BARTLETT
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MUTUAL FUNDS
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Annual Report
December 31, 1997
BARTLETT
BASIC VALUE FUND
BARTLETT
VALUE INTERNATIONAL FUND
BARTLETT
EUROPE FUND
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BARTLETT & CO.
PROFILE
[BARTLETT LOGO APPEARS HERE]
Bartlett & Co., headquartered in Cincinnati, Ohio, is an asset
management firm which manages over $2.8 billion for individuals,
family groups and institutions. Established in 1898, Bartlett & Co.
has built a reputation among individual and institutional investors of
strong performance and superior client service for the last century.
Bartlett & Co. offers its clients a diversity of services through four business
divisions:
(diamond) MUTUAL FUNDS
(diamond) INSTITUTIONAL CLIENT SERVICES
(diamond) PRIVATE CLIENT SERVICES
(diamond) REAL ESTATE PROGRAMS
Our tradition of excellence, the breadth of our services and the depth of our
experience give Bartlett & Co. the capabilities to serve as your financial
advisor.
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CONTENTS
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Pages
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Bartlett & Co. Profile Inside Cover
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President's Letter 2
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Reports to Shareholders
Bartlett Basic Value Fund 3
Bartlett Value International Fund 5
Bartlett Europe Fund 6
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Growth of a $10,000 Investment
Bartlett Basic Value Fund 8
Bartlett Value International Fund 9
Bartlett Europe Fund 9
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Industry Diversification 10
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Statement of Net Assets
Bartlett Basic Value Fund 11
Bartlett Value International Fund 13
Bartlett Europe Fund 15
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Statements of Operations 17
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Statements of Changes in Net Assets
Bartlett Basic Value Fund 18
Bartlett Value International Fund 19
Bartlett Europe Fund 20
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Financial Highlights
Bartlett Basic Value Fund 21
Bartlett Value International Fund 22
Bartlett Europe Fund 23
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Notes To Financial Statements 24
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Report of Independent Accountants 30
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Trustees and Officers 31
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This report is for the information of shareholders of the Bartlett Mutual
Funds. It may be used as sales literature if preceded or accompanied by a
current prospectus of the Bartlett Mutual Funds.
1
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PRESIDENT'S LETTER
Dear Fellow Shareholder,
What had seemed to be a Heaven on Earth investment environment for common stock
investors around the world is now seen as an investment situation that does have
an element of risk. The Southeast Asian currency debacle, with the attendant
problems that it will cause American companies with large consumer markets in
that part of the world, is well known. The past year -- especially the last six
months -- has been a challenging period for investors.
The key determinant in one's experience as an equity investor during 1997 did
not hinge upon whether the manager was a growth or a value manager. The size of
the stocks that comprised a portfolio was the major factor. The S&P 500 Index
produced a return in 1997 of 33%, while the Russell 2000 Index, a small stock
index, generated a return of 22%. One of the more significant curiosities of the
past year is that small capitalization issues had very poor relative performance
during the last part of the year when the foreign markets were being roiled by
the currency crisis. Usually, one would expect the stocks of large
multi-national companies to be battered. Smaller companies, which are not
dependent upon foreign consumers to as large an extent, should be less
sensitive. Nevertheless, stocks that had market capitalizations greater than $20
billion declined by 8.3% from their fifty-two week highs by mid-December while
companies with market capitalizations less than $250 million experienced an
average decline of 34.3%. This would compromise a manager who decides to own
small to mid capitalization stocks, in spite of the fact that these are the
areas in which the most compelling values happen to be.
Prior generations of investors would have viewed 1997 as a complete market cycle
for international stocks. During the first six months of the year, most
international equity investors' enjoyed returns in the mid-teens, only to see
their returns disappear and, in the case of emerging markets investors, lose
money for the year. There seemed to be an investment frenzy in the developing
economies during the Spring while, at present, with markets much cheaper,
investors' enthusiasm for the foreign markets is almost non-existent. It would
seem that an investor with an array of mutual funds might consider re-balancing
his or her portfolio to include non-U.S. shares. For instance, the European
stock markets, as a whole, are now trading at 12x earnings -- roughly half the
multiple accorded the U.S. market as measured by the S&P 500 Index. Furthermore,
if generally accepted U.S. accounting principles were applied to European
stocks, they would be one-third as expensive as the US stock market in terms of
earnings.
