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BARTLETT & CO.
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REGISTERED INVESTMENT ADVISORS
MUTUAL
FUNDS
PROSPECTUS
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JULY 21, 1997
BARTLETT
VALUE INTERNATIONAL FUND
BARTLETT
BASIC VALUE FUND
BARTLETT
EUROPE FUND
BARTLETT CAPITAL TRUST
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PROSPECTUS
July 21, 1997
TABLE OF CONTENTS
<TABLE>
<S> <C>
Prospectus Highlights................................. 2
Fund Expenses......................................... 4
Financial Highlights.................................. 6
Investment Performance................................ 10
Investment Objectives and Policies.................... 11
Investment Policies, Techniques and Risk
Considerations....................................... 13
Purchase of Shares.................................... 18
Redemption of Shares.................................. 22
Calculation of Share Price............................ 25
Dividends and Other Distributions..................... 26
Taxes................................................. 27
Management of the Trust............................... 28
Description of the Trust.............................. 30
</TABLE>
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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
21, 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 (800) 800-3609.
INVESTORS SHOULD BE COGNIZANT OF THE UNIQUE RISKS OF INTERNATIONAL
INVESTING, INCLUDING EXPOSURE TO CURRENCY FLUCTUATIONS AND TO FOREIGN ECONOMIC
AND POLITICAL CHANGES.
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) 800-3609 or contact your broker/dealer.
BARTLETT CAPITAL TRUST
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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 equity 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 total
assets in equity securities 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, 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
("CDSC") 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. A
CDSC of 1% of net asset value at the time of
purchase or sale, whichever is less, may be
charged on redemptions of Class C shares made
within one year of the purchase date.
2
<PAGE> 4
Shares Available Through: Many brokerage firms nationwide, or directly
through the Funds' distributor. See "Purchase
of Shares," page 18.
Initial Purchase: $1,000 minimum, generally.
Subsequent Purchases: $100 minimum, generally.
Exchange Privilege: Exchanges may be made for shares of the
corresponding class of shares of any other
Fund and for shares of Legg Mason Cash
Reserve Trust, a money market mutual fund.
See "Exchange Privilege," page 23.
Redemption Fee: Europe Fund will deduct a 2% redemption fee
from the proceeds of all redemptions made by
shareholders who own shares of the Fund
through the merger of Worldwide Value Fund
into Europe Fund. The redemption fee will be
charged on all redemptions until January 20,
1998 and is intended to offset the additional
trading costs the Fund may experience as a
result of such redemptions. See "Redemption
of Shares," page 22.
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 capital gains
are declared and paid annually for each Fund.
See "Dividends and Other Distributions," page
26. 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 is 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 also
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
Policies, Techniques and Risk
Considerations."
3
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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 18, 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.
Long-term Class A and Class C shareholders may pay more in direct and
indirect sales charges (including 12b-1 distribution fees) 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 "Management of the Trust."
CLASS A SHARES
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<TABLE>
<CAPTION>
VALUE BASIC EUROPE
SHAREHOLDER TRANSACTION EXPENSES INTERNATIONAL VALUE FUND
- ----------------------------------------- -----------------------------------------
<S> <C> <C> <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)
<CAPTION>
ANNUAL FUND OPERATING EXPENSES(d)(e)
(as a % of average net assets)
- -----------------------------------------------
<S> <C> <C> <C>
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 CDSC 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) Europe Fund will deduct a 2% redemption fee from the proceeds of all
redemptions made by shareholders who own shares of the Fund through the
merger of Worldwide Value Fund into Europe Fund. The redemption fee will be
charged on all redemptions until January 20, 1998. 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.
4
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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.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
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<S> <C> <C> <C> <C>
VALUE INTERNATIONAL.................................... $65 $ 101 $ 140 $249
BASIC VALUE............................................ $59 $ 82 $ 108 $181
EUROPE FUND............................................ $64 $ 100 $ 138 $244
</TABLE>
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% CDSC 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 waives its 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> <C> <C>
Maximum sales charge on purchases None None None
Deferred sales charges(a) 1.00% 1.00% 1.00%
Redemption or exchange fees None None None
ANNUAL FUND OPERATING EXPENSES(b)(c)
(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) A CDSC of 1% of net asset value at the time of purchase or sale, whichever
is less, may be charged on redemptions of Class C shares made within one
year of the purchase date. See "Purchase of Shares."
(b) 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.
(c) The expense information has been restated to reflect current fees and
expenses and a changed management fee.
5
<PAGE> 7
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.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------
<S> <C> <C> <C> <C>
VALUE INTERNATIONAL
Assuming full redemption............................. $36 $79 $ 136 $289
Assuming no redemption............................... $26 $79 $ 136 $289
BASIC VALUE
Assuming full redemption............................. $29 $60 $ 103 $222
Assuming no redemption............................... $19 $60 $ 103 $222
EUROPE FUND
Assuming full redemption............................. $35 $78 $ 133 $284
Assuming no redemption............................... $25 $78 $ 133 $284
</TABLE>
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 waives its fees and the extent to which
Class C shares incur variable expenses, such as transfer agency costs.
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FINANCIAL HIGHLIGHTS
Each Fund offers three classes of shares. Prior to July 18, 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 Funds'
combined annual report to shareholders and are incorporated by reference into
the Statement of Additional Information. The annual report for the Funds is
available to shareholders without charge by calling BFP at (800) 800-3609. No
information is presented for the Funds' Class C shares because no such shares
were outstanding prior to July 18, 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 18, 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 18, 1997, Europe Fund,
which had no previous operating history, acquired the assets and assumed the
liabilities of Worldwide Value Fund, Inc.
