Bartlett
Semi-Annual Report
September 30, 1997
BARTLETT
VALUE INTERNATIONAL FUND
BARTLETT
BASIC VALUE FUND
mutual funds
<PAGE>
BARTLETT & CO.
PROFILE
[Bartlett Logo]
Bartlett & Co., headquartered in Cincinnati, Ohio, is an asset management firm
which manages over $2 billion for individuals, family groups and institutions.
Established in 1898, Bartlett & Co. has built a reputation among individual and
institutional investors of strong performance and superior client service for
nearly a century.
Bartlett & Co. offers its clients a diversity of services through four business
divisions:
(diamond) Mutual Funds
(diamond) Institutional Client Services
(diamond) Private Client Services
(diamond) Real Estate Programs
Our tradition of excellence, the breadth of our services and the depth of our
experience give Bartlett & Co. the capabilities to serve as your financial
advisor.
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CONTENTS
Pages
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Bartlett & Co. Profile Inside Cover
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President's Letter 2
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Reports to Shareholders
Bartlett Value International Fund 3
Bartlett Basic Value Fund 4
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Growth of a $10,000 Investment
Bartlett Value International Fund 6
Bartlett Basic Value Fund 6
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Portfolios of Investments
Bartlett Value International Fund 7
Bartlett Basic Value Fund 9
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Statements of Assets and Liabilities 11
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Statements of Operations 12
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Statements of Changes in Net Assets 13
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Financial Highlights
Bartlett Value International Fund 14
Bartlett Basic Value Fund 15
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Notes To Financial Statements 16
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Trustees and Officers 19
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This report is for the information of shareholders of the Bartlett Mutual
Funds. It may be used as sales literature if preceded or accompanied by a
current prospectus of the Bartlett Mutual Funds.
1
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PRESIDENT'S LETTER
Dear Fellow Shareholder,
We are pleased to report that the Bartlett Basic Value Fund and the Bartlett
Value International Fund enjoyed superior absolute and relative results during
the quarter ended September 30, 1997. In fact, the relative performance became
more favorable during the poor global market environment of October. While
Bartlett & Co. would never take pride in losing money while losing less than
most of the investment manager universe, this is precisely what did happen
during October.
Alan Greenspan has spent the better part of the last twelve months attempting to
throw a wet blanket on investors' enthusiasm for the market. The experience that
Japan had with the "wealth effect" and, then, the "wealth diminution effect"
when the Japanese stock market began to crater in the fall of 1991, has weighed
heavily on his mind. In fact, the precarious state of the Japanese economy at
present is due largely to the excesses of Japanese investors and consumers prior
to the decline of the Nikkei Index.
The currency debacle in Southeast Asia, therefore, is a double edged sword.
First, it has forced investors to remember that stocks, in fact, can go down, so
that the Federal Reserve may not have to pursue a monetary policy that would be
unpopular. Unfortunately, the other edge of the blade is that a powerful
monetary tool has been taken from the Federal Reserve Board, albeit temporarily.
If the U.S. economy does, in fact, become overheated, it would be difficult to
increase interest rates since this would have the effect of deepening or
protracting the currency problems in most other parts of the world. This, in
turn, would have negative implications for our economy since our exports would
surely suffer. Consumers in other parts of the world would simply not be able to
afford American made goods as their currencies would be worth less.
Many have referred to market conditions over the past few years as being a
fool's paradise: the S&P 500 Index is trading at a multiple of 51/2 times the
stated net worth of the companies included in the Index, while the mean
historical valuation multiple has been 1.9. The price earnings multiple attained
a level of 22 times trailing earnings, while the historic mean is 16. There used
to be a red flag any time the S&P 500 Index had a dividend yield of 3%. It fell
to 1.5% by the end of the summer. The morning after the Dow slipped 554 points,
there were film clips of investors lining up to place buy orders with their
brokers. A few investors, shown on national TV, actually proclaimed that the
previous day's decline presented "the buying opportunity of a lifetime." It is
curious that the stock market had actually been lower on May 20, 1997 than it
was after the crash on Monday, October 27. Do those five months and one week now
constitute a lifetime? Do we now dream about the good old days, way back in the
spring of 1997, when there were still bargains to be had in the market?
Admittedly, it is tough to have unbridled enthusiasm when purchasing stocks at
this time. However, a hallmark of value investing is that it generally shows
resilience during less than favorable market conditions. This is due to a value
investor's refusal to make pie in the sky projections as to what a company's
earnings might be and then, to ascribe an inordinately high probability to a
company's ability to meet those expectations by rewarding it with a high price
earnings multiple. Bartlett & Co. is not looking for companies that are
downtrodden, unwanted, or unloved. We, however, do not want to pay more than a
reasonable price for very well run companies. That being said, we will always
look at the company itself, rather than making prognostications regarding the
market. Madelynn Matlock, your portfolio manager for the Bartlett Value
International Fund, has never made currency, continent, or country specific
bets. By steadfastly pursuing economic value rather than worldwide trends, the
Bartlett Value International Fund has been a solid performer.
The Bartlett & Co. family of funds now has a number of new trustees, each of
whom add a global perspective to the operation--both procedural and investment
wise--of your funds. Of particular significance is our pleasure in announcing
that Lorrence T. Kellar, a trustee for the Bartlett family of funds since their
inception, has accepted the position as the Chairman of the Board of Trustees
for Bartlett Mutual Funds. Larry's keen insight, experience, and wise counsel
can only serve to enhance the quality of your position as a shareholder.
In closing, we once again thank you for continuing to appreciate and embrace
what has certainly been a tried and true investment philosophy--especially
during the past few months.
James A. Miller, CFA
President, Bartlett & Co.
2
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BARTLETT
VALUE INTERNATIONAL
FUND REPORT
[Bartlett Logo]
International markets had a very mixed performance during the third quarter of
1997. European markets in general were quite good, while Pacific markets, most
notably the Asian "tigers" fell. The Morgan Stanley Europe, Australia and Far
East Index (EAFE) slipped slightly, by .7% for the quarter, while the broader
Morgan Stanley All Country ex US Index (MSAC) dropped 1.4%. European markets
continued to gain on prospects for improving economics and company fundamentals,
while the Japanese market stagnated and the smaller Asian markets plunged on
currency turmoil. Bartlett Value International gained 2.7% (excluding the 4.75%
sales charge, effective July 21, 1997) in the quarter, benefiting from having
most of its holdings in better performing markets, as well as a number of stocks
that outperformed their local markets.
For the 1997 year to date, the performance pattern in overseas markets has been
very similar to the third quarter. The EAFE Index overall returned 10.4%, while
the MSAC rose 10.2%. Bartlett Value International nearly doubled the indexes,
with a return of 19.9% (excluding the 4.75% sales charge, effective July 21,
1997). A disparate group of equities have boosted the Fund's performance this
year, including Michelin in France, Hudson's Bay Co. in Canada, Rohm in Japan,
and YPF in Argentina. Our strategy of focusing on company fundamentals rather
than relying on economic projections for various geographic regions allows the
Fund to avoid the substantial market drops that occur when high stock valuations
combine with quickly deteriorating economic expectations, as we have seen in
Southeast Asia. At the end of the third quarter, the Fund's portfolio had a
little over half of its assets in European stocks, about a third in Pacific
region stocks, including 12% in Japan, and the balance in the Americas. We
continue to find excellent values for new additions to the portfolio. During the
third quarter, we added the shares of New Holland, a global manufacturer of
agricultural machinery, and AGA, a Swedish industrial gases company, to the
portfolio.