Our letters to you which follow describe the favorable performance produced by
the Bartlett Basic Value Fund while the Bartlett Value International Fund, with
better than a 50% exposure toEurope, still managed to outperform the EAFE Index
and, perhaps more importantly, is well positioned going forward. The Bartlett
Europe Fund, managed by Ronnie Armist, Neil Worsley and William Lovering of
Lombard Odier, represents a pure European exposure. The Fund's 17.5% return (for
Class A shares, excluding the 4.75% sales charge effective July 21, 1997) for
the twelve months ended December 31, 1997 is testimony to their money management
skills in a less than hospitable international equity market environment.
Although much has been said about the increased volatility of the market, one
should realize that 1997 was the third most erratic market that we have
experienced in the United States in the past fifty years. With lower expected
return in common stocks and increased volatility, most investors would be well
served to temper their enthusiasm for common stocks. It is during such times
that a tried and true value philosophy usually provides very attractive
relative, if not palatable, results.
We now sponsor a family of three mutual funds. In order to schedule financial
reporting of each fund in the most efficient manner, we have changed the fiscal
year-end of the Bartlett Basic Value Fund and the Bartlett Value International
Fund from March 31 to December 31. This report therefore includes financial
statements audited byCoopers &Lybrand L.L.P., our independent public
accountants, for the period April 1, 1997 through December 31, 1997.
Once again, we wish to thank you for your appreciation of our value approach to
common stock investing.
Our best to you for 1998.
James A. Miller, CFA
President, Bartlett & Co.
2
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BARTLETT
BASIC VALUE
FUND REPORT
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Quarter Year
Index 10/1/97-12/31/97 1/1/97-12/31/97
Basic Value* 2.39% 29.46%
S&P 500 2.87% 33.36%
S&P 400 (mid-cap) 0.52% 30.44%
Russell 2000 (small-cap) (3.35)% 22.36%
EAFE (7.77)% 2.06%
</TABLE>
[BARTLETT LOGO APPEARS HERE]
Good returns in the fourth quarter put the finishing touches on an
outstanding year in the US equity market. The fourth quarter and full
year 1997 turned out to be strong periods for the Bartlett Basic Value Fund.
Generally speaking, a good measure of large, growth-oriented companies was
necessary to keep up with or outperform the Standard & Poor's 500 Index. In this
report we are adding the comparative data listed in the table above to give you
a better understanding of the disparate nature of market performance and how it
influences our results.
Our experience has been that our performance may deviate, substantially at
times, from the Standard & Poor's 500 Index over shorter periods of time as the
search for value frequently takes us outside of a portfolio comprised of
companies exclusively in the S&P 500. This is not a new discovery, just an
acknowledgment of market conditions and our specific performance
characteristics. We typically have significant holdings of small, medium and
large domestic companies and, to a lesser extent, foreign companies in our
portfolio, although the S&P 500 is a very important, in some cases the primary,
benchmark in evaluating our performance. Given the nature of market returns last
year, we are pleased with our investment results.
One noteworthy change in market conditions during 1997 was the increase in
volatility. Daily percentage changes in the trading range of stocks increased to
a level not experienced in over ten years. Although this would suggest that risk
factors are higher for equity investors, it has been our experience that
increased market turbulence has frequently been additive to our performance.
This occurs as stocks fluctuate more in relation to our calculation of a
company's intrinsic value and create more opportunities for us to buy, sell,
increase or reduce our positions; permitting us to capture gains on sales or to
add to compelling investment opportunities.
Measuring Both Risk and Return
Bartlett Basic Value Fund vs Standard & Poor's 500 Index
May 1983 to December 31, 1997
[GRAPH APPEARS HERE]
Bartlett
Basic S & P
Value 500
Fund Index
_________ ______
Risk 11.1% 14.2%
Return 13.3%* 16.7%
This chart compares the historical average annual total return and the risk
(as measured by the standard deviation) of the Bartlett Basic Value Fund and
the Standard & Poor's 500 Index from May 1983 to December 31, 1997. The S&P
500 Index is an unmanaged index of common stocks widely used as a measure of
stock market activity. The return for the Index does not include any expenses
or transaction costs. The return for the Fund includes such expenses and
costs.
