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. These contracts are traded directly between currency traders
(usually large commercial banks) and their customers. By entering into a forward
contract in U.S. dollars for the purchase or sale of the amount of foreign
currency involved in an underlying security transaction, a Fund is able to
protect itself against a possible loss between trade and settlement dates
resulting from an adverse change in the relationship between the U.S. dollar and
such foreign currency. This process is known as transaction hedging. Transaction
hedging may protect a Fund from a possible loss, but will limit potential gains
which might result from a positive change in the currency relationships.
When it is desirable to limit or reduce exposure in a foreign currency
in order to moderate potential changes in the U.S. dollar value of the
portfolio, a Fund may enter into a forward contract to sell, for a fixed amount
of U.S. dollars, the amount of foreign currency approximating the value of some
or all of that Fund's portfolio securities denominated in such foreign currency.
This technique is known as portfolio hedging. Hedging against a decline in the
value of currency does not eliminate fluctuations in the prices of portfolio
securities or prevent losses if the prices of such securities declines. The
Funds may also employ forward contracts to hedge against an increase in the
value of the currency in which the securities a Fund intends to buy are
denominated.
A Fund may also hedge its foreign currency exchange rate risk by
engaging in currency futures contracts and options transactions described above.
No Fund will engage in foreign currency transactions for speculative purposes.
A more complete description of the characteristics, risks and possible
benefits of option and hedging transactions is included in the Funds' Statement
of Additional Information.
Repurchase Agreements
Each Fund may enter into repurchase agreements. A repurchase agreement
is a transaction by which a Fund purchases a security and simultaneously commits
to resell that security to the seller at an agreed upon price and date. 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 security and
losses. Europe Fund may enter into repurchase agreements with respect to
securities issued by the U.S. government, its agencies or instrumentalities.
Under normal circumstances, no more than 25% of Europe Fund's assets will be
invested in repurchase agreements at any time.
Illiquid Securities
The portfolio of each Fund may contain illiquid securities. A Fund will
not invest more than 10% (15% with respect to Europe Fund) of its net assets in
securities for which there are legal or contractual restrictions on resale or
other illiquid securities. Illiquid securities generally include securities
which cannot be disposed of promptly and in the ordinary course of business
without taking a reduced price. Securities may be illiquid due to contractual or
legal restrictions on resale or lack of a ready market. The following securities
are considered generally to be illiquid (although if they are liquid they will
be treated as such): repurchase agreements and time deposits maturing in more
than seven days, options traded in the over-the-counter market, nonpublicly
offered securities, stripped collateralized mortgage obligations ("CMOs"), CMOs
for which there is no established market, direct investments in mortgages and
restricted securities.
Loans of Portfolio Securities
Basic Value and Value International may make short- and long-term loans
of their portfolio securities. Under the lending policy authorized by the Board
of Trustees and implemented by Bartlett, in response to requests of
broker/dealers or institutional investors which Bartlett deems qualified, the
borrower must agree to maintain collateral, in the form of cash or U.S.
government obligations, with the
16
<PAGE>
Fund on a daily mark-to-market basis in an amount at least equal to 100% of the
value of the loaned securities. The Funds will continue to receive dividends or
interest on the loaned securities and may terminate such loans at any time or
reacquire such securities in time to vote on any matter which the Board of
Trustees determines to be serious. There is the risk that the borrower may fail
to return the loaned securities or that the borrower may not be able to provide
additional collateral. No loan of securities will be made if, as a result, the
aggregate amount of such loans would exceed 25% of the value of a Fund's total
assets.
Other Investment Companies
Each Fund is permitted to invest in other investment companies at any
time. A Fund will not invest more than 10% of its total assets in securities of
other investment companies or invest more than 5% of its total assets in
securities of any investment company and will not purchase more than 3% of the
outstanding voting stock of any investment company. If a Fund acquires
securities of another investment company, the shareholders of the Fund may be
subject to duplicative management fees.
PURCHASE OF SHARES
General
Each Fund is authorized to issue three classes of shares. Class A
Shares of the Funds are subject to an initial sales charge or a contingent
deferred sales charge under limited circumstances, while Class C Shares are sold
without an initial or contingent deferred sales charge but are subject to higher
ongoing expenses. The third class of shares of the Funds, Class Y Shares, is
offered through a separate prospectus only to certain investors. See "Class Y
Shares."
Orders received before the close of regular trading on the New York
Stock Exchange ("Exchange") (normally 4:00 p.m. Eastern time) ("close of the
Exchange") on any day the Exchange is open will be executed at the net asset
value for the applicable class of shares, plus any applicable sales charge,
determined as of the close of the Exchange on that day. Orders received after
the close of the Exchange or on days the Exchange is closed will be executed at
the net asset value for the applicable class of shares, plus any applicable
sales charge, determined as of the close of the Exchange on the next day the
Exchange is open. When placing purchase orders, investors should specify whether
the order is for Class A or Class C shares of a Fund. All purchase orders that
fail to specify a class will automatically be invested in Class A Shares. The
Funds and BFP reserve the right to reject any purchase order and to suspend the
offering of shares for a period of time. The Funds do not issue share
certificates.
The minimum initial investment for each class of shares is $1,000,
including investments made by exchange from another Fund or Legg Mason Cash
Reserve Trust, and investments through an Individual Retirement Account ("IRA")
or similar plan. The minimum investment for each purchase of additional shares
is $100. Each Fund may reduce or waive such minimums for investments made by
employer sponsored qualified retirement plans or through automatic investment
programs, investments made through brokerage firms or other financial
institutions, or investments made by advisory clients of Bartlett and employees
of Bartlett and their families, or under other circumstances. The minimum amount
for subsequent investments will be waived if an investment in an IRA or similar
plan will bring the investment for the year to the maximum amount permitted
under the Internal Revenue Code of 1986, as amended ("Code").
Once an account has been established, investors may also purchase
shares of the Funds through BFP by bank wire. Bank wire purchases will be
effected at the next determined net asset value, plus any applicable sales
charge, after the bank wire is received. An investor's bank may charge a service
fee for wiring money to the Funds.
Reports will be sent to each Fund's shareholders at least semiannually
showing its portfolio and other information; an annual report for the Funds will
contain financial statements audited by the Trust's independent accountants.
Shareholder inquiries should be addressed to: [insert complete Fund name]
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BFP Funds Processing
P.O. Box 1476
Baltimore, Maryland 21203-1476
Telephone inquiries: call BFP at 1-800-822-5544.
Purchases Through Broker/Dealers:
Shares of the Funds may be purchased through broker/dealers with which
BFP has entered into dealer agreements. Orders received by such broker/dealers
before the close of the Exchange will be effected that day, provided that such
order is transmitted to Boston Financial Data Services, Inc. ("BFDS"), the
Trust's transfer agent, prior to its close of business on such day. The
broker/dealer will be responsible for forwarding the investor's order to BFDS so
that it will be received prior to such time. After an initial investment is made
and a shareholder account is established through a broker/dealer, at the
investor's option, subsequent purchases may be made directly through BFP.
Broker/dealers that do not have dealer agreements with BFP also may
offer to place orders for the purchase of shares. Purchases made through such
broker/dealers will be effected at the net asset value per share plus any
applicable sales charge next determined after the order is received by BFDS.
Such a broker/dealer may charge the investor a transaction fee as determined by
the broker/dealer. That fee will be in addition to the sales charge payable by
the investor with respect to Class A Shares, and may be avoided if shares are
purchased through a broker/dealer that has a dealer agreement with BFP or
directly through BFP.
Purchasing Class A Shares:
Each Fund's public offering price for Class A Shares is equal to the
net asset value per share plus a sales charge determined in accordance with the
following schedule:
Sales Charge as a % of Dealer Reallowance
Offering Net as a percentage of
Amount of Purchase Price Investment the Offering Price
- ------------------ ----- ---------- ------------------
Less than $25,000 4.75% 4.99% 4.00%
$25,000 to $49,999 4.50% 4.71% 3.75%
$50,000 to $99,000 4.00% 4.17% 3.25%
$100,000 to $249,000 3.50% 3.63% 2.75%
$250,000 to $499,000 2.50% 2.56% 2.00%
$500,000 to $999,999 2.00% 2.04% 1.60%
$1 million or more* 0.00% 0.00% 1.00%
*A contingent deferred sales charge of 1% of the shares' net asset
value at the time of purchase or sale, whichever is less, may be charged on
redemptions of shares purchased pursuant to the front-end sales charge waiver
for purchases of $1 million or more made within one year of the purchase date.
See below. BFP will pay the following commission to brokers that initiate and
are responsible for purchases of Class A shares by any single purchaser of $2
million or more in the aggregate: 0.80% up to $2,999,999, plus 0.50% of the
excess over $3 million up to $20 million, plus 0.25% of the excess over $20
million.
From time to time, BFP may pay out, in addition to a sales commission,
special additional compensation and promotional incentives to broker/dealers who
sell Class A shares.
Sales Charge Waivers
Class A Shares are sold at net asset value without imposition of sales
charges when investments are made by the following classes of investors:
advisory clients (and related accounts) of Bartlett & Co., certain employee
benefit or retirement accounts (subject to the discretion of Bartlett & Co.),
officers and trustees of the Trust, employees of Legg Mason, Inc. and its
affiliates, registered representatives or full-time employees of broker/dealers
that have entered into dealer agreements with BFP, and the children, siblings
and parents of such persons. In addition, all existing shareholders of Basic
Value and Value
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International as of July [ ], 1997 will be eligible for the waiver going
forward.
Reduced Sales Charge Purchase Plans - Class A Shares
Class A Shares may be purchased at reduced sales charges either through
the Right of Accumulation or under a Letter of Intent. For more details on these
plans, investors should contact their broker/dealers or BFP.
Right of Accumulation. Pursuant to the Right of Accumulation,
shareholders are permitted to purchase shares of the Funds at the sales charge
applicable to the total of (a) the dollar amount then being purchased plus (b)
the dollar amount of the shareholder's concurrent purchases of [the
corresponding class of] other Bartlett Mutual Funds plus (c) the price of all
shares of [the corresponding class of] Bartlett Mutual Funds already held by the
shareholder. To receive the Right of Accumulation, at the time of purchase
shareholders must give their broker/dealers or BFP sufficient information to
permit confirmation of qualification.
Letter of Intent. In executing a Letter of Intent ("LOI"), a
shareholder indicates an aggregate investment amount he or she intends to invest
in Class A Shares of a Fund and the Class A Shares of other Bartlett Mutual
Funds in the following thirteen months. The sales charge applicable to that
aggregate amount then becomes the applicable sales charge on all purchases made
concurrently with the execution of the LOI and in the thirteen months following
that execution. If a shareholder executes an LOI within 90 days of a prior
purchase of Bartlett Mutual Fund Class A Shares, the prior purchase may be
included under the LOI and an appropriate adjustment, if any, with respect to
the sales charges paid by the shareholder in connection with the prior purchase
will be made, based on the then-current net asset value(s) of the pertinent
Fund(s).
If at the end of the thirteenth month period covered by the LOI, the
total amount of purchases does not equal the amount indicated, the shareholder
will be required to pay the difference between the sales charges paid at the
reduced rate and the sales charges applicable to the purchases actually made.
Shares having a value equal to 5% of the amount specified in the LOI will be
held in escrow during the thirteen month period (while remaining registered in
the shareholder's name) and are subject to redemption to assure any necessary
payment to BFP of a higher applicable sales charge.
Contingent Deferred Sales Charge - Class A Shares
Purchases of Class A shares of $1,000,000 or more may be made without
an initial sales charge. Purchases of Class A shares of two or more Bartlett
Mutual Funds may be combined for this purpose, and the Right of Accumulation
[and LOI] also applies [apply] to such purchases. If a shareholder redeems any
Class A shares that were purchased without a sales charge by reason of a
purchase of $1,000,000 or more within one year after the date of purchase, a
contingent deferred sales charge of 1% of the lower of the original purchase
price or the net asset value of such shares at the time of redemption will be
charged. Class A shares that are redeemed will not be subject to the contingent
deferred sales charge to the extent that the value of such shares represents:
(1) reinvestment of dividends or other distributions or (2) Class A shares
redeemed more than one year after their purchase. Such share purchases of at
least $1,000,000 without a sales charge may be exchanged for Class A shares of
another Bartlett Mutual Fund without the imposition of a contingent deferred
sales charge, although the contingent deferred sales charge described above will
apply to the redemption of the shares acquired through an exchange. For federal
income tax purposes, the amount of the contingent deferred sales charge will
reduce the gain or increase the loss, as the case may be, on the amount realized
on redemption. The amount of any contingent deferred sales charge will be paid
to BFP.
Purchasing Class C Shares:
The public offering price of Class C shares of each Fund is the next
determined net asset value. No initial or contingent deferred sales charge is
imposed.
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Class Y Shares:
Class Y shares are offered through a separate Prospectus only to
advisory clients of Bartlett that are employee benefit or retirement plans,
other than IRAs and Keogh Plans, to retirement plans having net assets of at
least $10 million, to purchasers of $5 million or more, and to participants in
certain wrap fee investment advisory programs that are currently or in the
future sponsored by Bartlett and that may invest in Bartlett proprietary funds,
provided that shares are purchased through or in connection with those programs.
Programs Applicable to Class A and Class C:
Systematic Investment Plan. Shares of each Fund may be purchased
through the Systematic Investment Plan. Under this plan, you may arrange for
automatic monthly investments in the Funds of $50 or more by authorizing BFDS to
transfer funds each month from your checking account. Please contact your
broker/dealer or BFP for further information.
Automatic Investments. Arrangements may be made with some employers and
financial institutions, such as banks or credit unions, for regular automatic
monthly investments of $50 or more in shares. In addition, it may be possible
for dividends from certain unit investment trusts to be invested automatically
in shares. Persons interested in establishing such automatic investment programs
should contact the Funds through their broker/dealer or BFP.
REDEMPTION OF SHARES
As described below, shares of the Funds may be redeemed at their net
asset value (subject to any applicable contingent deferred sales charge, in
limited circumstances, for Class A shares). Redemption proceeds normally will
settle in your BFP brokerage account two business days after trade date;
however, each Fund reserves the right to take up to seven days to make payment
upon redemption if, in the judgment of Bartlett and/or Lombard Odier, the
respective Fund could be adversely affected by immediate payment. The Statement
of Additional Information describes several other circumstances in which the
date of payment may be postponed or the right of redemption suspended.
Redemptions Through Broker/Dealers:
Shareholders may call their BFP or affiliated broker/dealer and give
them an order for redemption. Shareholders should have the following information
ready when they call: the name of the Fund, the number of shares to be redeemed
and their shareholder account number. Shareholders may also send a written
request for redemption to the address listed below.
Shareholders with accounts at broker/dealers that sell shares of the
Funds may submit redemption requests to such broker/dealers. Broker/dealers may
honor a redemption request either by repurchasing shares from a redeeming
shareholder at the shares' net asset value next determined after the
broker/dealer receives the request or by forwarding such requests to BFDS. See
"Redemptions Through BFDS," below.
Redemption proceeds (less any applicable contingent deferred sales
charge) normally will be paid by check or; if offered by the broker/dealer,
credited to the shareholder's brokerage account at the election of the
shareholder. If shares are held in the broker/dealer's "street name," the
redemption must be made through the broker/dealer. Broker/dealers may impose a
service charge for handling redemption transactions placed through them and may
have other requirements concerning redemptions. Shareholders should contact
their broker/dealers for further information.
All redemptions will be effected at the net asset value next determined
after BFDS has received the request in good order and any required supporting
documentation (less any applicable contingent deferred sales charge, in limited
circumstances, for Class A shares). Redemption requests received before the
close of the Exchange will be effected at the net asset value calculated on that
day. ALL WRITTEN REDEMPTION REQUESTS MUST BE ACCOMPANIED BY A SIGNATURE
GUARANTEE UNLESS THE REDEMPTION PROCEEDS ARE TO BE SENT TO THE REDEEMING
SHAREHOLDER AT THE SHAREHOLDER'S ADDRESS OF RECORD AS
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MAINTAINED BY BFDS. A signature guarantee may be obtained by a national bank, a
state bank, a member firm of a principal stock exchange or other entity
described in Rule 17Ad-15 under the Securities Exchange Act of 1934.
Written redemption requests will be considered to be received in "good
order" only if:
1. The shareholder has indicated in writing the number of shares [or the
dollar amount] of the specific class to be redeemed, the complete Fund
name and shareholder account number;
2. The written request is signed by the shareholder and by any co-owner of
the account with exactly the same name or names used in establishing
the account;
3. The signatures on the written request have been guaranteed, if
required, as described above.
Other supporting legal documents may be required from corporations or
other organizations, fiduciaries or persons other than the shareholder of record
making the request for redemption or repurchase. Please contact BFP or your
broker/dealer for further information.
Redemption Fee:
A temporary 2% redemption fee will apply to redemptions and exchanges
of all Europe Fund shareholders as of July [ ], 1997 (effective date of the
reorganization of Worldwide Value Fund, Inc. into Europe Fund) who redeem or
exchange their shares within six months. This fee is paid directly to Europe
Fund and not to Bartlett, BFP or Lombard Odier.
Systematic Withdrawal Plan:
Shareholders may elect to make systematic withdrawals from their Fund
account of a minimum of $50 on a monthly basis if they are purchasing or already
own shares with a net asset value of $5,000 or more. Shareholders should not
purchase shares of a Fund while they are participating in the Systematic
Withdrawal Plan with respect to that Fund. Please contact BFP or your
broker/dealer for further information.
Reinstatement Privilege:
Shareholders who have redeemed their Class A Shares in a Fund may
reinstate their Fund account without a sales charge up to the dollar amount
redeemed by purchasing shares within 90 days of the redemption ("reinstatement
privilege"). Shareholders may exercise their reinstatement privilege by
notifying BFP or their broker/dealer of such desire and placing an order for the
amount to be purchased within 90 days after the date of redemption. The
reinstatement will be made at the net asset value next determined after the
Notice of Reinstatement and order have been received by BFDS.
Exchange Privilege:
As a Fund shareholder, you are entitled to exchange your shares of a
Fund for the corresponding class of shares of another Fund or the Legg Mason
Cash Reserve Trust (a money market mutual fund), provided that such shares are
eligible for sale in your state of residence.
Investments by exchange into a Fund sold with an initial sales charge
are made at the per share net asset value (plus any applicable sales charge)
determined on the same business day as redemption of the Fund shares you wish to
exchange.
No initial sales charge will be imposed on an exchange where the
investor paid an initial sales charge upon the purchase of shares. Investments
by exchange into the Legg Mason Cash Reserve Trust, which is sold without an
initial sales charge, are made at the per share net asset value determined on
the same business day as redemption of the Fund shares you wish to exchange. A
contingent deferred sales charge may apply to the redemption of Class A shares
acquired through an exchange.
There is no charge for the exchange privilege, but each Fund reserves
the right to terminate or limit the exchange privilege of any shareholder who
makes more than four exchanges from that Fund in
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one calendar year. To effect an exchange by telephone, or to obtain further
information concerning the exchange privilege, please contact BFP or your
broker/dealer.
Other Important Redemption Information:
The proceeds of your redemption may be more or less than your original
cost. If the shares to be redeemed were paid for by check (including certified
or cashier's checks) within 10 business days of the redemption request, the
proceeds may not be disbursed unless the Fund can be reasonably assured that the
check has been collected.
None of the Funds will be responsible for the authenticity of
redemption instructions received by telephone, provided it follows reasonable
procedures to identify the caller. Each Fund may request identifying information
from callers or employ identification numbers. Each Fund may be liable for
losses due to unauthorized or fraudulent instructions if it does not follow
reasonable procedures. Telephone redemption privileges are available
automatically to all shareholders. Shareholders who do not wish to have
telephone redemption privileges should call BFP or their broker/dealer for
further instructions.
Because of the relatively high cost of maintaining small accounts, each
Fund may elect to close any account with a current value of less than $500 by
redeeming all of the shares in the account and mailing the proceeds to you.
However, no Fund will redeem accounts that fall below $500 solely as a result of
a reduction in net asset value per share. If a Fund elects to redeem the shares
in your account, you will be notified that your account is below $500 and will
be allowed 60 days in which to make an additional investment in order to avoid
having your account closed.
The shares of each Fund are subject to redemption at any time if the
Board of Trustees of the Trust determines in its sole discretion that failure to
so redeem may have materially adverse consequences to all or any of the
shareholders of the Trust or any Fund of the Trust.
Telephone Transactions: Call BFP at 1-800-822-5544
Mail Transactions: [insert complete Fund name]
BFP Funds Processing
P.O. Box 1476
Baltimore, Maryland 21203-1476
CALCULATION OF SHARE PRICE
Net asset value per share of each Fund class is determined daily, as of
the close of the Exchange, on every day that the Exchange is open, by
subtracting the liabilities attributable to each class from the total assets of
such class and dividing the result by the number of shares of such class
outstanding. Securities owned by each Fund for which market quotations are
readily available are valued at current market value. In the absence of readily
available market quotations, securities are valued at fair value as determined
by Bartlett and/or Lombard Odier, subject to review of the Board of Trustees.
The Funds may use pricing services to determine the market value of its
portfolio securities, subject to Bartlett's and/or Lombard Odier's review. If
the Board of Trustees determines in good faith that another method of valuing
options and futures contracts is necessary to appraise their fair value, such
other method will be used.
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.
Fixed-income securities generally are valued by using market quotations
or independent pricing services that use prices provided by market makers or
estimates of market values. However, if Bartlett and/or Lombard Odier believes
that market value of a security will be more accurately reflected thereby, it
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<PAGE>
will use market value estimates obtained from yield spreads relating to
securities with similar characteristics as to credit quality, coupon rate,
maturity and other factors. Fixed-income securities having a maturity of less
than 60 days are valued at amortized cost.
For valuation purposes, quotations of foreign securities in a foreign
currency are converted to U.S. dollar equivalents at the time of pricing. In
computing the net asset value of a Fund, the values of foreign portfolio
securities are generally based upon market quotations that, depending upon the
exchange or market, may be last sale price, last bid price, or the mean between
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 on which the Exchange is open. Trading of these
securities may not take place on every business day the Exchange is open. In
addition, trading may take place in various foreign markets on Saturdays or on
other days when the Exchange is not open and on which a Fund's share price is
not calculated. Therefore, the value of the portfolio of a Fund holding foreign
securities may be significantly affected on days when shares of the Fund may not
be purchased or redeemed.
The calculation of the share price of a Fund holding foreign securities
in its portfolio does not take place contemporaneously with the determination of
the values of many of the foreign portfolio securities used in such calculation.
Events affecting the values of foreign portfolio securities that occur between
the time their prices are determined and the calculation of the Fund's share
price will not be reflected in the calculation unless Bartlett and/or Lombard
Odier determines, subject to review by the Trust's Board of Trustees, that the
particular event would materially affect net asset value, in which case an
adjustment will be made.
DIVIDENDS AND OTHER DISTRIBUTIONS
Each Fund distributes substantially all of its investment company
taxable income (which consists of net investment income, net short-term capital
gain and net gains from certain foreign currency transactions), if any, in the
form of dividends to its shareholders of each class. Value International and
Basic Value each declares and pays dividends from net investment income on a
quarterly basis, and dividends from any net short-term capital gains annually;
Europe Fund declares and pays all dividends on an annual basis. Each Fund also
distributes substantially all of its net capital gain (the excess of net
long-term capital gain over net short-term capital loss) and net gains from
foreign currency transactions after the end of the taxable year in which the
gains are realized. A second distribution of net capital gain may be necessary
in some years to avoid imposition of the excise tax described under the heading
"Additional Tax Information" in the Statement of Additional Information.
Dividends and other distributions, if any, on a class of shares of a
Fund held in an IRA, Keogh Plan, SEP, SIMPLE or other qualified retirement plan
and by shareholders maintaining a Systematic Withdrawal Plan, generally are
reinvested in the corresponding class of shares of the distributing Fund on the
payment date (including instances when no election is made). Other shareholders
may elect to:
1. Receive both dividends and other distributions in shares of the
corresponding class of the distributing Fund (automatic option - no
action needed);
2. Receive dividends in cash and other distributions in shares of the
corresponding class of the distributing Fund;
3. Receive dividends in shares of the corresponding class of the
distributing Fund and other distributions in cash; or
4. Receive both dividends and other distributions in cash.
In certain cases, shareholders may reinvest dividends and other
distributions in the corresponding class of shares of another Fund. Please
contact BFP or your financial advisor for additional information concerning this
option. If no election is made, both dividends and other distributions are
credited to your account in shares of the corresponding class of the
distributing Fund at the net asset value of the shares determined as of the
close of the Exchange on the reinvestment date. Shares received pursuant to any
of the first three (reinvestment) elections above are also credited to your
account at that net asset value.
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Shareholders electing to receive dividends and/or other distributions in cash
will be sent a check or will have their brokerage account credited after the
payment date. You may elect at any time to change your option by notifying the
applicable Fund in writing at: [insert complete Fund name], c/o BFP Funds
Processing, P.O. Box 1476, Baltimore, Maryland 21203-1476. Your election must be
received at least 10 days before the record date in order to be effective for
dividends and other distributions paid to shareholders as of that date.
TAXES
Each Fund intends to continue to qualify for treatment as a regulated
investment company under the Code so that it will be relieved of federal income
tax on that part of its investment company taxable income and net capital gain
that is distributed to its shareholders.
Dividends from a Fund's investment company taxable income (whether paid
in cash or reinvested in shares) are taxable to its shareholders (other than
IRAs, Keogh Plans, SEPs, SIMPLEs, other qualified retirement plans and other
tax-exempt investors) as ordinary income to the extent of the Fund's earnings
and profits. Distributions of a Fund's net capital gain (whether paid in cash or
reinvested in shares), when designated as such, are taxable to those
shareholders as long-term capital gain, regardless of how long they have held
their Fund shares.
Each Fund sends its shareholders a notice following the end of each
calendar year specifying, among other things, the amounts of all dividends and
other distributions paid (or deemed paid) during the year. Each Fund is required
to withhold 31% of all dividends, capital gain distributions and redemption
proceeds payable to any individuals and certain other non-corporate shareholders
who do not provide the Fund with a certified taxpayer identification number.
Each Fund also is required to withhold 31% of all dividends and other
distributions payable to such shareholders who otherwise are subject to backup
withholding.
A redemption of Fund shares may result in a taxable gain or loss to the
redeeming shareholder, depending on whether the redemption proceeds are more or
less than the shareholder's adjusted basis for the redeemed shares (which
normally includes any initial sales charge paid on Class A shares). An exchange
of Fund shares for shares of any other Fund or the Legg Mason Cash Reserve Trust
generally will have similar tax consequences. See "Exchange Privilege," above.