Investor confidence in equity markets as a sure place to grow wealth has been
severely dented by market volatility in the last several weeks. Just like a
Medieval plague, currency volatility and uncertainty about the future have
visited ports in every part of the world, including the previously invulnerable
US market. Investor psychology changes much faster than the underlying economic
fundamentals, so the crucial question at this point is whether the various
regional markets, such as those in Southeast Asia, have fallen too far, or if
they are just beginning to reflect reality. It seems to us that the substantial
drops in the smaller Asian markets represent the dissipation of too much
enthusiasm for growth and too little respect for risk, while falls in Japan and
Europe seem overdone. Markets in Latin America had gotten a bit too frothy as
well, although the fundamentals in most of those countries remain sound. The
sharp market swings in the last few weeks are hard evidence of the role that the
investor emotions of fear and greed play in the movement of company stock prices
and the value of currencies. We remain committed to building the portfolio on
the fundamentals of companies, not on the swings of the markets.
Portfolio Composition
Bartlett Value International Fund vs
Europe, Australia, Far East (EAFE) Index
September 30, 1997
[GRAPH APPEARS HERE]
Fund EAFE Index
Americas 16% 0%
Latin America 5%
Canada 8%
Cash Equivalents 3%
Europe 52% 62%
Pacific 32% 38%
Japan 12% 29%
/s/ Madelynn M. Matlock
------------------------
Madelynn M. Matlock, CFA
Portfolio Manager
*The EAFE Index is an unmanaged index of common stocks of foreign companies. The
returns for the Index do not include any expenses or transaction costs. The
returns for the Fund include such expenses.
3
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BARTLETT
BASIC VALUE
FUND REPORT
[Bartlett Logo]
The portfolio's equity holdings had a great quarter, beating the S&P 500 Index
by over five percentage points. This allowed the portfolio's stocks to just
about pull even with the S&P 500 Index for the year and to pull slightly ahead
of the Dow Jones Industrial Average. Far be it from us to think it's time to
take a bow, since the last quarter allowed us to essentially recapture the
shortfall in performance that occurred in January when nothing but the largest
companies were propelling the market averages higher.
During the first six months of the year, the Russell 2000 Index of small stocks
produced an 8.1% return, compared to a return of 20.6% that was produced by the
S&P 500 Index which is dominated by large company stocks. For the trailing nine
month period ending 9/30/97, the S&P 500 produced a 29.6% return, while the
Russell 2000 generated a 26.6% return. It was not until mid-April that investors
became interested in including smaller issues among their common stock holdings.
This trend was key to our having an outstanding quarter.
This is not to say that the large capitalization issues in the portfolio have
not contributed to the gains. Companies such as Time Warner, General Motors,
AMR, Federated Department Stores, and AT&T have been additive to the results.
Furthermore, these contributions have been made to the portfolio from a diverse
set of industrial sectors, thereby reducing the overall risk. It is one thing to
buy good companies that are cheaply or reasonably priced. We, however, attempt
to reduce investment risk further by making sure that we do not have an
overconcentration in any one particular sector of the economy.
The list regarding the smaller companies that have buoyed results is quite long.
Of particular note, however, is Kansas City Southern Industries--a large
position in the portfolio that became only larger as its stock nearly doubled in
price since the end of May. Kansas City Southern, incidentally, was not a
difficult company to analyze. The problem was that the company is followed
almost exclusively by rail analysts, yet over seventy percent of its earnings
are derived from its ownership of the Janus and Berger groups of funds and DST,
Inc., a processor of mutual funds confirmations and statements. In addition, at
quarter-end another significant holding,
Measuring Both Risk and Return
Bartlett Basic Value Fund vs Standard & Poor's 500 Index
May 1983 to September 1997
[GRAPH APPEARS HERE]
Bartlett
Basic S&P
Value 500
Fund Index
-------- -----
Return 13.0%* 16.6%
Risk 11.1% 14.3%
This chart compares the historical average annual total return and the risk
(as measured by the standard deviation) of the Bartlett Basic Value Fund and
the Standard & Poor's 500 Index from May 1983 to September 30, 1997. The S&P
500 Index is an unmanaged index of common stocks widely used as a measure of
stock market activity. The return for the Index does not include any expenses
or transaction costs. The return for the Fund includes such expenses and
costs.
Standard deviation is a statistical measure of volatility often used as a
measure of risk. In general, the greater the standard deviation, the greater
the tendency to vary from the average annual total return. By comparing the
magnitude of the standard deviations, the relative volatility of each
investment can be determined. A lower standard deviation reflects lower
volatility.
The average annual total return figures assume the reinvestment of dividends.
Of course, past performance is no guarantee of future results. The principal
value and investment returns of the Fund fluctuate so that upon redemption
you may receive more or less than your original investment.
- --------------------------------------------------------------------------------
*Excluding the 4.75% sales charge effective July 21, 1997.
4
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Salomon Bros. Inc., announced that it would be acquired by Travelers. This
represented a nice return to a level that approximated our target price.
Situations such as Kansas City Southern and Salomon are not hard to find from
time to time. However, it takes patience to continue to maintain positions in
them when investors are literally throwing money at nothing but the most
familiar household name companies.
Among the new companies purchased in the portfolio during the quarter were H&R
Block and UCAR, a manufacturer of carbide electrodes used in steel production.
We also added to our existing positions in GATX, First Data, Jostens, and United
Dominion Realty. During the strong market conditions we took advantage of
several stocks that reached our target price and sold MBIA, Bristol Myers and
Raytheon. Position sizes were reduced in Salomon Bros., Royce Value Trust,
Kansas City Southern, and State Auto Financial.
Generally speaking, a value approach should not be able to capture all of the
gains generated by a market as hot as this one has been, especially since this
methodology has inherently less risk. The last quarter of 1996, combined with
the first three quarters of this year, has allowed the equities in the portfolio
to keep pace or to exceed the market indices by a comfortable margin.
We are pleased with the progress that your investments have made and are happy
to report it to you. Perhaps more important, we do want to thank you for your
commitment to Bartlett & Co.'s value approach. We shall do everything to
continue to make your commitment to our value methodology a rewarding one.
Sincerely,
/s/ James A. Miller /s/ Woodrow H. Uible
________________________ _________________________
James A. Miller, CFA Woodrow H. Uible, CFA
Portfolio Manager Portfolio Manager
Largest Industry Allocations
Bartlett Basic Value Fund vs Standard & Poor's 500 Index
September 30, 1997
[GRAPH APPEARS HERE]
Fund S&P 500
---- -------
Basic Industry 17% 11%
Finance 17% 18%
Consumer Cyclical 17% 12%
Transportation 11% 1%
Technology/Defense 11% 18%
Consumer Staples 7% 11%
5
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GROWTH OF A
$10,000
INVESTMENT
[Bartlett Logo]
The following graphs compare each Fund's total return against that of a closely
matched broad-based securities market index.