6
<PAGE> 8
BARTLETT VALUE INTERNATIONAL FUND
<TABLE>
<CAPTION>
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YEARS ENDED MARCH 31, 1997 1996 1995 1994 1993 1992 1991 1990(a)
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period $12.59 $11.64 $12.46 $10.08 $9.93 $9.09 $9.79 $10.00
- ----------------------------------------------------------------------------------------------------------------------------------
Income from Investment
Operations:
Net Investment Income .08 .13 .09 .07 .12 .18 .30 .08
Net Realized and Unrealized
Gains
(Losses) on Securities 1.81 1.33 (.21) 2.38 .15 .88 (.70) (.05)
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Total from Investment
Operations 1.89 1.46 (.12) 2.45 .27 1.06 (.40) .03
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Less Distributions:
Dividends from Net Investment
Income (.08) (.13) (.09) (.07) (.10) (.22) (.28) (.08)
In Excess of Net Investment
Income (.01) (.01) -- -- -- -- -- --
Distributions from Realized
Gains (.75) (.37) (.61) -- (.02) -- (.02) (.16)
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Total Distributions (.84) (.51) (.70) (.07) (.12) (.22) (.30) (.24)
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Net Asset Value, End of Period $13.64 $12.59 $11.64 $12.46 $10.08 $9.93 $9.09 $9.79
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return 15.45% 12.76% (1.18%) 24.42% 2.71% 11.88% (3.84%) 0.59%(c)
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RATIOS/SUPPLEMENTAL DATA:
Ratio of Net Expenses to
Average
Net Assets(b) 1.81% 1.83% 1.83% 1.88% 2.00% 2.00% 1.99% 1.41%(c)
Ratio of Net Investment Income
to Average Net Assets(b) .62% 1.06% .80% .55% 1.13% 1.79% 3.31% 1.80%(c)
Portfolio Turnover Rate 31% 38% 24% 19% 19% 27% 39% 155%(c)
Average Commission Rate
Paid(d) $.0296 -- -- -- -- -- -- --
Net Assets, End of Period (in
thousands) $83,973 $72,041 $57,664 $49,607 $29,572 $22,042 $23,661 $20,557
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</TABLE>
(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
(d) 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.
7
<PAGE> 9
BARTLETT BASIC VALUE FUND
<TABLE>
<CAPTION>
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
YEARS ENDED MARCH 31, 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
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Net Asset Value,
Beginning of Year $17.94 $15.39 $14.89 $14.76 $13.47 $12.60 $12.34 $12.56 $12.44 $12.96
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Income from Investment
Operations:
Net Investment Income .22 .30 .27 .22 .30 .36 .46 .62 .57 .35
Net Realized and
Unrealized Gains
(Losses) on
Securities 1.82 3.32 1.53 .28 1.57 .87 .26 .21 1.20 (.51)
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Total from Investment
Operations 2.04 3.62 1.80 .50 1.87 1.23 .72 .83 1.77 (.16)
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Less Distributions:
Dividends from Net
Investment Income (.26) (.24) (.27) (.23) (.30) (.36) (.46) (.62) (.56) (.36)
Distributions from
Realized Gains (1.39) (.83) (1.03) (.14) (.28) -- -- (.43) (1.09) --
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Total Distributions (1.65) (1.07) (1.30) (.37) (.58) (.36) (.46) (1.05) (1.65) (.36)
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Net Asset Value, End of
Year $18.33 $17.94 $15.39 $14.89 $14.76 $13.47 $12.60 $12.34 $12.56 $12.44
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Total Return 11.30% 24.05% 12.67% 3.42% 14.22% 9.91% 6.29% 6.49% 15.61% (1.24%)
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RATIOS/SUPPLEMENTAL
DATA:
Ratio of Expenses to
Average Net Assets 1.16% 1.17% 1.20% 1.20% 1.21% 1.22% 1.21% 1.19% 1.23% 1.57%
Ratio of Net Investment
Income to Average Net
Assets 1.18% 1.79% 1.81% 1.48% 2.14% 2.77% 3.87% 4.81% 4.57% 2.75%
Portfolio Turnover Rate 23% 25% 26% 33% 43% 49% 92% 77% 99% 97%
Average Commission Rate
Paid(a) $.0655 -- -- -- -- -- -- -- -- --
Net Assets, End of Year
(in thousands) $119,208 $125,636 $102,721 $94,289 $103,507 $88,536 $96,165 $105,842 $100,333 $80,583
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</TABLE>
(a) 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.
8
<PAGE> 10
BARTLETT EUROPE FUND
(SUCCESSOR TO WORLDWIDE VALUE FUND, INC.)