Special rules apply when a shareholder redeems or exchanges Class A shares of a
Fund within 90 days after purchase thereof and subsequently reacquires shares of
the same Fund or acquires shares of another Fund or the Legg Mason Cash Reserve
Trust without paying a sales charge due to the 90-day reinstatement privilege or
the exchange privilege (see "Redemption of Shares -- Reinvestment Privilege" and
"Exchange Privilege"). In these cases, any gain on the redemption or exchange of
the original Fund shares would be increased, or any loss would be decreased, by
the amount of the sales charge paid when those shares were acquired, and that
amount will increase the basis of the shares subsequently acquired. If Fund
shares are purchased within 30 days before or after redeeming at a loss other
shares of the same Fund (regardless of class), all or part of that loss will not
be deductible and instead will increase the basis of the newly purchased shares.
A dividend or other distribution paid shortly after shares have been
purchased, although in effect a return of investment, is subject to federal
income tax. Accordingly, an investor should recognize that a purchase of shares
immediately before the record date for a dividend or other distribution could
cause the investor to incur tax liabilities and should not be made solely for
the purpose of receiving the dividend or other distribution.
Each Fund's dividend and interest income, and gains realized from
disposition of foreign securities, may be subject to income, withholding or
other taxes imposed by foreign countries and U.S. possessions that would reduce
the yield on that Fund's securities. Tax conventions between certain countries
and the United States may reduce or eliminate these foreign taxes, however, and
many foreign countries do not impose taxes on capital gains in respect of
investments by foreign investors. Shareholders may be entitled to claim tax
credits or deductions, subject to certain limitations, for foreign income taxes
paid by a Fund (see "Additional Tax Information" in the Statement of Additional
Information). Each Fund will notify its shareholders if such credit or deduction
is available.
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The foregoing is only a summary of some of the important federal tax
considerations generally affecting each Fund and its shareholders; see the
Statement of Additional Information for a further discussion. In addition to
federal income tax, you may also be subject to state, local or foreign taxes on
distributions from the Funds, depending on the laws of your home state and
locality or country of residence. Prospective shareholders are urged to consult
their tax advisers with respect to the effects of this investment on their own
tax situations.
MANAGEMENT OF THE TRUST
Bartlett & Co.
Bartlett & Co., 36 East Fourth Street, Cincinnati, Ohio, serves as
investment adviser and administrator to each Fund. Bartlett is an investment
advisory firm which has provided investment advice to individuals, corporations,
pension and profit sharing plans and trust accounts since 1898. As of [______],
1997, Bartlett had aggregate assets under management of approximately [______].
Bartlett is a wholly owned subsidiary of Legg Mason, Inc., a publicly traded
financial services firm.
Pursuant to an Investment Management and Administration Agreement,
which was approved by the Board of Trustees, Bartlett acts as investment adviser
and administrator for each Fund and has responsibility for the actual investment
management of the Funds, including the responsibility for making decisions and
placing orders to buy, sell or hold a particular security, except with respect
to Europe Fund, where it has delegated that responsibility to Lombard Odier.
Bartlett receives for its services a management fee from each Fund
attributable to the net assets of each class, calculated daily and payable
monthly. For its services to Basic Value, Bartlett receives and annual fee of
0.75% of its average daily net assets; for its services to Value International,
Bartlett receives an annual fee of 1.25% of its average daily net assets; and
for its services to Europe Fund, Bartlett receives an annual fee of 1.00% of its
average daily net assets.
Lombard Odier
Lombard Odier, Norfolk House, 13 Southampton Place, London WC1A 2AJ,
England, serves as investment sub-adviser to Europe Fund pursuant to a
Sub-Advisory Agreement, which was approved by the Board of Trustees. For its
services under the Sub-Advisory Agreement, Lombard Odier will receive from
Bartlett (not Europe Fund) a monthly fee at the rate of 60% of the monthly fee
actually paid to Bartlett by the Trust under the Investment Management and
Administration Agreement, taking into account any fee waiver or expense
reimbursement arrangements in effect for Europe Fund (see below).
Lombard Odier specializes in advising and managing investment
portfolios for institutional clients and also serves as investment adviser for
one other investment company. As of [ ], Lombard Odier had approximately [ ]
billion in aggregate assets under management. Lombard Odier is an indirect
wholly owned subsidiary of Lombard Odier & Cie, a Swiss private bank.
Fee waivers:
Bartlett has agreed to waive fees and/or assume other expenses to the
extent that a Fund's expenses exceed the following annual rates of average daily
net assets until July 31, 1998:
Class A Class C
------- -------
Value International 1.80% 2.55%
Basic Value 1.15% 1.90%
Europe Fund 1.75% 2.50%
Portfolio Managers:
James A. Miller, CFA, Vice President of the Trust, and Woodrow H.
Uible, CFA, Vice President of the Trust, are responsible for co-managing Basic
Value. Mr. Miller is a Senior Portfolio Manager, President and a Director of
Bartlett. Mr. Miller joined Bartlett in 1977 and is a member of its
Institutional
25
<PAGE>
Investment Group. Mr. Uible is a Senior Portfolio Manager of Bartlett. Mr. Uible
has been employed by Bartlett since 1980. He chairs Bartlett's Equity Investment
Group, and is responsible for Bartlett's equity investment processes.
Madelynn M. Matlock, CFA, Vice President of the Trust, is primarily
responsible for managing Value International. Ms. Matlock, Director of
International Investments for Bartlett, joined Bartlett in 1981. She also served
as Director of Research for Bartlett from 1983 to 1992.
Ronnie Armist, Chief Investment Officer, Equities, of Lombard Odier in
London, is primarily responsible for managing the Europe Fund. Mr. Armist joined
Lombard Odier in 1983 and has served as Chief Investment Officer, Equities,
since 1991.
BFP
BFP is the distributor, or principal underwriter, of each Fund's shares
pursuant to a Distribution Agreement with the Trust on behalf of each Fund. The
Distribution Agreement obligates BFP to pay certain expenses in connection with
the offering of shares of each Fund, including any compensation to
brokers/dealers, the printing and distribution of prospectuses, statements of
additional information and periodic reports used in connection with the offering
to prospective investors, after the prospectuses, statements of additional
information and periodic reports have been prepared, set in type and mailed to
existing shareholders at the Fund's expense, and for any supplementary sales
literature and advertising costs. BFP collects the sales charges imposed on
purchases of Class A shares and any contingent deferred sales charges that may
be imposed on certain redemptions of Class A shares. BFP reallows a portion of
the sales charges on Class A shares to broker/dealers that have sold such shares
in accordance with the schedule set forth under "Purchase of Shares." BFP may
also pay special additional compensation and promotional incentives to
broker/dealers who sell Class A shares of the Funds. BFP is a wholly owned
subsidiary of Legg Mason, Inc.
The Board of Trustees of the Trust has adopted a Plan of Distribution
pursuant to Rule 12b-1 under the 1940 Act, with respect to each Fund's Class A
shares ("Class A Plan"). The Class A Plan provides that as compensation for its
ongoing services to investors, each Fund may pay BFP a service fee at the
annualized rate of 0.25% of the average daily net assets of each Fund's Class A
shares. Pursuant to a separate Plan of Distribution adopted with respect to each
Fund's Class C shares ("Class C Plan"), each Fund may pay BFP distribution and
service fees at the annualized rate of 1.00% of the average daily net assets of
each Fund's Class C shares for its ongoing services to investors and its
activities and expenses related to the sale and distribution of Class C shares.
These fees are calculated daily and paid monthly. The fees received by
BFP during any year may be more or less than its costs of providing distribution
and shareholder services for Class A and Class C shares. NASD rules limit the
amount of annual distribution fees that may be paid by mutual funds and impose a
ceiling on the cumulative distribution fees received. Each Fund's distribution
plans comply with those rules.
DESCRIPTION OF THE TRUST
Bartlett Capital Trust ("Trust") is a diversified, open-end management
investment company organized as a Massachusetts business trust on October 31,
1982. The business activities of the Trust are supervised by its Board of
Trustees. Like other mutual funds, the Trust retains various organizations to
perform specialized services.
The trustees of the Trust have authority to issue an unlimited number
of shares of beneficial interest of separate series, all without par value.
Shares of three series, consisting of the Funds, have been authorized.
The shares of beneficial interest of each Fund are divided into three
classes, designated Class A, Class C and Class Y shares. Each class represents
interests in the same assets of the Fund. The classes differ as follows: (1)
each of Class A and Class C has exclusive voting rights on matters pertaining to
its plan of distribution, (2) Class A shares generally are subject to an initial
sales charge, and may,
26
<PAGE>
under limited circumstances, be subject to a contingent deferred sales charge,
and bear ongoing service fees, (3) Class C shares are subject to neither an
initial or contingent deferred sales charge, but bear ongoing distribution and
service fees, and (4) each Class may bear differing amounts of certain class-
specific expenses.
The differing sales charges and other expenses applicable to the
different classes of each Fund's shares may affect the performance of those
classes. More information concerning the classes of shares of the Funds may be
obtained by calling BFP at 1-800-822-5544.
Any Trustee of the Trust may be removed by vote of the shareholders
holding not less than two-thirds of the outstanding shares of the Trust. The
Trust does not hold annual meetings of shareholders. Shareholders of the Funds
are entitled to one vote per share and fractional votes for fractional shares
held. Voting rights are not cumulative. All shares of the Funds are fully paid
and nonassessable and have no preemptive or conversion rights. A separate vote
is taken by a class of shares of a Fund if a matter affects just that class of
shares. Each class of shares may bear certain differing class-specific expenses.
Financial advisors and others entitled to receive compensation for selling or
servicing Fund shares may receive more with respect to one class than another.
The Board of Trustees of the Trust does not anticipate that there will
be any conflicts among the interests of the holders of the different classes of
Fund shares. On an ongoing basis, the Board will consider whether any such
conflict exists and, if so, take appropriate actions.
Each Fund acknowledges that it is solely responsible for the
information or any lack of information about it in this joint Prospectus and in
the joint Statement of Additional Information, and no other Fund is responsible
therefor. There is a possibility that one Fund might be deemed liable for
misstatements or omissions regarding another Fund in this Prospectus or in the
joint Statement of Additional Information; however, the Funds deem this
possibility slight.
27
<PAGE>
Investment Adviser
Bartlett & Co.
36 East Fourth Street
Cincinnati, Ohio 45202-3896
Investment Sub-Adviser to Europe Fund
Lombard Odier International Portfolio Management Limited
Norfolk House
13 Southampton Place
London WC1A 2AJ, England
Custodian
State Street Bank and Trust Company
P.O. Box 1713
Boston, Massachusetts 02105
Sub-Custodian for Europe Fund
The Chase Manhattan Bank, N.A.
1 Chaseside
Bournemouth, Dorset BH7 7DB
England
Transfer Agent
Boston Financial Data Services, Inc.
2 Heritage Drive
North Quincy, Massachusetts 02171
Independent Accountants
Coopers & Lybrand L.L.P.
217 East Redwood Street
Baltimore, Maryland 21202
Legal Counsel
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, DC 20036
No person has been authorized to give any information
or to make any representations, other than those
contained in this Prospectus, in connection with the
offering contained in this Prospectus, and if given or
made, such information or representations must not be
relied upon as being authorized by the Trust. This
Prospectus does not constitute an offer by the Trust
to sell its shares in any state to any person to whom
it is unlawful to make such offer in such state.
<PAGE>
BARTLETT CAPITAL TRUST
PROSPECTUS
CLASS Y SHARES
July [ ], 1997
Table of Contents
Prospectus Highlights Redemption of Shares
Fund Expenses Calculation of Share Price
Financial Highlights Dividends and Other Distributions
Investment Objectives and Policies Taxes
Investment Techniques and Risk Investment Performance
Considerations Management of the Trust
Purchase of Shares Description of the Trust
Bartlett Capital Trust ("Trust") is an open-end management investment
company which currently offers three series: Bartlett Value International Fund,
Bartlett Basic Value Fund and Bartlett Europe Fund (each separately referred to
as a "Fund" and collectively referred to as the "Funds").
BARTLETT VALUE INTERNATIONAL FUND ("Value International") seeks capital
appreciation by investing primarily in foreign equity securities believed by its
adviser, Bartlett & Co. ("Bartlett" or "Adviser"), to be attractively priced
relative to their intrinsic value. Income is a secondary consideration.
BARTLETT BASIC VALUE FUND ("Basic Value") seeks capital appreciation by
investing primarily in common stocks or securities convertible into common
stocks that are believed by the Adviser to be attractively priced relative to
their intrinsic value. Income is a secondary consideration.
BARTLETT EUROPE FUND ("Europe Fund") seeks long-term growth of capital by
investing primarily in equity securities of European issuers which Lombard Odier
International Portfolio Management Limited ("Lombard Odier"), investment
sub-adviser to Europe Fund, believes are undervalued and thus may offer
above-average potential for capital appreciation.
This Prospectus sets forth concisely the information about the Funds
that you ought to know before investing. Please read and retain this Prospectus
for future reference. A Statement of Additional Information for the Funds dated
July [ ], 1997 has been filed with the Securities and Exchange Commission
("SEC") and, as amended or supplemented from time to time, is incorporated
herein by reference. The Statement of Additional Information is available
without charge upon request by calling BFP Financial Partners, Inc. ("BFP"), the
Funds' distributor, at 1-800-822-5544.
The Class Y shares described in this Prospectus are currently offered
for sale only to advisory clients of Bartlett that are employee benefit or
retirement plans, other than individual retirement accounts and self-employed
individual retirement plans, to retirement plans having net assets of at least
$10 million, to purchasers of $5 million or more, and to participants in certain
wrap fee investment advisory programs that are currently or in the future
sponsored by Bartlett and that may invest in Bartlett proprietary funds,
provided that shares are purchased through or in connection with those programs.
INVESTORS SHOULD BE COGNIZANT OF THE UNIQUE RISKS OF INTERNATIONAL
INVESTING, INCLUDING EXPOSURE TO CURRENCY FLUCTUATIONS. BECAUSE OF THESE RISKS,
AN INVESTMENT IN VALUE INTERNATIONAL OR EUROPE FUND SHOULD NOT BE CONSIDERED A
COMPLETE INVESTMENT PROGRAM.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK OR OTHER DEPOSITORY INSTITUTION. SHARES ARE NOT INSURED BY
THE FDIC, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND ARE SUBJECT TO
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
For further information, call (800) 822-5544 or contact your financial advisor.
<PAGE>
PROSPECTUS HIGHLIGHTS
Bartlett Value International Fund
Bartlett Basic Value Fund
Bartlett Europe Fund
The following summary is qualified in its entirety by the more detailed
information appearing in the body of this Prospectus and in the Statement of
Additional Information.
Investment Objectives
and Policies: Value International is a diversified,
professionally managed portfolio seeking to
provide capital appreciation. In attempting
to achieve the Fund's objective, the Fund
normally invests at least 65% of its total
assets in securities of non-U.S. issuers. At
least three different foreign countries will
normally be represented in the Fund's
portfolio.
Basic Value is a diversified, professionally
managed portfolio seeking to provide capital
appreciation. In attempting to achieve the
Fund's objective, the Fund invests primarily
in common stocks or securities convertible
into common stocks. The Fund seeks to
diversify its investments across industry
sectors.
Europe Fund is a diversified, professionally
managed portfolio seeking to provide
long-term growth of capital. In attempting
to achieve the Fund's objective, the Fund
normally invests at least 65% of its assets
in equity securities, including common
stock, preferred stock, convertible
securities and warrants, of European
issuers.
Investment Adviser: Bartlett & Co. has provided investment
advice to individuals, pension and
profit-sharing plans and trust accounts
since 1898.
Investment Sub-Adviser to Lombard Odier International Portfolio
Europe Fund: Management Limited ("Lombard Odier"), a
subsidiary of one of the oldest and largest
private banks in Switzerland, specializes in
advising and managing investment portfolios
for institutional clients.
Purchase Plan: Class Y shares are offered only to a limited
class of investors.
Class Y Shares: Offered for sale only to advisory clients of
Bartlett that are employee benefit or
retirement plans, other than individual
retirement accounts ("IRAs") and
self-employed individual retirement plans,
to retirement plans having net assets of at
least $10 million, to purchasers of $5
million or more, and to participants in
certain wrap fee investment advisory
programs that are currently or in the future
sponsored by Bartlett and that may invest in
Bartlett proprietary funds, provided that
shares are purchased through or in
connection with those programs. See
"Purchase of Shares."
Initial Purchase: $1,000 minimum, generally, subject to the
above limitations.
Subsequent Purchases: $100 minimum, generally.
1
<PAGE>
Exchange Privilege: Exchanges may be made for shares of the
corresponding class of shares of any other
Bartlett Mutual Fund and for shares of Legg
Mason Cash Reserve Trust, a money market
mutual fund. See "Exchange Privilege," page
[ ].
Dividends and Other Distributions: Dividends from net investment income are
declared and paid quarterly by Value
International and Basic Value and annually
by Europe Fund. Distributions of gains are
declared and paid annually by each Fund. See
"Dividends and Other Distributions," page
[ ]. All dividends and other distributions
are automatically reinvested in Fund shares
unless cash payments are requested.
Risk Factors: There can be no assurance that any Fund will
achieve its investment objective. Each
Fund's net asset value will fluctuate,
reflecting fluctuations in the value of its
securities. The value of the equity and
other instruments held by the Funds are
subject to market risk. The market risk of
equity securities is generally perceived to
be higher than that of any other securities
of an issuer. The value of debt instruments
generally fluctuates inversely with
movements in market interest rates. The
values of longer-term debt securities
generally fluctuate more than those of
shorter-term securities.
Changes in economic conditions in, or
governmental policies of, foreign nations
may have a significant impact on the
performance of Value International and
Europe Fund. Foreign investment involves a
possibility of expropriation, nationaliza-
tion, confiscatory taxation, limitations on
the use or removal of funds or other assets
of a Fund, the withholding of tax on
interest or dividends, and restrictions on
the ownership of securities by foreign
entities such as the Funds. Fluctuations in
the value of foreign currencies relative to
the U.S. dollar will affect the value of
Fund holdings denominated in such
currencies.
Each Fund's participation in hedging and
option strategies also involves certain
investment risks and transaction costs. None
of the Funds should be considered a complete
investment program. See "Investment
Objectives and Policies" and "Investment
Techniques and Risk Considerations."
2
<PAGE>
FUND EXPENSES
The purpose of the following tables is to assist an investor in
understanding the various costs and expenses that an investor in Class Y shares
of a Fund will bear directly or indirectly. For Value International and Basic
Value Class Y shares, the expenses set forth in the table below are based on
average net assets and annual Fund operating expenses relating to Value
International and Basic Value shares, respectively, for the year ended March 31,
1997, but have been restated to reflect current management fees and estimated
other expenses. Those shares were redesignated as Class A shares on July [ ],
1997. For Class Y shares of Europe Fund, other expenses are based on estimates
for the current fiscal period. Fees are adjusted for current expense limits and
fee waiver levels for all three Funds.
Class Y Shares
<TABLE>
<CAPTION>
Value Basic Europe
Shareholder Transaction Expenses: International Value Fund
=======================================================================================================================
<S> <C>
Maximum sales charge on purchases: None None None
Deferred sales charges: None None None
Redemption or exchange fees: None None None
Annual Fund Operating Expenses(A,B)
(as a % of average net assets):
- -----------------------------------------------------------------------------------------------------------------------
Management fees (after fee waivers) 1.20% 0.72% 0.69%
12b-1 fees None None None
Other expenses 0.35% 0.18% 0.81%
- -----------------------------------------------------------------------------------------------------------------------
Total operating expenses (after fee waivers) 1.55% 0.90% 1.50%
=======================================================================================================================
</TABLE>
(A) Pursuant to voluntary expense limitations, the Adviser has agreed to
waive fees to the extent that Value International's Class Y expenses
exceed 1.55%, Basic Value's Class Y expenses exceed 0.90%, and Europe
Fund's Class Y expenses exceed 1.50% of their respective average daily
net assets through July 31, 1998. In the absence of such waivers, the
expected management fee, other expenses and total operating expenses of
Value International would be 1.25 %, 0.35% and 1.60%; of Basic Value
would be 0.75%, 0.18% and 0.93%; and of Europe Fund would be
1.00%,0.81% and 1.81% of average daily net assets, respectively.
(B) The expense information has been restated to reflect current fees and
expenses and a changed management fee.
Example
The following example illustrates the expenses that you would pay on a
$1,000 investment in Class Y Shares over various time periods assuming (1) a 5%
annual rate of return and (2) full redemption at the end of each time period.
With the limited exceptions noted above, the Funds charge no redemption fees of
any kind.
1 Year 3 Years 5 Years 10 Years
===========================================================================
Value International $16 $49 $84 $185
Basic Value $9 $29 $50 $111
Europe Fund $15 $47 $82 $179
3
<PAGE>
THE ASSUMED 5% ANNUAL RETURN IS NOT A PREDICTION OF, AND DOES NOT
REPRESENT, THE PROJECTED OR ACTUAL PERFORMANCE OF CLASS Y SHARES OF THE FUNDS.
THE ABOVE TABLES AND EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
actual expenses attributable to Class Y Shares will depend upon, among other
things, the level of average net assets, the levels of sales and redemptions of
shares, the extent to which Bartlett or Lombard Odier waive their fees and the
extent to which Class Y Shares incur variable expenses, such as transfer agency
costs.
INVESTMENT PERFORMANCE
From time to time each Fund may quote the TOTAL RETURN of each class of
shares in advertisements or in reports or other communications to shareholders.
A mutual fund's total return is a measurement of the overall change in value,
including changes in share price and assuming reinvestment of dividends and
capital gain distributions, of an investment in the fund. CUMULATIVE TOTAL
RETURN shows the fund's performance over a specific period of time. AVERAGE
ANNUAL TOTAL RETURN is the average annual compounded return that would have
produced the same cumulative total return if the fund's performance had been
constant over the entire period. Average annual returns, which differ from
actual year-by-year results, tend to smooth out variations in a fund's return.
No adjustment will be made for any income taxes payable by shareholders.
Total return information reflects past performance and is not a
prediction or guarantee of future results. Investment return and share price
will fluctuate, and the value of an investors shares, when redeemed, may be
worth more or less than their original cost. Further information about each
Fund's performance is contained in the combined annual report to shareholders,
which may be obtained without charge by calling BFP at 1-800-822-5544.
4
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of Basic Value and Value International may be
changed without shareholder approval; however, shareholders of these two Funds
will be given a minimum of 30 days' prior written notice before any change in
investment objective becomes effective. Europe Fund's investment objective may
not be changed without shareholder approval. Except as otherwise noted, the
investment policies of each Fund described below may be changed by the Trust's
Board of Trustees without a shareholder vote. There can be no assurance that any
Fund will achieve its investment objective. Each Fund's net asset value
fluctuates based upon changes in the value of its portfolio securities.
BARTLETT VALUE INTERNATIONAL FUND
The investment objective of Value International is to seek capital
appreciation. The Fund seeks its objective by investing primarily in foreign
equity securities believed by Bartlett to be attractively priced relative to
their intrinsic value. Income is a secondary consideration.
The Fund invests primarily in equity securities of non-U.S. issuers
generally consisting of common stocks, common stock equivalents and preferred
stocks. The Fund also may invest indirectly in foreign equity securities by
purchasing American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs") or other similar securities and by purchasing shares of closed-end
investment companies that hold foreign equity securities in their portfolios.
However, there is no requirement that the Fund invest exclusively in
foreign equity securities. The Fund may invest in other types of foreign
securities such as debt obligations of foreign companies, foreign governments,
foreign governmental agencies and international organizations. In addition, the
Fund may invest a portion of its assets in U.S. government obligations, debt and
equity obligations of U.S. issuers, and repurchase agreements, and may hold a
portion of its assets in cash and U.S. dollar-denominated time deposits.
In seeking its objective, the Fund intends to diversify its investments
among issuers representing various countries. Under normal circumstances, at
least 65% of the Fund's total assets will be invested in non-U.S. issuers and at
least three different foreign countries will be represented in the Fund's
portfolio. The Fund may invest in countries in Western Europe, the Far East,
Canada, Australia and other geographic regions. The Fund may, from time to time,
have more than 25% of its assets invested in any major industrial or developed
country which in the view of Bartlett poses no unique investment risk. If
circumstances warrant, for temporary defensive purposes, the Fund may invest
substantially all of its assets in one or two countries.
The Fund may employ several investment techniques, including the use of
options, hedging programs, currency transactions, repurchase agreements, lending
of portfolio securities, short sales "against the box" and forward commitment
transactions. For temporary defensive purposes, the Fund may hold all or a
portion of its assets in money market instruments, cash equivalents, short-term
government and corporate obligations or repurchase agreements.
Bartlett selects portfolio securities on the basis of what it considers
to be the intrinsic value of each security. In analyzing the intrinsic value of
a specific security, particular emphasis is given to such characteristics as
relative price/earnings ratio, dividend yield, and price/book value ratio. In
making investment decisions, Bartlett considers all other pertinent factors
affecting the intrinsic value of a security, including financial, tax, social,
political and national conditions.
Although the Fund provides a means for individuals and institutional
investors to invest a portion of their assets outside the U.S., it should not be
considered a complete investment program. In addition, investments in foreign
securities may be subject to risks not typically associated with investments in
domestic securities. See "Foreign Securities" for a more complete discussion of
certain risks associated with investments in foreign securities.
See "Investment Techniques and Risk Considerations" beginning at page
[___] for a more detailed
5
<PAGE>
discussion of risks associated with the securities and investment techniques
discussed above.
BARTLETT BASIC VALUE FUND
The investment objective of Basic Value is to seek capital
appreciation. The Fund seeks its objective by investing primarily in common
stocks or securities convertible into common stocks that Bartlett believes to be
selling at attractive prices relative to their intrinsic value. Income is a
secondary consideration. In determining whether a specific security represents
investment value, particular emphasis is given to such characteristics as low
debt, relative price/earnings ratio, dividend yield, and price/book ratio. The
Fund seeks to diversify its investments across industry sectors. The Fund's
investments may include foreign securities.
In seeking its objective, Basic Value invests only in securities of
companies with at least three years of operating history. Due to the Fund's
disciplined investment methodology, and the cyclical nature of the economy and
investment markets, there will be times when Bartlett is unable to purchase
reasonably valued common stocks and common stock equivalents. At these times,
the Fund may hold all or a portion of its assets in fixed income securities.
The Fund may employ several investment techniques, including the use of
options, hedging programs, currency transactions, repurchase agreements, reverse
repurchase agreements and dollar rolls, lending of portfolio securities, short
sales, short sales "against the box", structured securities and forward
commitment transactions. For temporary defensive purposes, the Fund may hold all
or a portion of its assets in money market instruments, cash equivalents,
short-term government and corporate obligations or repurchase agreements.