Standard deviation is a statistical measure of volatility often used as a
measure of risk. In general, the greater the standard deviation, the greater
the tendency to vary from the average annual total return. By comparing the
magnitude of the standard deviations, the relative volatility of each
investment can be determined. A lower standard deviation reflects lower
volatility.
The average annual total return figures for both the Fund and the index
assume the reinvestment of dividends.
Of course, past performance is no guarantee of future results. The principal
value and investment returns of the Fund fluctuate so that upon redemption
you may receive more or less than your original investment.
*Reflects return on Class A Shares, excluding the 4.75% sales charge
effective July 21, 1997. Return information for the other share classes may
be found on page 21.
3
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Our solid performance during the quarter came from many different industry
sectors as well as small, medium and large-sized companies. AT&T was the best
performing stock, up 39%. We added AT&T to the portfolio earlier in the year at
a time when the company was very much out of favor. Investors at the time
focused on the uncertainty over who would fill the CEO role and overlooked
AT&T's powerful position in the growing business of global telecommunications.
Fleetwood Enterprises was also a top performer and one of the larger positions
in the portfolio. Although it is a small capitalization company, it is dominant
in the recreational vehicle and manufactured home industries.
It is unusual for a public utility to be among the top performing stocks,
but Western Resources contributed nicely to our returns in the fourth quarter.
The market finally recognized the tremendous value created through its
investment in Tyco International, which the fund also owns. From time to time,
we have had significant exposure to tobacco stocks due to the attractive
valuations, steady growth and high profitability of these companies. UST, a new
holding this year, is a mid-sized company dominant in the smokeless tobacco
market. Its market share has stabilized recently and investor interest in the
stock has picked up. UST continues to represent excellent value from a growth
and income standpoint.
As is usually the case with a portfolio of our size, there are a number of
underperforming stocks as well. Triton Energy underperformed as a result of its
substantial oil reserves in geographic areas also known as emerging markets. The
turbulence in these economies has had a negative effect on investor sentiment
toward the company. We remain very enthused about Triton's opportunities and the
inherent values within the company and we added further to the position during
the quarter. First Data Corp. also has underperformed due to disappointment on
the earnings front.
There were numerous changes made within the portfolio during the quarter
although, as indicated above, many of these were of an incremental
nature--meaning we added to those positions we felt were attractive and reduced
holdings which had become oversized, or too expensive. Among our successful
investments that were reduced in size, but still retained, were Pioneer
Standard, Kaydon, Pitney Bowes, US Trust, Salomon/Travelers, and Time Warner.
Nipsco and Universal Foods were outright eliminations from the portfolio as we
felt that the companies had fully realized their intrinsic value potential.
New positions during the quarter were Kansas City Power & Light, Frontier
Insurance, Lowe's and UST. Frontier Insurance is a small specialty insurance
company with an enviable record of growth and profitability. The company sells
at a price/earnings ratio that is unduly low, in our opinion, given its track
record. Lowe's is a home improvement retailer that is a beneficiary of the
consolidation taking place within its industry. The company is a proven survivor
and a successful competitor against Home Depot.
It has been a pleasure to serve you in 1997 and we thank you for your
continued appreciation of our value approach to investing. Our best to you for
the new year.
Sincerely,
/s/ James A. Miller /s/ Woodrow H. Uible
____________________ ______________________
James A. Miller, CFA Woodrow H. Uible, CFA
Portfolio Manager Portfolio Manager
Largest Industry Allocations
Bartlett Basic Value Fund vs Standard & Poor's 500 Index
December 31, 1997
[GRAPH APPEARS HERE - PLOT POINTS BELOW]
Percent of Total Portfolio
__________________________
Fund S & P 500
____ _________
Finance 18% 20%
Basic Industry 17 10
Consumer Cyclical 17 12
Transportation 11 1
Technology/Defense 10 16
Consumer Staples 9 12
4
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BARTLETT
VALUE INTERNATIONAL
FUND REPORT
[BARTLETT LOGO GOES HERE]
In the fourth quarter of 1997, Asian markets suffered another
severe attack of a chronic illness that has been plaguing the region for several
years, while European and North American markets remained healthy. The Europe,
Australia and Far East (EAFE) Index sank by 7.8% in the quarter, bringing the
results for the year to a paltry 1.8%. This is the third year in a row that the
EAFE Index has lagged the Standard and Poor's 500 Index, once again by a
substantial amount. It is also an unprecedented third year in a row that the
S&P500 has produced a 20%+ performance. As has been the case for the last
several quarters, the dismal performance of the international index stems from
the weakness in Asia. European markets had a flat quarter and nearly matched the
S&P for the year, while Pacific markets sank over 20% for the quarter and more
than 25% for the year. These disparities in performance cannot continue
indefinitely, and each quarter that they persist adds to the potential returns
available should these trends shift.