(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>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
YEARS ENDED
DECEMBER 31, 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987(C) 1987(B)
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Net Asset Value,
Beginning of
Period $21.13 $17.68 $18.46 $14.29 $15.44 $14.65 $20.14 $19.53 $16.46 $21.98 $20.00
- ----------------------------------------------------------------------------------------------------------------------------------
Net Investment
Income (Loss) .02 .01 (.03) .14 .08 .08 .19 .03 .03 -- .16
Net Realized and
Unrealized Gain
(Loss) on
Investments,
Options and
Currency
Transactions 6.34 3.50 (.75) 4.13 (1.19) .92 (4.30) 2.19 4.04 (4.41) 3.39
- ----------------------------------------------------------------------------------------------------------------------------------
Total From
Investment
Operations 6.36 3.51 (.78) 4.27 (1.11) 1.00 (4.11) 2.22 4.07 (4.41) 3.55
- ----------------------------------------------------------------------------------------------------------------------------------
Less
Distributions:
Net Investment
Income -- (.06) -- (.05) (.04) (.21) (.08) (.19) -- (.09) --
Net Realized
Gains (3.25) -- -- -- -- -- (.85) (1.42) (1.00) (1.02) --
In Excess of Net
Investment
Income -- -- -- (.05) -- -- (.45) -- -- -- --
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Total
Distributions (3.25) (.06) -- (.10) (.04) (.21) (1.38) (1.61) (1.00) (1.11) --
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Net Asset Value,
End of Period $24.24 $21.13 $17.68 $18.46 $14.29 $15.44 $14.65 $20.14 $19.53 $16.46 $21.98
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Market Value Per
Share, End of
Period $22.00 $16.88 $14.25 $16.63 $12.00 $12.50 $12.125 $19.00 $16.125 $12.00 $17.875
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Total Investment
Return:
Based on Market
Value Per Share 49.5% 18.8% (14.3%) 39.3% (3.7%) 4.7% (30.4%) 28.5% 42.2% (29.6%)(e) (10.6%)(e)
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RATIOS/SUPPLEMENTAL DATA:
Ratios to Average
Net Assets:
Expenses 2.0% 2.1% 2.1% 2.1% 2.2% 2.3% 2.4% 2.2% 2.2% 2.1%(d) 2.2%(d)
Net Investment
Income 0.1% 0.1% -- 0.9% 0.5% 0.5% 1.1% 0.1% 0.2% -- 0.9%(d)
Portfolio
Turnover Rate 109.0% 147.7% 75.0% 66.8% 148.4% 91.9% 84.3% 121.5% 95.6% 110.5%(d) 117.0%(d)
Average
Commission Rate
Paid(a) $.0313 -- -- -- -- -- -- -- -- -- --
Net Assets at End
of Period (in
Thousands) $70,991 $62,249 $53,135 $55,486 $42,930 $46,405 $44,026 $60,522 $58,684 $49,463 $66,040
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</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
(e) Not annualized
9
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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.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BASIC VALUE EUROPE
CUMULATIVE TOTAL RETURN VALUE INTERNATIONAL FUND
- ----------------------------- ----------------------------------
<S> <C> <C> <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)
AVERAGE ANNUAL TOTAL RETURN
- ----------------------------------
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 18, 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 investor's shares, when redeemed, may be worth
more or less than their original cost. Further information about each Fund's
performance is contained in the Funds' combined annual report to shareholders,
which may be obtained without charge by calling BFP at (800) 800-3609.
10
<PAGE> 12
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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.
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
fixed income 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 equity securities of
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 total 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
11
<PAGE> 13
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 Policies, Techniques and Risk Considerations" beginning at
page 13 for a more detailed 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 value 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 Policies, Techniques and Risk Considerations,"
beginning on page 13.
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"
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<PAGE> 14
(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.
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 net assets in illiquid or restricted securities.
================================================================================
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================================================================================
INVESTMENT POLICIES, TECHNIQUES AND RISK CONSIDERATIONS
This section contains general information about various types of securities
and investment techniques. Each Fund may invest in any security or employ any
investment technique described in this section unless specifically noted
otherwise. Each Fund may purchase combinations of different types of securities
provided that the securities in the combination are permissible investments of
the Fund.
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.
ADRs, 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.
13
<PAGE> 15
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 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. 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
or Lombard Odier
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<PAGE> 16
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) ADRs (or similar instruments) with respect to the foregoing.
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 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
15
<PAGE> 17
(i) appropriate liquid assets sufficient to purchase the underlying equity
security, debt security, futures contract or foreign currency or (ii)
appropriate liquid 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 SEC 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.
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 obli-
16
<PAGE> 18
gation 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 decline. 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 total 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.
RESTRICTED SECURITIES
Each Fund may invest in restricted securities, although Basic Value and
Value International do not intend to invest more than 5% of their respective net
assets in 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,
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<PAGE> 19
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, a 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.
LOANS OF PORTFOLIO SECURITIES
Each Fund 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 or Lombard Odier, in response to requests of broker/
dealers or institutional investors which Bartlett or Lombard Odier deems
qualified, the borrower must agree to maintain collateral, in the form of cash
or U.S. government obligations, with the 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.
Value International and Europe Fund each may invest in any closed-end
investment company that holds foreign equity securities in its portfolio. For
Value International, investments in the shares of closed-end investment
companies that invest primarily in the equity securities of non-U.S. issuers
will be included in the 65% of total assets that Value International normally
would expect to invest in such issuers. Likewise, investments by Europe Fund in
the shares of closed-end investment companies that invest primarily in equity
securities of European issuers will be included in the 65% of total assets that
Europe Fund normally would expect to invest in European issuers.
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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 CDSC under limited
circumstances. Class C shares are sold without an initial sales charge but are
subject to a CDSC on certain redemptions and 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
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<PAGE> 20
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")
self-employed individual retirement plan ("Keogh Plan"), simplified employee
pension plan ("SEP"), savings incentive match plan for employees ("SIMPLE") or
other qualified retirement 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]
BFP Funds Processing
P.O. Box 1476
Baltimore, Maryland 21203-1476
Telephone inquiries:
call BFP at (800) 800-3609
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.
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<PAGE> 21
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, which may be amended from time to time:
<TABLE>
<CAPTION>
DEALER
SALES CHARGE AS A % OF REALLOWANCE AS
---------------------- A PERCENTAGE
OFFERING NET OF THE
AMOUNT OF PURCHASE PRICE INVESTMENT OFFERING PRICE
- ---------------------------------------------------------- -------- ---------- --------------
<S> <C> <C> <C>
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%
</TABLE>
*A CDSC 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 reallow to broker/dealers the full amount of the
sales charge on Class A shares or may pay out, in addition to a sales
commission, special additional compensation and promotional incentives to
broker/dealers who sell Class A shares. To the extent that BFP reallows the full
amount of the sales charge to broker/dealers, such broker/dealers may be deemed
to be underwriters under the Securities Act of 1933, as amended.
SALES CHARGE WAIVERS
Class A shares of each Fund 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 International as of July 18, 1997 will be eligible for the
waiver going forward. No initial sales charge will be imposed on Class A shares
issued as a result of reinvestment of any dividends or other distributions.