For a further discussion of the risks associated with these securities
and techniques, see "Investment Techniques and Risk Considerations," beginning
on page [ ].
BARTLETT EUROPE FUND
The investment objective of Europe Fund is to seek long-term growth of
capital. The Fund seeks to achieve its investment objective by investing, under
normal market conditions, at least 65% of its total assets in equity securities
of European issuers that Lombard Odier believes are undervalued and thus may
offer above-average potential for capital appreciation.
The Fund invests primarily in equity securities, including common
stock, preferred stock, convertible securities, rights and warrants, but may
also invest in bonds, notes and other fixed income securities. The Fund will
normally invest at least 65% of its total assets in equity securities and may
invest up to 35% of its total assets in fixed income securities. When conditions
warrant, for temporary defensive purposes, the Fund may invest over 35% and as
much as 100% of its total assets in fixed income securities. The fixed income
securities in which the Fund may invest generally include obligations of foreign
or domestic governments, government agencies or municipalities, and obligations
of foreign or domestic companies. The Fund may invest in fixed income securities
without regard to rating, although Lombard Odier does not anticipate that more
than 5% of the Fund's total assets will be invested in fixed income securities
rated lower than "investment grade" (that is, Baa by Moody's Investors Service,
Inc. ("Moody's") or BBB by Standard & Poor's ("S&P")), or, if unrated, deemed by
Lombard Odier to be of comparable quality. Most fixed income securities of
foreign issuers are not rated by Moody's or S&P. Generally, the fixed income
securities in which the Fund will invest will be those which Lombard Odier
believes offer potential for capital appreciation, either because of anticipated
changes in the general level of interest rates, or because of anticipated
improvement in the issuer's credit rating.
For temporary defensive purposes, the Fund may hold all or a portion of
its assets in money market instruments, cash equivalents, short-term government
and corporate obligations. The Fund may also enter into repurchase agreements.
The Fund may purchase securities both on recognized stock exchanges and
in over-the-counter markets. Most of the Fund's portfolio transactions will be
effected in the primary trading market for the given security.
6
<PAGE>
The Fund may also invest in depositary receipts and securities of other
investment companies, and may enter into when-issued and delayed-delivery
transactions. The Fund is authorized to invest in options, futures and options
on futures contracts and may enter into foreign currency transactions and
forward foreign currency exchange contracts ("forward contracts"). The Fund may
invest up to 15% of its total assets in illiquid or restricted securities.
INVESTMENT TECHNIQUES AND RISK CONSIDERATIONS
The following investment techniques and risks apply to each Fund unless
otherwise stated.
Equity Securities
Equity securities include common stock, preferred stock and other
similar securities such as convertible preferred stock, convertible debentures,
rights and warrants. Convertible preferred stock is preferred stock that can be
converted into common stock pursuant to its terms. Convertible debentures are
debt instruments that can be converted into common stock pursuant to their
terms. Warrants are options to purchase equity securities at a specified price
valid for a specific time period. Rights are similar to warrants, but normally
have a short duration and are distributed by the issuer to its shareholders.
Foreign Securities
Each Fund may invest, without limitation, in foreign equity securities.
Value International and Europe Fund are expected normally to invest at least 65%
of their respective assets in foreign securities. In addition, Value
International and Europe Fund each may invest in any closed-end investment
company that holds foreign equity securities in its portfolio.
American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs") and other similar securities convertible into securities of foreign
companies provide a means for investing indirectly in foreign equity securities.
ADRs are receipts typically issued by a U.S. bank evidencing ownership of the
underlying foreign securities. EDRs are receipts typically issued by a European
bank evidencing ownership of the underlying foreign securities. To the extent an
ADR or EDR is issued by a bank unaffiliated with the foreign company issuer of
the underlying security, the bank has no obligation to disclose material
information about the foreign company issuer. Each Fund may invest in ADRs and
EDRs.
Foreign fixed income securities include corporate debt obligations
issued by foreign companies and debt obligations of foreign governments or
international organizations. This category may include floating rate
obligations, variable rate obligations, Yankee dollar obligations (U.S.
dollar-denominated obligations issued by foreign companies and traded on U.S.
markets) and Eurodollar obligations (U.S. dollar-denominated obligations issued
by foreign companies and traded on foreign markets).
Foreign government obligations generally consist of debt securities
supported by national, state or provincial governments or similar political
units or governmental agencies. Such obligations may or may not be backed by the
national government's full faith and credit and general taxing powers.
Investments in foreign securities also include obligations issued by
international organizations, which include entities designated or supported by
governmental entities to promote economic reconstruction or development as well
as international banking institutions and related governmental agencies.
Examples are the International Bank for Reconstruction and Development (the
World Bank), the European Coal and Steel Community, the Asian Development Bank
and the InterAmerican Development Bank. In addition, investments in foreign
securities may include debt securities denominated in multinational currency
units of an issuer (including international issuers). An example of a
multinational currency unit is the European Currency Unit. A European Currency
Unit represents specified amounts of the currencies of certain member states of
the European Economic Community, more commonly known as the Common Market. Each
Fund may include foreign fixed income securities and foreign government
obligations in its portfolio.
Value International and Europe Fund under normal conditions will invest
at least 65% of their assets in foreign securities and European securities,
respectively. For purposes of this 65% test, foreign
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and European securities respectively include securities of issuers: (i) which
are organized under the laws of a foreign country or Europe; (ii) for which the
principal trading market is in a foreign country or Europe; or (iii) which
derive at least 50% of their revenues or profits from goods produced or sold,
investments made, or services performed in foreign countries or Europe or which
have at least 50% of their assets situated in foreign countries or Europe.
Purchases of foreign securities are usually made in foreign currencies
and, as a result, a Fund may incur currency conversion costs and may be affected
favorably or unfavorably by changes in the value of foreign currencies against
the U.S. dollar. In addition, there may be less information publicly available
about a foreign company than about a U.S. company, and foreign companies are not
generally subject to accounting, auditing and financial reporting standards and
practices comparable to those in the U.S. Other risks associated with
investments in foreign securities include changes in restrictions on foreign
currency transactions and rates of exchange, changes in the administrations or
economic and monetary policies of foreign governments, the imposition of
exchange control regulations, the possibility of expropriation decrees and other
adverse foreign governmental action, the imposition of confiscatory foreign
taxes, less liquid markets, less government supervision of exchanges, brokers
and issuers, difficulty in enforcing contractual obligations, delays in
settlement of securities transactions and greater price volatility. In addition,
investing in foreign securities will generally result in higher commissions than
investing in similar domestic securities.
Emerging Markets
Value International and Europe Fund may invest in securities of issuers
based in emerging markets. Europe Fund may (but is not limited to) invest in
issuers based in Greece, Portugal, Hungary, Poland, Czech Republic, Slovakia or
Turkey. International Fund may (but is not limited to) invest in issuers based
in the countries in Latin America, Southeast Asia, the Far East and South
America. The risks of foreign investment, described above, are greater for
investments in emerging markets. Investors are strongly advised to consider
carefully the special risks involved in emerging markets, which are in addition
to the usual risks of investing in developed markets around the world. Many
emerging market countries have experienced substantial, and in some periods
extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had, and may continue to have, very
negative effects on the economies and securities markets of certain emerging
markets. Economies in emerging markets generally are heavily dependent upon
international trade and, accordingly, have been and may continue to be affected
adversely by economic conditions, trade barriers, exchange controls, managed
adjustments in relative currency values and other protectionist measures imposed
or negotiated by the countries with which they trade. In addition, many of the
currencies of emerging market countries have experienced steady devaluations
relative to the U.S. dollar, and major devaluations have occurred in certain
countries.
Fixed Income Securities
Fixed income securities include corporate debt securities, municipal
obligations, mortgage-related securities, asset-backed and receivable-backed
securities, U.S. government obligations and participation interests in such
securities. Certain fixed income securities are floating rate obligations or
variable rate obligations. Certain fixed income securities may carry demand
features that permit a Fund to sell the obligation back to the issuer or to a
third party at a specified price upon short notice at any time or prior to
specific dates. Preferred stock and convertible debt securities may also be
considered to be fixed income securities.
Corporate Debt Securities. Each Fund is permitted to invest in
corporate debt securities, i.e., long-term and short-term debt obligations
issued by companies (such as publicly issued and privately placed bonds, notes
and commercial paper.) Corporate debt securities include variable amount master
demand notes. These obligations permit the investment of fluctuating amounts at
varying rates of interest pursuant to direct arrangements between a Fund, as
lender, and the borrower. Variable amount master demand notes are direct lending
arrangements between the lender and borrower and are not generally transferable.
A Fund may invest in such notes only if the Board of Trustees believes that the
notes are of comparable quality to the other obligations in which the Fund may
invest. Variable amount master demand notes may be deemed illiquid under certain
circumstances and a Fund's investment in such notes
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would be limited to the extent that it is not permitted to invest more than 10%
(15% for Europe Fund) of the value of its net assets in illiquid investments.
Options, Futures and Forward Currency Exchange Contracts
Each Fund may engage in option transactions involving equity
securities, debt securities, futures contracts and stock indexes. Each Fund may
also engage in option transactions involving foreign currencies and foreign
stock indexes.
To cover the potential obligations involved in option transactions, a
Fund will own the underlying equity security, debt security, futures contract or
foreign currency or the Fund will segregate with its custodian (i) high grade
liquid debt assets sufficient to purchase the underlying equity security, debt
security, futures contract or foreign currency or (ii) high grade liquid debt
assets equal to the market value of the stock index. A Fund will engage in
options on futures contracts only for hedging purposes (see below). Option
transactions involve the following principal risks: (i) the loss of a greater
percentage of the Fund's investment than a direct investment in the underlying
instrument, (ii) the loss of opportunity to profit from price movements in the
underlying instrument, and (iii) the inability to effect a closing transaction
on a particular option.
There is no restriction on the percentage of a Fund's total assets
which may be committed to transactions in options (except options on futures
contracts as discussed below). However, the SEC considers over-the-counter
options to be illiquid. As long as the Commission maintains this position, a
Fund will not engage in an over-the-counter option transaction if such
transaction would cause the value of such options purchased by the Fund and the
assets used to cover such options written (sold) by the Fund, together with the
value of other illiquid securities held by the Fund, to exceed 10% (15% for
Europe Fund) of its net assets. The policy of Basic Value and Value
International with respect to options is fundamental, although the particular
practices followed with respect to options, such as the procedures used to cover
or secure options which a Fund writes, are not deemed fundamental and may be
changed by the Board of Trustees without shareholder vote.
Each Fund may hedge all or a portion of its portfolio investments
through the use of options, futures contracts and options on futures contracts.
Each Fund may hedge currency risks associated with investments in foreign
securities and in particular may hedge its portfolio through the use of forward
contracts as described below. The objective of a hedging program is to protect a
profit or offset a loss in a portfolio security from future price erosion or to
assure a definite price for a security, stock index, futures contract or
currency. There are transactional costs connected with a hedging program.
The principal risks associated with hedging transactions are: (i)
possible imperfect correlation between the prices of the options and futures
contracts and the market value of a Fund's portfolio securities, (ii) possible
lack of a liquid secondary market for closing out an option or futures contract
transaction, (iii) the need for additional skills and techniques beyond normal
portfolio management, and (iv) losses resulting from market movements not
anticipated by Bartlett and/or Lombard Odier.
No Fund may purchase or sell futures contracts or purchase related
options if, immediately thereafter, more than one-third of its net assets would
be hedged. In addition, no Fund may enter into transactions involving futures
contracts and related options if such transactions would result in more than 5%
of the fair market value of the Fund's assets being deposited as initial margin
for such transactions. A Fund's ability to engage in the hedging transactions
and strategies described above may be limited by the requirement for federal
income tax purposes that a Fund derive less than 30% of its gross income from
the sale or other disposition of stock, securities or certain options, futures,
forward contracts or foreign currencies held for less than three months.
When a Fund purchases or sells a security denominated in a foreign
currency, it may be required to settle the purchase transaction in the relevant
foreign currency or to receive the proceeds of the sale in the relevant foreign
currency. In either event, the Fund will be obligated to acquire or dispose of
the foreign currency by selling or buying an equivalent amount of U.S. dollars.
To effect the conversion of the amount of foreign currency involved in the
purchase or sale of a foreign security, the Fund may purchase or sell such
foreign currency on a "spot" (i.e., cash) basis.
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In addition, a Fund may wish to lock in the U.S. dollar value of the
transaction at or near the time of the purchase or sale at the exchange rate or
rates then prevailing between the U.S. dollar and the currency in which the
foreign security is denominated. Therefore, a Fund may enter into a forward
contract. A forward contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. These contracts are traded directly between currency traders
(usually large commercial banks) and their customers. By entering into a forward
contract in U.S. dollars for the purchase or sale of the amount of foreign
currency involved in an underlying security transaction, a Fund is able to
protect itself against a possible loss between trade and settlement dates
resulting from an adverse change in the relationship between the U.S. dollar and
such foreign currency. This process is known as transaction hedging. Transaction
hedging may protect a Fund from a possible loss, but will limit potential gains
which might result from a positive change in the currency relationships.
When it is desirable to limit or reduce exposure in a foreign currency
in order to moderate potential changes in the U.S. dollar value of the
portfolio, a Fund may enter into a forward contract to sell, for a fixed amount
of U.S. dollars, the amount of foreign currency approximating the value of some
or all of that Fund's portfolio securities denominated in such foreign currency.
This technique is known as portfolio hedging. Hedging against a decline in the
value of currency does not eliminate fluctuations in the prices of portfolio
securities or prevent losses if the prices of such securities declines. The
Funds may also employ forward contracts to hedge against an increase in the
value of the currency in which the securities a Fund intends to buy are
denominated.
A Fund may also hedge its foreign currency exchange rate risk by
engaging in currency futures contracts and options transactions described above.
No Fund will engage in foreign currency transactions for speculative purposes.
A more complete description of the characteristics, risks and possible
benefits of option and hedging transactions is included in the Funds' Statement
of Additional Information.
Repurchase Agreements
Each Fund may enter into repurchase agreements. A repurchase agreement
is a transaction by which a Fund purchases a security and simultaneously commits
to resell that security to the seller at an agreed upon price and date. 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 security and
losses. Europe Fund may enter into repurchase agreements with respect to
securities issued by the U.S. government, its agencies or instrumentalities.
Under normal circumstances, no more than 25% of Europe Fund's assets will be
invested in repurchase agreements at any time.
Illiquid Securities
The portfolio of each Fund may contain illiquid securities. A Fund will
not invest more than 10% (15% with respect to Europe Fund) of its net assets in
securities for which there are legal or contractual restrictions on resale or
other illiquid securities. Illiquid securities generally include securities
which cannot be disposed of promptly and in the ordinary course of business
without taking a reduced price. Securities may be illiquid due to contractual or
legal restrictions on resale or lack of a ready market. The following securities
are considered generally to be illiquid (although if they are liquid they will
be treated as such): repurchase agreements and time deposits maturing in more
than seven days, options traded in the over-the-counter market, nonpublicly
offered securities, stripped collateralized mortgage obligations ("CMOs"), CMOs
for which there is no established market, direct investments in mortgages and
restricted securities.
Loans of Portfolio Securities
Basic Value and Value International may make short- and long-term loans
of their portfolio securities. Under the lending policy authorized by the Board
of Trustees and implemented by Bartlett, in response to requests of
broker/dealers or institutional investors which Bartlett deems qualified, the
borrower must agree to maintain collateral, in the form of cash or U.S.
government obligations, with the
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Fund on a daily mark-to-market basis in an amount at least equal to 100% of the
value of the loaned securities. The Funds will continue to receive dividends or
interest on the loaned securities and may terminate such loans at any time or
reacquire such securities in time to vote on any matter which the Board of
Trustees determines to be serious. There is the risk that the borrower may fail
to return the loaned securities or that the borrower may not be able to provide
additional collateral. No loan of securities will be made if, as a result, the
aggregate amount of such loans would exceed 25% of the value of a Fund's total
assets.
Other Investment Companies
Each Fund is permitted to invest in other investment companies at any
time. A Fund will not invest more than 10% of its total assets in securities of
other investment companies or invest more than 5% of its total assets in
securities of any investment company and will not purchase more than 3% of the
outstanding voting stock of any investment company. If a Fund acquires
securities of another investment company, the shareholders of the Fund may be
subject to duplicative management fees.
PURCHASE OF SHARES
General
Each Fund is authorized to issue three classes of shares. Class A
Shares and Class C Shares of the Funds are offered through a separate
prospectus. Class Y Shares, as described in this Prospectus, are offered for
sale only to advisory clients of Bartlett that are employee benefit or
retirement plans, other than IRAs and self-employed individual retirement plans,
to retirement plans having net assets of at least $20 million, to purchasers of
$5 million or more, and to participants in certain wrap fee investment advisory
programs that are currently or in the future sponsored by Bartlett and that may
invest in Bartlett proprietary funds, provided that shares are purchased through
or in connection with those programs.
Investors eligible to purchase Class Y Shares may purchase them through
a brokerage account with Bartlett, BFP or their affiliates. Subject to the above
limitations, the minimum initial investment for Class Y Shares is $1,000,
including investments made by exchange from other Funds or Legg Mason Cash
Reserve Trust. The minimum investment for each purchase of additional shares is
$100. Each Fund may reduce or waive such minimums for investments made by
employer sponsored qualified retirement plans or through automatic investment
programs, investments made through brokerage firms or other financial
institutions, or investments made by advisory clients of Bartlett and employees
of Bartlett and their families, or under other circumstances.
Share purchases will be processed at the net asset value next
determined after Bartlett or BFP has received the order. Orders received before
the close of regular trading on the New York Stock Exchange ("Exchange")
(normally 4:00 p.m. Eastern time) ("close of the Exchange") on any day the
Exchange is open will be executed at the net asset value determined as of the
close of the Exchange on that day. Orders received after the close of the
Exchange or on days the Exchange is closed will be executed at the net asset
value determined as of the close of the Exchange on the next day the Exchange is
open. The Funds, Bartlett and BFP reserve the right to reject any purchase order
and to suspend the offering of shares for a period of time. The Funds do not
issue share certificates.
No sales charge is imposed by any Fund in connection with the purchase
of Class Y Shares.
Once an account has been established, investors may also purchase
shares of the Funds through BFP by bank wire. Bank wire purchases will be
effected at the next determined net asset value after the bank wire is received.
An investor's bank may charge a service fee for wiring money to the Funds.
Reports will be sent to each Fund's shareholders at least semiannually
showing its portfolio and other information; an annual report for the Funds will
contain financial statements audited by the Trust's independent accountants.
Shareholder inquiries should be addressed to: [insert complete Fund name]
BFP Funds Processing
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P.O. Box 1476
Baltimore, Maryland 21203-1476
Telephone Purchase Transactions: Call BFP at 1-800-822-5544
Programs Applicable to Class Y:
Systematic Investment Plan. Shares of each Fund may be purchased
through the Systematic Investment Plan. Under this plan, you may arrange for
automatic monthly investments in the Funds of $50 or more by authorizing BFDS to
transfer funds each month from your checking account. Please contact Bartlett or
BFP for further information.
Automatic Investments. Arrangements may be made with some employers and
financial institutions, such as banks or credit unions, for regular automatic
monthly investments of $50 or more in shares. In addition, it may be possible
for dividends from certain unit investment trusts to be invested automatically
in shares. Persons interested in establishing such automatic investment programs
should contact the Funds through Bartlett or BFP.
REDEMPTION OF SHARES
As described below, shares of the Funds may be redeemed at their net
asset value. Redemption proceeds normally will settle in your Bartlett or BFP
brokerage account two business days after trade date; however, each Fund
reserves the right to take up to seven days to make payment upon redemption if,
in the judgment of Bartlett and/or Lombard Odier, the respective Fund could be
adversely affected by immediate payment. The Statement of Additional Information
describes several other circumstances in which the date of payment may be
postponed or the right of redemption suspended.
Shareholders may call Bartlett or BFP and give them an order for
redemption. Shareholders should have the following information ready when they
call: the name of the Fund, the number of shares (or dollar amount) to be
redeemed and their shareholder account number. Shareholders may also send a
written request for redemption to the address listed below.
Orders for redemption received by Bartlett or BFP before the close of
the Exchange, on any day that the Exchange is open, will be transmitted to BFDS
for redemption at the net asset value per share determined as of the close of
the Exchange on that day. Requests for redemption received by Bartlett or BFP
after the close of the Exchange will be executed at the net asset value
determined as of the close of the Exchange on its next trading day. A redemption
request received by Bartlett or BFP may be treated as a request for repurchase
and, if it is accepted by Bartlett or BFP, the investors shares will be
purchased at the net asset value per share determined as of the next close of
the Exchange.
Systematic Withdrawal Plan:
Eligible shareholders may elect to make systematic withdrawals from
their Fund account of a minimum of $50 on a monthly basis if they are purchasing
or already own shares with a net asset value of $5,000 or more. Shareholders
should not purchase shares of a Fund while they are participating in the
Systematic Withdrawal Plan with respect to that Fund. Please contact BFP or your
broker/dealer for further information.
Exchange Privilege:
As a Fund shareholder, investors are entitled to exchange their shares
of a Fund for the corresponding class of shares of any of the other Funds or the
Legg Mason Cash Reserve Trust (a money market mutual fund), provided that such
shares are eligible for sale in the investor's state of residence.
Investments by exchange into a Fund are made at the per share net asset
value determined on the same business day as redemption of the Fund shares you
wish to exchange.
There is no charge for the exchange privilege, but each Fund reserves
the right to terminate or
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limit the exchange privilege of any shareholder who makes more than four
exchanges from that Fund in one calendar year. To effect an exchange by
telephone, or to obtain further information concerning the exchange privilege,
please contact BFP or Bartlett.
Other Important Redemption Information:
The proceeds of your redemption may be more or less than your original
cost. If the shares to be redeemed were paid for by check (including certified
or cashier's checks) within 10 business days of the redemption request, the
proceeds may not be disbursed unless the Fund can be reasonably assured that the
check has been collected.
None of the Funds will be responsible for the authenticity of
redemption instructions received by telephone, provided it follows reasonable
procedures to identify the caller. Each Fund may request identifying information
from callers or employ identification numbers. Each Fund may be liable for
losses due to unauthorized or fraudulent instructions if it does not follow
reasonable procedures. Telephone redemption privileges are available
automatically to all shareholders. Shareholders who do not wish to have
telephone redemption privileges should call BFP or Bartlett for further
instructions.
Because of the relatively high cost of maintaining small accounts, each
Fund may elect to close any account with a current value of less than $500 by
redeeming all of the shares in the account and mailing the proceeds to you.
However, no Fund will redeem accounts that fall below $500 solely as a result of
a reduction in net asset value per share. If a Fund elects to redeem the shares
in your account, you will be notified that your account is below $500 and will
be allowed 60 days in which to make an additional investment in order to avoid
having your account closed.
The shares of each Fund are subject to redemption at any time if the
Board of Trustees of the Trust determines in its sole discretion that failure to
so redeem may have materially adverse consequences to all or any of the
shareholders of the Trust or any Fund of the Trust.
Telephone Redemption Transactions: Call BFP at 1-800-822-5544
Redemption By Mail Transactions: [insert complete Fund name]
BFP Funds Processing
P.O. Box 1476
Baltimore, Maryland 21203-1476
CALCULATION OF SHARE PRICE
Net asset value per share of each Fund class is determined daily, as of
the close of the Exchange, on every day that the Exchange is open, by
subtracting the liabilities attributable to each class from the total assets of
such class and dividing the result by the number of shares of such class
outstanding. Securities owned by each Fund for which market quotations are
readily available are valued at current market value. In the absence of readily
available market quotations, securities are valued at fair value as determined
by Bartlett and/or Lombard Odier, subject to review of the Board of Trustees.
The Funds may use pricing services to determine the market value of its
portfolio securities, subject to Bartlett's and/or Lombard Odier's review. If
the Board of Trustees determines in good faith that another method of valuing
options and futures contracts is necessary to appraise their fair value, such
other method will be used.
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.
Fixed-income securities generally are valued by using market quotations
or independent pricing
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services that use prices provided by market makers or estimates of market
values. However, if Bartlett and/or Lombard Odier believes that market value of
a security will be more accurately reflected thereby, it will use market value
estimates obtained from yield spreads relating to securities with similar
characteristics as to credit quality, coupon rate, maturity and other factors.
Fixed-income securities having a maturity of less than 60 days are valued at
amortized cost.
For valuation purposes, quotations of foreign securities in a foreign
currency are converted to U.S. dollar equivalents at the time of pricing. In
computing the net asset value of a Fund, the values of foreign portfolio
securities are generally based upon market quotations that, depending upon the
exchange or market, may be last sale price, last bid price, or the mean between
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 on which the Exchange is open. Trading of these
securities may not take place on every business day the Exchange is open. In
addition, trading may take place in various foreign markets on Saturdays or on
other days when the Exchange is not open and on which a Fund's share price is
not calculated. Therefore, the value of the portfolio of a Fund holding foreign
securities may be significantly affected on days when shares of the Fund may not
be purchased or redeemed.
The calculation of the share price of a Fund holding foreign securities
in its portfolio does not take place contemporaneously with the determination of
the values of many of the foreign portfolio securities used in such calculation.
Events affecting the values of foreign portfolio securities that occur between
the time their prices are determined and the calculation of the Fund's share
price will not be reflected in the calculation unless Bartlett and/or Lombard
Odier determines, subject to review by the Trust's Board of Trustees, that the
particular event would materially affect net asset value, in which case an
adjustment will be made.
DIVIDENDS AND OTHER DISTRIBUTIONS
Each Fund distributes substantially all of its investment company
taxable income (which consists of net investment income, net short-term capital
gain and net gains from certain foreign currency transactions), if any, in the
form of dividends to its shareholders of each class. Value International and
Basic Value each declares and pays dividends from net investment income on a
quarterly basis, and dividends from any net short-term capital gains annually;
Europe Fund declares and pays all dividends on an annual basis. Each Fund also
distributes substantially all of its net capital gain (the excess of net
long-term capital gain over net short-term capital loss) and net gains from
foreign currency transactions after the end of the taxable year in which the
gains are realized. A second distribution of net capital gain may be necessary
in some years to avoid imposition of the excise tax described under the heading
"Additional Tax Information" in the Statement of Additional Information.