The Bartlett Value International Fund fell by 11.5%(dagger) for the
quarter, underperforming the EAFE. The Fund's geographic mix contributed to the
shortfall, with a smaller exposure to Europe than the index and more invested in
Asia. Although the Fund's allocation to Japan's weak market was half that of the
index, the other markets in the region did even more poorly than the Japanese
market, mainly due to currency weakness. For the year 1997, the Fund returned
6.1%(dagger), substantially outperforming the EAFE's return of 1.8%. A more
favorable geographic mix combined with some good individual stock performance
led to the Fund's outperformance.
Stocks that were a drag on fourth quarter portfolio performance were, not
surprisingly, concentrated in Pacific markets, including Korea Fund, Swire
Pacific, Perlis Plantation and Sumitomo Warehouse. We are sticking with these
holdings, and in some cases, have added to positions. Other stocks helped
performance, including Dairy Farm International, Cadbury Schweppes, Potash, and
two bank stocks, Allied Irish Banks and Istituto Mobiliare Italiano. These
holdings remain in the portfolio, although we have taken some profits in them.
As we have pointed out in the past, we focus our investment attention on
individual companies rather than making predictions for overall markets or
regions. The result of our continuing work to compare company earnings and
assets to the valuations placed on them in the various markets in which they
trade has led to a gradual decline in the amount we have invested in Europe and
an increase in the Asian portion. Given the events in regional markets over the
last few months, we would expect this slow-moving trend to continue.
Over the next few years, we can expect to see many ugly things in Asian
markets. We expect to see political upheaval, much dissent by workers and the
general population, considerably slower growth, many bankruptcies and the
surfacing of corruption. If things go well, we should also begin to see better
accounting practices, mergers and acquisitions by both local and foreign
companies, the re-creation of banking systems that are smaller and much more
profitable, and the emergence of a new, technically competent leadership. As
investors, we will be able to live with the former, as long as the latter is
growing in power. Both the emerging and developed countries in Asia account for
over a third of the world's output, two-thirds of the world's people, and have
been the growth leader of the global economy for the last decade. There is
nothing about the current situation that cannot be changed for the better, and a
bet that it won't be, has very long odds.
The ongoing financial crisis in Asia has all the elements that market
opportunists look for: a total upheaval in the status quo, substantial shifts in
government policies, shunning by almost all investors, and a very low level of
confidence in the future on the part of all involved. At this point, the
contrast of the strong and influential US economic success with the struggles in
Asia have made confidence in US markets very high, and eroded the desire to
invest in Asia. All of these factors will combine to create a substantial
opportunity, although we continue to have a very healthy respect for the risk
involved, especially since political and economic policy decisions, as well as
currency movements, are playing a large role in current events in the Pacific
Rim.
Portfolio Composition
Bartlett Value International Fund vs
Europe, Australia, Far East (EAFE) Index
December 31, 1997
[GRAPH APPEARS HERE - PLOT POINTS BELOW]
Percent of Total Portfolio
___________________________________________
Fund EAFE Index
___________________ ___________________
18% 0%
Americas (5% Latin America,
7% Canada,
6% Cash Equivalents)
Europe 50% 67%
Pacific 32% 33%
(Japan 14%) (Japan 25%)
/s/ Madelynn M. Matlock
________________________
Madelynn M. Matlock, CFA
Portfolio Manager
*The EAFE Index is an unmanaged index of common stocks of foreign companies. The
returns for the Index do not include any transaction costs associated with
buying and selling securities in the index or other administrative expenses.
The returns for the Fund include such expenses.
(dagger) Return information is for Class A shares, excluding the 4.75% sales
charge, effective July 21, 1997. Return information for the other share
classes may be found on page 22.