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 Funds plus (c) the price of all shares of the corresponding class of Funds
already held by the shareholder. To receive the Right of Accumulation, at the
time of purchase shareholders must give their
20
<PAGE> 22
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 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 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 Funds may be
combined for this purpose, and the Right of Accumulation and LOI also 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 CDSC 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
CDSC 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 Fund without the
imposition of a CDSC, although the CDSC described above will apply to the
redemption of the shares acquired through an exchange. For federal income tax
purposes, the amount of the CDSC will reduce the gain or increase the loss, as
the case may be, on the amount realized on redemption. The amount of any CDSC
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 sales charge is imposed, but Class C
shares are subject to higher ongoing expenses.
CONTINGENT DEFERRED SALES CHARGE -- CLASS C SHARES
A CDSC of 1% of net asset value at the time of purchase or sale, whichever
is less, may be charged on redemptions of Class C shares made within one year of
the purchase date. Class C shares that are redeemed will not be subject to the
CDSC to the extent that the value of such shares represents: (1) reinvestment of
dividends or other distributions or (2) Class C shares redeemed more than one
year after their purchase. For federal income tax purposes, the amount of the
CDSC will reduce the gain or increase the loss, as the case may be, on the
amount realized on redemption. The amount of any CDSC will be paid to BFP.
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 of the shares of any Fund, and to
21
<PAGE> 23
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 CDSC or redemption fee). 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 BFP or their 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 (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.
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 CDSC or redemption fee) 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 CDSC or redemption fee). 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
22
<PAGE> 24
SENT TO THE REDEEMING SHAREHOLDER AT THE SHAREHOLDER'S ADDRESS OF RECORD AS
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.
EUROPE FUND REDEMPTION FEE:
Europe Fund will deduct a 2% redemption fee from the proceeds of all
redemptions made by shareholders who own shares of the Fund through the merger
of Worldwide Value Fund into Europe Fund. The redemption fee will be charged on
all redemptions until January 20, 1998 and is intended to offset the additional
trading costs the Fund may experience as a result of such redemptions. The
redemption fee will be retained by Europe Fund, and not Bartlett, BFP or Lombard
Odier, and will be calculated based upon 2% of the net asset value of the shares
redeemed.
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 class of 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
CDSC may apply to the redemption of Class A and/or Class C 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
23
<PAGE> 25
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 your
broker/dealer.
CONVERSION PRIVILEGE:
Shareholders who acquire Class A shares of a Fund and thereafter become
eligible to purchase Class Y shares of that Fund (see "Purchase of
Shares -- Class Y Shares" for a description of the relevant eligibility
requirements) may convert those Class A shares to Class Y shares having an equal
aggregate net asset value. With respect to Europe Fund, if the Class A shares
being converted were acquired as a result of the reorganization of Worldwide
Value Fund, Inc. into that Fund, the redemption fee described under "Redemption
of Shares -- Europe Fund Redemption Fee" shall apply to the Class Y shares of
Europe Fund received on the conversion to the same extent as that fee would have
applied to those Class A shares. To obtain further information concerning the
conversion 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.
Telephone Transactions:
Call BFP at (800) 800-3609
Mail Transactions:
[insert complete Fund name]
BFP Funds Processing
P.O. Box 1476
Baltimore, Maryland 21203-1476
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<PAGE> 26
===========================================================================
=======================================================================
=====================================================================
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, under authority delegated by 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 the 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 then-prevailing
exchange rates. 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.
25
<PAGE> 27
===========================================================================
=======================================================================
=====================================================================
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, if any, 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 Class A or Class C 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 broker/dealer 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. 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.
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<PAGE> 28
===========================================================================
=======================================================================
=====================================================================
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 capital gain
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 "Redemption of
Shares -- 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 -- Reinstatement 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
27
<PAGE> 29
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 income 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 June 30,
1997, Bartlett had aggregate assets under management of approximately $2.6
billion. Bartlett is a wholly owned subsidiary of Legg Mason, Inc., a financial
services holding company.
Pursuant to an Investment Management and Administration Agreement, which
was approved by the Board of Trustees, Bartlett acts as investment adviser 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 also
supervises all aspects of the operations of each Fund in its capacity as
administrator for each Fund.
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 an 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 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 June 30, 1997, Lombard Odier had approximately $3.0
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 to the extent that a Fund's expenses
exceed the
28
<PAGE> 30
following annual rates of average daily net assets until July 31, 1998:
<TABLE>
<CAPTION>
CLASS A CLASS C
------- -------
<S> <C> <C>
Value International 1.80% 2.55%
Basic Value 1.15% 1.90%
Europe Fund 1.75% 2.50%
</TABLE>
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.
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 broker/
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 CDSCs that may be imposed on certain
redemptions of Class A and Class C 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," and may from
time to time reallow the full amount of the sales charge. 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 an annual
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 an annual rate of 0.75% and 0.25%, respectively, 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.
29
<PAGE> 31
===========================================================================
=======================================================================
=====================================================================
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 CDSC, and
bear ongoing service fees, (3) no initial sales charge is imposed on Class C
shares, but Class C shares are subject to a CDSC, and 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 (800) 800-3609.
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.
Broker/dealers 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.
30
<PAGE> 32
INVESTMENT ADVISOR
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 AND SHAREHOLDER SERVICING 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.
- -------------------------------------------------
(RECYCLE LOGO)PRINTED ON RECYCLED PAPER
<PAGE> 33
---------------------------------------------------
------------------------------------------
BARTLETT & CO.
------------------------------------
REGISTERED INVESTMENT ADVISORS
MUTUAL
FUNDS
PROSPECTUS
------------------------------------------
---------------------------------------------------
JULY 21, 1997
BARTLETT
VALUE INTERNATIONAL FUND
BARTLETT
BASIC VALUE FUND
BARTLETT
EUROPE FUND
Class Y Shares
BARTLETT CAPITAL TRUST
<PAGE> 34
PROSPECTUS
CLASS Y SHARES
July 21, 1997
TABLE OF CONTENTS
<TABLE>
<S> <C>
Prospectus Highlights................................. 2
Fund Expenses......................................... 4
Investment Performance................................ 5
Investment Objectives and Policies.................... 6
Investment Policies, Techniques and Risk
Considerations....................................... 8
Purchase of Shares.................................... 13
Redemption of Shares.................................. 15
Calculation of Share Price............................ 16
Dividends and Other Distributions..................... 17
Taxes................................................. 18
Management of the Trust............................... 19
Description of the Trust.............................. 20
</TABLE>
- --------------------------------------------------------------------------------
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
21, 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 (800) 800-3609.