Dividends and other distributions, if any, on a class of shares of a
Fund held in an IRA, Keogh Plan, SEP, SIMPLE or other qualified retirement plan
and by shareholders maintaining a Systematic Withdrawal Plan, generally are
reinvested in Class Y shares of that Fund on the payment date (including
instances when no election is made). Other shareholders may elect to:
1. Receive both dividends and other distributions in Class Y shares of the
distributing Fund (automatic option - no action needed);
2. Receive dividends in cash and other distributions in Class Y shares of
the distributing Fund;
3. Receive dividends in Class Y shares of the distributing Fund and other
distributions in cash; or
4. Receive both dividends and other distributions in cash.
In certain cases, shareholders may reinvest dividends and other
distributions in Class Y shares of another Fund. Please contact BFP or your
financial advisor for additional information concerning this option. If no
election is made, both dividends and other distributions are credited to your
account in shares of the corresponding class of the distributing Fund at the net
asset value of the shares determined as of the close of the Exchange on the
reinvestment date. Shares received pursuant to any of the first three
(reinvestment) elections above are also credited to your account at that net
asset value.
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Shareholders electing to receive dividends and/or other distributions in cash
will be sent a check or will have their brokerage account credited after the
payment date. You may elect at any time to change your option by notifying the
applicable Fund in writing at: [insert complete Fund name], c/o BFP Funds
Processing, P.O. Box 1476, Baltimore, Maryland 21203-1476. Your election must be
received at least 10 days before the record date in order to be effective for
dividends and other distributions paid to shareholders as of that date.
TAXES
Each Fund intends to continue to qualify for treatment as a regulated
investment company under the Code so that it will be relieved of federal income
tax on that part of its investment company taxable income and net capital gain
that is distributed to its shareholders.
Dividends from a Fund's investment company taxable income (whether paid
in cash or reinvested in shares) are taxable to its shareholders as ordinary
income to the extent of the Fund's earnings and profits. Distributions of a
Fund's net capital gain (whether paid in cash or reinvested in shares), when
designated as such, are taxable to those shareholders as long-term capital gain,
regardless of how long they have held their Fund shares.
Each Fund sends its shareholders a notice following the end of each
calendar year specifying, among other things, the amounts of all dividends and
other distributions paid (or deemed paid) during the year. Each Fund is required
to withhold 31% of all dividends, capital gain distributions and redemption
proceeds payable to any individuals and certain other non-corporate shareholders
who do not provide the Fund with a certified taxpayer identification number.
Each Fund also is required to withhold 31% of all dividends and other
distributions payable to such shareholders who otherwise are subject to backup
withholding.
A redemption of Fund shares may result in a taxable gain or loss to the
redeeming shareholder, depending on whether the redemption proceeds are more or
less than the shareholder's adjusted basis for the redeemed shares. An exchange
of Fund shares for shares of any other Fund or the Legg Mason Cash Reserve Trust
generally will have similar tax consequences. See "Exchange Privilege," above.
If Fund shares are purchased within 30 days before or after redeeming at a loss
other shares of the same Fund (regardless of class), all or part of that loss
will not be deductible and instead will increase the basis of the newly
purchased shares.
A dividend or other distribution paid shortly after shares have been
purchased, although in effect a return of investment, is subject to federal
income tax. Accordingly, an investor should recognize that a purchase of shares
immediately before the record date for a dividend or other distribution could
cause the investor to incur tax liabilities and should not be made solely for
the purpose of receiving the dividend or other distribution.
Each Fund's dividend and interest income, and gains realized from
disposition of foreign securities, may be subject to income, withholding or
other taxes imposed by foreign countries and U.S. possessions that would reduce
the yield on that Fund's securities. Tax conventions between certain countries
and the United States may reduce or eliminate these foreign taxes, however, and
many foreign countries do not impose taxes on capital gains in respect of
investments by foreign investors. Shareholders may be entitled to claim tax
credits or deductions, subject to certain limitations, for foreign income taxes
paid by a Fund (see "Additional Tax Information" in the Statement of Additional
Information). Each Fund will notify its shareholders if such credit or deduction
is available.
The foregoing is only a summary of some of the important federal tax
considerations generally affecting each Fund and its shareholders; see the
Statement of Additional Information for a further discussion. In addition to
federal income tax, you may also be subject to state, local or foreign taxes on
distributions from the Funds, depending on the laws of your home state and
locality or country of residence. Prospective shareholders are urged to consult
their tax advisers with respect to the effects of this investment on their own
tax situations.
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MANAGEMENT OF THE TRUST
Bartlett & Co.
Bartlett & Co., 36 East Fourth Street, Cincinnati, Ohio, serves as
investment adviser and administrator to each Fund. Bartlett is an investment
advisory firm which has provided investment advice to individuals, corporations,
pension and profit sharing plans and trust accounts since 1898. As of [ ], 1997,
Bartlett had aggregate assets under management of approximately [ ]. Bartlett is
a wholly owned subsidiary of Legg Mason, Inc., a publicly traded financial
services firm.
Pursuant to an Investment Management and Administration Agreement,
which was approved by the Board of Trustees, Bartlett acts as investment adviser
and administrator for each Fund and has responsibility for the actual investment
management of the Funds, including the responsibility for making decisions and
placing orders to buy, sell or hold a particular security, except with respect
to Europe Fund, where it has delegated that responsibility to Lombard Odier.
Bartlett receives for its services a management fee from each Fund
attributable to the net assets of each class, calculated daily and payable
monthly. For its services to Basic Value, Bartlett receives and annual fee of
0.75% of its average daily net assets; for its services to Value International,
Bartlett receives an annual fee of 1.25% of its average daily net assets; and
for its services to Europe Fund, Bartlett receives an annual fee of 1.00% of its
average daily net assets.
Lombard Odier
Lombard Odier, Norfolk House, 13 Southampton Place, London WC1A 2AJ,
England, serves as investment sub-adviser to Europe Fund pursuant to a
Sub-Advisory Agreement, which was approved by the Board of Trustees. For its
services under the Sub-Advisory Agreement, Lombard Odier will receive from
Bartlett (not Europe Fund) a monthly fee at the rate of 60% of the monthly fee
actually paid to Bartlett by the Trust under the Investment Management and
Administration Agreement, taking into account any fee waiver or expense
reimbursement arrangements in effect for Europe Fund (see below).
Lombard Odier specializes in advising and managing investment
portfolios for institutional clients and also serves as investment adviser for
one other investment company. As of [ ], Lombard Odier had approximately [ ]
billion in aggregate assets under management. Lombard Odier is an indirect
wholly owned subsidiary of Lombard Odier & Cie, a Swiss private bank.
Fee waivers:
Bartlett has agreed to waive fees and/or assume other expenses to the
extent that a Fund's expenses exceed the following annual rates of average daily
net assets until July 31, 1998:
Class Y
-------
Value International 1.55%
Basic Value 0.90%
Europe Fund 1.50%
Portfolio Managers:
James A. Miller, CFA, Vice President of the Trust, and Woodrow H.
Uible, CFA, Vice President of the Trust, are responsible for co-managing Basic
Value. Mr. Miller is a Senior Portfolio Manager, President and a Director of
Bartlett. Mr. Miller joined Bartlett in 1977 and is a member of its
Institutional Investment Group. Mr. Uible is a Senior Portfolio Manager of
Bartlett. Mr. Uible has been employed by Bartlett since 1980. He chairs
Bartlett's Equity Investment Group, and is responsible for Bartlett's equity
investment processes.
Madelynn M. Matlock, CFA, Vice President of the Trust, is primarily
responsible for managing Value International. Ms. Matlock, Director of
International Investments for Bartlett, joined Bartlett in 1981. She also served
as Director of Research for Bartlett from 1983 to 1992.
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Ronnie Armist, Chief Investment Officer, Equities, of Lombard Odier in
London, is primarily responsible for managing the Europe Fund. Mr. Armist joined
Lombard Odier in 1983 and has served as Chief Investment Officer, Equities,
since 1991.
BFP
BFP is the distributor, or principal underwriter, of each Fund's shares
pursuant to a Distribution Agreement with the Trust on behalf of each Fund. The
Distribution Agreement obligates BFP to pay certain expenses in connection with
the offering of shares of each Fund, including any compensation to
brokers/dealers, the printing and distribution of prospectuses, statements of
additional information and periodic reports used in connection with the offering
to prospective investors, after the prospectuses, statements of additional
information and periodic reports have been prepared, set in type and mailed to
existing shareholders at the Fund's expense, and for any supplementary sales
literature and advertising costs. BFP is a wholly owned subsidiary of Legg
Mason, Inc.
DESCRIPTION OF THE TRUST
Bartlett Capital Trust ("Trust") is a diversified, open-end management
investment company organized as a Massachusetts business trust on October 31,
1982. The business activities of the Trust are supervised by its Board of
Trustees. Like other mutual funds, the Trust retains various organizations to
perform specialized services.
The trustees of the Trust have authority to issue an unlimited number
of shares of beneficial interest of separate series, all without par value.
Shares of three series, consisting of the Funds, have been authorized.
The shares of beneficial interest of each Fund are divided into three
classes, designated Class A, Class C and Class Y shares. Each class represents
interests in the same assets of the Fund. The classes differ as follows: (1)
each of Class A and Class C has exclusive voting rights on matters pertaining to
its plan of distribution, (2) Class A shares generally are subject to an initial
sales charge, and may, under limited circumstances, be subject to a contingent
deferred sales charge, and bear ongoing service fees, (3) Class C shares are
subject to neither an initial or contingent deferred sales charge, but bear
ongoing distribution and service fees, and (4) each Class may bear differing
amounts of certain class- specific expenses.
The differing sales charges and other expenses applicable to the
different classes of each Fund's shares may affect the performance of those
classes. More information concerning the classes of shares of the Funds may be
obtained by calling BFP at 1-800-822-5544.
Any Trustee of the Trust may be removed by vote of the shareholders
holding not less than two-thirds of the outstanding shares of the Trust. The
Trust does not hold annual meetings of shareholders. Shareholders of the Funds
are entitled to one vote per share and fractional votes for fractional shares
held. Voting rights are not cumulative. All shares of the Funds are fully paid
and nonassessable and have no preemptive or conversion rights. A separate vote
is taken by a class of shares of a Fund if a matter affects just that class of
shares. Each class of shares may bear certain differing class-specific expenses.
Financial advisors and others entitled to receive compensation for selling or
servicing Fund shares may receive more with respect to one class than another.
The Board of Trustees of the Trust does not anticipate that there will
be any conflicts among the interests of the holders of the different classes of
Fund shares. On an ongoing basis, the Board will consider whether any such
conflict exists and, if so, take appropriate actions.
Each Fund acknowledges that it is solely responsible for the
information or any lack of information about it in this joint Prospectus and in
the joint Statement of Additional Information, and no other Fund is responsible
therefor. There is a possibility that one Fund might be deemed liable for
misstatements or omissions regarding another Fund in this Prospectus or in the
joint Statement of Additional Information; however, the Funds deem this
possibility slight.
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Investment Adviser
Bartlett & Co.
36 East Fourth Street
Cincinnati, Ohio 45202-3896
Investment Sub-Adviser to Europe Fund
Lombard Odier International Portfolio Management Limited
Norfolk House
13 Southampton Place
London WC1A 2AJ, England
Custodian
State Street Bank and Trust Company
P.O. Box 1713
Boston, Massachusetts 02105
Sub-Custodian for Europe Fund
The Chase Manhattan Bank, N.A.
1 Chaseside
Bournemouth, Dorset BH7 7DB
England
Transfer Agent
Boston Financial Data Services, Inc.
2 Heritage Drive
North Quincy, Massachusetts 02171
Independent Accountants
Coopers & Lybrand L.L.P.
217 East Redwood Street
Baltimore, Maryland 21202
Legal Counsel
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, DC 20036
No person has been authorized to give any information
or to make any representations, other than those
contained in this Prospectus, in connection with the
offering contained in this Prospectus, and if given or
made, such information or representations must not be
relied upon as being authorized by the Trust. This
Prospectus does not constitute an offer by the Trust
to sell its shares in any state to any person to whom
it is unlawful to make such offer in such state.
<PAGE>
BARTLETT CAPITAL TRUST:
Bartlett Value International Fund
Bartlett Basic Value Fund
Bartlett Europe Fund
STATEMENT OF ADDITIONAL INFORMATION
July [ ], 1997
The three funds named above (each a "Fund" and collectively, the
"Funds") are series of Bartlett Capital Trust (the "Trust"), a diversified
open-end investment company. Bartlett Value International Fund ("Value
International") seeks capital appreciation; it invests primarily in foreign
equity securities that its investment adviser, Bartlett & Co. ("Bartlett"),
believes are attractively priced relative to their intrinsic value. Income is a
secondary consideration. Bartlett Basic Value Fund ("Basic Value") seeks capital
appreciation; it invests primarily in common stocks or securities convertible
into common stocks that Bartlett believes are selling at attractive prices
relative to their intrinsic value. Income is a secondary consideration. Bartlett
Europe Fund ("Europe Fund") seeks long-term growth of capital; it invests, under
normal conditions, at least 65% of its total assets in equity securities of
European issuers that its investment sub-adviser, Lombard Odier International
Portfolio Management Limited ("Lombard Odier"), believes are undervalued and
thus may offer above-average potential for capital appreciation.
This Statement of Additional Information is not a prospectus. It should
be read in conjunction with the Prospectuses for Bartlett Capital Trust dated
July [ ], 1997, which have been filed with the Securities and Exchange
Commission ("SEC"). Class A and Class C shares of the Funds are offered through
one Prospectus; Class Y shares are offered through a separate Prospectus. A copy
of each Prospectus can be obtained by calling BFP Financial Partners, Inc.
("BFP"), the Trust's distributor, toll-free at 1-800-822-5544.
BFP Financial Partners, Inc.
111 South Calvert Street
Baltimore, Maryland 21202
(800) 822-5544
Bartlett & Co.
36 East Fourth Street
Cincinnati, Ohio 45202
<PAGE>
TABLE OF CONTENTS
PAGE
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS
INVESTMENT LIMITATIONS
THE FUNDS' INVESTMENT ADVISER AND SUB-ADVISER
THE TRUST'S DISTRIBUTOR
TRUSTEES AND OFFICERS
PORTFOLIO TRANSACTIONS AND BROKERAGE
DETERMINATION OF SHARE PRICE
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
ADDITIONAL TAX INFORMATION
TAX-DEFERRED RETIRMEMENT PLANS
INVESTMENT PERFORMANCE
DESCRIPTION OF THE TRUST
CUSTODIAN
ACCOUNTANTS
TRANSFER AGENT
FINANCIAL STATEMENTS
2
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ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS
- ---------------------------------------------
This section supplements the information in the Prospectuses concerning
the investments a Fund may make and the techniques it may use (see "Investment
Objectives and Policies" and "Investment Techniques and Risk Considerations").
Emerging Market Securities
Europe Fund may invest in securities of issuers based in the emerging
markets of Europe including, (but not limited to) issuers based in Greece,
Portugal, Hungary, Poland, Czech Republic, Slovakia or Turkey. International
Fund may (but is not limited to) invest in issuers based in the countries in
Latin America, Southeast Asia, the Far East and South America. Subject to the
above restrictions, emerging markets will include any country: (i) having an
"emerging stock market" as defined by the International Finance Corporation;
(ii) with low- to middle-income economies according to the International Bank
for Reconstruction and Development ("World Bank"); (iii) listed in World Bank
publications as developing; or (iv) determined by Bartlett & Co. or Lombard
Odier to be an emerging market in accordance with the criteria of those
organizations. The following are considered emerging market securities: (1)
securities publicly traded on emerging market stock exchanges, or whose
principal trading market is over-the-counter (i.e., off-exchange) in an emerging
market; (2) securities (i) denominated in any emerging market currency or (ii)
denominated in a major currency if issued by companies to finance operations in
an emerging market; (3) securities of companies that derive a substantial
portion of their total revenues from goods or services produced in, or sales
made in, emerging markets; (4) securities of companies organized under the laws
of an emerging market country or region, which are publicly traded in securities
markets elsewhere; and (5) American depositary receipts ("ADRs") (or similar
instruments) with respect to the foregoing.
Because of the high levels of foreign-denominated debt owed by many
emerging market countries, fluctuating exchange rates can significantly affect
the debt service obligations of those countries. This could, in turn, affect
local interest rates, profit margins and exports which are a major source of
foreign exchange earnings. Although it might be theoretically possible to hedge
for anticipated income and gains, the ongoing and indeterminate nature of the
foregoing risk (and the costs associated with hedging transactions) makes it
virtually impossible to hedge effectively against such risks.
To the extent an emerging market country faces a liquidity crisis with
respect to its foreign exchange reserves, it may increase restrictions on the
outflow of any foreign exchange. Repatriation is ultimately dependent on the
ability of the Fund to liquidate its investments and convert the local currency
proceeds obtained from such liquidation into U.S. dollars. Where this conversion
must be done through official channels (usually the central bank or certain
authorized commercial banks), the ability to obtain U.S. dollars is dependent on
the availability of such U.S. dollars through those channels and, if available,
upon the willingness of those channels to allocate those U.S. dollars to the
Fund. In such a case, the Fund's ability to obtain U.S. dollars may be adversely
affected by any increased restrictions imposed on the outflow of foreign
exchange. If the Fund is unable to repatriate any amounts due to exchange
controls, it may be required to accept an obligation payable at some future date
by the central bank or other government entity of the jurisdiction involved. If
such conversion can legally be done outside official channels, either directly
or indirectly, the Fund's ability to obtain U.S. dollars may not be affected as
much by any increased restrictions except to the extent of the price which may
be required to be paid for the U.S. dollars.
Many emerging market countries have little experience with the
corporate form of business organization, and may not have well developed
corporation and business laws or concepts of fiduciary duty in the business
context.
The securities markets of emerging markets are substantially smaller,
less developed, less liquid and more volatile than the securities markets of the
U.S. and other more developed countries. Disclosure and
3
<PAGE>
regulatory standards in many respects are less stringent than in the U.S. and
other major markets. There also may be a lower level of monitoring and
regulation of emerging markets and the activities of investors in such markets;
enforcement of existing regulations has been extremely limited.
Some emerging markets have different settlement and clearance
procedures. In certain markets there have been times when settlements have been
unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. The inability of the Fund to make
intended securities purchases due to settlement problems could cause the Fund to
miss attractive investment opportunities. Inability to dispose of a portfolio
security caused by settlement problems could result either in losses to the Fund
due to subsequent declines in the value of the portfolio security or, if the
Fund has entered into a contract to sell the security, in possible liability to
the purchaser.
The risk also exists that an emergency situation may arise in one or
more emerging markets as a result of which trading of securities may cease or
may be substantially curtailed and prices for the Fund's portfolio securities in
such markets may not be readily availiable.
Option Transactions
Each of the Funds may engage in option transactions involving equity
securities, debt securities, futures contracts and stock indexes. An option
involves either (a) the right or the obligation to buy or sell a specific
instrument at a specific price until the expiration date of the option, or (b)
the right to receive payments or the obligation to make payments representing
the difference between the closing price of a market index and the exercise
price of the option expressed in dollars times a specified multiple until the
expiration date of the option. Options are sold (written) on equity securities,
debt securities, futures contracts and stock indexes. The purchaser of an option
on an equity security, debt security or futures contract pays the seller (the
writer) a premium for the right granted but is not obligated to buy or sell the
underlying security or futures contract. The purchaser of an option on a stock
index pays the seller a premium for the right granted, and in return the seller
of such an option is obligated to make the payment. A writer of an option may
terminate the obligation prior to expiration of the option by making an
offsetting purchase of an identical option. Options are traded on organized
exchanges and in the over-the- counter market. Options on equity securities,
debt securities or options on futures contracts which each Fund sells (writes)
will be covered or secured, which means that it will own the underlying security
or futures contracts in the case of a call option and that the Fund will
segregate with the Trust's custodian, State Street Bank and Trust Company
("State Street" or "Custodian"), high grade liquid debt securities sufficient to
purchase the underlying security or futures contracts in the case of a put
option. Each Fund will also segregate and maintain with its Custodian liquid
assets equal to the market value of each put option sold (written) by the Fund
on a stock index. In addition, when a Fund writes options, it may be required to
maintain a margin account, to pledge the underlying securities or U.S.
government obligations or to deposit high grade liquid debt securities in escrow
with its Custodian.
The purchase and writing of options involves certain risks. The
purchase of options limits a Fund's potential loss to the amount of the premium
paid and can afford the Fund the opportunity to profit from favorable movements
in the price of an underlying security to a greater extent than if transactions
were effected in the security directly. However, the purchase of an option could
result in a Fund losing a greater percentage of its investment than if the
transaction were effected directly. When a Fund writes a covered call option, it
will receive a premium, but it will give up the opportunity to profit from a
price increase in the underlying security above the exercise price as long as
its obligation as a writer continues, and it will retain the risk of loss should
the price of the security decline. When a Fund writes a secured put option, it
will assume the risk that the price of the underlying security will fall below
the exercise price, in which case the Fund may be required to purchase the
security at a higher price than the market price of the security. In addition,
there can be no assurance that a Fund can effect a closing transaction on a
particular option it has written.
4
<PAGE>
Each of the Funds (particularly Value International and Europe Fund)
may engage in option transactions involving foreign currencies, foreign stock
indexes or futures contracts. A foreign currency option or an option on a
futures contract involves either the right or the obligation to buy or sell a
specific currency or futures contract at a specific price until the expiration
date of the option. A foreign stock index option involves either the right to
receive payments or the obligation to make payments representing the difference
between the closing price of a market index and the exercise price of the option
until the expiration date of the option. The purchaser of an option on a foreign
currency or futures contract pays the seller (the writer) a premium for the
right granted but is not obligated to buy or sell the underlying currency or
futures contract. The purchaser of an option on a stock index pays the seller a
premium for the right granted, and in return the seller of such an option is
obligated to make the payment. A writer of an option may terminate the
obligation prior to expiration of the option by making an offsetting purchase of
an identical option.
Options on foreign currencies and futures contracts which a Fund sells
(writes) will be covered or secured, which means that it will own the underlying
currency or futures contract in the case of a call option and that the Fund will
segregate with its Custodian liquid assets sufficient to purchase the underlying
currency or futures contract in the case of a put option. The Fund will also
segregate and maintain with its Custodian high grade liquid assets equal to the
market value of each put option sold (written) by the Fund on a stock index. In
addition, when a Fund writes options, it may be required to maintain a margin
account, to pledge the underlying currency, futures contract or U.S. government
obligations, or to deposit high grade liquid assets in escrow with its
Custodian.
Hedging Transactions
(1) U. S. Securities
Each of the Funds may hedge all or a portion of its portfolio
investments through the use of options, futures contracts and options on futures
contracts. The objective of a hedging program is to protect a profit or offset a
loss in a portfolio security from future price erosion or to assure a definite
price for a security by acquiring the right or option to purchase or to sell a
fixed amount of the security at a future date. For example, in order to hedge
against an anticipated rise in interest rates that might cause the value of a
Fund's portfolio securities to decline, the Fund might sell interest rate
futures contracts. When hedging of this character is successful, any
depreciation in the value of the hedged portfolio securities will be
substantially offset by an increase in the Fund's equity in the interest rate
futures position. Alternatively, an interest rate futures contract may be
purchased when a Fund anticipates the future purchase of a security but expects
the rate of return then available in the securities market to be less favorable
than rates currently available in the futures markets.
There is no assurance that the objective of the hedging program will be
achieved, since the success of the program will depend on Bartlett's and/or
Lombard Odier's ability to predict the future direction of stock prices or
interest rates and incorrect predictions by Bartlett and/or Lombard Odier may
have an adverse effect on a Fund. In this regard, it should be noted that the
skills and techniques necessary to arrive at such predictions are different from
those needed to predict price changes in individual stocks. Bartlett [and
Lombard Odier are] [is] registered as [a] commodity trading advisor with the
Commodity Futures Trading Commission ("CFTC"), [are members] [is a member] of
the National Futures Association and [have] [has] prior experience in the use of
options, futures contracts and options on futures contracts.
The hedging strategy involves the use of one or more techniques,
including buying and selling options (described above), futures contracts and
options on such futures contracts. A futures contract is a binding contractual
commitment which involves either (a) the delivery and payment for a specified
amount of securities or currency at a price agreed upon at the time the contract
is entered into but with actual delivery made during a specified period in the
future, or (b) the payment or receipt of payments representing, respectively,
the loss or gain of a specified group of stocks or market index. The securities
or currency underlying the contract may
5
<PAGE>
be government or corporate bonds (an interest rate futures contract), foreign
currency (a foreign currency futures contract), or a group of stocks such as a
popular market index (a stock index futures contract). Interest rate futures
contracts are currently available in standardized amounts on government
obligations (such as Treasury bills, notes and bonds), Government National
Mortgage Association ("GNMA") certificates, corporate bonds, domestic
certificates of deposit and Eurodollar certificates of deposit. It is expected
that other financial instruments will at later dates be subject to other futures
contracts. As new futures contracts are developed and offered to investors,
Bartlett and/or Lombard Odier will, consistent with each Fund's investment
objectives and policies, consider making investments in such new futures
contracts. Ordinarily a Fund would enter into interest rate futures contracts to
hedge its investments in fixed income securities such as preferred stocks and
money market obligations, stock index futures contracts to hedge its investments
in common stocks and foreign currency futures contracts to hedge currency risks
associated with investments in foreign securities.
Futures contracts are traded on exchanges licensed and regulated by the
CFTC. Interest rate futures contracts are principally traded on the Chicago
Board of Trade and International Monetary Market. Stock index futures contracts
are principally traded on the New York Futures Exchange, Chicago Mercantile
Exchange, Kansas City Board of Trade, New York Stock Exchange and Chicago Board
of Trade. Each Fund will be subject to any limitations imposed by these
Exchanges with respect to futures contracts trading and positions. A clearing
corporation associated with the particular exchange assumes responsibility for
all purchases and sales and guarantees delivery and payment on the contracts.
Although most futures contracts call for actual delivery or acceptance of the
underlying securities or currency, in most cases the contracts are closed out
before settlement date without the making or taking of delivery. Closing out is
accomplished by entering into an offsetting transaction, which may result in a
profit or a loss. There is no assurance that a Fund will be able to close out a
particular futures contract.
(2) International Securities
In general, the strategies and risks associated with hedging portfolio
investments in international securities are similar to those involved in hedging
U.S. securities, but have some differences.
Each Fund may hedge the international securities in its portfolio by
engaging in futures contracts transactions involving foreign currencies or stock
indexes. A foreign currency futures contract is a binding contractual commitment
which involves either the delivery and payment for a specified period in the
future. A foreign stock index futures contract involves either the payment or
receipt of payments representing, respectively, the loss or gain of a specified
group of stocks or market index. Ordinarily a Fund would enter into foreign
stock index futures contracts to hedge its investments in foreign common stocks
and foreign currency futures contracts to hedge currency risks associated with
investments in foreign securities.