Growth of a $10,000 Investment
Bartlett Value International Fund
October 31, 1989 through September 30, 1997
Average Annual Total Returns
For periods ended September 30, 1997
- --------------------------------------------------------------------------------
1 Year 3 Years 5 Years Life of the Fund
(since 10/06/89)
- --------------------------------------------------------------------------------
27.78% 13.09% 13.98% 9.46%
21.67%* 11.27%* 12.87%* 8.80%*
Bartlett Value International Fund
vs
Europe, Australia, Far East Index
[GRAPH APPEARS HERE]
Bartlett Value
International EAFE
Fund Index
10/31/89 10,000 10,000
1990 10,958 10,891
M 10,796 8,737
J 11,226 9,572
S 9,074 7,543
1991 9,367 8,337
M 10,381 8,958
J 9,970 8,469
S 10,972 9,195
1992 11,380 9,350
M 11,614 8,241
J 12,351 8,414
S 11,426 8,541
1993 11,172 8,212
M 11,929 9,196
J 12,153 10,121
S 13,413 10,793
1994 14,674 10,886
M 14,841 11,266
J 14,555 11,844
S 15,331 11,862
1995 14,597 11,741
M 14,666 11,960
J 15,271 12,048
S 15,928 12,556
1996 15,933 13,062
M 16,537 13,436
J 17,443 13,659
S 17,352 13,634
1997 18,490 13,893
M 19,092 13,675
J 21,584 15,461
9/30/97 22,173 15,362
-----------------------------------
These performance tables and charts represent past performance and are no
guarantee of future results. The investment return and principal value of the
Funds will fluctuate so that upon redemption, you may receive more or less than
your original cost.
The charts illustrate the cumulative total return of an initial $10,000
investment in Class A Shares for the periods indicated and do not reflect the
maximum sales charge of 4.75% currently applicable to Class A shares. The
performance tables and charts assume all dividends and distributions are
reinvested at the net asset value on the reinvestment date and reflect the
periodic absorption of some Fund expenses through the waiver of management fees.
Had a portion of these fees not been waived, the Funds' total returns would have
been slightly lower.
The lines representing the securities market indices (which is, in each case, an
unmanaged index) do not include any transaction costs associated with buying and
selling securities in the index or other administrative expenses.
No performance information is shown for Class C and Class Y shares for either
Fund as no such shares were outstanding prior to July 21, 1997. A contingent
deferred sales charge may be imposed under certain circumstances on Class A and
C Shares. Please refer to the prospectus for details.
*Reflects return information on Class A Shares including the 4.75% sales charge
which became effective July 21, 1997.
The Europe, Australia, Far East (EAFE) Index is a broad-based index administered
by Morgan Stanley Capital International and is composed of select common stocks
of companies based outside the United States and including Europe, Australia,
and the Far East. It is often used to measure international stock market
activity.
The Standard & Poor's 500 Index is a broad-based unmanaged index of common
stocks commonly used to measure general stock market activity.
Growth of a $10,000 Investment
Bartlett Basic Value Fund
May 31, 1983 through September 30, 1997
Average Annual Total Returns
For periods ended September 30, 1997
- --------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years Life of the Fund
(since 05/05/83)
- --------------------------------------------------------------------------------
39.34% 24.16% 17.84% 12.05% 13.40%
32.74%* 22.16%* 16.71%* 11.51%* 13.01%*
Bartlett Basic Value Fund
vs
Standard and Poors 500 Index
[GRAPH APPEARS HERE]
Bartlett Basic S&P 500
Value Fund Index
5/31/83 10,000 10,000
J 10,100 10,379
S 10,250 10,362
1984 10,534 10,407
M 10,657 10,156
J 10,636 9,892
S 11,078 10,847
1985 11,419 11,042
M 12,189 12,059
J 12,705 12,935
S 12,987 12,400
1986 14,304 14,529
M 16,177 16,572
J 16,793 17,518
S 16,259 16,300
1987 16,259 17,178
M 18,018 20,840
J 18,811 21,913
S 19,596 23,360
1988 15,649 18,067
M 17,795 19,105
J 18,667 20,355
S 19,202 20,429
1989 19,761 21,047
M 20,572 22,524
J 21,555 24,503
S 22,680 27,113
1990 22,066 27,656
M 21,908 26,812
J 22,707 28,502
S 18,441 24,568
1991 19,946 26,776
M 23,286 30,674
J 22,769 30,610
S 24,149 32,248
1992 25,125 34,948
M 25,598 34,056
J 26,548 34,715
S 26,912 35,795
1993 27,698 37,624
M 29,239 39,268
J 28,882 39,458
S 29,978 40,476
1994 30,926 41,417
M 30,237 39,848
J 30,542 40,015
S 31,950 41,972
1995 31,051 41,966
M 34,068 46,052
J 36,480 50,450
S 38,838 54,461
1996 40,849 57,740
M 42,262 60,837
J 43,699 63,562
S 43,892 65,540
1997 48,373 70,991
M 47,110 72,907
J 54,111 85,644
9/30/97 61,259 92,050
-----------------------------------
6
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PORTFOLIOS OF INVESTMENTS
Bartlett Value International Fund
As of September 30, 1997 (Unaudited)
Market
Shares Value
- ------------------------------------------------------------------------------
Common Stock--95.06%
- ------------------------------------------------------------------------------
Argentina --5.28%
IRSA Inversiones y
Representaciones S.A. (ADR)
(Real Estate Invest./Management) 48,000 $ 2,124,000
YPF Sociedad Anonima SA (ADR)
(Energy, Oil & Gas) 82,600 3,045,875
____________
5,169,875
- ------------------------------------------------------------------------------
Australia -- 4.59%
Brambles Industries Ltd.
(Transport Services) 121,600 2,537,922
National Australia Bank (ADR)
(Banking) 25,300 1,951,262
____________
4,489,184
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Canada --5.11%
Hudson's Bay Co.
(Retailing) 87,800 2,350,566
Potash Corporation of
Saskatchewan Inc. (ADR)
(Mining) 33,800 2,653,300
____________
5,003,866
- ------------------------------------------------------------------------------
Finland --2.26%
Metra Oy B Shares
(Engineering/Construction) 76,000 2,212,079
- ------------------------------------------------------------------------------
France --9.91%
Alcatel Althsom (ADR)
(Capital Goods) 73,600 1,955,000
Michelin
(Rubber) 45,800 2,601,637
Cie de Saint Gobain
(Glass/Building Materials) 18,434 2,843,099
Total SA
(Energy) 3,000 343,354
Total SA (ADR)
(Energy) 34,100 1,954,356
____________
9,697,446
- ------------------------------------------------------------------------------
Germany --2.38%
Deutsche Lufthansa AG
(Transportation) 118,000 2,324,005
- ------------------------------------------------------------------------------
HongKong --3.08%
Swire Pacific Ltd.-B
(Diversified) 394,000 3,016,865
- ------------------------------------------------------------------------------
Market
Shares Value
- ------------------------------------------------------------------------------
India --2.52%
- ------------------------------------------------------------------------------
Morgan Stanley India
Investment Fund*
(Closed-End Mutual Fund) 218,200 $ 2,468,388
- ------------------------------------------------------------------------------
Ireland --2.36%
Allied Irish Banks PLC (ADR)
(Banking) 43,800 2,307,713
- ------------------------------------------------------------------------------
Italy --2.68%
Istituto Mobiliare SpA (ADR)
(Banking) 82,600 2,627,713
- ------------------------------------------------------------------------------
Japan --12.44%
Canon Inc.
(Visual Image Equipment) 86,000 2,515,787
Fujitsu Ltd.
(Computers) 137,000 1,714,345
Ito-Yokado (ADR)
(Retailing) 7,500 1,608,750
Matsushita Electric Industrial
Company Ltd.