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 ("IRAs") and
self-employed individual retirement plans ("Keogh Plans"), to retirement plans
having net assets of at least $10 million, to purchasers of $5 million or more
in shares of any Fund, 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 AND TO FOREIGN ECONOMIC
AND POLITICAL CHANGES.
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) 800-3609 or contact your broker/dealer.
BARTLETT CAPITAL TRUST
<PAGE> 35
===========================================================================
=======================================================================
=====================================================================
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 equity 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 total
assets in equity securities 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, 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 (1) to advisory clients
of Bartlett that are employee benefit or
retirement plans, other than IRAs and Keogh
Plans, (2) to retirement plans having net
assets of at least $10 million, (3) to
purchasers of $5 million or more in shares of
any Fund, and (4) 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.
2
<PAGE> 36
Exchange Privilege: Exchanges may be made for shares of the
corresponding class of shares of any other
Fund and for shares of Legg Mason Cash
Reserve Trust, a money market mutual fund.
See "Exchange Privilege," page 15.
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 capital gains
are declared and paid annually by each Fund.
See "Dividends and Other Distributions," page
17. 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 is 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 also
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
Policies, Techniques and Risk
Considerations."
3
<PAGE> 37
===========================================================================
=======================================================================
=====================================================================
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 18,
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> <C> <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.
The Funds charge no redemption fees of any kind.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------
<S> <C> <C> <C> <C>
VALUE INTERNATIONAL.................................... $16 $49 $84 $185
BASIC VALUE............................................ $ 9 $29 $50 $111
EUROPE FUND............................................ $15 $47 $82 $179
</TABLE>
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 waives its fees and the extent to which
Class Y shares incur variable expenses, such as transfer agency costs.
4
<PAGE> 38
===========================================================================
=======================================================================
=====================================================================
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. No information is presented for Class Y shares
of any Fund because no such shares were outstanding during the periods shown.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BASIC VALUE EUROPE
CUMULATIVE TOTAL RETURN VALUE INTERNATIONAL FUND
- ----------------------------- ----------------------------------
<S> <C> <C> <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)
AVERAGE ANNUAL TOTAL RETURN
- ----------------------------------
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 18, 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 investor's shares, when redeemed, may be worth
more or less than their original cost. Further information about each Fund's
performance is contained in the Funds' combined annual report to shareholders,
which may be obtained without charge by calling BFP at (800) 800-3609.
5
<PAGE> 39
===========================================================================
=======================================================================
=====================================================================
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.
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
fixed income 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 equity securities of
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 total 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.
6
<PAGE> 40
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 Policies, Techniques and Risk Considerations" beginning at
page 8 for a more detailed 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 value 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 Policies, Techniques and Risk Considerations,"
beginning on page 8.
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
7
<PAGE> 41
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.
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 net assets in illiquid or restricted securities.
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INVESTMENT POLICIES, TECHNIQUES AND RISK CONSIDERATIONS
This section contains general information about various types of securities
and investment techniques. Each Fund may invest in any security or employ any
investment technique described in this section unless specifically noted
otherwise. Each Fund may purchase combinations of different types of securities
provided that the securities in the combination are permissible investments of
the Fund.
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.
ADRs, 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
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<PAGE> 42
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 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. Subject to the above restrictions, emerging markets will include any
country: (i) having an
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<PAGE> 43
"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 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) ADRs (or similar instruments) with respect to the foregoing.
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 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
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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) appropriate
liquid assets sufficient to purchase the underlying equity security, debt
security, futures contract or foreign currency or (ii) appropriate liquid 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 SEC 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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<PAGE> 45
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 decline. 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 total 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.
RESTRICTED SECURITIES
Each Fund may invest in restricted securities, although Basic Value and
Value Interna-
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<PAGE> 46
tional do not intent to invest more than 5% of their respective net assets in
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, a 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.
LOANS OF PORTFOLIO SECURITIES
Each Fund 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 or Lombard Odier, in response to requests of
broker/dealers or institutional investors which Bartlett or Lombard Odier, deems
qualified, the borrower must agree to maintain collateral, in the form of cash
or U.S. government obligations, with the 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.
Value International and Europe Fund each may invest in any closed-end
investment company that holds foreign equity securities in its portfolio. For
Value International, investments in the shares of closed-end investment
companies that invest primarily in the equity securities of non-U.S. issuers
will be included in the 65% of total assets that Value International normally
would expect to invest in such issuers. Likewise, investments by Europe Fund in
the shares of closed-end investment companies that invest primarily in equity
securities of European issuers will be included in the 65% of total assets that
Europe Fund normally would expect to invest in European issuers.
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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 Keogh Plans, to retirement plans having net assets of at least $10
million, to purchasers of $5 million or more in shares of any Fund, and to
participants in certain wrap fee investment advisory programs that
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<PAGE> 47
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
P.O. Box 1476
Baltimore, Maryland 21203-1476
Telephone Purchase Transactions:
Call BFP at (800) 800-3609
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.
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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 investor's shares will be purchased at
the net asset value per share determined as of the next close of the Exchange.