There is no assurance that the objective of any hedging strategy used
by a Fund will be achieved, since the success of the strategy will depend on
Bartlett's and/or Lombard Odier's ability to predict the future direction of the
relevant currency, stock index or futures contract and incorrect predictions by
Bartlett and/or Lombard Odier may have an adverse effect on the Fund. The
forecasting of currency market movement is extremely difficult and whether a
hedging strategy involving foreign currency transactions will be successful is
highly uncertain. In addition, it should be noted that the skills and techniques
necessary to predict movements in a stock index are different from those needed
to predict price changes in individual stocks.
Futures contracts are traded on exchanges licensed and regulated by the
Commodity Futures Trading Commission and analogous foreign regulatory agencies.
Each Fund will be subject to any limitations imposed by the exchanges with
respect to futures contracts trading and positions. A clearing corporation
associated with the particular exchange assumes responsibility for all purchases
and sales and guarantees delivery and payment on the contracts. Although foreign
currency futures contracts call for actual delivery or acceptance of the
currency, in most cases the contracts are closed out before settlement date
without the making or taking
6
<PAGE>
of delivery. Closing out is accomplished by entering into an offsetting
transaction, which may result in a profit or a loss. There is no assurance that
a Fund will be able to close out a particular futures contract or that a liquid
secondary market will exist for any particular futures contract at any specific
time.
Futures contracts transactions entail some risks. For example, it is
possible that the futures contracts selected by a Fund will not follow the price
movement of the underlying currency or stock index. If this occurs, the hedging
strategy may not be successful. Further, if a Fund sells a stock index futures
contract and is required to pay an amount measured by any increase in the index,
it will be exposed to an indeterminate liability. In addition, a liquid
secondary market may not exist for any particular futures contract at any
specific time.
(3) Risks of Hedging Strategies
A hedging strategy involving options and futures contracts entails some
risks. For example, the total premium paid for an option on a futures contract
may be lost if a Fund does not exercise the option or the writer does not
perform his obligations. It is also possible that the futures contracts selected
by a Fund will not follow the price movement of the underlying securities,
currencies or stock index. If this occurs, the hedging strategy may not be
successful. Further, if a Fund sells a stock index futures contract and is
required to pay an amount measured by any increase in the market index, it will
be exposed to an indeterminate liability. In addition, a liquid secondary market
may not exist for any particular option or futures contract at any specific
time.
Each Fund will incur transactional costs in connection with the hedging
program. When a Fund purchases or sells a futures contract, an amount of cash
and liquid assets will be deposited in a segregated account with the Trust's
Custodian to guarantee performance of the futures contract. The amount of such
deposits will depend upon the requirements of each exchange and broker and will
vary with each futures contract. Because open futures contract positions are
marked-to-market and gains and losses are settled on a daily basis, a Fund may
be required to deposit additional funds in such a segregated account if it has
incurred a net loss on its open futures contract positions on any day.
The Trust has filed a supplemental notice of eligibility with the CFTC
to claim relief from regulation as a commodity "pool" within the meaning of the
CFTC's regulations. In its filing, the Trust has represented that each Fund's
transactions in futures contracts and options on futures contracts will
constitute bona fide hedging transactions within the meaning of such regulations
and that each Fund will enter into commitments which require as deposits for
initial margin for futures contracts or premiums for options on futures
contracts no more than 5% of the fair market value of its assets.
Corporate Debt Securities
Corporate debt securities are bonds or notes issued by corporations and
other business organizations, including business trusts, in order to finance
their credit needs. Corporate debt securities include commercial paper which
consists of short-term (usually from 1 to 270 days) unsecured promissory notes
issued by corporations in order to finance their current operations. Any Fund
may invest in foreign corporate debt securities denominated in U.S. dollars or
foreign currencies. Foreign debt securities include Yankee dollar obligations
(U.S. dollar denominated securities issued by foreign corporations and traded on
U.S. markets) and Eurodollar obligations (U.S. dollar denominated securities
issued by foreign corporations and traded on foreign markets).
U.S. Government Obligations and Related Securities
U.S. government obligations include a variety of securities that are
issued or guaranteed by the United States Treasury, by various agencies of the
United States government or by various instrumentalities that
7
<PAGE>
have been established or sponsored by the United States government. U.S.
Treasury securities and securities issued by the GNMA and Small Business
Administration are backed by the "full faith and credit" of the United States
government. Other U.S. government obligations may or may not be backed by the
"full faith and credit" of the United States. In the case of securities not
backed by the "full faith and credit" of the United States, the investor must
look principally to the agency issuing or guaranteeing the obligation (such as
the Federal Farm Credit System, the Federal Home Loan Banks, Fannie Mae ("FNMA")
and the Federal Home Loan Mortgage Corporation ("FHLMC")) for ultimate repayment
and may not be able to assert a claim against the United States itself in the
event the agency or instrumentality does not meet its commitments.
Participation interests in U.S. government obligations are pro rata
interests in such obligations which are generally underwritten by government
securities dealers. Certificates of safekeeping for U.S. government obligations
are documentary receipts for such obligations. Both participation interests and
certificates of safekeeping are traded on exchanges and in the over-the-counter
market.
Each Fund may invest in U.S. government obligations and related
participation interests. In addition, each Fund may invest in custodial receipts
that evidence ownership of future interest payments, principal payments or both
on certain U.S. government obligations. Such obligations are held in custody by
a bank on behalf of the owners. These custodial receipts are known by various
names, including Treasury Receipts, Treasury Investors Growth Receipts ("TIGRs")
and Certificates of Accrual on Treasury Securities ("CATS"). Custodial receipts
generally are not considered obligations of the U.S. government for purposes of
securities laws. The Funds will consider all interest-only or principal-only
fixed income securities as illiquid.
Municipal Obligations
Municipal obligations are debt obligations issued by or on behalf of
states, territories and possessions of the United States and the District of
Columbia, and their political subdivisions, agencies, authorities and
instrumentalities and other qualifying issuers which pay interest that is, in
the opinion of bond counsel to the issuer, exempt from federal income tax. Each
Fund may also invest no more than 5% of its net assets in municipal obligations
(including participation interests). Municipal obligations are issued to obtain
funds to construct, repair or improve various public facilities such as
airports, bridges, highways, hospitals, housing, schools, streets and water and
sewer works, to pay general operating expenses or to refinance outstanding
debts. They also may be issued to finance various private activities, including
the lending of funds to public or private institutions for construction of
housing, educational or medical facilities or the financing of privately owned
or operated facilities. Municipal obligations consist of tax-exempt bonds,
tax-exempt notes and tax-exempt commercial paper. Tax-exempt notes generally are
used to provide short term capital needs and generally have maturities of one
year or less. Tax-exempt commercial paper typically represents short-term,
unsecured, negotiable promissory notes.
The two principal classifications of municipal obligations are "general
obligations" and "revenue" bonds. General obligation bonds are backed by the
issuer's full credit and taxing power. Revenue bonds are backed by the revenues
of a specific project, facility or tax. Industrial development revenue bonds are
a specific type of revenue bond backed by the credit of the private issuer of
the facility, and therefore investments in these bonds have more potential risk
that the issuer will not be able to meet scheduled payments of principal and
interest.
Zero Coupon and Pay-in-Kind Bonds
Corporate debt securities and municipal obligations include so-called
"zero coupon" bonds and "pay-in-kind" bonds. Zero coupon bonds are issued at a
significant discount from their principal amount in lieu of paying interest
periodically. Pay-in-kind bonds allow the issuer, at its option, to make current
interest payments on the bonds either in cash or in additional bonds. The value
of zero coupon and pay-in-kind bonds is subject to greater fluctuation in
response to changes in market interest rates than bonds which make regular
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payments of interest. Both of these types of bonds allow an issuer to avoid the
need to generate cash to meet current interest payments. Accordingly, such bonds
may involve greater credit risks than bonds which make regular payment of
interest. Even though zero coupon and pay-in-kind bonds do not pay current
interest in cash, a Fund holding those bonds is required to accrue interest
income on such investments and may be required to distribute such amounts at
least annually to shareholders. Thus, the Fund could be required at times to
liquidate other investments in order to satisfy its dividend requirements.
Mortgage-Related Securities
Each Fund may invest in mortgage-related securities. Mortgage-related
securities provide capital for mortgage loans made to residential homeowners,
including securities which represent interests in pools of mortgage loans made
by lenders such as savings and loan institutions, mortgage bankers, commercial
banks and others. Pools of mortgage loans are assembled for sale to investors
(such as the Funds) by various governmental, government-related and private
organizations, such as dealers. The market value of mortgage-related securities
will fluctuate as a result of changes in interest rates and mortgage rates.
Interests in pools of mortgage loans generally provide a monthly
payment which consists of both interest and principal payments. In effect, these
payments are a "pass-through" of the monthly payments made by the individual
borrowers on their residential mortgage loans, net of any fees paid to the isser
or guarantor of such securities. Additional payments are caused by repayments of
principal resulting from the sale of the underlying residential property,
refinanciang or foreclosure, net of fees or costs which may be incurred. Some
mortgage-related securities (such as securities issued by GNMA) are described as
"modified pass-through" because they entitle the holder to receive all interest
and principal payments owed on the mortgage pool, net of certain fees,
regardless of whether the mortgagor actually makes the payment.
Commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage bankers and other secondary market issuers, such
as dealers, create pass-through pools of conventional residential mortgage
loans. Such issuers also may be the originators of the underlying mortgage loans
as well as the guarantors of the mortgage-related securities. Pools created by
such non-governmental issuers generally offer a higher rate of interest than
government and government-related pools because there are no direct or indirect
government guarantees of payments with respect to such pools. However, timely
payment of interest and principal of these pools is supported by various forms
of insurance or guarantees, including individual loan, title, pool and hazard
insurance. There can be no assurance that the private insurers can meet their
obligations under the policies. A Fund may buy mortgage-related securities
without insurance or guarantees if, through an examination of the loan
experience and practices of the persons creating the pools, Bartlett and/or
Lombard Odier determines that the securities are appropriate investments for the
Fund.
Another type of security representing an interest in a pool of mortgage
loans is known as a collateralized mortgage obligation ("CMO"). CMOs represent
interests in a short-term, intermediate-term or long-term portion of a mortgage
pool. Each portion of the pool receives monthly interest payments, but the
principal repayments pass through to the short-term CMO first and the long-term
CMO last. A CMO permits an investor to more accurately predict the rate of
principal repayments. CMOs are issued by private issuers, such as broker/dealers
and government agencies, such as FNMA and FHLMC. Investments in CMOs are subject
to the same risks as direct investments in the underlying mortgage-backed
securities. In addition, in the event of a bankruptcy or other default of a
broker who issued the CMO held by a Fund, the Fund could experience both delays
in liquidating its position and losses. Each Fund may invest in CMOs in any
rating category of the recognized rating services and may invest in unrated
CMOs. Each Fund may also invest in "stripped" CMOs, which represent only the
income portion or the principal portion of the CMO.
Bartlett and/or Lombard Odier each expects that governmental,
government-related or private entities may create mortgage loan pools offering
pass-through investments in addition to those described above. The mortgages
underlying these securities may be second mortgages or alternative mortgage
instruments (for
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example, mortgage instruments whose principal or interest payments may vary or
whose terms to maturity may differ from customary long-term fixed rate
mortgages). As new types of mortgage-related securities are developed and
offered to investors, Bartlett and/or Lombard Odier will, consistent with a
Fund's investment objective and policies, consider making investments in such
new types of securities. The Prospectuses will be amended with any necessary
additional disclosure prior to that Fund investing in such securities.
The average life of securities representing interests in pools of
mortgage loans is likely to be substantially less than the original maturity of
the mortgage pools as a result of prepayments or foreclosures of such mortgages.
Prepayments are passed through to the registered holder with the regular monthly
payments of principal and interest, and have the effect of reducing future
payments. To the extent the mortgages underlying a security representing an
interest in a pool of mortgages are prepaid, a Fund may experience a loss (if
the price at which the respective security was acquired by the Fund was at a
premium over par, which represents the price at which the security will be
redeemed upon prepayment) or a gain (if the price at which the respective
security was acquired by the Fund was at a discount from par). In addition,
prepayments of such securities held by a Fund will reduce the share price of the
Fund to the extent the market value of the securities at the time of prepayment
exceeds their par value, and will increase the share price of the Fund to the
extent the par value of the securities exceeds their market value at the time of
prepayment. Prepayments may occur with greater frequency in periods of declining
mortgage rates because, among other reasons, it may be possible for mortgagors
to refinance their outstanding mortgages at lower interest rates.
Although the market for mortgage-related securities issued by private
organizations is becoming increasingly liquid, such securities may not be
readily marketable. No Fund will purchase mortgage-realted securities for which
there is no established market (including CMOs and direct investments in
mortgages as described below) or any other investments which Bartlett and/or
Lombard Odier deems to be illiquid pursuant to criteria established by the Board
of Trustees if, as a result, more than 10% (15% for Europe Fund) of the value of
the Fund's net assets would be invested in such illiquid securities and
investments. Government-related organizations which issue mortgage-related
securities include GNMA, FNMA and FHLMC. Securities issued by GNMA and FNMA are
fully modified pass-through securities, i.e., the timely payment of principal
and interest is guaranteed by the issuer. FHLMC securities are modified
pass-through securities, i.e., the timely payment of interest is guaranteed by
FHLMC, principal is passed through as collected but payment thereof is
guaranteed not later than one year after it becomes payable.
Direct Investment in Mortgages
Mortgage-related securities include investments made directly in
mortgages secured by real estate. When a Fund makes a direct investment in
mortgages, the Fund, rather than a financial intermediary, becomes the mortgagee
with respect to such loans purchased by the Fund. Direct investments in
mortgages are normally available from lending institutions which group together
a number of mortgages for resale (usually from 10 to 50 mortgages) and which act
as servicing agent for the purchaser with respect to, among other things, the
receipt of principal and interest payments. (Such investments are also referred
to as "whole loans.") The vendor of such mortgages receives a fee from the
purchaser for acting as servicing agent. The vendor does not provide any
insurance or guarantees covering the repayment of principal or interest on the
mortgages. Each Fund will invest in such mortgages only if Bartlett and/or
Lombard Odier has determined through an examination of the mortgage loans and
their originators that the purchase of the mortgages should not present a
significant risk of loss to the Fund.
Loan Participation Interests
Basic Value and Value International may invest in loan participation
interests. Loan participation interests are interests in debt obligations (such
as corporate loans) that are owned by banks or other financial institutions.
Loan participation interests are subject to the creidt risks generally
associated with the corporate borrower; however, certain loan participation
interests may be backed by irrevocable letters of credit or a
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guarantee of the bank or financial institution. Certain loan participation
interests may carry demand features that permit a Fund to sell the obligations
back to the financial intermediaries for the full amount of the Fund's interest
in the debt obligation plus accrued interest upon short notice at any time or
prior to specific dates. In the event of a default by the corporate borrower, a
Fund may be required to assert its rights through the financial intermediary
which may subject the Fund to delays, expenses and risks that are greater than
those that would have been involved if the Fund had purchased a direct
obligation (such as commerical paper) of such borrower. Moreover, under the
terms of the loan participation, the fund may be regarded as a creditor of the
bank or financial institution (rather than of the corporate borrower), so that
the fund may also be subject to the risk that the financial intermediary may
become insolvent. Further, in the event of the bankruptcy or insolvency of the
corporate borrower, the loan participation may be subject to certain defenses
that can be asserted by such borrower as a result of improper conduct by the
financial intermediary. Loan participation interests which do not carry
unconditional demand features that can be exercised within seven days or less
are deemed illiquid and a Fund's investment in such interests would be limited
to the extent that it is not permitted to invest more than 10% of the value of
its net assets in illiquid investments.
Asset-Backed and Receivable-Backed Securities
Basic Value and Value International are permitted to invest in
asset-backed and receivable-backed securities. Several types of asset-backed and
receivable-backed securities are available to investors, including CARs(SM)
(Certificates for Automobile ReceivablesSM) and interests in pools of credit
card receivables. CARs(SM) represent a pool (the "Pool") of motor vehicle retail
installment sales contracts and security interests in the vehicles securing the
contracts. Payments of principal and interest on CARs(SM) are passed through
monthly to certificate holders. Such payments may be guaranteed up to certain
amounts for a certain time period by a letter of credit issued by a financial
institution unaffiliated with the Pool. Early prepayment of principal on the
underlying vehicle sales contracts may reduce the overall return to an investor.
If the letter of credit is exhausted and if the full amount of the underlying
sales contracts are not repaid, certificate holders may experience losses on
CARs(SM) or delays in payment. Certificates representing pools of credit card
receivables have characteristics similar to CARsSM, however, the underlying
receivables are not secured.
Consistent with each Fund's investment objective and subject to the
review and approval of the Board of Trustees, Basic Value and Value
International also may invest in other types of asset-backed and
receivable-backed securities. The Prospectuses will be amended with any
necessary additional disclosure prior to either Fund investing in such
securities.
Floating and Variable Rate Obligations
Fixed income securities may be offered in the form of floating and
variable rate obligations. Floating rate obligations have an interest rate which
is fixed to a specified interest rate, such as bank prime rate, and is
automatically adjusted when the specified interest rate changes. Variable rate
obligations have an interest rate which is adjusted at specified intervals to a
specified interest rate. Periodic interest rate adjustments help stabilize the
obligations' market values.
A Fund may purchase these obligations from the issuers or may purchase
participation interests in pools of these obligations from banks or other
financial institutions. Variable and floating rate obligations usually carry
demand features that permit a Fund to sell the obligations back to the issuers
or to financial intermediaries at par value plus accrued interest upon short
notice at any time or prior to specific dates. The inability of the issuer or
financial intermediary to repurchase an obligtion on demand could affect the
liquidity of the Fund's portfolio. Frequently, obligations with demand features
are secured by letters of credit or comparable guarantees. Floating and variable
rate obligations which do not carry unconditional demand features that can be
exercised within seven days or less are deemed illiquid unless the Board
determines otherwise. A Fund's investment in illiquid floating and variable rate
obligations would be limited to the extent that it is not permitted to invest
more than 10% (15% for Europe Fund) of the value of its net assets in illiquid
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investments.
Structured Securities
Basic Value may invest in structured securities which are derived from
securities that are issued by U.S. government agencies and are denominated in
U.S. dollars. These short maturity notes differ from traditional government
agency securities in that the return (principal and/or interest) is linked to
the performance of a diversified array of financial indices.
An investment in structured securities entails risks not associated
with investments in conventional debt securities. However, the Fund uses these
securities only as a hedge or to protect its portfolio against rising interest
rates. Structured securities are privately issued securities, although they are
traded in the secondary market. The secondary market for such securities is
affected by factors independent of the creditworthiness of the issuer and the
value of the index, such as the volatility of the index, time remaining to
maturity and the amount of such securities outstanding.
Forward Commitments, Reverse Repurchase Agreements and Dollar Rolls
Basic Value and Value International may purchase or sell securities on
a "forward commitment" basis, including purchases on a "when-issued" basis, a
"when, as and if issued" basis and a "to be announced" basis. When such
transactions are negotiated, the price, which is generally expressed in yield
terms, is fixed at the time the commitment is made, but delivery and payment for
the securities take place at a later date. Normally, the settlement date occurs
within two months after the transaction, but delayed settlements beyond two
months may be negotiated. During the period between a commitment and settlement,
no payment is made by the purchaser for the securities purchased and, thus, no
interest accrues to the purchaser from the transaction. In a "when, as and if
issued" transaction, the issuance of the security depends upon the occurrence of
a subsequent event, such as approval of a merger, corporate reorganization or
debt restructuring. In a "to be announced" transaction, a Fund has committed to
purchase or sell securities for which all specific information is not yet known
at the time of the trade, particularly the face amount in GNMA securities
transactions.
The use of forward commitments enables a Fund to hedge against
anticipated changes in interest rates and prices. Forward commitment securities
may be sold prior to the settlement date, but a Fund will enter into forward
commitment transactions only with the intention of actually receiving or
delivering the securities, as the case may be. Any significant commitment of a
Fund's assets to the purchase of securities on a forward commitment basis may
increase the possibility that its net asset value will fluctuate. In addition,
if a Fund chooses to dispose of the right to receive or deliver a forward
commitment security prior to the settlement date, it may incur a gain or loss.
Purchases of forward commitment securities also involve a risk of loss if the
value of the securities declines prior to the settlement date or if the seller
fails to deliver after the value of the securities has risen.
A Fund will direct State Street to place cash or U.S. government
obligations in a separate account in an amount equal to the commitments of the
Fund to purchase securities as a result of its forward commitment obligations.
With respect to forward commitments to sell securities, a Fund will direct State
Street to place the securities in a separate account. A Fund will direct State
Street to segregate such assets for "when, as and if issued" commitments only
when it determines that issuance of the security is probable.
Basic Value may enter into reverse repurchase agreements. Reverse
repurchase agreements involve sales of portfolio securities by a Fund to member
banks of the Federal Reserve System or recognized securities dealers,
concurrently with an agreement by the Fund to repurchase the same securities at
a later date at a fixed price, which is generally equal to the original sales
price plus interest. The Fund retains record ownership and the right to receive
interest and principal payments on the portfolio security involved. The
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Fund's objective in such a transaction would be to obtain funds to pursue
additional investment opportunities whose yield would exceed the cost of the
reverse repurchase transaction. Generally, the use of reverse repurchase
agreements should reduce portfolio turnover and increase yield.
In connection with each reverse repurchase agreement, the Fund will
direct State Street to place cash or U.S. government obligations in a separate
account in an amount equal to the repurchase price. In the event of bankruptcy
or other default by the purchaser, the Fund could experience both delays in
repurchasing the portfolio securities and losses.
Basic Value also may enter in dollar roll transactions with certain
broker/dealers and banks. For all purposes (including borrowing restrictions)
the Fund treats dollar roll transactions as reverse repurchase agreements.
Dollar roll transactions consist of the sale by a Fund of mortgage-backed
securities combined with a commitment to purchase similar (although not
identical) securities at a future date at the same price. The Fund would receive
a fee for entering into the commitment to purchase. The principal risk of dollar
roll transactions is that if the broker/dealer or bank to whom the Fund sells
the securities underlying a dollar roll transaction becomes insolvent, the
Fund's right to purchase similar securities may be restricted. Similarly, the
value of the securities may change adversely over the term of the dollar roll
transaction and the securities that the Fund is required to repurchase may be
worth less than the securities originally held by the Fund. Finally, the return
earned by the Fund with the proceeds of a dollar roll transaction may not exceed
transaction costs.
When a separate account is maintained in connection with forward
commitment transactions to purchase securities or reverse repurchase agreements,
the securities deposited in the separate account will be valued daily at market
for the purpose of determining the adequacy of the securities in the account. If
the market value of such securities declines, additional cash or securities will
be placed in the account on a daily basis so that the market value of the
account will equal the amount of the Fund's commitments to purchase or
repurchase securities. To the extent funds are in a separate account, they will
not be available for new investment or to meet redemptions.
Commitments to purchase securities on a when, as and if issued basis
will not be recognized in the portfolio of a Fund until Bartlett determines that
issuance of the security is probable. At such time, the Fund will record the
transaction and, in determining its net asset value, will reflect the value of
the security daily.
Securities purchased on a forward commitment basis, securities subject
to reverse repurchase agreements and the securities held in each Fund's
portfolio are subject to changes in market value based upon the public's
perception of the creditworthiness of the issuer and changes in the level of
interest rates (which will generally result in all of those securities changing
in value in the same way, i.e., all those securities experiencing appreciation
when interest rates decline and depreciation when interest rates rise).
Therefore, if in order to achieve a higher level of income, the Fund remains
substantially fully invested at the same time that it has purchased securities
on a forward commitment basis or entered into reverse repurchase transactions,
there will be a possibility that the market value of the Fund's assets will have
greater fluctuation.
Short Sales
Basic Value may sell a security short in anticipation of a decline in
the market value of the security. When the Fund engages in a short sale, it
sells a security which it does not own. To complete the transaction, the Fund
must borrow the security in order to deliver it to the buyer. The Fund must
replace the borrowed security by purchasing it at the market price at the time
of replacement, which may be more or less than the price at which the Fund sold
the security. The Fund will incur a loss as a result of the short sale if the
price of the security increases between the date of the short sale and the date
on which the Fund replaces the borrowed security. The Fund will realize a profit
if the security declines in price between those dates.
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In connection with its short sales, the Fund will be required to
maintain a segregated account with State Street of cash or high grade liquid
debt assets equal to the market value of the securities sold less any collateral
deposited with its broker. The Fund will limit its short sales so that no more
than 25% of its net assets (less all its liabilities other than obligations
under the short sales) will be deposited as collateral and allocated to the
segregated account. However, the segregated account and deposits will not
necessarily limit the Fund's potential loss on a short sale, which is unlimited.
The Fund's policy with respect to short sales is fundamental, although the
particular practices followed with respect to short sales, such as the
percentage of the Fund's assets which may be deposited as collateral or
allocated to the segregated account, are not deemed fundamental and may be
changed by the Board of Trustees without the vote of the Fund's shareholders.
When a Fund borrows a security in connection with a short sale, the
Fund is required to pay to the lender any dividends or interest which accrue
during the period of the loan. To borrow the security, the Fund also may be
required to pay a premium to the lender, which would increase the cost of the
security sold. The amount of any gain will be decreased, and the amount of any
loss increased, by the amount of any premium, dividends or interest the Fund may
be required to pay in connection with the short sale. The proceeds of the short
sale will be retained by the lender or its broker, to the extent necessary to
meet margin requirements, until the short position is closed out by delivery of
the underlying security.
Short Sales Against the Box
Basic Value and Value International may make short sales "against the
box." Short sales "against the box" are transactions, similar to those described
above, in which a security identical to one owned by a Fund is borrowed and sold
short. The transaction may serve to defer a gain or loss for federal income tax
purposes. There is no limit as to the percentage of a Fund's assets that may be
committed to short sales "against the box."
Restricted Securities
Restricted securities are securities the resale of which is subject to
legal or contractual restrictions. Restricted securities may be sold only in
privately negotiated transactions, in a public offering with respect to which a
registration statement is in effect under the Securities Act of 1933 or pursuant
to Rule 144 or Rule 144A promulgated under such Act. Where registration is
required, the Fund may be obligated to pay all or part of the registration
expense, and a considerable period may elapse between the time of the decision
to sell and the time such security may be sold under an effective registration
statement. If during such a period adverse market conditions were to develop,
the Fund might obtain a less favorable price than the price it could have
obtained when it decided to sell.