(Consumer Electronics Equip.) 109,000 1,969,172
Rohm Company
(Electronics) 17,000 2,000,497
Sumitomo Warehouse
(Storage) 516,000 2,368,973
____________
12,177,524
- ------------------------------------------------------------------------------
Korea --2.21%
Korea Fund Inc.
(Closed-End Mutual Fund) 182,525 2,167,484
- ------------------------------------------------------------------------------
Malaysia --2.47%
Perlis Plantations Bhd
(Diversified) 1,145,500 2,417,641
- ------------------------------------------------------------------------------
Netherlands --2.53%
New Holland NV (ADR)
(Capital Goods) 84,000 2,478,000
- ------------------------------------------------------------------------------
Norway --7.34%
Elkem ASA
(Metal-Diversified) 142,500 2,526,454
Kvaerner ASA
(Shipbuilding) 36,400 2,146,057
Norsk Hydro ASA (ADR)
(Chemicals) 42,000 2,512,125
____________
7,184,636
- ------------------------------------------------------------------------------
7
<PAGE>
Bartlett Value International Fund (Cont.)
As of September 30, 1997
Market
Shares Value
- ------------------------------------------------------------------------------
Portugal --1.73%
Portugal Fund Inc.
(Closed-End Mutual Fund) 91,500 $ 1,692,750
- ------------------------------------------------------------------------------
Singapore --3.00%
Dairy Farm International
Holdings Ltd.
(Retail-Grocery) 3,096,000 2,941,200
- ------------------------------------------------------------------------------
Spain --2.61%
Repsol SA (ADR)
(Energy) 58,800 2,550,450
- ------------------------------------------------------------------------------
Sweden --7.62%
AGA
(Industrial Gas) 175,000 2,813,838
AssiDoman AB
(Forest Products & Paper) 80,500 2,747,875
Cardo AB
(Engineering/Construction) 61,200 1,899,519
____________
7,461,232
- ------------------------------------------------------------------------------
Switzerland --1.17%
Novartis AG
(Medical-Drugs) 750 1,149,959
- ------------------------------------------------------------------------------
Taiwan --1.96%
Taiwan Fund Inc.
(Closed-End Mutual Fund) 75,625 1,918,984
- ------------------------------------------------------------------------------
United Kingdom --9.81%
Cadbury Schweppes PLC (ADR)
(Beverages) 68,172 2,637,404
Grand Metropolitan PLC (ADR)
(Consumer Goods) 28,289 1,103,271
Tomkins PLC (ADR)
(Diversified) 152,600 3,452,575
Tyco International*
(Diversified) 29,381 2,411,078
____________
9,604,328
- ------------------------------------------------------------------------------
Total Common Stock $93,061,322
- ------------------------------------------------------------------------------
(Cost-$71,990,744)
- ------------------------------------------------------------------------------
Face Market
Amount Value
- ------------------------------------------------------------------------------
Convertible Bond--2.57%
- ------------------------------------------------------------------------------
Magna International $1,900,000 $ 2,512,750
5% 10/15/02
- ------------------------------------------------------------------------------
Total Convertible Bond $ 2,512,750
- ------------------------------------------------------------------------------
(Cost-$2,338,061)
- ------------------------------------------------------------------------------
Repurchase Agreement--2.76%
- ------------------------------------------------------------------------------
State Street Corporation
4.25% dated 9/30/97, to be
repurchased at $2,704,319 on
10/1/97 (Collateral: $2,415,000
United States Treasury Bonds,
7% due 11/15/16,
value $2,755,856) 2,704,000 2,704,000
- ------------------------------------------------------------------------------
Total Repurchase Agreement $ 2,704,000
- ------------------------------------------------------------------------------
(Cost-$2,704,000)
- ------------------------------------------------------------------------------
Total Investments
At Value--100.39% $98,278,072
- ------------------------------------------------------------------------------
(Cost-$77,032,805)
- ------------------------------------------------------------------------------
Other Assets Less Liabilities--(0.39%) (383,071)
- ------------------------------------------------------------------------------
Net Assets--100.00% $97,895,001
==============================================================================
*Non-dividend paying investment.
See accompanying notes to financial statements.
8
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Bartlett Basic Value Fund
As of September 30, 1997 (Unaudited)
Market
Shares Value
- ------------------------------------------------------------------------------
Common Stock--97.88%
- ------------------------------------------------------------------------------
Aerospace/Defense -- 1.80%
Lockheed Martin Corp. 23,000 $ 2,452,375
- ------------------------------------------------------------------------------
Air Transportation -- 2.89%
AMR Corp.* 35,550 3,934,941
- ------------------------------------------------------------------------------
Automobiles &
Auto Parts -- 4.89%
Ford Motor Co. 35,000 1,583,750
General Motors Corp. 47,275 3,164,470
Stewart & Stevenson
Services, Inc. 79,100 1,903,344
____________
6,651,564
- ------------------------------------------------------------------------------
Broadcasting -- 1.99%
Time Warner, Inc. 50,000 2,709,375
- ------------------------------------------------------------------------------
Chemicals -- 1.32%
Ferro Corporation 47,000 1,794,813
- ------------------------------------------------------------------------------
Construction & Building
Materials -- 0.82%
Martin Marietta Materials, Inc. 30,927 1,113,372
- ------------------------------------------------------------------------------
Diversified -- 7.23%
Canadian Pacific Ltd. (ADR) 66,000 1,951,125
Loews Corp. 40,000 4,517,500
Tyco International Ltd. 41,000 3,364,563
____________
9,833,188
- ------------------------------------------------------------------------------
Electronics -- 3.18%
Pioneer Standard
Electronics, Inc. 252,000 4,331,250
- ------------------------------------------------------------------------------
Energy -- 7.27%
Cabot Oil & Gas Corporation 113,700 2,622,206
Phillips Petroleum Company 56,000 2,891,000
Total SA (ADR) 30,000 1,719,375
Triton Energy Ltd.* 64,000 2,652,000
____________
9,884,581
- ------------------------------------------------------------------------------
Financial Services -- 12.56%
Fannie Mae 100,000 4,700,000
H & R Block, Inc. 40,000 1,545,000
Salomon, Inc. 65,000 4,887,187
State Auto Financial Corp. 20,000 452,500
U.S. Trust Corp. 40,000 2,255,000
Washington Federal, Inc. 109,600 3,246,900
____________
17,086,587
- ------------------------------------------------------------------------------
Market
Shares Value
- ------------------------------------------------------------------------------
Food, Beverage & Tobacco -- 7.46%
Archer-Daniels-Midland Co. 141,818 $ 3,394,774
McDonald's Corporation 56,000 2,667,000
RJR Nabisco Holdings Corp. 65,000 2,234,375
Universal Foods Corp. 46,000 1,851,500
____________
10,147,649
- ------------------------------------------------------------------------------
Health Care -- 1.16%
Columbia/HCA Healthcare
Corporation 55,000 1,581,250
- ------------------------------------------------------------------------------
Investment Companies -- 3.23%
Royce Value Trust, Inc. 270,537 4,396,226
- ------------------------------------------------------------------------------
Machinery -- 8.47%
Kaydon Corp. 105,000 6,300,000
UCAR International Inc.* 25,000 1,193,750
York International Corporation 90,000 4,027,500
____________
11,521,250
- ------------------------------------------------------------------------------
Metals & Mining -- 1.71%
Potash Corporation of
Saskatchewan Inc. (ADR) 29,600 2,323,600
- ------------------------------------------------------------------------------
Manufactured Housing-- 2.86%
Fleetwood Enterprises, Inc. 116,000 3,893,250
- ------------------------------------------------------------------------------
Office Automation &
Equipment -- 0.61%
Pitney Bowes, Inc. 10,000 831,875
- ------------------------------------------------------------------------------
Railroads -- 7.80%
GATX Corporation 50,000 3,378,125
Kansas City Southern
Industries Inc. 210,000 7,231,875
____________
10,610,000
- ------------------------------------------------------------------------------
Real Estate Investment
Trusts (REITs) -- 3.88%
Chateau Communities, Inc. 92,730 2,735,535
United Dominion Realty
Trust, Inc. 170,000 2,550,000
____________
5,285,535
- ------------------------------------------------------------------------------
Retail -- 8.27%
Federated Dept. Stores, Inc.* 76,500 3,299,062
Jostens, Inc. 155,000 4,204,375
Toys `R' Us, Inc.* 105,300 3,738,150
____________
11,241,587
- ------------------------------------------------------------------------------
Services -- 2.29%
First Data Corporation 83,000 3,117,687
- ------------------------------------------------------------------------------
Telecommunications -- 1.95%
AT&T Corporation 60,000 2,658,750
- ------------------------------------------------------------------------------
9
<PAGE>
Bartlett Basic Value Fund (Cont.)