5
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BARTLETT
EUROPE
FUND REPORT
World Equity Markets
US Dollar Returns for 1997
[CO CHECK]
Austria 1.6% Netherlands 20.5%
Belgium 16.7% Norway 13.5%
Denmark 24.0% Portugal 22.2%
Finland 11.8% Spain 21.7%
France 11.7% Sweden 6.3%
Germany 19.0% Switzerland 40.7%
Italy 36.2% UK 14.7%
Source: Morgan Stanley Capital International Indices. Individual country returns
have fluctuated significantly during this time period.
Market Review
[BARTLETT LOGO GOES HERE]
The year started in a very positive fashion with nearly all
European markets rising to new record levels, a trend that was to continue until
September. An economic backdrop of low inflation, easy monetary policy, a strong
dollar and very large liquidity flows resulted in gains for all European bourses
which, for the most part, took their lead from events in the US, until concerns
over economic and financial problems in Southeast Asia took hold, forcing
European markets down from their record high levels.
The US market benefited from robust economic growth with a distinct lack of
inflationary pressure. Indeed, the PPI data that was released showed 7
consecutive months of decline while core CPI fell to its lowest level since
1965. Consequently the Dow rose 22.6% over the period, closing at 7,908 just
4.2% below its record of 8,259. There were bouts of volatility, however, caused
by concerns over interest rates. At one point the chairman of the Federal
Reserve warned of the "irrational exuberance" of the markets, but generally
these concerns were quickly forgotten as economic data gave increasing credence
to the concept of a "new paradigm" in the US -- steady growth with no inflation
thanks to significant improvements in productivity. The US bond market rallied
in response to this. The yield on the long bond fell from 7.17% in April,
reaching a low of 5.87% in December.
In "core" Europe, interest rates were held at low levels while the theme of
European Monetary Union (EMU) convergence resulted in a significant tightening
in yield spreads of the high-yielding markets such as Italy and Spain vs.
Germany. The appreciation of the USDagainst the DEM from the 1.53 level to a
peak of 1.89, before being talked back down by the Bundesbank, was beneficial to
all European markets.
There were two major political events over the year. In the UK, Tony Blair
secured a record Labour majority and set about establishing a new government
with considerable verve. Full independence in setting monetary policy was
granted to the Bank of England (BoE). This sent the Gilt market soaring over 4
points in one day. The BoE immediately began exercising its new-found freedom
and has now raised interest rates five times to the current 7.25% in order to
maintain a check on the strong UK economy. This is being driven by a consumer
whose confidence is buoyed not only by windfall payouts from the recently
privatised Building Societies but also by the lowest unemployment rate (5.5%) in
17 years.
The situation in France was rather different. Having called an early
General Election, President Chirac's gamble failed to pay off and the Socialists
overturned a large majority and swept to a surprise victory. Chirac's intention
was to give the incumbent government a renewed 5 year term, during which period
it would steer France into EMU. He must now serve out his presidency with a
left-wing government in the National Assembly. The French market fell sharply on
the initial results, with the future of the privatisation programme particularly
uncertain, but it gradually recovered as investors took a more sanguine view of
new Prime Minister Jospin's policies. These appeared to focus on the more
immediate issues of growth and unemployment, rather than strict budgetary
targets. Nevertheless, it soon became clear that France's finances were in a
worse state than at first thought and thus the corporate tax rate was raised to
42% to plug the hole in the budget deficit.
The entire EMU debate grew ever more heated over the year, to such an
extent that the Bundesbank clashed publicly with Finance Minister Waigel over
proposed measures to ensure Germany meets the required targets. Europeans are
paying a high price for EMU, especially in Germany where the unemployment rate
is the highest since the depression years of the 1930s. More than 4.5 million
Germans are now without work. It appears that a broad-based EMU (i.e. including
Spain and Italy) is increasingly more likely, particularly since the Italian
Lira was readmitted to the Exchange Rate Mechanism.
Against this background of low growth, companies have turned to
rationalising and restructuring their operations in order to increase their
profits. Indeed, the whole theme of restructuring is one that has characterised
the period.