Bond Ratings
Each Fund may invest in debt obligations (such as corporate debt
securities and municipal obligations) in any rating category of the recognized
rating services, including issues that are in default, and may invest in unrated
debt obligations. Most foreign debt obligations are not rated.
Generally, investments in securities in the lower rating categories or
comparable unrated securities provide higher yields but involve greater price
volatility and risk of loss of principal and interest than investments in
securities with higher ratings. Securities rated lower than Baa by Moody's
Investor's Service, Inc. ("Moody's") or BBB by Standard & Poor's ("S&P")
(commonly known as "junk bonds"), are below investment grade and have
speculative characteristics, and those in the lowest rating categories are
extremely speculative and may be in default with respect to payment of principal
and interest. Each Fund does not intend to invest more than 5% of its net assets
in securities below investment grade.
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Lower ratings reflect a greater possibility that an adverse change in
financial condition will affect the ability of the issuer to make payments of
principal and interest than is the case with higher grade securities. In
addition, lower-rated securities will also be affected by the market's
perceptions of their credit quality and the outlook for economic growth. In the
past, economic downturns or an increase in interest rates have under certain
circumstances caused a higher incidence of default by the issuers of these
securities and may do so in the future, especially in the case of highly
leveraged issuers. The prices for these securities may be affected by
legislative and regulatory developments. For example, federal rules require that
savings and loan associations gradually reduce their holdings of high yield
securities. An effect of such legislation may be to significantly depress the
prices of outstanding lower-rated securities. The market for lower-rated
securities may be less liquid than the market for securities with higher
ratings. Furthermore, the liquidity of lower-rated securities may be affected by
the market's perception of their credit quality. Therefore, judgment may at
times play a greater role in valuing these securities than in the case of
higher-rated securities, and it also may be more difficult during certain
adverse market conditions to sell lower-rated securities at their face value to
meet redemption requests or to respond to changes in the market.
Although the above risks apply to all lower-rated securities, the
investment risk increases when the rating of the security is below investment
grade. The lowest-rated securities (D by S&P and C by Moody's) are regarded as
having extremely poor prospects of ever attaining any real investment standing
and, in fact, may be in default of payment of interest or repayment of
principal. To the extent a Fund invests in these lower-rated securities, the
achievement of its investment objective may be more dependent on Bartlett's
and/or Lombard Odier's own credit analysis than in the case of a Fund investing
in higher-rated securities.
Each Fund may invest in securities which are in lower rating categories
or are unrated if Bartlett and/or Lombard Odier determines that the securities
provide the opportunity of meeting the Fund's objective without presenting
excessive risk. Bartlett and/or Lombard Odier will consider all factors which it
deems appropriate, including ratings, in making investment decisions for a Fund
and will attempt to minimize investment risks through diversification,
investment analysis and monitoring of general economic conditions and trends.
While Bartlett and/or Lombard Odier may refer to ratings, they do not rely
exclusively on ratings, but make their own independent and ongoing review of
credit quality.
Standard & Poor's Bond Ratings
AAA. Debt rated AAA has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.
AA. Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher-rated issues only in small degree.
A. Debt rated A has a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.
BBB. Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.
BB. Debt rated BB generally has less near-term vulnerability to default
than other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments.
B. Debt rated B has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions likely will impair
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capacity or willingness to pay interest and repay principal. The B rating
category also is used for debt subordinated to senior debt that is assigned an
actual or implied BB- rating.
CCC. Debt rated CCC has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, it is not likely to
have the capacity to pay interest and repay principal.
CC. Debt rated CC is typically applied to debt subordinated to senior
debt that is assigned an actual or implied CCC debt rating.
C. The rating C typically is applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.
CI. The rating CI is reserved for income bonds on which no interest is
being paid.
D. Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
Plus (+) or minus (-). The ratings from "AA" to "CCC" may be modified
by the addition of a plus or minus sign to show relative standing within the
major categories.
Moody's Investors Service, Inc. Bond Ratings
Aaa. Bonds rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa. Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
A. Bonds rated A possess many favorable investment attributes and are
to be considered as upper- medium-grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa. Bonds rated Baa are considered as medium-grade obligations; i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba. Bonds rated Ba are judged to have speculative elements. Their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad economic times over the future. Uncertainty of position
16
<PAGE>
characterizes bonds in this class.
B. Bonds rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa. Bonds rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca. Bonds rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C. Bonds rated C are the lowest-rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Moody's applies numerical modifiers, 1, 2, and 3, in each generic
rating classification from As through B in its corporate bond system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
INVESTMENT LIMITATIONS
- ----------------------
Except as indicated, the investment limitations described below have
been adopted by the Trust with respect to each Fund and may not be changed
without the affirmative vote of a majority of the outstanding shares of the
applicable Fund. As used in the Prospectuses and this Statement of Additional
Information, the term "majority" of the outstanding shares of the Trust (or of
any Fund) means the lesser of (1) 67% or more of the outstanding shares of the
Trust (or the applicable Fund) present at a meeting, if the holders of more than
50% of the outstanding shares of the Trust (or applicable Fund) are present or
represented at such meeting; or (2) more than 50% of the outstanding shares of
the Trust (or the applicable Fund).
With respect to the percentages adopted by the Trust as maximum
limitations on its investment policies and limitations, an excess above the
fixed percentage will not be a violation of the policy or limitation unless the
excess results immediately and directly from the acquisition of any security or
the action taken.
Notwithstanding any of the following limitations, any investment
company (or series thereof), whether organized as a trust, association or
corporation, or a personal holding company, may be merged or consolidated with
or acquired by the Trust (or any Fund), provided that if such merger,
consolidation or acquisition results in an investment in the securities of any
issuer prohibited by said limitations, the Trust (or applicable Fund) shall,
within ninety days after the consummation of such merger, consolidation or
acquisition, dispose of all of the securities of such issuer so acquired or such
portion thereof as shall bring the total investment therein within the
limitations imposed as of the date of consummation.
For purposes of the diversification requirements described below, a
Fund will treat both the corporate borrower and the financial intermediary as
issuers of a loan participation interest. Investments by a Fund in CMOs that are
deemed to be investment companies under the Investment Company Act of 1940, as
amended ("1940 Act") will be included in the limitation on investments in other
investment companies.
Limitations Applicable to the Funds
-----------------------------------
1. Borrowing Money. A Fund will not borrow money, except (a) from a
bank, provided that immediately after such borrowing there is an asset coverage
of 300% for all borrowings of the Fund; or (b) from a bank or other persons for
temporary purposes only, provided that such temporary borrowings are in
17
<PAGE>
an amount not exceeding 5% of the Fund's total assets at the time when the
borrowing is made. This limitation does not preclude Basic Value from entering
into reverse repurchase transactions and dollar rolls, provided that it has an
asset coverage of 300% for all borrowings and repurchase commitments pursuant to
reverse repurchase transactions and dollar rolls. Value International will not
borrow money in excess of one-third of the Fund's total assets at the time when
the borrowing is made. Europe Fund will not borrow money in excess of 15% of the
total value of its assets (including the amount borrowed) less its liabilities
(not including its borrowings), and will not purchase securities at any time
when borrowings exceed 5% of its total assets.
2. Pledging; Senior Securities. Basic Value and Value International
will not mortgage, pledge, hypothecate or in any manner transfer, as security
for indebtedness, any assets of the Fund except as may be necessary in
connection with borrowings described in limitation (1) above. (Margin deposits,
security interests, liens and collateral arrangements with respect to
transactions involving options, futures contracts, short sales and other
permitted investments and techniques are not deemed to be a mortgage, pledge or
hypothecation of assets for purposes of this limitation.) Europe Fund may not
issue senior securities except to evidence borrowings permitted by limitation
(1) above.
3. Underwriting. A Fund will not act as underwriter of securities
issued by other persons. This limitation is not applicable to the extent that,
in connection with the disposition of portfolio securities (including restricted
securities), the Fund may be deemed an underwriter under certain federal
securities laws.
4. Real Estate. A Fund will not purchase, hold or deal in real estate.
This limitation is not applicable to investments in securities which are secured
by or represent interests in real estate or to securities issued by companies,
including real estate investment trusts, that invest in real estate or interests
in real estate. This limitation does not preclude a Fund from investing in
mortgage-related securities or (except for Value International) investing
directly in mortgages.
5. Commodities. A Fund will not purchase, hold or deal in commodities
or commodities futures contracts except as described in the Prospectuses and
Statement of Additional Information. This does not preclude Value International
or Europe Fund from investing in futures contracts, put and call options on
foreign currencies or forward currency exchange contracts.
6. Loans. Basic Value and Value International will not make loans to
other persons, except (a) by loaning portfolio securities, (b) by engaging in
repurchase agreements, (c) by purchasing nonpublicly offered debt securities, or
(except for Value International) (d) through direct investments in mortgages.
For purposes of this limitation, the term "loans" shall not include the purchase
of a portion of an issue of publicly distributed bonds, debentures or other
securities. Europe Fund may not lend money to other persons except through the
use of publicly distributed debt obligations and the entering into of repurchase
agreements consistent with its investment policies.
7. Margin Purchases. A Fund will not purchase securities or evidences
of interest thereon on "margin." This limitation is not applicable to short term
credit obtained by a Fund for the clearance of purchases and sales or redemption
of securities, or to arrangements with respect to transactions involving
options, futures contracts, short sales and other permitted investments and
techniques (including foreign currency exchange contracts).
8. Concentration. A Fund will not invest 25% or more of its total
assets in a particular industry. This limitation is not applicable to
investments in obligations issued or guaranteed by the U.S. government, its
agencies and instrumentalities or repurchase agreements with respect thereto.
9. Diversification. Basic Value and Value International will not
purchase the securities of any issuer if such purchase at the time thereof would
cause less than 75% of the value of its total assets to be
18
<PAGE>
invested in cash and cash items (including receivables), securities issued by
the U.S. government, its agencies or instrumentalities and repurchase agreements
with respect thereto, securities of other investment companies, other securities
for the purposes of this calculation limited in respect of any one issuer to an
amount not greater in value than 5% of the value of the total assets of the Fund
and to not more than 10% of the outstanding voting securities of such issuer.
Europe Fund will not purchase any security (other than obligations of the United
States government, its agencies or instrumentalities), if as a result (a) more
than 25% of the value of the Fund's total assets would then be invested in
securities of any single issuer, or (b) as to 75% of the value of the Fund's
total assets (i) more than 5% of the value of the Fund's total assets would then
be invested in securities of any single issuer, or (ii) the Fund would own more
than 10% of the voting securities of any single issuer.
Additional Limitations Applicable to Europe Fund
------------------------------------------------
1. Short Sales. Europe Fund may not make short sales of securities or
maintain a short position in any security.
2. Restricted Securities. Europe Fund will not purchase securities for
which there are legal restrictions on resale and other securities that are not
readily marketable if as a result of such purchase more than 15% of the value of
the Fund's total assets would be invested in such securities, provided that
securities that are not subject to restrictions on resale in the country in
which they are principally traded are not considered subject to this
restriction.
3. Oil and Gas Programs. Europe Fund may not invest in oil, gas,
mineral exploration or development programs, except that the Fund may invest in
issuers which invest in such programs.
4. "Unseasoned" Companies. Europe Fund may not purchase any security if
as a result the Fund would have more than 5% of its net assets invested in
securities of companies which together with any predecessors have been in
continuous operation for less than three years.
5. Warrants. Europe Fund may not invest more than 5% of its net assets
in warrants issued by U.S. entities, provided that no more than 2% of its net
assets will be invested in warrants that are not listed on the New York Stock
Exchange or American Stock Exchange; except that these limitations are not
applicable to warrants issued by non-U.S. issuers.
Additional Limitations Applicable to Basic Value
------------------------------------------------
1. Short Sales. Basic Value will not effect short sales of securities
except as described in the Prospectuses and Statement of Additional Information.
2. Options. Basic Value will not purchase or sell puts, calls, options
or straddles except as described in the Prospectuses and Statement of Additional
Information.
3. Other Investment Companies. Basic Value will not invest more than
10% of its total assets in securities of other investment companies or invest
more than 5% of its total assets in securities of any investment company and
will not purchase more than 3% of the outstanding voting stock of any investment
company.
4. Oil and Gas Programs. Basic Value will not purchase, hold or deal in
oil, gas or other mineral explorative or development programs.
5. Illiquid Investments. Basic Value will not invest more than 10% of
its net assets in securities for which there are legal or contractual
restrictions on resale and other illiquid securities.
19
<PAGE>
Additional Limitation on Value International
--------------------------------------------
Senior Securities. Value International may not issue senior securities.
This limitation is not applicable to activities that may be deemed to involve
the issuance or sale of a senior security by the Fund, provided that the Fund's
engagement in such activities is consistent with or permitted by the 1940 Act,
the rules and regulations promulgated thereunder or interpretations of the SEC
or its staff.
Statement of Intention by Value International
---------------------------------------------
It is the intention of Value International (which may be changed by the
Trustees without shareholder approval) that it will not invest in
mortgage-related securities and will limit its borrowings to an amount not
exceeding 5% of the Fund's total assets at the time when the borrowing is made.
Portfolio Turnover
For the year ended March 31, 1997, Basic Value's and Value
International's portfolio turnover rates for its shares (redesignated as Class A
shares) were 23% and [ ], respectively. For the year ended December 31, 1996,
the portfolio turnover rate of Worldwide Value Fund, Inc. (a closed-end
investment company traded on the New York Stock Exchange) was 109%.
Each Fund anticipates that in the future its portfolio turnover rate
will not exceed [ ], [ ] and [ ], respectively. The portfolio turnover rate is
computed by dividing the lesser of purchases or sales of securities for the
period by the average value of portfolio securities for that period. Short-term
securities are excluded from the calculation. High portfolio turnover rates
(100% or more) will involve correspondingly greater transaction costs which will
be borne directly by that Fund. It may also increase the amount of short-term
capital gains, if any, realized by a Fund and will affect the tax treatment of
distributions paid to shareholders because distributions of net short-term
capital gains are taxable as ordinary income. Each Fund will take these
possibilities into account as part of its investment strategies.
THE FUNDS' INVESTMENT ADVISER AND SUB-ADVISER
- ---------------------------------------------
The Trust's investment adviser is Bartlett & Co., 36 East Fourth
Street, Cincinnati, Ohio 45202. Bartlett became a wholly owned subsidiary of
Legg Mason, Inc. ("Legg Mason") effective January 2, 1996. Bartlett has provided
investment advice to individuals, corporations, pension and profit sharing plans
and trust accounts since 1898.
The directors and officers of Bartlett are James A. Miller, William A.
Friedlander, Raymond A. Mason, Edward A. Taber, III, Robert G. Sabelhaus and
Thomas A. Steele.
An Investment Management and Administration Agreement dated May 1, 1997
between the Trust and Bartlett ("Management Agreement") was approved by the
Board of Trustees, including a majority of the trustees who are not "interested
persons" of the Trust, Bartlett or BFP, on February 24, 1997, by the vote of the
sole shareholder of Europe Fund on July [ ], 1997 and by a majority of Value
International's and Basic Value's outstanding shares on July [ ], 1997. Pursuant
to the Management Agreement, and subject to overall direction by the Board of
Trustees, Bartlett manages the Funds' investments consistent with each Fund's
investment objectives and policies described in the Prospectus and this
Statement of Additional Information. As administrator, Bartlett also is
obligated to, among other things, (a) furnish the Funds with office space and
executive and other personnel necessary for the operations of each Fund; (b)
supervise all aspects of each Fund's operations; (c) bear the expense of certain
informational and purchase and redemption services to each Fund's shareholders;
(d) arrange, but not pay for, the periodic updating of prospectuses, proxy
materials, tax returns and reports to shareholders and state and federal
regulatory agencies; and (e) report regularly to the Trust's officers and
trustees. Bartlett and its affiliates pay all the
20
<PAGE>
compensation of trustees and officers of the Trust who are employees of
Bartlett.
Each Fund pays all its other expenses which are not expressly assumed
by Bartlett. These expenses include, among others, interest expense, taxes,
brokerage fees, commissions, expenses of preparing and printing prospectuses,
statements of additional information, proxy statements and reports and of
distributing them to existing shareholders, custodian charges, transfer agency
fees, organizational expenses, distribution fees paid to the Fund's distributor,
compensation of the independent trustees, legal and audit expenses, insurance
expenses, expenses of registering and qualifying shares of the Funds for sale
under federal and state law, governmental fees and expenses incurred in
connection with membership in investment company organizations.
As compensation for the services provided and the expenses assumed
pursuant to the Management Agreement, each Fund will pay to Bartlett a fee,
subject to any fee or expense waiver or reimbursement arrangements in place,
computed daily and paid monthly, at the following annual rates: 0.75% of Basic
Value's average daily net assets; 1.25% of Value International's average daily
net assets; and 1.00% of Europe Fund's average daily net assets.
Bartlett has agreed to waive fees and/or assume other expenses to the
extent that a Fund's expenses exceed the following annual rates of average daily
net assets until July 31, 1998:
Class A Class C Class Y
------- ------- -------
Value International 1.80% 2.55% 1.55%
Basic Value 1.15% 1.90% 0.90%
Europe Fund 1.75% 2.50% 1.50%
The following table depicts the advisory fees paid by Basic Value and
Value International to Bartlett for the fiscal years ended March 31, 1997, 1996
and 1995.
Fiscal Year Value
Ended International Basic Value
March 31, Fund Fund
--------- ------------- -----------
1997 $1,430,591 $1,468,801
1996 $1,215,664 $1,366,123
1995 $1,025,125 $1,173,808
The expenses of Value International and Europe Fund, like those of
other international funds, generally can be expected to be higher than expenses
of investment companies investing in domestic securities due to the greater
costs of custody, communications and investment advisory services for foreign
securities.
Under the Management Agreement, Bartlett will not be liable for any
error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the performance of the Management Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its obligations or duties thereunder.
The Management Agreement terminates automatically upon assignment. It
also is terminable at any time without penalty by vote of the Trust's Board of
Trustees, by vote of a majority of a Fund's outstanding voting securities, or by
Bartlett, on not less than 60 days' notice to the other party to the Management
Agreement and may be terminated immediately upon the mutual written consent of
both parties to the
21
<PAGE>
Management Agreement. Termination of the Management Agreement with respect to
any given Fund shall in no way affect the continued validity of this Management
Agreement or the performance thereunder with respect to any other Fund.
Bartlett retains the right to use the name "Bartlett" in connection
with another investment company or business enterprise with which Bartlett is or
may become associated. The Trust's right to use the name "Bartlett"
automatically ceases thirty days after termination of the Management Agreement
and may be withdrawn by Bartlett on thirty days written notice.
Lombard Odier International Portfolio Management Limited ("Lombard
Odier"), Norfolk House, 13 Southampton Place, London WC1A 2AJ, England, serves
as investment sub-adviser to Europe Fund under a Sub-Advisory Agreement dated
May 1, 1997, between Lombard Odier and Bartlett ("Sub-Advisory Agreement"). The
Sub-Advisory Agreement was approved by the Board of Trustees, including a
majority of the trustees who are not "interested persons" of the Trust, Bartlett
or Lombard Odier, on February 24, 1997 and by the sole shareholder of Europe
Fund on July [ ], 1997.
Lombard Odier is responsible for providing investment advice to Europe
Fund in accordance with its investment objective and policies, and for placing
orders to purchase and sell portfolio securities pursuant to directions from the
Fund's officers. For Lombard Odier's services to Europe Fund, Bartlett (not the
Fund) pays Lombard Odier a fee, computed daily and payable monthly, at an annual
rate equal to 60% of the monthly fee actually paid to Bartlett by the Fund under
the Management Agreement.
Under the Sub-Advisory Agreement, Lombard Odier will not be liable for
any error of judgment or mistake of law or for any loss suffered by Bartlett or
by the Fund in connection with the performance of the Sub-Advisory Agreement,
except a loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations or duties thereunder.
The Sub-Advisory Agreement terminates automatically upon assignment and
is terminable at any time without penalty by vote of the Trust's Board of
Trustees, by vote of a majority of the Fund's outstanding voting securities, by
Bartlett or by Lombard Odier, on not less than 60 days' notice to the Fund
and/or the other party(ies). The Sub-Advisory Agreement terminates immediately
upon any termination of the Advisory Agreement or upon the mutual written
consent of Bartlett, Lombard Odier and the Fund.
THE TRUST'S DISTRIBUTOR
BFP Financial Partners Inc. ("BFP") acts as distributor of the Funds'
shares pursuant to a Distribution Agreement dated July [ ], 1997 between the
Trust and BFP ("Distribution Agreement"). The Distribution Agreement obligates
BFP to promote the sale of Fund shares and to pay certain expenses in connection
with its distribution efforts, including the printing and distribution of
prospectuses and periodic reports used in connection with the offering to
prospective investors (after the prospectuses and reports have been prepared,
set in type and mailed to existing shareholders at each Fund's expense) and for
supplementary sales literature and advertising costs.
The Trust has adopted separate Distribution Plans ("Plan") pertaining
to the Class A and Class C shares of each Fund which, among other things, permit
a Fund to pay BFP fees for its services related to sales and distribution of
Fund shares and the provision of ongoing services to shareholders. Service
and/or distribution activities for which such payments may be made include, but
are not limited to, compensation to persons who engage in or support
distribution and redemption of shares, printing of prospectuses and reports for
persons other than existing shareholders, advertising, preparation and
distribution of sales literature, overhead, travel, telephone and other
communication expenses.
22
<PAGE>
Each Plan was adopted, as required by Rule 12b-1 under the 1940 Act, by
a vote of the Board of Trustees on February 24, 1997, including a majority of
the trustees who are not "interested persons" of the Trust as that term is
defined in the 1940 Act and who have no direct or indirect financial interest in
the operation of the Plan ("12b-1 Trustees"). In approving each Plan, in
accordance with the requirements of Rule 12b-1, the trustees determined that
there was a reasonable likelihood that each Plan would benefit each Fund and its
shareholders.
As compensation for its services and expenses as principal underwriter
of each Fund's Class A shares, BFP receives an annual service fee equivalent to
0.25% of the average daily net assets of each Fund's Class A shares. For BFP's
services and expenses as principal underwriter of each Fund's Class C shares,
BFP receives annual distribution and service fees equivalent to 1.00% of the
average daily net assets of each Fund's Class C shares. Such fees shall be
calculated daily and paid monthly.
Each Plan continues in effect only so long as it is approved at least
annually by the vote of a majority of the Board of Trustees, including a
majority of the 12b-1 Trustees, cast in person at a meeting called for the
purpose of voting on the Plans. Each Plan may be terminated with respect to each
Fund by a vote of a majority of 12b-1 Trustees or by vote of a majority of the
outstanding voting securities of that Fund. Any change in a Plan that would
materially increase the distribution costs to a Fund requires shareholder
approval; otherwise, each Plan may be amended by the trustees, including a
majority of the 12b-1 Trustees.
Rule 12b-1 requires that any person authorized to direct the
disposition of monies paid or payable by a Fund, pursuant to the Plan or any
related agreement shall provide to that Fund's Board of Trustees, and the
trustees shall review, at least quarterly, a written report of the amounts so
expensed and the purposes for which the expenditures were made. Rule 12b-1 also
provides that a Fund may rely on that Rule only if, while the Plan is in effect,
the nomination and selection of that Fund's independent trustees is committed to
the discretion of such independent trustees.
TRUSTEES AND OFFICERS
- ---------------------
The Trust's officers are responsible for the operation of the Trust
under the direction of the Board of Trustees. The officers and trustees and
their principal occupations during the past five years are set forth below. An
asterisk (*) indicates those trustees who are "interested persons" of the Trust
as defined by the 1940 Act.
<TABLE>
<CAPTION>
===================================================================================================================
Name, Address and Date of Birth Position with the Trust Principal Occupation
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Dale H. Rabiner, CFA* Chairman of the Board, President Senior Portfolio Manager and a
[09/14/51] and Trustee managing Director of Bartlett
36 East Fourth Street
Cincinnati, Ohio 45202
- -------------------------------------------------------------------------------------------------------------------
Lorrence T. Kellar Trustee Vice President - Real Estate for
[08/10/37] KMart Corporation, (a general
36 East Fourth Street merchandise retailer) since May
Cincinnati, Ohio 45202 1996; formerly: Goup Vice
President of Finance and Real
Estate at The Kroger Co. (a food
retailer); Director or BT Office
Products International, Inc. and
Director of Multi-Color Corporation
===================================================================================================================
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================
Name, Address and Date of Birth Position with the Trust Principal Occupation
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Alan R. Schriber Trustee President of ARS Broadcasting
[08/20/45] Corp., a company which owns and
36 East Fourth Street operates radio stations
Cincinnati, Ohio 45202
- -------------------------------------------------------------------------------------------------------------------
William P. Sheehan Trustee Member of the State of Ohio
[02/16/27] Employment Relations Board
36 East Fourth Street
Cincinnati, Ohio 45202
- -------------------------------------------------------------------------------------------------------------------
Charles J. Swindells Trustee Vice Chairman, U.S. Trust
[ ] Company of the Pacific Northwest
36 East Fourth Street (a non-depository trust company);
Cincinnati, Ohio 45202 Founder of Capital Trust Company,
which was merged into U.S. Trust
Company of New York in July 1993;
Chairman, Oregon Public
Broadcasting
- -------------------------------------------------------------------------------------------------------------------
Prinz Wolfgang E. Ysenburg Trustee Director of Holland Fund (Dutch
[ ] investment company); Director of
36 East Fourth Street Beteilingungsgesellschaft (German
Cincinnati, Ohio 45202 investment company); Director of
Profirent Investment Fund ( )
- -------------------------------------------------------------------------------------------------------------------
A. John W. Campbell Trustee Director of Campbell Lutyens & Co.
[ ] Ltd (UK investment banking firm);
36 East Fourth Street Director of Beradin Holdings, PLC
Cincinnati, Ohio 45202 ( )
- -------------------------------------------------------------------------------------------------------------------
Henri Deegenaar Trustee Independent Consultant;
[ ] Investment Adviser to Saint Honore
36 East Fourth Street Marche Emergents (French
Cincinnati, Ohio 45202 investment company); Director of
Guilbert SA (office supplies
distribution company) and OFREX
( )
- -------------------------------------------------------------------------------------------------------------------
Ian F. H. Grant Trustee Managing Director of Glenmoriston
[ ] Estates Ltd. (Scottish holding
36 East Fourth Street company); Chairman of Pacific
Cincinnati, Ohio 45202 Assets Trust PLC (UK investment
company); Director of Royal Bank
of Scotland PLC, Royal Bank of
Scotland Group PLC, Banco Santander
SA, and a number of publicly owned
companies in Europe and the Far
East
- -------------------------------------------------------------------------------------------------------------------
Edmund J. Cashman, Jr.* Trustee Senior Executive Vice President
[08/31/ ] and Director of Legg Mason Wood
111 South Calvert Street Walker, Inc.; President/Vice
Baltimore, MD 21202 Chairman/Director/Trustee of
various Legg Mason funds; Director
of E. A. Engineering, Science and
Technology, Inc. ( )
===================================================================================================================
</TABLE>
24
<PAGE>
The executive officers of the Trust, other than those who also serve as
trustee, are:
<TABLE>
<CAPTION>
===================================================================================================================
Name, Address and Date of Birth Position With Trust Principal Occupation
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
James B. Reynolds, CFA Vice President Senior Portfolio Manager and a
[09/13/43] Managing Director of Bartlett
36 East Fourth Street
Cincinnati, Ohio 45202
- -------------------------------------------------------------------------------------------------------------------
Marie K. Karpinski, CPA Vice President and Treasurer Treasurer of Legg Mason Fund
[01/01/49] Adviser, Inc., Vice President and
7 East Redwood Street Treasurer of other registered
Baltimore, MD 21202 investment companies for which
Legg Mason Fund Adviser, Inc. is
investment adviser or manager and
Vice President of Legg Mason
Wood Walker, Inc.