As of September 30, 1997
Market
Shares Value
- ------------------------------------------------------------------------------
Utilities -- 4.24%
NIPSCO Ind., Inc. 58,000 $ 2,443,250
TNP Enterprises, Inc. 30,000 753,750
Western Resources, Inc. 75,000 2,573,438
____________
5,770,438
==============================================================================
Total Common Stock $133,171,143
- ------------------------------------------------------------------------------
(Cost $84,115,060)
- ------------------------------------------------------------------------------
Preferred Stock--0.77%
- ------------------------------------------------------------------------------
J.P. Morgan & Company
Incorporated 5%** 12,000 1,047,000
- ------------------------------------------------------------------------------
Total Preferred Stock $ 1,047,000
- ------------------------------------------------------------------------------
(Cost $738,250)
- ------------------------------------------------------------------------------
Face Market
Amount Value
- ------------------------------------------------------------------------------
Commercial Paper -- 1.47%
- ------------------------------------------------------------------------------
General Electric Capital
Corporation
5.52%, 10/06/97 $2,000,000 $ 1,998,467
- ------------------------------------------------------------------------------
Total Commercial Paper $ 1,998,467
- ------------------------------------------------------------------------------
(Cost $1,998,467)
- ------------------------------------------------------------------------------
Repurchase Agreement -- 2.40%
- ------------------------------------------------------------------------------
State Street Corporation
4.25%, dated 9/30/97, to be
repurchased at $3,262,385 on
10/1/97 (Collateral: $3,280,000
United States Treasury Notes, 5.75%
due 12/31/98, value $3,329,200)
$3,262,000 $ 3,262,000
- ------------------------------------------------------------------------------
Total Repurchase Agreement $ 3,262,000
- ------------------------------------------------------------------------------
(Cost $3,262,000)
- ------------------------------------------------------------------------------
Total Investments
At Value -- 102.52% $139,478,610
- ------------------------------------------------------------------------------
(Cost $90,113,777)
- ------------------------------------------------------------------------------
Other Assets
Less Liabilities --(2.52%) (3,427,765)
- ------------------------------------------------------------------------------
Net Assets--100.00% $136,050,845
==============================================================================
*Non-dividend paying investment.
**The variable dividend rate is tied to the greater of the Treasury Bill rate,
Ten Year Treasury Constant Maturity Rate or Twenty Year Treasury Constant
Maturity Rate. The rate shown is the rate as of September 30, 1997.
See accompanying notes to financial statements.
10
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
As of September 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Bartlett Bartlett
Value Basic
International Value
Fund Fund
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
Assets:
- ------------------------------------------------------------------------------------------------------------------------
Investment securities, at cost $77,032,805 $ 90,113,777
========================================================================================================================
Investment securities, at value $98,278,072 $139,478,610
Dividends and interest receivable 394,869 160,198
Receivable for securities sold -- 1,363,105
Cash 5,101 875
Shareholder subscriptions receivable 28,444 30,625
Other Assets 3,909 3,147
- ------------------------------------------------------------------------------------------------------------------------
Total Assets 98,710,395 141,036,560
- ------------------------------------------------------------------------------------------------------------------------
Liabilities:
- ------------------------------------------------------------------------------------------------------------------------
Shareholder redemptions payable 672,051 4,885,136
Management and distribution fees payable 87,174 58,238
Accrued expenses 56,169 42,341
- ------------------------------------------------------------------------------------------------------------------------
Total Liabilities 815,394 4,985,715
- ------------------------------------------------------------------------------------------------------------------------
Net Assets $97,895,001 $136,050,845
========================================================================================================================
Net Assets Consist of:
- ------------------------------------------------------------------------------------------------------------------------
Capital shares:
Class A shares $49,714,841 $ 60,079,098
Class C shares 425,262 13,879
Class Y shares 19,810,812 2,409,362
Accumulated undistributed net investment income 141,206 355,396
Accumulated net realized gains from security transactions 6,558,474 23,828,256
Net unrealized appreciation on investments
and foreign currency transactions 21,244,406 49,364,854
- ------------------------------------------------------------------------------------------------------------------------
Net Assets $97,895,001 $136,050,845
========================================================================================================================
Shares of beneficial interest outstanding (unlimited number
of shares authorized, no par value)
Class A shares 4,907,899 5,628,929
Class C shares 27,519 612
Class Y shares 1,272,202 108,290
- ------------------------------------------------------------------------------------------------------------------------
Net asset value and redemption price per share -- Class A $15.77 $23.71
========================================================================================================================
Maximum offering price per share -- Class A
(net asset value plus sales charge of 4.75% of offering price) $16.56 $24.89
========================================================================================================================
Net asset value, offering price and redemption price per share -- Class C $15.75 $23.71
========================================================================================================================
Net asset value, offering price and redemption price per share -- Class Y $15.78 $23.72
========================================================================================================================
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
STATEMENTS OF OPERATIONS
For the six months ended September 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Bartlett Bartlett
Value Basic
International Value
Fund Fund
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Investment Income:
- -------------------------------------------------------------------------------------------------------------------
Interest $ 114,171 $ 71,608
Dividends 1,380,952 1,373,646
Less foreign taxes withheld (156,112) (10,785)
- -------------------------------------------------------------------------------------------------------------------
Total Investment Income 1,339,011 1,434,469
- -------------------------------------------------------------------------------------------------------------------
Expenses:
- -------------------------------------------------------------------------------------------------------------------
Investment advisory fees 729,422 638,061
Distribution and service fees 42,102 65,642
Custodian fees 25,190 12,200
Trustees' fees 15,300 15,300
Legal and audit fees 8,770 8,360
Registration fees 4,350 4,120