Consolidation through mergers or acquisitions was another major theme. The
most noted was the merger of the two Bavarian banks, Bayerische Vereinsbank and
Bayerische Hypobank, which heralded the long-awaited rationalisation of the
German banking sector. Also in the financial sector, Axa merged with UAP. BAT
and Zurich said they would unite their insurance businesses and at the end of
the year the two Swiss banks SBC and UBS also released merger plans. Elsewhere,
Roche made its largest ever acquisition, paying $11.5bn for the German
diagnostics company Boehringer Mannheim, and Wolters Kluwer joined forces with
Reed/Elsevier to create the world's largest publishing company. Both Aegon and
ING made acquisitions in the US, thereby strengthening their positions there. BT
flirted with MCI, but the deal fell into difficulties. Guinness and Grand
Metropolitan overcame the worries of the competition authorities and joined
forces.
6
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Having risen sharply throughout the year, European bourses fell victim to a
double blow as Autumn arrived. The markets were initially unnerved by a surprise
raising of interest rates by the Bundesbank, and then renewed turbulence in
Southeast Asia rapidly spread to financial markets around the world, resulting
in most European markets ending the period below their record levels but still
with significant gains over the past 12 months.
Investment Strategy
The Fund benefited from an overweight position in the Netherlands up until
the final quarter and an underweight stance with regard to the UK and Ireland,
which have lagged other European bourses.
Increasing our exposure to the UK financial sector had a positive effect,
while our strategy of preferring Dutch financials on fundamental grounds over
those in Germany was to the detriment of the fund since the German banking
sector performed very well following the merger described above.
Our exposure to `peripheral' Europe, i.e. Italy and Spain, was dramatically
increased in the fourth quarter. We believe the continuing trend of falling
interest rates, coupled with a strong domestic economy, will prove very positive
for the equity markets in these countries.
The year was characterised by the marked outperformance of large stocks vs.
mid and small-sized companies. Hence our exposure to second-line stocks has not
yet had the positive effect we expect, but we firmly believe that it is just a
matter of time before these stocks begin to catch up.
We remain committed to our style of investing in high quality growth stocks
with excellent management teams or those stocks which commit themselves to
tangible corporate change in the interests of increasing value for the
shareholder. We have increased our weighting in interest rate sensitive stocks,
particularly those in Italy and Spain, and are avoiding those companies which
are exposed to price sensitive base products because of the poor outlook given
the economic slowdown and large currency devaluations in Asia.
Excellent stock selection, therefore, will be even more crucial to ensure
good performance over the coming months, and on that basis we are confident of
another year of solid performance for the Bartlett Europe Fund.
Ronnie Armist
Portfolio Manager
Neil Worsely
William Lovering
Portfolio Co-managers
7
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GROWTH OF A $10,000 INVESTMENT
[BARTLETT GRAPHIC GOES HERE]
The following graphs compare each Fund's total return against that of
a closely matched broad-based securities market index.
These performance tables and charts represent past performance and are no
guarantee of future results. The investment return and principal value of the
Funds will fluctuate so that upon redemption, you may receive more or less than
your original cost.
The charts illustrate the cumulative total return of an initial $10,000
investment in Class A shares for the periods indicated and reflect the maximum
sales charge of 4.75% currently applicable to Class A shares. The performance
tables and charts assume all dividends and distributions are reinvested at the
net asset value on the reinvestment date and reflect the periodic absorption of
some Fund expenses through the waiver of management fees. Had a portion of these
fees not been waived, the Funds' total returns would have been slightly lower.
The lines representing the securities market indices (which is, in each case, an
unmanaged index) do not include any transaction costs associated with buying and
selling securities in the index or other administrative expenses.
No performance information is shown for Class C and Class Y shares for any of
these Funds as no such shares were outstanding prior to July 21, 1997. A
contingent deferred sales charge may be imposed under certain circumstances on
Class A and C shares. Please refer to the prospectus for details.
*Reflects return information on Class A Shares excluding the 4.75% sales charge
which became effective July 21, 1997.
The Standard & Poor's 500 Index is a broad-based unmanaged index of common
stocks commonly used to measure general stock market activity.