- -------------------------------------------------------------------------------------------------------------------
Madelynn M. Matlock, CFA Vice President Director of International Equities for
[12/8/49] Bartlett
36 East Fourth Street
Cincinnati, Ohio 45202
- -------------------------------------------------------------------------------------------------------------------
James A. Miller Vice President Senior Portfolio Manager, President
[03/13/49] and a Director of Bartlett
36 East Fourth Street
Cincinnati, Ohio 45202
- -------------------------------------------------------------------------------------------------------------------
Donna M. Prieshoff Vice President Director of Operations of Bartlett
[09/19/49]
36 East Fourth Street
Cincinnati, Ohio 45202
- -------------------------------------------------------------------------------------------------------------------
Woodrow H. Uible, CFA Vice President Senior Portfolio Manager of Bartlett
[06/13/53]
36 East Fourth Street
Cincinnati, Ohio 45202
- -------------------------------------------------------------------------------------------------------------------
Kathi D. Bair Secretary Secretary and/or Assistant
[12/15/64] Treasurer of other registered
7 East Redwood Street investment companies for which
Baltimore, MD 21202 Legg Mason Fund Adviser, Inc. is
investment adviser or manager
===================================================================================================================
</TABLE>
For the fiscal year ended March 31, 1997, the Trustees of the Trust
received the following compensation:
<TABLE>
<CAPTION>
Aggregate
Compensation Total Compensation From Registrant
Name of Person, Position From Trust and Trust Complex Paid to Trustees
============================================================================================================
<S> <C>
Dale H. Rabiner*, $0 $0
Chairman of the Board, President and
Trustee
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Aggregate
Compensation Total Compensation From Registrant
Name of Person, Position From Trust and Trust Complex Paid to Trustees
============================================================================================================
<S> <C>
Lorrence T. Kellar, $6,400 $8,000
Trustee
Philip J. Ringo** $1,500 $1,500
Alan R. Schriber, $4,800 $6,000
Trustee
William P. Sheehan, $4,800 $6,000
Trustee
</TABLE>
* Interested Person
** Mr. Ringo resigned as trustee effective February 6, 1997.
Officers and trustees of the Trust who are "interested persons"
thereof, as defined in the 1940 Act, receive no salary or fees from the Trust.
Independent trustees of the Trust receive an annual fee of $2,000 and an
attendance fee of $1,000 per meeting of the Board plus travel and out-of-pocket
expenses incurred in connection with the Board of Trustees' meetings.
The Trust does not have an Audit Committee, a Compensation Committee or
a Nominating Committee. The Board of Trustees nominates individuals for election
to the Board of Trustees. As of [ ], no trustee or officer beneficially owned
more than 1% of the shares outstanding of each Fund.
PORTFOLIO TRANSACTIONS AND BROKERAGE
- ------------------------------------
Subject to policies established by the Board of Trustees of the Trust,
Bartlett is responsible for the Trust's portfolio decisions and the placing of
the Trust's portfolio transactions. In placing portfolio transactions, Bartlett
seeks the best qualitative execution for the Trust, taking into account such
factors as price (including the applicable brokerage commission or dealer
spread), the execution capability, financial responsibility and responsiveness
of the broker or dealer and the brokerage and research services provided by the
broker or dealer. Bartlett generally seeks favorable prices and commission rates
that are reasonable in relation to the benefits received. The Trust has no
obligation to deal with any broker or dealer in the execution of its
transactions.
Bartlett is specifically authorized to select brokers or dealers who
also provide brokerage and research services to the Trust and/or the other
accounts over which Bartlett exercises investment discretion and to pay such
brokers or dealers a commission in excess of the commission another broker or
dealer would charge if Bartlett determines in good faith that the commission is
reasonable in relation to the value of the brokerage and research services
provided. The determination may be viewed in terms of a particular transaction
or Bartlett's overall responsibilities with respect to the Trust and to other
accounts over which it exercises investment discretion.
Research services include supplemental research, securities and
economic analyses, statistical services and information with respect to the
availability of securities or purchasers or sellers of securities and analyses
of reports concerning performance of accounts. The research services and other
information furnished by brokers through whom the Trust effects securities
transactions may also be used by Bartlett in servicing all of its accounts and
all such services may not be used by Bartlett in connection with the Trust.
Similarly, research and information provided by brokers or dealers serving other
clients may be useful to Bartlett in connection with its services to the Trust.
[Although research services and other information are useful to the Trust and
Bartlett, it is not possible to place a dollar value on the research and other
information received. It is the opinion of the Board of Trustees and Bartlett
that the review and study of the research and other information will not reduce
the overall cost to Bartlett of performing its duties to the Trust under the
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<PAGE>
Agreement.] Due to research services provided by brokers, the Trust directed to
the brokers $[ ] of brokerage transactions (on which the commissions were $[ ])
during the fiscal year ended March 31, 1997.
Bartlett and its affiliates (including Legg Mason Wood Walker, Inc.),
in their capacity as broker/dealers, may receive brokerage commissions in
connection with effecting portfolio transactions for the Trust. The Trust will
not effect any brokerage transactions in the Funds' portfolio securities with
Bartlett or its affiliates if such transactions would be unfair or unreasonable
to the Trust's shareholders, and the commissions will be paid solely for the
execution of trades and not for any other services.
Over-the-counter transactions will be placed either directly with
principal market makers or with broker/dealers, if the same or a better price,
including commissions and executions, is available. Fixed income securities are
normally purchased directly from the issuer, an underwriter or a market maker.
Purchases include a concession paid by the issuer to the underwriter and the
purchase price paid to market makers may include the spread between the bid and
asked prices. While the Trust contemplates no ongoing arrangements with any
other brokerage firms, brokerage business may be given from time to time to
other firms. Bartlett and its affiliates do not receive reciprocal brokerage
business as a result of the brokerage business placed by the Trust with others.
Under the 1940 Act, persons affiliated with the Trust are prohibited
from dealing with the Trust as a principal in the purchase and sale of
securities. Since transactions in the over-the-counter market usually involve
transactions with dealers acting as principal for their own account, affiliated
persons of the Trust, including Bartlett and its affiliates, will not serve as
the Trust's dealer in connection with such transactions. However, affiliated
persons of the Trust may serve as its broker in over-the-counter transactions
conducted on an agency basis.
In determining the commissions to be paid to Bartlett or its
affiliates, it is the policy of the Trust that such commissions will, in the
judgment of the Board of Trustees, be (a) at least as favorable to the Trust as
those which would be charged by other qualified brokers having comparable
execution capability and (b) at least as favorable to the Trust as commissions
contemporaneously charged by Bartlett and its affiliates on comparable
transactions for its most favored unaffiliated customers, except for customers
of Bartlett considered by a majority of the Trust's independent trustees not to
be comparable to theTrust. The Board of Trustees, including a majority of the
independent trustees, will from time to time review, among other things,
information relating to the commissions charged by Bartlett and its affiliates
to the Trust and its other customers, and posted rates and other information
concerning the commissions charged by other qualified brokers.
To the extent that the Trust and another of Bartlett's clients seek to
acquire the same security at about the same time, the Trust may not be able to
acquire as large a position in such security as it desires or it may have to pay
a higher price for the security. Similarly, the Trust may not be able to obtain
as large an execution of an order to sell or as high a price for any particular
portfolio security if the other client desires to sell the same portfolio
security at the same time. On the other hand, if the same securities are bought
or sold at the same time by more than one client, the resulting participation in
volume transactions could produce better executions for the Trust. In the event
that more than one client wants to purchase or sell the same security on a given
date, the purchases and sales will normally be made by random client selection.
The following table depicts, for the fiscal years ended March 31, 1997,
1996 and 1995, the total brokerage commissions paid by the Trust, the amount of
those commissions paid to Bartlett, the percentage of all commissions paid that
were received by Bartlett and the percentage of all portfolio transactions
represented by the commissions received by Bartlett.
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Bartlett
Fiscal Year Total Commissions Commissions Percentage
Ended Commissions Paid to As % Of All Of Portfolio
March 31, Paid Bartlett Commissions Transactions
--------- ---- -------- ----------- ------------
1997 $ $
1996 $300,025 $327 0.11% 0.10%
1995 $209,389 $900 0.43% 0.48%
As of [_____], 1997, Basic Value owned securities of its regular
brokers or dealers or their parents (as defined in Rule 10b-1 promulgated
under the Investment Company Act of 1940) as follows: [_____].
DETERMINATION OF SHARE PRICE
The price (net asset value) of the shares of each class of a Fund is
determined as of the close of regular trading on the New York Stock Exchange
(generally, 4:00 P.M., Eastern time) on each day the Trust and the Custodian of
the applicable Fund are open for business. The price of the shares of each class
of a Fund will also be calculated on other days if there is sufficient trading
in the Fund's portfolio securities that its net asset value might be materially
affected. The Trust is open for business on every day except Saturdays, Sundays
and the following holidays: New Year's Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas, or any
other national holiday which results in the closing of the New York Stock
Exchange. For a description of the methods used to determine the net asset value
(share price), see "Calculation of Share Price" in the Prospectuses.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Systematic Investment Plan
If you invest in shares of the Funds, the Prospectuses explain that you
may buy additional shares through the Systematic Investment Plan. Under this
plan, you may arrange for automatic monthly investments in the Funds of $50 or
more by authorizing Boston Financial Data Services ("BFDS"), the Funds' transfer
agent, to transfer funds to be used to buy Class A, Class C or Class Y shares at
the per share net asset value determined on the day the funds are sent by your
bank. You will receive a quarterly account statement. You may terminate the
Systematic Investment Plan at any time without charge or penalty. Forms to
enroll in the Systematic Investment Plan are available from your broker/dealer
or BFP.
Purchases by Check
In making purchases of Fund shares by check, you should be aware that
checks drawn on a member bank of the Federal Reserve System will normally be
converted to federal funds and used to purchase shares of the Fund within two
business days of receipt by BFDS. BFDS is closed on the days that the New York
Stock Exchange ("Exchange") is closed. Checks drawn on banks that are not
members of the Federal Reserve System may take up to nine business days to be
converted.
Systematic Withdrawal Plan
Investors in Class A and Class C shares, [and certain eligible
investors in Class Y shares,] with a net asset value of $5,000 or more, may also
elect to make systematic withdrawals from their Fund account of a minimum of $50
on a monthly basis. The amounts paid to you each month are obtained by redeeming
sufficient shares from their account to provide the withdrawal amount that was
specified. The Systematic Withdrawal Plan is not currently available for shares
held in an Individual Retirement Account ("IRA"), Self- Employed Individual
Retirement Plan ("Keogh Plan"), Simplified Employee Pension Plan ("SEP"),
Savings Incentive Match Plan for Employees ("SIMPLE") or other qualified
retirement plan. You may change the monthly amount to be paid to you without
charge not more than once a year by notifying BFP or the broker/dealer with
which you have an account. Redemptions will be made at the shares' net asset
value
28
<PAGE>
determined as of the close of regular trading on the Exchange on the first day
of each month. If the Exchange is not open for business on that day, the shares
will be redeemed at the net asset value determined as of the close of regular
trading on the Exchange on the preceding business day. The check for the
withdrawal payment will usually be mailed to you on the next business day
following redemption. If you elect to participate in the Systematic Withdrawal
Plan, dividends and other distributions on all shares in your account must be
automatically reinvested in the applicable class of shares. You may terminate
the Systematic Withdrawal Plan at any time without charge or penalty. Each Fund,
its transfer agent, and BFP also reserve the right to modify or terminate the
Systematic Withdrawal Plan at any time.
Withdrawal payments are treated as a sale of shares rather than as a
dividend or a capital gain distribution. These payments are taxable to the
extent that the total amount of the payments exceeds the tax basis of the shares
sold. If the periodic withdrawals exceed reinvested dividends and other
distributions, the amount of your original investment may be correspondingly
reduced.
Ordinarily, you should not purchase additional shares of the Fund in
which you have an account if you maintain a Systematic Withdrawal Plan because
you may incur tax liabilities in connection with such purchases and withdrawals.
Each Fund will not knowingly accept purchase orders from you for additional
shares if you maintain a Systematic Withdrawal Plan unless your purchase is
equal to at least one year's scheduled withdrawals. In addition, if you maintain
a Systematic Withdrawal Plan you may not make periodic investments under the
Systematic Investment Plan.
Redemption Services
Each Fund reserves the right to modify or terminate the wire or
telephone redemption services described in the Prospectuses at any time.
The date of payment may not be postponed for more than seven days, and
the right of redemption may not be suspended except (a) for any period during
which the Exchange is closed (other than for customary weekend and holiday
closings), (b) when trading in markets a Fund normally utilizes is restricted or
an emergency, as defined by rules and regulations of the SEC, exists, making
disposal of that Fund's investments or determination of its net asset value not
reasonably practicable, or (c) for such other periods as the SEC, by order, may
permit for protection of a Fund's shareholders. In the case of any such
suspension, you may either withdraw your request for redemption or receive
payment based upon the net asset value next determined after the suspension is
lifted.
Each Fund reserves the right, under certain conditions, to honor any
request or combination of requests for redemption from the same shareholder in
any 90-day period, totaling $250,000 or 1% of the net assets of the Fund,
whichever is less, by making payment in whole or in part by securities valued in
the same way as they would be valued for purposes of computing that Fund's net
asset value per share. If payment is made in securities, a shareholder generally
will incur brokerage expenses in converting those securities into cash and will
be subject to fluctuation in the market price of those securities until they are
sold. Each Fund does not redeem in kind under normal circumstances but would do
so where Bartlett determines that it would be in the best interests of the
Fund's shareholders as a whole.
Foreign securities exchanges may be open for trading on days when the
Funds are not open for business. The net asset value of Fund shares may be
significantly affected on days when investors do not have access to their Fund
to purchase and redeem shares.
ADDITIONAL TAX INFORMATION
- --------------------------
The following is a general summary of certain federal tax
considerations affecting each Fund and its shareholders. Investors are urged to
consult their own tax advisers for more detailed information regarding
29
<PAGE>
any federal, state or local taxes that may be applicable to them.
General
For federal tax purposes, each Fund is a separate corporation. In order
to continue to qualify for treatment as a regulated investment company ("RIC")
under the Internal Revenue Code of 1986, as amended ("Code"), a Fund must
distribute annually to its shareholders at least 90% of its investment company
taxable income (generally, net investment income, net short-term capital gain,
and net gains from certain foreign currency transactions, if any) ("Distribution
Requirement") and must meet several additional requirements. For each Fund,
these requirements include the following: (1) the Fund must derive at least 90%
of its gross income each taxable year from dividends, interest, payments with
respect to securities loans and gains from the sale or other disposition of
securities or foreign currencies, or other income (including gains from options,
futures or forward contracts) derived with respect to its business of investing
in securities or those currencies ("Income Requirement"); (2) the Fund must
derive less than 30% of its gross income each taxable year from the sale or
other disposition of securities, or any of the following, that were held for
less than three months -- options or futures (other than those on foreign
currencies), or foreign currencies (or options, futures or forward contracts
thereon) that are not directly related to the Fund's principal business of
investing in securities (or options and futures with respect to securities)
("Short-Short Limitation"); (3) at the close of each quarter of the Fund's
taxable year, at least 50% of the value of its total assets must be represented
by cash and cash items, U.S. government securities, securities of other RICs and
other securities, with those other securities limited, in respect of any one
issuer, to an amount that does not exceed 5% of the value of the Fund's total
assets and does not represent more than 10% of the issuer's outstanding voting
securities; and (4) at the close of each quarter of the Fund's taxable year, not
more than 25% of the value of its total assets may be invested in the securities
(other than U.S. government securities or the securities of other RICs) of any
one issuer.
If Fund shares are sold at a loss after being held for six months or
less, the loss will be treated as a long-term, instead of a short-term, capital
loss to the extent of any capital gain distributions received on those shares.
Investors also should be aware that if shares are purchased shortly before the
record date for any dividend or other distribution, the investor will pay full
price for the shares and receive some portion of the price back as a taxable
distribution.
Each Fund will be subject to a nondeductible 4% excise tax ("Excise
Tax") to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ending on October 31 of that year, plus certain
other amounts. For this and other purposes, dividends and other distributions
declared by a Fund in December of any year and payable to its shareholders of
record on a date in that month will be deemed to have been paid by the Fund and
received by the shareholders on December 31 if the distributions are paid by the
Fund during the following January. Accordingly, those distributions will be
taxed to shareholders for the year in which that December 31 falls.
Foreign Securities
Foreign Taxes. Interest and dividends received by a Fund may be subject
to income, withholding or other taxes imposed by foreign countries and U.S.
possessions that would reduce the yield on its securities. Tax conventions
between certain countries and the United States may reduce or eliminate these
foreign taxes, however, and many foreign countries do not impose taxes on
capital gains in respect of investments by foreign investors. If more than 50%
of the value of Value International's or Europe Fund's total assets at the close
of any taxable year consists of securities of foreign corporations, that Fund
will be eligible to, and may, file an election with the Internal Revenue Service
that will enable its shareholders, in effect, to receive the benefit of the
foreign tax credit with respect to any foreign and U.S. possessions income taxes
paid by it. Pursuant to any such election, a Fund would treat those taxes as
dividends paid to its shareholders and each shareholder
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<PAGE>
would be required to (1) include in gross income, and treat as paid by the
shareholder, the shareholder's proportionate share of those taxes, (2) treat the
shareholder's share of those taxes and of any dividend paid by the Fund that
represents income from foreign or U.S. possessions sources as the shareholder's
own income from those sources, and (3) either deduct the taxes deemed paid by
the shareholder in computing the shareholder's taxable income or, alternatively,
use the foregoing information in calculating the foreign tax credit against the
shareholder's federal income tax. Each Fund will report to its shareholders
shortly after each taxable year the shareholders' respective shares of the
Fund's income from sources within, and taxes paid to, foreign countries and U.S.
possessions if it makes this election.
Passive Foreign Investment Companies. Each Fund may invest in the stock
of "passive foreign investment companies" ("PFICs"). A PFIC is a foreign
corporation that, in general, meets either of the following tests: (i) at least
75% of its gross income is passive or (ii) an average of at least 50% of its
assets produce, or are held for the production of, passive income. Under certain
circumstances, a Fund will be subject to federal income tax on a portion of any
"excess distribution" received on the stock of a PFIC or of any gain on
disposition of the stock (collectively "PFIC income"), plus interest thereon,
even if the Fund distributes the PFIC income as a taxable dividend to its
shareholders. The balance of the PFIC income will be included in the Fund's
investment company taxable income and, accordingly, will not be taxable to it to
the extent that income is distributed to its shareholders.
If a Fund invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund" ("QEF"), then in lieu of the foregoing tax and
interest obligation, the Fund would be required to include in income each year
its pro rata share of the QEF's annual ordinary earnings and net capital gain
(the excess of net long-term capital gain over net short-term capital loss) --
which probably would have to be distributed by the Fund to satisfy the
Distribution Requirement and avoid imposition of the Excise Tax -- even if those
earnings and gain were not received by the Fund from the QEF. In most instances
it will be very difficult, if not impossible, to make this election because of
certain requirements thereof.
Proposed regulations have been published pursuant to which open-end
RICs, such as the Funds, would be entitled to elect to "mark-to-market" their
stock in certain PFICs. "Marking-to-market," in this context, means recognizing
as gain for each taxable year the excess, as of the end of that year, of the
fair market value of each such PFIC's stock over the adjusted basis in that
stock (including mark-to-market gain for each prior year for which an election
was in effect).
Foreign Currencies. Gains or losses (i) from the disposition of foreign
currencies, (ii) from the disposition of debt securities denominated in foreign
currencies that are attributable, in each case, to fluctuations in the value of
the foreign currency between the date of acquisition of the security and the
date of its disposition, and (iii) that are attributable to fluctuations in
exchange rates that occur between the time a Fund accrues dividends, interest or
other receivables or expenses or other liabilities denominated in a foreign
currency and the time the Fund actually collects the receivables or pays the
liabilities, generally will be treated as ordinary income or loss. These gains
or losses, referred to under the Code as "section 988" gains or losses, may
increase or decrease the amount of a Fund's investment company taxable income to
be distributed to its shareholders.
Options, Futures, Forward Contracts and Foreign Currencies
The use of hedging strategies, such as writing (selling) and purchasing
options and futures contracts and entering into forward contracts, involves
complex rules that will determine for income tax purposes the character and
timing of recognition of the gains and losses a Fund realizes in connection
therewith. Gains from the disposition of foreign currencies (except certain
gains that may be excluded by future regulations), and gains from options,
futures and forward contracts derived by a Fund with respect to its business of
investing in securities and foreign currencies, will qualify as permissible
income under the Income Requirement. However, income from the disposition of
options and futures contracts (other than those on
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foreign currencies) will be subject to the Short-Short Limitation if they are
held for less than three months. Income from the disposition of foreign
currencies, and options, futures and forward contracts on foreign currencies,
that are not directly related to a Fund's principal business of investing in
securities (or options and futures with respect to securities) also will be
subject to the Short-Short Limitation if they are held for less than three
months.
If a Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease in
value (whether realized or not) of the offsetting hedging position during the
period of the hedge for purposes of determining whether the Fund satisfies the
Short-Short Limitation. Thus, only the net gain, if any, from the designated
hedge will be included in gross income for purposes of that limitation. Each
Fund will consider whether it should seek to qualify for this treatment for its
hedging transactions. To the extent a Fund does not so qualify, it may be forced
to defer the closing out of certain options, futures, forward contracts and/or
foreign currency positions beyond the time when it otherwise would be
advantageous to do so, in order for that Fund to continue to qualify as a RIC.
Certain options and futures in which a Fund may invest will be "section
1256 contracts." Section 1256 contracts held by a Fund at the end of each
taxable year, other than section 1256 contracts that are part of a "mixed
straddle" with respect to which the Fund has made an election not to have the
following rules apply, must be "marked-to-market" (that is, treated as sold for
their fair market value) for federal income tax purposes, with the result that
unrealized gains or losses will be treated as though they were realized. Sixty
percent of any net gain or loss recognized on these deemed sales, and 60% of any
net realized gain or loss from any actual sales of section 1256 contracts, will
be treated as long-term capital gain or loss, and the balance will be treated as
short-term capital gain or loss. Section 1256 contracts also may be marked-to-
market for purposes of the Excise Tax.
Code section 1092 (dealing with straddles) also may affect the taxation
of options and futures contracts in which a Fund may invest. Section 1092
defines a "straddle" as offsetting positions with respect to personal property;
for these purposes, options and futures contracts are personal property. Section
1092 generally provides that any loss from the disposition of a position in a
straddle may be deducted only to the extent the loss exceeds the unrealized gain
on the offsetting position(s) of the straddle. Section 1092 also provides
certain "wash sale" rules, which apply to transactions where a position is sold
at a loss and a new offsetting position is acquired within a prescribed period,
and "short sale" rules applicable to straddles. If a Fund makes certain
elections, the amount, character and timing of recognition of gains and losses
from the affected straddle positions would be determined under rules that vary
according to the elections made. Because only a few of the regulations
implementing the straddle rules have been promulgated, the tax consequences to a
Fund of straddle transactions are not entirely clear.
Original Issue Discount and "Pay-in-Kind" Securities
Each Fund may purchase zero coupon or other debt securities issued with
original issue discount ("OID"). As a holder of those securities, a Fund must
include in its income the OID that accrues thereon during the taxable year, even
if it receives no corresponding payment on the securities during the year.
Similarly, a Fund must include in its gross income securities it receives as
"interest" on pay-in-kind securities. Because each Fund annually must distribute
substantially all of its investment company taxable income, including any OID
and other non-cash income, to satisfy the Distribution Requirement and avoid
imposition of the Excise Tax, it may be required in a particular year to
distribute as a dividend an amount that is greater than the total amount of cash
it actually receives. Those distributions will be made from a Fund's cash assets
or from the proceeds of sales of portfolio securities, if necessary. A Fund may
realize capital gains or losses from those dispositions, which would increase or
decrease its investment company taxable income and/or net capital gain . In
addition, any such gains may be realized on the disposition of securities held
for less than three months. Because of the Short-Short Limitation, any such
gains would reduce a Fund's ability to sell other securities (and certain
options, futures, forward contracts and/or foreign currencies) held for less
than
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three months that it might wish to sell in the ordinary course of its portfolio
management.
Miscellaneous
If a Fund invests in shares of common stock or preferred stock, a
portion of the dividends from its investment company taxable income (whether
paid in cash or reinvested in additional Fund shares) may be eligible for the
dividends-received deduction allowed to corporations. The eligible portion may
not exceed the aggregate dividends received by the Fund from U.S. corporations.
However, dividends received by a corporate shareholder and deducted by it
pursuant to the dividends-received deduction are subject indirectly to the
federal alternative minimum tax.
TAX-DEFERRED RETIREMENT PLANS
- -----------------------------
Investors may invest in Class A or Class C shares of a Fund through
IRAs, Keogh Plans, SEPs, SIMPLEs and other qualified retirement plans. In
general, income earned through the investment of assets of qualified retirement
plans is not taxed to the beneficiaries thereof unitl the income is distributed
to them. Investors who are considering establishing such a plan should consult
their attorneys or other tax advisors with respect to individual tax questions.
Please contact BFP or your broker/dealer for further information with respect to
these plans.