Reports to shareholders 3,930 5,765
Transfer agent and shareholder servicing expense 3,397 4,797
Other expenses 448 245
Less: Expenses waived by Advisor (4,473) (14,076)
- -------------------------------------------------------------------------------------------------------------------
Total Expenses 828,436 740,414
- -------------------------------------------------------------------------------------------------------------------
Net Investment Income 510,575 694,055
- -------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Gains on Investments:
Net realized gains from security transactions 3,225,120 14,891,269
Net change in net unrealized appreciation (depreciation)
of investments and foreign currency transactions 9,777,383 17,873,373
- -------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gains
on Investments 13,002,503 32,764,642
- -------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets
from Operations $13,513,078 $33,458,697
===================================================================================================================
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Bartlett Bartlett
Value International Fund Basic Value Fund
Six Months Year Six Months Year
Ended Ended Ended Ended
9/30/97 3/31/97 9/30/97 3/31/97
(Unaudited) (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
From Operations:
- ------------------------------------------------------------------------------------------------------------------------
Net investment income $ 510,575 $ 485,806 $ 694,055 $ 1,500,723
Net realized gains from
security transactions 3,225,120 5,034,699 14,891,269 14,218,555
Net change in net unrealized
appreciation (depreciation)
on investments 9,777,383 5,827,351 17,873,373 (1,663,068)
- ------------------------------------------------------------------------------------------------------------------------
Net increase in net assets
from operations 13,513,078 11,347,856 33,458,697 14,056,210
- ------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:
- ------------------------------------------------------------------------------------------------------------------------
From net investment income:
Class A Shares (369,236) (485,806) (548,230) (1,780,551)
Class C Shares (133) -- -- --
Class Y Shares -- -- -- --
In excess of net investment income -- (47,035) -- --
From net realized gains from
security transactions:
Class A Shares -- (4,402,999) -- (8,971,516)
Class C Shares -- -- -- --
Class Y Shares -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from
distributions to shareholders (369,369) (4,935,840) (548,230) (10,752,067)
- ------------------------------------------------------------------------------------------------------------------------
From Fund Share Transactions:
- ------------------------------------------------------------------------------------------------------------------------
Proceeds from shares sold:
Class A Shares 20,636,782 37,234,561 3,526,103 38,456,739
Class C Shares 425,236 -- 13,879 --
Class Y Shares 19,931,489 -- 2,439,338 --
Net asset value of shares issued
in reinvestment of shareholder
distributions:
Class A Shares 252,986 3,770,092 521,246 10,364,400
Class C Shares 132 -- -- --
Class Y Shares -- -- -- --
Payment for shares redeemed:
Class A Shares (40,347,938) (35,483,885) (22,538,284) (58,553,595)
Class C Shares (106) -- -- --
Class Y Shares (120,677) -- (29,976) --
- ------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from Fund
share transactions 777,904 5,520,768 (16,067,694) (9,732,456)
- ------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets 13,921,613 11,932,784 16,842,773 (6,428,313)
Net Assets:
Beginning of period 83,973,388 72,040,604 119,208,072 125,636,385
- ------------------------------------------------------------------------------------------------------------------------
End of period $ 97,895,001 $ 83,973,388 $ 136,050,845 $ 119,208,072
========================================================================================================================
Accumulated undistributed net
investment income $ 141,206 $ -- $ 355,396 $ 209,571
========================================================================================================================
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
FINANCIAL HIGHLIGHTS
Bartlett Value International Fund
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Class A Class C Class Y
---------------------------------------------------------------------------------------------------
Year Ended March 31, July 23, Aug. 15,
Six Months --------------------------------------------------- 1997(dagger) 1997(dagger)
Ended to to
9/30/97 Sept. 30, Sept. 30,
(Unaudited) 1997 1996 1995 1994 1993 1997 1997
===================================================================================================================================
<S> <C>
Net Asset Value,
Beginning of Period $13.64 $12.59 $11.64 $12.46 $10.08 $9.93 $15.70 $15.27
- -----------------------------------------------------------------------------------------------------------------------------------
Income From Investment
Operations:
Net Investment Income (Loss) .09(B) .08 .13 .09 .07(A) .12 .04(C) N.M.
Net Realized and
Unrealized Gains
(Losses) on Securities 2.10 1.81 1.33 (.21) 2.38 .15 .07 .51
- -----------------------------------------------------------------------------------------------------------------------------------
Total From Investment
Operations 2.19 1.89 1.46 (.12) 2.45 .27 .11 .51
- -----------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Dividends From Net
Investment Income (.06) (.08) (.13) (.09) (.07) (.10) (.06) --
In Excess of Net
Investment Income -- (.01) (.01) -- -- -- -- --
Distributions From
Realized Gains -- (.75) (.37) (.61) -- (.02) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (.06) (.84) (.51) (.70) (.07) (.12) (.06) --
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $15.77 $13.64 $12.59 $11.64 $12.46 $10.08 $15.75 $15.78
===================================================================================================================================
Total Return(E) 16.13%(F) 15.45% 12.76% (1.18%) 24.42% 2.71% 0.70%(F) 3.34%(F)
===================================================================================================================================
Ratios / Supplemental Data:
- ---------------------------
Net Assets, End of Period (000's) $77,388 $83,973 $72,041 $57,664 $49,607 $29,572 $433 $20,074
Ratio of Net Expenses
to Average Net Assets 1.80%(B,G) 1.81% 1.83% 1.83% 1.88%(A) 2.00% 2.55%(C,G) 1.54%(D,G)
Ratio of Net Investment
Income to Average Net Assets 1.18%(B,G) .62% 1.06% .80% .55%(A) 1.13% (.91%)(C,G) (.27%)(D,G)
Portfolio Turnover Rate 44%(G) 31% 38% 24% 19% 19% 44%(G) 44%(G)
Average commission
rate paid(H) $.0254 $.0296 -- -- -- -- $.0254 $.0254
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(dagger) Commencement of operations of each Class.
(A) The Advisor has periodically absorbed expenses of the Bartlett Value
International Fund through management fee waivers. If the Advisor had
not waived any fees, the ratio of net expenses to average net assets
would have been 1.94% and the ratio of net investment income to average
net assets would have been .49% for the period ended March 31, 1994.
(B) Net of fees waived pursuant to a voluntary expense limitation of 1.80%.
(C) Net of fees waived pursuant to a voluntary expense limitation of 2.55%.
(D) Net of fees waived pursuant to a voluntary expense limitation of 1.55%.
(E) Excluding sales charge
(F) Not Annualized
(G) Annualized
(H) Pursuant to SEC regulations effective for fiscal years beginning after
September 1, 1995, this is the average commission rate paid on
securities purchased and sold by the fund.
N.M. Not meaningful
See accompanying notes to financial statements.