EUROPE FUND REDEMPTION FEE:
Europe Fund will deduct a 2% redemption fee from the proceeds of the
redemption of Class Y shares of that Fund received upon conversion of Class A
shares thereof that were acquired in the reorganization of Worldwide Value Fund,
Inc. into that Fund. The redemption fee will be charged on all redemptions of
Class Y shares obtained by such a conversion until January 20, 1998 and is
intended to offset the additional trading and other costs the Fund may
experience as a result of such redemptions. The redemption fee will be retained
by Europe Fund, and not Bartlett, BFP or Lombard Odier, and will be calculated
using the net asset value of the shares redeemed. No redemption fee will apply
to any other Class Y shares of Europe Fund or to any Class Y shares of either of
the other Funds.
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 Bartlett 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 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
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<PAGE> 49
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.
Telephone Transactions:
Call BFP at (800) 800-3609
Mail Transactions:
[insert complete Fund name]
BFP Funds Processing
P.O. Box 1476
Baltimore, Maryland 21203-1476
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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, under authority delegated by 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.
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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 the 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 then-prevailing
exchange rates. 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, if any, 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 Class Y shares of a Fund held
in a Simplified Employee Pension Plan ("SEP"), Savings Incentive Match Plan for
Employees ("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:
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<PAGE> 51
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 Bartlett
for additional information concerning this option. If no election is made, both
dividends and other distributions are credited to your account in Class Y shares
of the distributing Fund at the net asset value of the shares determined as of
the close of the Exchange on the reinvestment date. Class Y shares received
pursuant to any of the first three (reinvestment) elections above are also
credited to your account at that net asset value. 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
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 capital gain
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 "Redemption of Shares --
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.
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<PAGE> 52
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 income 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 June 30,
1997, Bartlett had aggregate assets under management of approximately $2.6
billion. Bartlett is a wholly owned subsidiary of Legg Mason, Inc., a financial
services holding company.
Pursuant to an Investment Management and Administration Agreement, which
was approved by the Board of Trustees, Bartlett acts as investment adviser 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 also
supervises all aspects of the operations of each Fund in its capacity as
administrator for each Fund.
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 an 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
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<PAGE> 53
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 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 June 30, 1997, Lombard Odier had approximately $3.0
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 to the extent that a Fund's expenses
exceed the following annual rates of average daily net assets until July 31,
1998:
<TABLE>
<CAPTION>
CLASS Y
------
<S> <C>
Value International 1.55%
Basic Value 0.90%
Europe Fund 1.50%
</TABLE>
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.
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 broker/
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
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<PAGE> 54
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) no
initial sales charge is imposed on Class C shares, but Class C shares are
subject to a contingent deferred sales charge, and 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 (800) 800-3609.
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.
Broker/dealers 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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<PAGE> 55
INVESTMENT ADVISOR
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 AND SHAREHOLDER SERVICING 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.
- -------------------------------------------------
(RECYCLE LOGO)PRINTED ON RECYCLED PAPER
<PAGE> 56
BARTLETT CAPITAL TRUST:
Bartlett Value International Fund
Bartlett Basic Value Fund
Bartlett Europe Fund
STATEMENT OF ADDITIONAL INFORMATION
July 21, 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 21, 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; the Funds' 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 (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> 57
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS 3
INVESTMENT LIMITATIONS 17
THE FUNDS' INVESTMENT ADVISER AND SUB-ADVISER 20
THE TRUST'S DISTRIBUTOR 22
TRUSTEES AND OFFICERS 23
PORTFOLIO TRANSACTIONS AND BROKERAGE 26
DETERMINATION OF SHARE PRICE 28
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION 28
ADDITIONAL TAX INFORMATION 30
TAX-DEFERRED RETIREMENT PLANS 33
INVESTMENT PERFORMANCE 34
DESCRIPTION OF THE TRUST 38
CUSTODIAN 39
ACCOUNTANTS 39
TRANSFER AGENT 39
FINANCIAL STATEMENTS 39
</TABLE>
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<PAGE> 58
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS
This section supplements the information in the Prospectuses
concerning the investments the Funds may make and the techniques they may use
(see "Investment Objectives and Policies" and "Investment Policies, Techniques
and Risk Considerations").
EMERGING MARKET SECURITIES
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 a 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 U.S. dollars through those channels and, if
available, upon the willingness of those channels to allocate those U.S.
dollars to a Fund. In such a case, a Fund's ability to obtain U.S. dollars may
be adversely affected by any increased restrictions imposed on the outflow of
foreign exchange. If a 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, a 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 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 a 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 a 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 a Fund's portfolio securities in
such markets may not be readily available.
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<PAGE> 59
OPTION TRANSACTIONS
Each Fund 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 a 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.
Each Fund (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. Each
Fund will also segregate and maintain with its Custodian
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<PAGE> 60
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 Fund 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 is
registered as a commodity trading advisor with the Commodity Futures Trading
Commission ("CFTC"), is a member of the National Futures Association and 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 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 U.S. 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
5
<PAGE> 61
will be subject to any limitations imposed by these boards of trades and
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 CFTC 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 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
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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 total 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 U.S. Treasury, by various agencies of the U.S.
Government or by various instrumentalities that have been established or
sponsored by the U.S. 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 U.S. Government. Other U.S. government obligations may
or may not be backed by the "full faith and credit" of the U.S. In the case of
securities not backed by the "full faith and credit" of the U.S., 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 (formerly Federal National Mortgage Association) ("FNMA") and the Federal
Home Loan Mortgage Corporation ("FHLMC")) for ultimate repayment and may not be
able to assert a claim against the U.S. 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
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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 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. A Fund may invest no more than 5%
of its net assets in zero coupon bonds or pay-in-kind bonds, respectively.
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 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 payments 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 that income at least annually to shareholders. Thus,
such a Fund could be required at times to liquidate other investments in order
to satisfy its dividend requirements.
MORTGAGE-RELATED SECURITIES
Each Fund may invest no more than 5% of its net assets 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.
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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 issuer or guarantor of such securities. Additional payments are caused
by repayments of principal resulting from the sale of the underlying
residential property, refinancing 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 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
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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-related 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 each invest no more than 5% of
its net assets 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 credit risks generally associated with the corporate borrower;
however, certain loan participation interests may be backed by irrevocable
letters of credit or a 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 commercial 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.