Individual Retirement Account - IRA
- -----------------------------------
Certain investors in Class A or Class C shares may obtain tax
advantages by establishing an IRA. Specifically, if neither you nor your spouse
is an active participant in a qualified employer or government retirement plan,
or if either you or your spouse is an active participant in such a plan and your
adjusted gross income does not exceed a certain level, then each of you may
deduct cash contributions made to an IRA in an amount for each taxable year not
exceeding the lesser of 100% of your earned income or $2,000. In addition, if
your spouse is not employed and you file a joint return, you may establish a
separate IRA for your spouse and contribute up to a total of $4,000 to the two
IRAs, provided that the contribution to either does not exceed $2,000. If your
employer's plan qualifies as a SEP, permits voluntary contributions and meets
certain other requirements, you may make voluntary contributions to that plan
that are treated as deductible IRA contributions.
Even if you are not in one of the categories described in the preceding
paragraph, you may find it advantageous to invest in Class A or Class C shares
through non-deductible IRA contributions, up to certain limits, because all
dividends and capital gain distributions on your shares are then not immediately
taxable to you or the IRA; they become taxable only when distributed to you. To
avoid penalties, your interest in an IRA must be distributed, or start to be
distributed, to you not later than the end of the taxable year in which you
attain age 70 1/2. Distributions made before age 59 1/2, in addition to being
taxable, generally are subject to a penalty equal to 10% of the distribution,
except in the case of death or disability, where the distribution is rolled over
into another qualified plan, or certain other situations.
Self-Employed Individual Retirement Plan - Keogh Plan
- -----------------------------------------------------
BFP makes available to self-employed individuals a Plan and Trustee
Agreement for a Keogh Plan through which Class A or Class C shares may be
purchased. You have the right to use a bank of your own choice to provide these
services at your own cost. There are penalties for distributions from a Keogh
Plan prior to age 59 1/2, except in the case of death or disability.
Simplified Employee Pension Plan - SEP
- --------------------------------------
BFP also makes available to corporate and other employers a Simplified
Employee Pension Plan for
33
<PAGE>
investment in Class A or Class C shares.
Savings Incentive Match Plan for Employees - SIMPLE
- ---------------------------------------------------
Although a salary reduction SEP, or SARSEP, may no longer be
established after December 31, 1996, an employer with no more than 100 employees
that does not maintain another retirement plan instead may establish a SIMPLE
either as separate IRAs or as part of a Code section 401(k) plan. A SIMPLE,
which is not subject to the complicated nondiscrimination rules that generally
apply to qualified retirement plans, will allow certain employees to make
elective contributions of up to $6,000 per year and will require the employer to
make matching contributions up to 3% of each such employee's salary.
Withholding at the rate of 20% is required for federal income tax
purposes on distributions eligible for rollover from the foregoing retirement
plans (except IRAs and SEPs), unless the recipient transfers the distribution
directly to an "eligible retirement plan" (including IRAs and other qualified
plans) that accepts those distributions. Other distributions generally are
subject to regular wage withholding or to withholding at the rate of 10%
(depending on the type and amount of the distribution), unless the recipient
elects not to have any withholding apply. Investors in Class A or Class C shares
should consult their plan administrator or tax advisor for further information.
INVESTMENT PERFORMANCE
- ----------------------
"Average annual total return," as defined by the SEC, is computed by
finding the average annual compounded rates of return (over the one and five
year periods and the period from initial public offering through the end of a
Fund's most recent fiscal year) that would equate the initial amount invested to
the ending redeemable value, according to the following formula:
n
P(1+T) =ERV
Where: P = a hypothetical $1,000 initial investment
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the applicable
period of the hypothetical $1,000 investment made at
the beginning of the applicable period.
The computation assumes that all dividends and other distributions are
reinvested at the net asset value on the reinvestment dates and that a complete
redemption occurs at the end of the applicable period.
A Fund's investment performance will vary depending upon market
conditions, the composition of the Fund's portfolio and operating expenses of
the Fund. These factors and possible differences in the methods and time periods
used in calculating non-standardized investment performance should be considered
when comparing a Fund's performance to those of other investment companies or
investment vehicles. The risks associated with a Fund's investment objective,
policies and techniques should also be considered. At any time in the future,
investment performance may be higher or lower than past performance, and there
can be no assurance that any performance will continue.
From time to time, in advertisements, sales literature and information
furnished to present or prospective shareholders, the performance of the Funds
may be compared to indices of broad groups of unmanaged securities considered to
be representative of or similar to the portfolio holdings of the appropriate
Fund or considered to be representative of the stock market in general or the
fixed income securities market in general.
Value International and Europe Fund will use the Standard & Poor's 500
Composite Stock Price Index, the Morgan Stanley Capital International EAFE
Index, the Morgan Stanley Capital International World Index
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<PAGE>
and the Consumer Price Index. The Morgan Stanley Capital International EAFE
Index (EAFE Index), compiled from a composite of securities markets of Europe,
Australia and the Far East, is widely recognized by investors in foreign markets
as the measurement index for portfolios of non-North American securities. The
Morgan Stanley Capital International World Index, compiled from a composite of
securities of the U.S., Europe, Canada, Mexico, Australia and the Far East, is
widely recognized by investors as the measurement index for portfolios of
international securities. Both indexes are prepared by Morgan Stanley Capital
International, an investment management and research company located in Geneva,
Switzerland. The Consumer Price Index, prepared by the U.S. Bureau of Labor
Statistics, is a commonly used measure of inflation. The index shows changes in
the cost of selected consumer goods and does not represent an investment return.
The investment performance figures for the Funds and the indices (other than the
Consumer Price Index) will include reinvestment of dividends and other
distributions.
Basic Value will use the Standard & Poor's 500 Composite Stock Price
Index, the Dow Jones Industrial Average, the Value Line Composite Index and the
BARRA Value Index. The Value Line Composite Index is an index composed of
approximately 1700 issues. As a broad index containing the issues of many
smaller capitalization companies, it may be more representative of Basic Value
than narrower, large capitalization indices such as the Dow Jones Industrial
Average. The BARRA Value Index is prepared by ranking the stocks in the Standard
and Poor's 500 Composite Stock Price Index primarily on the basis of price to
book value. That ranking is split into two groups with equal aggregate market
capitalization, and the group with the lower price-to-book value ratio comprises
the stocks in the BARRA Value Index. The BARRA Value Index, which is weighted by
market capitalization, is designed as a long-term measure of investment
performance based upon some of the value investing criteria used by Bartlett.
The performance of a Fund may also be presented along with performance
information of other Funds in materials distributed to the public such as
annual, semi-annual and quarterly reports, advertising and sales literature. In
addition, the performance of any Fund may be compared to other groups of mutual
funds tracked by any widely used independent research firm which ranks mutual
funds by overall performance, investment objectives and assets, such as Lipper
Analytical Services, Inc., Value Line or Morningstar, Inc. The objectives,
policies, limitations and expenses of other mutual funds in a group may not be
the same as those of the applicable Fund. Performance rankings and ratings
reported periodically in national financial publications such as Barron's and
Fortune also may be used.
Basic Value. The average annual total returns of Basic Value shares
(redesignated as Class A shares) for the one, five and ten year periods ended
March 31, 1997 were 11.36%, 12.95% and 10.08%, respectively.
The following table shows the one year and cumulative rates of total
return for the indicated period as well as the value of a $10,000 investment
made on May 5, 1983 (the date of the initial public offering of shares), as of
the end of the specified period. Sales charges have not been deducted from total
returns; the Fund did not impose such charges for the periods shown.
<TABLE>
<CAPTION>
Year End Value of
Year Net Asset Dividends $10,000 Total Return
Ended Value Paid Investment(a) One Year Cumulative(b)
----- ----- ---- ------------- -------- -------------
<S> <C>
3/31/84(b) $10.20 $0.46 $10,668 6.68%(b) 6.68%
3/31/85 10.88 0.75 12,202 14.38% 22.02%
3/31/86 13.13 1.23 16,194 32.72% 61.94%
3/31/87 12.96 1.56 18,037 11.38% 80.37%
3/31/88 12.44 0.36 17,813 -1.24% 78.13%
3/31/89 12.56 1.71 20,593 15.61% 105.93%
3/31/90 12.34 1.05 21,930 6.49% 119.30%
3/31/91 12.60 0.46 23,310 6.29% 133.10%
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
Year End Value of
Year Net Asset Dividends $10,000 Total Return
Ended Value Paid Investment(a) One Year Cumulative(b)
----- ----- ---- ------------- -------- -------------
<S> <C>
3/31/92 13.47 0.36 25,624 9.91% 156.24%
3/31/93 14.76 0.58 29,268 14.22% 192.69%
3/31/94 14.89 0.37 30,268 3.42% 202.68%
3/31/95 15.39 1.30 34,103 12.67% 241.03%
3/31/96 17.94 1.07 42,306 24.05% 323.06%
3/31/97 18.33 1.65 47,110 11.36% 371.10%
</TABLE>
(a) Value at end of fiscal year of $10,000 investment made on May 5, 1983.
(b) Not annualized and from May 5, 1983.
Value International. The average annual total returns of Value
International's shares (redesignated as Class A shares) for the one and five
year periods ended March 31, 1997 and the period from October 6, 1989 (the date
of the initial public offering of shares) through March 31, 1997 were 15.45%,
10.45% and 7.95%, respectively.
The following table shows the one year and cumulative rates of total
return for the indicated period as well as the value of a $10,000 investment
made on October 6, 1989, as of the end of the specified period. Sales charges
have not been deducted from total returns; the Fund did not impose such charges
for the periods shown.
<TABLE>
<CAPTION>
Year End Value of Total
Year Net Asset Dividends $10,000 Return Total Return
Ended Value Paid Investments(a) One Year Cumulative(b)
- -------------- --------------- --------------- --------------------- ---------------- ----------------------
<S> <C>
3/31/90 $9.79 $0.24 $10,029 0.29%(b) 0.29%
3/31/91 9.09 0.30 9,644 (3.84)% (3.56)%
3/31/92 9.93 0.22 10,790 0.88% 7.90%
3/31/93 10.08 0.12 11,082 2.71% 10.82%
3/31/94 12.46 0.07 13,787 24.42% 37.87%
3/31/95 11.64 0.70 13,625 (1.18)% 36.25%
3/31/96 12.59 0.51 15,363 12.76% 53.63%
3/31/97 13.64 0.84 17,737 15.45% 77.37%
</TABLE>
(a) Value at end of fiscal year of $1,000 investment made on October 6, 1989.
(b) Not annualized and from October 6, 1989.
Europe Fund. The average annual total returns of Worldwide Value Fund,
Inc. (Europe Fund's predecessor) for the one, five and ten year periods ended
March 31, 1997 were 23.52%, 13.77% and 7.01%, respectively.
The following table shows the one year and cumulative rates of total
return (based on net asset value) for the indicated period as well as the value
of a $10,000 investment made on August 19, 1986 (the date of the initial public
offering of Worldwide Value Fund, Inc.), as of the end of the specified period.
Sales charges have not been deducted from total returns; the Fund did not impose
such charges for the periods shown.
36
<PAGE>
<TABLE>
<CAPTION>
Year End Value of Total
Year Net Asset Dividends $10,000 Return Total Return
Ended Value Paid Investments(a) One Year Cumulative(b)
- --------------- ---------------- -------------- --------------------- --------------- ---------------------
<S> <C>
12/31/86 $17.41 0.00 $10,990 n/a (12.95)%
12/31/87 16.46 $1.11 8,925 2.52% (10.75)%
12/31/88 19.53 1.00 11,208 25.59% 12.09%
12/31/89 20.14 1.61 12,606 12.47% 26.06%
12/31/90 14.65 1.38 10,002 (20.66)% .02%
12/31/91 15.44 0.21 10,709 7.07% 15.78%
12/31/92 14.29 0.04 9,941 (7.17)% (0.59)%
12/31/93 18.46 0.10 12,915 29.91% 29.15%
12/31/94 17.68 0.00 12,369 (3.68)% 24.39%
12/31/95 21.13 0.06 14,831 19.94% 48.35%
12/31/96 24.24 3.25 19,555 31.53% 95.07%
</TABLE>
(a) Value at end of fiscal year of $1,000 investment made on August 19, 1986.
(b) Not annualized and from August 19, 1986.
DESCRIPTION OF THE TRUST
- ------------------------
The Trust is a diversified, open-end investment company established
under the laws of Massachusetts by an Agreement and Declaration of Trust dated
October 31, 1982 (the "Trust Agreement"). The Trust Agreement permits the
Trustees to issue an unlimited number of shares of beneficial interest of
separate series without par value. Shares of three series have been authorized,
which shares constitute the interests in Value International, Basic Value and
Europe Fund. Each Fund's shares are divided into three classes, designated as
Class A, Class C and Class Y shares.
Each share of each class of a Fund represents an equal proportionate
interest in the assets and liabilities belonging to that Fund. The shares of
each class of each Fund do not have cumulative voting rights or any preemptive
or conversion rights, and the Trustees have the authority from time to time to
divide or combine the shares of any Fund into a greater or lesser number of
shares of that Fund so long as the proportionate beneficial interest in the
assets belonging to that Fund and the rights of shares of any other Fund are in
no way affected. In case of any liquidation of a Fund, the holders of shares of
the Fund being liquidated will be entitled to receive as a class a distribution
out of the assets, net of the liabilities, belonging to that Fund. Expenses
attributable to any Fund are borne by that Fund. Any general expenses of the
Trust not readily identifiable as belonging to a particular Fund are allocated
among the Funds by or under the direction of the Trustees in such manner as the
Trustees determine to be fair and equitable. No shareholder is liable to further
calls or to assessment by the Trust without his or her express consent.
Each Fund might determine to allocate certain of its expenses (in
addition to 12b-1 fees) to the specific classes of the Fund's shares to which
those expenses are attributable. For example, a higher transfer agency fee per
shareholder account may be imposed on a class of shares subject to a contingent
deferred
37
<PAGE>
sales charge because, upon redemption, the duration of the shareholder's
investment must be determined.
Under Massachusetts law, under certain circumstances, shareholders of a
Massachusetts business trust could be deemed to have the same type of personal
liability for the obligations of the Trust as does a partner of a partnership.
However, numerous investment companies registered under the 1940 Act have been
formed as Massachusetts business trusts, and the Trust is not aware of an
instance where such result has occurred. In addition, the Trust Agreement
disclaims shareholder liability for acts or obligations of the Trust and
requires that notice of such disclaimer be given in each agreement, obligation
or instrument entered into or executed by the Trust or the Trustees. The Trust
Agreement also provides for the indemnification out of the Trust property for
all losses and expenses of any shareholder held personally liable for the
obligations of the Trust. Moreover, it provides that the Trust will, upon
request, assume the defense of any claim made against any shareholder for any
act or obligation of the Trust and satisfy any judgment thereon. As a result,
and particularly because the Trust assets are readily marketable and ordinarily
substantially exceed liabilities, the Board of Trustees believes that the risk
of shareholder liability is slight and limited to circumstances in which the
Trust itself would be unable to meet its obligations. The Board of Trustees
believes that, in view of the above, the risk of personal liability is remote.
If at least ten shareholders (the "Petitioning Shareholders") wish to
obtain signatures to request a meeting for the purpose of voting upon removal of
any Trustee of the Trust, they may make a written application to the Trust
requesting to communicate with other shareholders. The Petitioning Shareholders
must hold in the aggregate at least 1% of the shares then outstanding or shares
then having a net asset value of $25,000, whichever is less, and each
Petitioning Shareholders must have been a shareholder for at least six months
prior to the date of the application. The application must be accompanied by the
form of communication which the shareholders wish to transmit. Within five
business days after receipt of the application, the Trust will (a) provide the
Petitioning Shareholders with access to a list of the names and addresses of all
shareholders of the Trust or (b) inform the Petitioning Shareholders of the
approximate number of shareholders and the estimated costs of mailing such
communication and undertake such mailing promptly after tender by the
Petitioning Shareholders to the Trust of the material to be mailed and the
reasonable expenses of such mailing.
CUSTODIAN
- ---------
The Custodian acts as the Trust's depository, safekeeps its portfolio
securities, collects all income and other payments with respect thereto,
disburses funds at the Trust's request and maintains records in connection with
its duties.
State Street Bank and Trust Company, P.O. Box 1713, Boston,
Massachusetts is the custodian of the Trust.
The Chase Manhattan Bank, N.A., 1 Chaseside, Bournemouth, Dorset BH7
7DB, England, is the sub-custodian for Europe Fund.
ACCOUNTANTS
- -----------
The firm of Coopers & Lybrand L.L.P. has been selected as independent
public accountants for the Trust for the fiscal year ending March 31, 1998.
Coopers & Lybrand L.L.P., 217 East Redwood Street, Baltimore, Maryland, performs
an annual audit of the Trust's financial statements, reviews the Trust's federal
tax return and provides financial and accounting consulting services as
requested.
TRANSFER AGENT
- --------------
Boston Financial Data Services, Inc., 2 Heritage Drive, North Quincy,
Massachusetts, acts as the Trust's transfer agent and, in such capacity,
maintains the records of each shareholder's account, answers
38
<PAGE>
shareholders' inquiries concerning their accounts, processes purchases and
redemptions of the Trust's shares, acts as dividend and distribution disbursing
agent and performs other accounting and shareholder service functions.
FINANCIAL STATEMENTS
- --------------------
To be filed by amendment.
39
<PAGE>
Bartlett Capital Trust
Part C. Other Information
Item 24. Financial Statements and Exhibits
(a) Financial Statements: To be filed by amendment
(b) Exhibits
(1) (a) Declaration of Trust*
(i) Amendment No. 1 to the Declaration of Trust*
(ii) Amendment No. 2 to the Declaration of Trust*
(iii) Amendment No. 3 to the Declaration of Trust*
(iv) Amendment No. 4 to the Declaration of Trust*
(v) Amendment No. 5 to the Declaration of Trust*
(vi) Amendment No. 6 to the Declaration of Trust*
(vii) Amendment No. 7 to the Declaration of Trust-
filed herewith
(2) (a) By-Laws*
(i) Amendment to By-Laws*
(3) Voting trust agreement -- none
(4) Specimen security -- none
(5) (i) Management Agreement -- Bartlett Basic Value
Fund(1)
(ii) Management Agreement -- Bartlett Value
International Fund(1)
(iii) Investment Management and Administration
Agreement -- Bartlett Basic Value Fund,
Bartlett Value International Fund and
Bartlett Europe Fund -- to be filed
(iv) Subadvisory Agreement -- Bartlett Europe Fund
-- to be filed
(6) (i) Distribution Agreement -- to be filed
(7) Bonus, profit sharing or pension plans -- none
(8) Custodian agreement(1)
(9) Transfer Agent Agreement(1)
(10) Opinion and consent of counsel
(i) Opinion and consent of Brown, Cummins &
Brown Co., L.P.A.(2)
(ii) Opinion and consent of Brown, Rudnick, Freed
& Gesmer(2)
(iii) Opinion and consent of Brown, Cummins & Brown
Co., L.P.A. with respect to Bartlett Europe
Fund -- to be filed
(11) Other opinions, appraisals, rulings and consents --
Accountants' consent -- to be filed
(12) Financial statements omitted from Item 23 -- none
(13) Agreement for providing initial capital
(14) (i) Prototype Retirement Plan*
(ii) Prototype corporate Simplified Employee
Pension Plan*
(iii) Prototype Keogh Plan*
(15) (i) Plan pursuant to Rule 12b-1 with respect to
Class A Shares -- to be filed
(ii) Plan pursuant to Rule 12b-1 with respect to
Class C Shares -- to be filed
(16) Schedule for computation of performance quotations--
to be filed
(17) (i) Power of Attorney for Registrant and
Certificate with respect thereto(1)
<PAGE>
(18) Plan Pursuant to Rule 18f-3 -- to be filed
(27) Financial Data Schedules -- to be filed
*Previously filed
(1) Incorporated by reference from Post-Effective Amendment No. 21 to the
Registrant's registration statement, SEC File No. 2-80648, filed May 31, 1996.
(2) Incorporated by reference from Registrant's Rule 24f-2 Notice for the fiscal
year ended March 31, 1996, filed May 30, 1996.
Item 25. Persons Controlled by or under Common Control with Registrant
-------------------------------------------------------------
None.
Item 26. Number of Holders of Securities
-------------------------------
Number of Recordholders
Title of Class (as of April 30, 1997)
-------------- ----------------------
Capital Stock
par value $.001
Bartlett Basic Value Fund 2,355
Bartlett Value International Fund 1,598
Bartlett Europe Fund, Class A Shares 0
Item 27. Indemnification
---------------
This item is incorporated by reference from Item 27 of Part C of
Post-Effective Amendment No. 21 to the registration statement, SEC File No.
2-80648, filed May 31, 1996.
Item 28. Business and other Connections of Investment Adviser and Subadviser
I. Bartlett & Co. ("Bartlett"), adviser to Bartlett Basic Value Fund,
Bartlett Value International Fund and Bartlett Europe Fund, is a registered
investment adviser incorporated on January 4, 1988. Information as to the
officers and directors of Bartlett is included in its Form ADV filed September
17, 1996 with the Securities and Exchange Commission (Registration Number
801-21) and is incorporated herein by reference.
II. Lombard Odier International Portfolio Management Limited ("Lombard
Odier") serves as investment sub-adviser to Bartlett Europe Fund. Lombard Odier,
which was incorporated in England and Wales in 1978, is a registered investment
adviser and a wholly owned subsidiary of Lombard Odier Holdings UK, Ltd. which
in turn is wholly owned by Lombard, Odier & Cie. Lombard Odier specializes in
advising and managing investment portfolios for institutional clients.
Information as to the officers and managing directors of Lombard Odier is
included in its Form ADV, as filed with the Securities and Exchange Commission
(registration number 801-14606), and is incorporated herein by reference.
<PAGE>
Item 29. Principal Underwriters
(a) BFP Financial Partners, Inc.
(b) The following table sets forth information concerning
each director and officer of the Registrant's principal
underwriter, BFP Financial Partners, Inc. ("BFP").
Position and Positions and
Name and Principal Offices with Offices with
Business Address Underwriter - BFP Registrant
- ---------------- ----------------- ----------
Horace M. Lowman, Jr. Chairman of the None
111 South Calvert Street Board and Director
Baltimore, Maryland 21202
John W. Houston President and Director None
111 South Calvert Street
Baltimore, Maryland 21202
John R. Mould Vice President None
111 South Calvert Street
Baltimore, Maryland 21202
L. Kay Strohecker Treasurer None
111 South Calvert Street
Baltimore, Maryland 21202
C. Gregory Kallmyer Secretary None
111 South Calvert Street
Baltimore, Maryland 21202
Suzanne E. Peluso Assistant Secretary None
111 South Calvert Street
Baltimore, Maryland 21202
Charles A. Bacigalupo Director None
111 South Calvert Street
Baltimore, Maryland 21202
James W. Brinkley Director None
111 South Calvert Street
Baltimore, Maryland 21202
W. Wiliiam Brab Director None
111 South Calvert Street
Baltimore, Maryland 21202
Item 30. Location of Accounts and Records
--------------------------------
<PAGE>
State Street Bank and Trust Company
P.O. Box 1713
Boston, Massachusetts 02105-1713
Item 31. Management Services
-------------------
None.
Item 32. Undertakings
------------
Registrant hereby undertakes to provide each person to whom a
prospectus is delivered with a copy of its latest annual report to shareholders
upon request and without charge.
Within five business days after receipt of a written application by
shareholders holding in the aggregate at least 1% of the shares then outstanding
or shares then having a net asset value of $25,000, whichever is less, each of
whom shall have been a shareholder for at least six months prior to the date of
application (hereinafter the "Petitioning Shareholders"), requesting to
communicate with other shareholders with a view to obtaining signatures to a
request for a meeting for the purpose of voting upon removal of any Trustee of
the Registrant, which application shall be accompanied by a form of
communication and request which such Petitioning Shareholders wish to transmit,
Registrant will:
(i) provide such Petitioning Shareholders with access to a list of the
names and addresses of all shareholders of the Registrant; or
(ii) inform such Petitioning Shareholders of the approximte number of
shareholders and the estimated costs of mailing such communication, and to
undertake such mailing promptly after tender by such Petitioning Shareholders to
the Registrant of the material to be mailed and the reasonable expenses of such
mailing.
<PAGE>
SIGNATURE PAGE
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 23 to its Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Baltimore and State of Maryland, on the 9th day of May, 1997.
Bartlett Capital Trust
By: /s/ Marie K. Karpinski
----------------------------
Marie K. Karpinski
Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 23 to the Registrant's Registration Statement has
been signed below by the following persons in the capacities and on the dates
indicated:
Signature Title Date
- --------- ----- ----
Chairman of the Board,
/s/Dale H. Rabiner* President and Trustee May 9, 1997
- ---------------------------
Dale H. Rabiner*
Vice President and
/s/ Marie K. Karpinski Treasurer May 9, 1997
- ---------------------------
Marie K. Karpinski
/s/William P. Sheehan* Trustee May 9, 1997
- ---------------------------
William P. Sheehan*
/s/Alan R. Schriber* Trustee May 9, 1997
- ---------------------------
Alan R. Schriber*
/s/ Lorrence T. Kellar* Trustee May 9, 1997
- ---------------------------
Lorrence T. Kellar*
*Signatures affixed by Marie K. Karpinski pursuant to a power of attorney dated
May 6, 1996, incorporated herein by reference to Post-Effective Amendment
No. 21, filed May 31, 1996.
BARTLETT CAPITAL TRUST
AMENDMENT NO. 7 TO AGREEMENT AND DECLARATION OF TRUST
ESTABLISHMENT AND DESIGNATION OF THE
BARTLETT EUROPE FUND
ABOLITION OF BARTLETT FIXED INCOME FUND
AND
BARTLETT SHORT TERM BOND FUND
Pursuant to Section 4.1 of the Agreement and Declaration of Trust of
Bartlett Capital Trust and effective upon the execution of this document, the
undersigned, being a majority of the Trustees of Bartlett Capital Trust, hereby:
(a) establish a new series of shares of the Trust, designate such
series the "Bartlett Europe Fund" and establish a new sub-series of such Series
as "Class A." The relative rights and preferences of the Bartlett Europe Fund
series of shares and the Class A sub-series shall be those rights and
preferences set forth in Section 4.2 of the Agreement and Declaration of Trust
of Bartlett Capital Trust; and
(b) abolish the Bartlett Fixed Income Fund series and the Bartlett
Short Term Bond Fund series.
This document shall have the status of an amendment to said Agreement
and Declaration of Trust.
/s/Dale H. Rabiner
- ------------------------ -------------------------
Dale H. Rabiner Philip J. Ringo
/s/Lorrence T. Kellar /s/Alan R. Schriber
- ------------------------ -------------------------
Lorrence T. Kellar Alan R. Schriber
/s/William P. Sheehan
-------------------------
William P. Sheehan
Date: February 24, 1996