14
<PAGE>
FINANCIAL HIGHLIGHTS
Bartlett Basic Value Fund
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Class A Class C Class Y
---------------------------------------------------------------------------------------------------
Year Ended March 31, Sept. 12, Aug. 15,
Six Months ---------------------------------------------------- 1997(dagger) 1997(dagger)
Ended to to
9/30/97 Sept. 30, Sept. 30,
(Unaudited) 1997 1996 1995 1994 1993 1997 1997
===================================================================================================================================
<S> <C>
Net Asset Value,
Beginning of Period $18.33 $17.94 $15.39 $14.89 $14.76 $13.47 $22.84 $21.92
- -----------------------------------------------------------------------------------------------------------------------------------
Income From Investment
Operations:
Net Investment Income .12(A) .22 .30 .27 .22 .30 .01(B) .04(C)
Net Realized and
Unrealized Gains
on Securities 5.35 1.82 3.32 1.53 .28 1.57 .86 1.76
- -----------------------------------------------------------------------------------------------------------------------------------
Total From Investment
Operations 5.47 2.04 3.62 1.80 .50 1.87 .87 1.80
- -----------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Dividends From Net
Investment Income (.09) (.26) (.24) (.27) (.23) (.30) -- --
Distributions From
Realized Gains -- (1.39) (.83) (1.03) (.14) (.28) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (.09) (1.65) (1.07) (1.30) (.37) (.58) -- --
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value,
End of Period $23.71 $18.33 $17.94 $15.39 $14.89 $14.76 $23.71 $23.72
===================================================================================================================================
Total Return(D) 30.03%(E) 11.30% 24.05% 12.67% 3.42% 14.22% 3.81%(E) 8.21%(E)
===================================================================================================================================
Ratios / Supplemental Data:
- ---------------------------
Net Assets, End of Period (000's) $133,468 $119,208 $125,636 $102,721 $94,289 $103,507 $14 $2,569
Ratio of Net Expenses
to Average Net Assets 1.15%(A,F) 1.16% 1.17% 1.20% 1.20% 1.21% 1.90%(B,F) 0.90%(B,F)
Ratio of Net Investment
Income to Average Net Assets 1.07%(A,F) 1.18% 1.79% 1.81% 1.48% 2.14% 1.56%(B,F) 1.46%(B,F)
Portfolio Turnover Rate 43%(F) 23% 25% 26% 33% 43% 43%(F) 43%(F)
Average commission
rate paid(G) $.0727 $.0655 -- -- -- -- $.0727 $.0727
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(dagger) Commencement of operations of each Class.
(A) Net of fees waived pursuant to a voluntary expense limitation of 1.15%.
(B) Net of fees waived pursuant to a voluntary expense limitation of 1.90%.
(C) Net of fees waived pursuant to a voluntary expense limitation of 0.90%.
(D) Excluding sales charge
(E) Not Annualized
(F) Annualized
(G) Pursuant to SEC regulations effective for fiscal years beginning after
September 1, 1995, this is the average commission rate paid on
securities purchased and sold by the fund.
See accompanying notes to financial statements.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS
As of September 30, 1997 (Unaudited)
1 Significant Accounting Policies Bartlett Capital Trust is registered under
the Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. Bartlett Capital Trust was established as a
Massachusetts business trust under a Declaration of Trust dated October 31,
1982. The Declaration of Trust, as amended, permits the Trustees to issue an
unlimited number of shares of the Bartlett Value International Fund, Bartlett
Basic Value Fund and Bartlett Europe Fund. The financial statements for the
Bartlett Europe Fund are included in a separate report to the shareholders.
Each of the Funds consist of three classes of shares: Class A, offered
since 1983 for Basic Value and since 1989 for Value International, Class C
offered since July 21, 1997, and Class Y offered to certain institutional
investors since July 21, 1997. The income and expenses of each of these Funds is
allocated proportionately to the three classes of shares based on daily net
assets, except for Rule 12b-1 distribution fees, which are charged only on Class
A and Class C shares, and transfer agent and shareholder servicing expenses,
which are determined separately for each class.
The following is a summary of the investment objectives followed by the
Funds:
Bartlett Value International Fund seeks capital appreciation by investing
primarily in foreign equity securities believed by its Advisor, Bartlett & Co.,
to be attractively priced relative to their intrinsic value. Income is a
secondary consideration.
Bartlett Basic Value Fund seeks capital appreciation by investing primarily
in common stocks or securities convertible into common stocks that are believed
by its Advisor, Bartlett & Co., to be attractively priced relative to their
intrinsic value. Income is a secondary consideration.
The following is a summary of the significant accounting policies of
Bartlett Capital Trust:
Security Valuation - Equity securities, options and commodities listed on
exchanges are valued at the last sale price as of the close of business on the
day the securities are being valued. Listed securities not traded on a
particular day and securities traded in the over-the-counter market are valued
at the mean between closing bid and ask prices quoted by brokers or dealers that
make markets in the securities. Portfolio securities which are traded both in
the over-the-counter market and on an exchange are valued according to the
broadest and most representative market.
The values of international securities are generally based upon market
quotations converted to U.S. dollar equivalents at 4:00 p.m. Eastern time which,
depending upon the exchange or market, may be last sale price, last bid price,
or the mean between the last bid and asked prices as of, in each case, the close
of the appropriate exchange or another designated time. Trading in securities on
European and Far Eastern securities exchanges and over-the-counter markets is
normally completed at various times before the close of business on each day the
New York Stock Exchange (NYSE) is open. Trading of these securities may not take
place on every NYSE business day. In addition, trading may take place in various
foreign markets on Saturdays or on other days when the NYSE is not open and on
which the Funds' share price is not calculated. Therefore, the value of each
Fund's portfolio may be significantly affected on days when shares may not be
purchased or redeemed.
Repurchase agreements are valued at cost which approximates market. It is
the policy of each of the Funds that its custodian take possession of the
underlying collateral securities. Collateral is marked-to-market daily to ensure
that the market value of the underlying assets equals or exceeds the value of
the seller's repurchase obligation. In the event of a bankruptcy or other
default of the seller of a repurchase agreement, a Fund could experience both
delays in liquidating the underlying securities and losses. The loss would equal
the amount by which the carrying value of the repurchase agreement(s) exceeded
the proceeds received in liquidation of the underlying collateral securities. To
minimize the possibility of loss, the Funds enter into repurchase agreements
only with institutions deemed to be creditworthy by the Advisor, including banks
that serve as custodian for the Funds, banks having assets in excess of $1
billion or primary government securities dealers.
Foreign Currency Translation - The books and records of each Fund are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars on the following basis:
(i) market value of investment securities, other assets and liabilities--at
the daily rate of exchange as reported by the custodian at 12:00 p.m. Eastern
time;
(ii) purchases and sales of investment securities, income and expenses--at
the rate of exchange prevailing on the respective dates of such transactions.
16
<PAGE>
Share Valuation - The net asset value per share is calculated daily by
dividing the total value of each Fund's investments and other assets, less
liabilities, by the total number of shares outstanding.
Investment Income and Distributions to Shareholders - Interest income is
accrued as earned. Dividend income is recorded on the ex-dividend date.
Distributions to shareholders from net investment income are declared and paid
quarterly and are recorded on the ex-dividend date. Net realized capital gains,
if any, are distributed to shareholders at least once a year.
Security Transactions - Security transactions are accounted for on a trade
date basis, which is the date the order to buy or sell is executed. Securities
sold are valued on a specific identification basis.
Federal Income Taxes - It is each Fund's policy to comply with the special
provisions of the Internal Revenue Code available to regulated investment
companies. As provided therein, in any fiscal year in which a Fund so qualifies,
and distributes at least 90% of its taxable net income, the Fund (but not its
shareholders) will be relieved of federal income tax on the income distributed.
Accordingly, no provision for income taxes is made.
In order to avoid imposition of the excise tax created by the Tax Reform
Act of 1986, as amended by the Revenue Act of 1987, it is each Fund's intention
to declare as dividends in each calendar year at least 98% of its net investment
income (earned during the calendar year) and 98% of its net realized capital
gains (earned during the twelve months ended October 31 of the calendar year)
plus undistributed amounts from prior years.