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ASSET-BACKED AND RECEIVABLE-BACKED SECURITIES
Basic Value and Value International are permitted to invest in
asset-backed and receivable-backed securities. Each of these Funds may invest
no more than 5% of its net assets in asset-backed securities and
receivable-backed securities, respectively. Several types of asset-backed and
receivable-backed securities are available to investors, including CARs(SM)
(Certificates for Automobile Receivables(SM)) 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
CARs(SM), 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. Each Fund may invest no more than 5% of its net
assets in floating and variable rate obligations, respectively. 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 obligation 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 investments.
STRUCTURED SECURITIES
Basic Value may invest no more than 5% of its net assets 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
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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. Each of these
Funds may invest no more than 5% of its net assets in forward commitments.
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 but may
invest no more than 5% of its net assets in such transactions. 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 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 but may invest no more than 5% of its net assets in
such transactions. For all purposes (including borrowing
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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. The Fund may invest no more than 5% of its
net assets in short sales. 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.
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.
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When Basic Value 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. Neither Fund may invest more than 5% of its net
assets in short sales "against the box."
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 rated below investment grade.
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.
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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 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.
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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 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.
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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 the 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. this paragraph does not apply to the "Borrowing Money"
limitation. A Fund may borrow money consistent with this limitation and with
the applicable provisions of the Investment Company Act of 1940, as amended
("1940 Act").
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 1940 Act will be included in
the limitation on investments in other investment companies. Europe Fund's
policy regarding loans does not prohibit the Fund from loaning portfolio
securities.
Fundamental 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 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.
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<PAGE> 73
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 this 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 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 U.S. 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 Fundamental 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
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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 net
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.
Statement of Intention by Europe Fund
Europe Fund will monitor the level of illiquid securities in its
portfolio and may determine at times to sell certain securities to maintain
adequate liquidity.
Additional Fundamental Limitations Applicable to Basic Value
1. Short Sales. Basic Value will not effect short sales of
securities except as described in the Prospectuses and this 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 this 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.
Non-Fundamental Limitation Applicable to Basic Value
Senior Securities. Basic Value 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.
Additional Fundamental 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
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<PAGE> 75
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 31%, 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%.
Value International, Basic Value and Europe Fund each anticipates that
in the future its portfolio turnover rate will not exceed 100%, 100% and 115%,
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 a
Fund. It may also increase the amount of short-term capital gains realized by a
Fund and thus may 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 July 18,
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 18, 1997 and by a
majority of Value International's and Basic Value's outstanding shares on July
15, 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 objective and policies as 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 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
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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 waiver 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 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 Management Agreement. Termination of the
Management Agreement with respect to any given Fund shall in no way affect the
continued validity of the 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
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<PAGE> 77
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
July 18, 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, BFP or Lombard Odier, on February 24, 1997 and by the sole
shareholder of Europe Fund on July 18, 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 Management Agreement.
THE TRUST'S DISTRIBUTOR
BFP Financial Partners Inc. ("BFP") acts as distributor of the Funds'
shares pursuant to a Distribution Agreement dated July 18, 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.
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
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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
expended 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> <C>
Dale H. Rabiner, CFA* President and Trustee Senior Portfolio Manager and a
09/14/51 managing Director of Bartlett
36 East Fourth Street
Cincinnati, Ohio 45202
- ------------------------------------------------------------------------------------------------------------
Lorrence T. Kellar Chairman of the Board and Vice President - Real Estate for
08/10/37 Trustee KMart Corporation, (a general
36 East Fourth Street merchandise retailer) since May
Cincinnati, Ohio 45202 1996; formerly: Group Vice
President of Finance and Real
Estate at The Kroger Co. (a food
retailer); Director of BT Office
Products International, Inc. and
Director of Multi-Color Corporation
(a producer of printed labels)
- ------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE> 79
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Name, Address and Date of Birth Position with the Trust Principal Occupation
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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
07/29/42 of the Pacific Northwest (a
36 East Fourth Street 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
06/20/36 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.
02/18/47 Ltd (UK investment banking firm);
36 East Fourth Street Director of Beradin Holdings, PLC
Cincinnati, Ohio 45202 (agricultural holding company)
- -----------------------------------------------------------------------------------------------------------------
Henri Deegenaar Trustee Independent Consultant; Investment
10/7/35 Adviser to Saint Honore Marche
36 East Fourth Street Emergents (French investment
Cincinnati, Ohio 45202 company); Director of Guilbert SA
(office supplies distribution
company) and OFREX (office supplies
distribution company)
- -----------------------------------------------------------------------------------------------------------------
Ian F. H. Grant Trustee Managing Director of Glenmoriston
06/03/39 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 and
08/31/36 Director of Legg Mason Wood Walker,
111 South Calvert Street Inc.; President/Vice
Baltimore, MD 21202 Chairman/Director/Trustee of
various Legg Mason funds; Director
of E. A. Engineering, Science and
Technology, Inc. (a multidisciplinary
environmental services company)
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE> 80
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> <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
12/8/49 for 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
06/13/53 Bartlett
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 Legg
Baltimore, MD 21202 Mason Fund Adviser, Inc. is
investment adviser or manager
- ---------------------------------------------------------------------------------------------------------------
Thomas A. Steele Assistant Treasurer and Vice President, Secretary and
03/09/59 Assistant Secretary Treasurer of Bartlett
36 East Fourth Street
Cincinnati, Ohio 45202
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
For the fiscal year ended March 31, 1997, the Trustees of the Trust
received the following compensation:
25
<PAGE> 81
<TABLE>
<CAPTION>
Aggregate
Compensation Total Compensation From Registrant
Name of Person, Position From Trust and Trust Complex Paid to Trustees
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Dale H. Rabiner*, $0 $0
Chairman of the Board, President and
Trustee
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 $3,750 and an
attendance fee of $1,500 per meeting of the Board plus travel and out-of-pocket
expenses incurred in connection with the Board of Trustees' meetings.