The following amounts are based on cost for both financial reporting and
federal income tax purposes as of September 30, 1997:
Bartlett Bartlett
Value Basic
International Value
Fund Fund
===============================================================================
Unrealized appreciation $23,868,520 $50,024,222
Unrealized depreciation (2,623,252) (659,388)
- -------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) $21,245,268 $49,364,833
===============================================================================
Federal income tax cost of investments $77,032,805 $90,113,777
===============================================================================
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires the Funds to make estimates
and assumptions that affect the reported amounts of assets and liabilites at the
date of the financial statements and the reported net changes in net assets from
operations during the reporting period.
2 Investment Transactions
Investment transactions (excluding short-term securities) are as follows for
the six months ended September 30, 1997:
Bartlett Bartlett
Value Basic
International Value
Fund Fund
===============================================================================
Purchases of investment securities $19,734,166 $27,004,382
===============================================================================
Proceeds from sales and maturities
of investment securities $19,089,949 $41,298,825
===============================================================================
3 Transactions with Affiliates and Related Parties
The officers of each of the Trusts are shareholders or employees of the
Advisor or Legg Mason Wood Walker, Incorporated (LMWW). LMWW is affiliated with
the Advisor through their common parent company, Legg Mason, Inc. The Advisor
became a wholly owned subsidiary of Legg Mason, Inc. in January 1996. Bartlett
Capital Trust's investments are managed by the Advisor under the terms of the
Management Agreement. Under the Management Agreement that was effective through
July 20, 1997, the Advisor paid all of the expenses of each Fund except
brokerage, taxes, interest and extraordinary expenses. As compensation for
investment advisory services and agreement to pay the above Fund expenses, each
Fund paid the Advisor a fee computed and accrued daily and paid monthly. The fee
for Bartlett Basic Value Fund was computed at an annual rate of 2% of the
average daily net assets of Bartlett Basic Value Fund up to and including
$10,000,000, 1.50% of such assets from $10,000,000 up to and including
$30,000,000 and 1% of such assets in excess of $30,000,000. The fee for Bartlett
Value International Fund was computed at an annual rate of 2% of the average
daily net assets of Bartlett Value International Fund up to and including
$20,000,000, 1.75% of such assets from $20,000,000 up to and including
$200,000,000 and 1.25% of such assets in excess of $200,000,000.
Effective July 21, 1997, the shareholders of the Trust approved changes to
the Investment Management and Administration Agreement. Bartlett receives for
its services an advisory fee from each Fund, computed daily and payable monthly
at annual rates of each Fund's average net assets as follows: Bartlett Basic
Value, .75% and Bartlett Value International, 1.25%.
The Advisor has agreed to waive fees to the extent the expenses
attributable to Class A, C, and Y shares,
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Cont.)
As of September 30, 1997 (Unaudited)
respectively, (exclusive of taxes, interest, brokerage and extraordinary
expenses) exceed during any month annual rates based on each respective class'
average daily net assets of 1.15%, 1.90% and 0.90% for Basic Value and 1.80%,
2.55% and 1.55% for Value International. Fees in excess of these limits will be
waived through July 31, 1998. For the period July 21, 1997 through September 30,
1997, advisory fees of $14,076 and $4,473, respectively were waived for Basic
Value and Value International. At September 30, 1997, amounts due to the Advisor
were as follows: Basic Value, $58,228 and Value International, $79,973.
BFP Financial Partners, Inc., as distributor of the Funds, receives from
Basic Value and Value International an annual service fee of 0.25% of the
average daily net assets of each Fund's Class A Shares and distribution and
service fees at an annual rate of 0.75% and 0.25%, respectively, of average
daily net assets of each Fund's Class C Shares. These fees are calculated daily
and paid monthly. At September 30, 1997, distribution and service fees due to
the distributor were as follows: Basic Value, $10 and Value International,
$7,307.
States in which shares of each Fund are offered may impose an expense
limitation based upon net assets. The Management Agreement between Bartlett
Capital Trust and the Advisor allows for the accrual and payment of the
management fee that does not exceed the lowest of the applicable expense
limitations imposed.
4 Fund Share Transactions
Proceeds and payments on shares of the Funds as shown in the Statements of
Changes in Net Assets are the result of the following share transactions:
Bartlett Value Bartlett Basic
International Fund Value Fund
For the Six Year For the Six Year
Months Ended Ended Months Ended Ended
Class A 9/30/97 3/31/97 9/30/97 3/31/97
===============================================================================
Shares sold 1,411,129 2,833,243 168,069 2,065,947
Shares issued in
reinvestment of
distributions 16,114 292,770 24,570 557,595
- -------------------------------------------------------------------------------
1,427,243 3,126,013 192,639 2,623,542
Less shares
redeemed (2,674,827) (2,692,355) (1,067,697) (3,123,012)
- -------------------------------------------------------------------------------
Net increase
(decrease)
in shares
outstanding (1,247,584) 433,658 (875,058) (499,470)
- -------------------------------------------------------------------------------
Bartlett Value Bartlett Basic
International Fund Value Fund
For the Period For the Period
7/21/97 through 7/21/97 through
Class C 9/30/97 9/30/97
===============================================================================
Shares sold 27,518 612
Shares issued in
reinvestment of
distributions 8 --
- -------------------------------------------------------------------------------
27,526 612
Less shares
redeemed (7) --
- -------------------------------------------------------------------------------
Net increase
in shares
outstanding 27,519 612
- -------------------------------------------------------------------------------
Bartlett Value Bartlett Basic
International Fund Value Fund
For the Period For the Period
7/21/97 through 7/21/97 through
Class Y 9/30/97 9/30/97
===============================================================================
Shares sold 1,280,099 109,574
Shares issued in
reinvestment of
distributions -- --
- -------------------------------------------------------------------------------
1,280,099 109,574
Less shares
redeemed (7,897) (1,284)
- -------------------------------------------------------------------------------
Net increase
in shares
outstanding 1,272,202 108,290
- -------------------------------------------------------------------------------
18
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TRUSTEES AND OFFICERS
================================================================================
Lorrence T. Kellar Chairman of the Board and Trustee
Dale H. Rabiner, CFA President and Trustee
Alan R. Schriber Trustee
William P. Sheehan Trustee
Charles J. Swindells Trustee
Prinz Wolfgang E. Ysenburg Trustee
A. John W. Campbell Trustee
Henri Deegenaar Trustee
Ian F.H. Grant Trustee
Edmund J. Cashman, Jr. Trustee
Kathi D. Bair Secretary
James B. Reynolds, CFA Vice President
R. Stuart Crickmer, CFA, CPA Vice President
Marie K. Karpinski, CPA Treasurer and Vice President
Madelynn M. Matlock, CFA Vice President
James A. Miller, CFA Vice President
Donna M. Prieshoff Vice President
Thomas A. Steele, CPA Assistant Treasurer and Assistant Secretary
Woodrow H. Uible, CFA Vice President
================================================================================
Investment Advisor Bartlett & Co.
Cincinnati, Ohio
Custodian State Street Bank & Trust Company
Boston, Massachusetts
Transfer Agent Boston Financial Data Services
Boston, Massachusetts
Auditors Coopers & Lybrand, L.L.P.
Baltimore, Maryland
================================================================================
Bartlett & Co.
-----------------------------------------------------------
REGISTERED INVESTMENT ADVISORS
- --------------------------------------------------------------------------------
36 East Fourth Street, Cincinnati, OH 45202-3896
(bullet) 513-345-6212 (bullet) 800-800-3609 (bullet) FAX 513-621-6462
19
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