The Nominating Committee of the Board of Trustees is responsible for
the selection and nomination of disinterested trustees. The Committee is
composed of Lorrence T. Kellar, Alan R. Schriber, William P. Sheehan, Charles
J. Swindells, Prinz Wolfgang E. Ysenburg, A. John W. Campbell, Henri Deegenaar
and Ian F. H. Grant. As of July 18, 1997, no trustee or officer beneficially
owned more than 1% of the shares outstanding of any Fund.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to policies established by the Board of Trustees of the Trust,
Bartlett and/or Lombard Odier is responsible for the Trust's portfolio
decisions and the placing of the Trust's portfolio transactions. In placing
portfolio transactions, Bartlett and/or Lombard Odier 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 and/or Lombard Odier 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 and/or Lombard Odier 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 and/or Lombard Odier
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
and/or Lombard Odier 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
and/or Lombard Odier's overall responsibilities with respect to the Trust and
to other accounts over which it exercises investment discretion.
26
<PAGE> 82
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 and/or Lombard Odier in servicing all
of its accounts and all such services may not be used by Bartlett and/or
Lombard Odier in connection with the Trust. Similarly, research and
information provided by brokers or dealers serving other clients may be useful
to Bartlett and/or Lombard Odier in connection with its services to the Trust.
Although research services and other information are useful to the Trust and
Bartlett and/or Lombard Odier, 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 and/or Lombard Odier that the review and study of the
research and other information will not reduce the overall cost to Bartlett
and/or Lombard Odier of performing its duties to the Trust under the Agreement.
Due to research services provided by brokers, the Trust directed to the brokers
$100,950,172 of brokerage transactions (on which the commissions were $284,114)
during the fiscal year ended March 31, 1997.
Bartlett and its affiliates (including Legg Mason Wood Walker, Inc.)
and Lombard Odier and its affiliates, 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
or Lombard Odier 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 and Lombard Odier 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 and Lombard Odier
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 and Lombard Odier and 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 and Lombard Odier and its affiliates on comparable transactions
for its most favored unaffiliated customers, except for customers of Bartlett
or Lombard Odier considered by a majority of the Trust's independent trustees
not to be comparable to the Trust. 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
and Lombard Odier 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 or Lombard
Odier'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
27
<PAGE> 83
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 on behalf of Value International and Basic Value will
normally be made by random client selection; purchases and sales on behalf of
Europe Fund would normally be allocated in terms of amount, according to the
proportion that Europe Fund's order bears to the aggregate size of all orders
simultaneously made, with appropriate adjustments to avoid odd lots.
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.
<TABLE>
<CAPTION>
Bartlett
Fiscal Year Total Commissions Commissions Percentage
Ended Commissions Paid To As % Of All Of Portfolio
March 31, Paid Bartlett Commissions Transactions
- ---------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
1997 $284,114 $ 0 0.00% 0.00%
1996 $300,025 $ 327 0.11% 0.10%
1995 $209,389 $ 900 0.43% 0.48%
</TABLE>
As of March 31, 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: 60,000 shares of Salomon, Inc.
with a market value of $2,992,500.
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.
28
<PAGE> 84
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 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.
EUROPE FUND REDEMPTION FEE
As described in the Prospectus, until January 20, 1998 Europe Fund
will impose a 2% redemption fee on all redemptions from the Fund (including
exchanges to another fund) of shares acquired through the reorganization of
Worldwide Value Fund into Europe Fund. Shares purchased after the
reorganization which are subsequently redeemed are not subject to the
redemption fee.
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
29
<PAGE> 85
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 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
30
<PAGE> 86
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 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: (1)
at least 75% of its gross income is passive or (2) 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).
31
<PAGE> 87
Foreign Currencies. Gains or losses (1) from the disposition of
foreign currencies, (2) 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 (3) 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 or 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 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.
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<PAGE> 88
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 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 until 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
33
<PAGE> 89
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 SEP for
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.
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<PAGE> 90
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 ("S&P 500 Index"), the Morgan Stanley Capital
International EAFE Index, the Morgan Stanley Capital International World Index
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 S&P 500 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 S&P 500 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 a 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.
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<PAGE> 91
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> <C> <C> <C> <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%
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
Year Net Asset Dividends $10,000 Total Return Total Return
Ended Value Paid Investments(a) One Year Cumulative(b)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <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%
</TABLE>
36
<PAGE> 92
<TABLE>
<S> <C> <C> <C> <C> <C>
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 December 31, 1996 were 31.53%, 12.74% and 8.40%, 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. shares), as of the end of the specified
period. Sales charges have not been deducted from total returns; that 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> <C> <C> <C> <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.
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<PAGE> 93
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 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.
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<PAGE> 94
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 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
The Portfolios of Investments as of March 31, 1997; the Statements of
Assets and Liabilities as of March 31, 1997; the Statements of Operations for
the year ended March 31, 1997; the Statements of Changes in Net Assets for the
years ended March 31, 1997 and 1996; the Financial Highlights for all periods;
the Notes to Financial Statements and the Report of Independent Public
Accountants, each with respect to Basic Value and Value International, are
included in the combined annual report for the year ended March 31, 1997, and
are hereby incorporated by reference in this Statement of Additional
Information.
The Statement of Net Assets as of December 31, 1996; the Statement of
Operations for the year ended December 31, 1996; the Statement of Changes in
Net Assets for the years ended December 31, 1996 and 1995; the Financial
Highlights for all periods; the Notes to Financial Statements and the Report of
Independent Accountants are included in Worldwide Value Fund, Inc.'s annual
report for the year ended December 31, 1996, and are hereby incorporated by
reference in this Statement of Additional Information.
39