Growth of a $10,000 Investment
Bartlett Basic Value Fund
May 31, 1983 through December 31, 1997
Average Annual Total Returns
For years ended December 31, 1997
1 Year 3 Years 5 Years 10 Years Life of the Fund
(since 05/05/83)
29.46%* 26.34%* 17.72%* 14.88%* 13.34%*
23.31% 24.32% 16.58% 14.32% 12.96%
Bartlett Basic Value Fund
vs
Standard and Poor's 500 Index
[GRAPH APPEARS HERE - PLOT POINTS BELOW]
Bartlett Basic S & P 500
Value Fund Index
______________ ______
5/31/83 $ 9,524 $10,000
1983 10,042 10,407
1984 10,886 11,042
1985 13,637 14,529
1986 15,692 17,178
1987 14,919 18,067
1988 18,839 21,047
1989 21,036 27,656
1990 19,016 26,776
1991 23,953 34,948
1992 26,405 37,624
1993 29,483 41,417
1994 29,602 41,966
1995 38,943 57,740
1996 46,115 70,991
1997 59,701 94,691
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8
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Growth of a $10,000 Investment
Bartlett Value International Fund
October 31, 1989 through December 31, 1997
Average Annual Total Returns
For years ended December 31, 1997
- -------------------------------------------------------------------------------
1 Year 3 Years 5 Years Life of the Fund
(since 10/06/89)
- -------------------------------------------------------------------------------
6.14%* 10.37%* 11.93%* 7.56%*
1.09% 8.59% 10.85% 6.92%
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Bartlett Value International Fund
vs
Europe, Australia, Far East Index
[GRAPH APPEARS HERE - PLOT POINTS BELOW]
Bartlett Value
International EAFE
Fund Index
______________ ______
10/31/89 $ 8,848 $10,000
1989 9,695 10,891
1990 8,288 8,337
1991 10,069 9,350
1992 9,884 8,212
1993 12,983 10,886
1994 12,942 11,741
1995 14,097 13,062
1996 15,926 13,892
1997 17,364 14,179
*Reflects return information on Class A shares excluding the 4.75% sales charge
which became effective July 21, 1997.
The Europe, Australia, Far East (EAFE) Index is a broad-based index
administered by Morgan Stanley Capital International and is composed of select
common stocks of companies based outside the United States and including
Europe, Australia, and the Far East. It is often used to measure international
stock market activity.
Growth of a $10,000 Investment
Bartlett Europe Fund
August 19, 1986 through December 31, 1997
1 Year 3 Years 5 Years 10 Years Life of the Fund
(since 08/19/86)
- -------------------------------------------------------------------------------
17.52%* 22.84%* 18.19%* 9.89%* 7.57%*
11.94% 20.86% 17.05% 9.36% 7.11%
Bartlett Europe Fund
vs
MSCI Europe Index
[GRAPH APPEARS HERE - PLOT POINTS BELOW]
Bartlett MSCI Europe
Europe Fund Fund
___________ ___________
12/31/87 8,500 10,000
1988 10,675 11,635
1989 12,006 15,016
1990 9,526 14,510
1991 10,199 16,492
1992 9,468 15,792
1993 12,300 20,495
1994 11,780 21,040
1995 14,124 25,697
1996 18,578 31,240
1997 21,834 38,800
*Reflects return information on Class A shares excluding the 4.75% sales charge
which became effective July 21, 1997.
Prior to 7/21/97, the Fund was a closed-end fund which reinvested all dividends
and distributions at an average reported sales price on the New York Stock
Exchange.
The Morgan Stanley Capital International (MSCI) Europe Index is a broad-based
unmanaged index based on the share prices of common stocks in different
European countries. The countries included in this are--Austria, Belgium,
Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Norway, Spain,
Sweden, Switzerland and the UK.
9
<PAGE>
INDUSTRY DIVERSIFICATION
Bartlett Capital Trust
December 31, 1997
Value International Fund
% of Net Market
Assets Value
- -------------------------------------------------------------------------------
(000)
Automotive 2.7% $2,237
Banking 7.4 6,096
Chemicals 5.4 4,462
Computer Services 1.8 1,469
Construction 9.0 7,404
Consumer Goods 9.9 8,211
Diversified 6.0 5,000
Electronics 4.0 3,326
Investment Companies 7.8 6,422
Metals & Mining 8.0 6,655
Miscellaneous Services 7.5 6,174
Oil & Gas 10.2 8,452
Real Estate 2.9 2,359
Retail Sales 5.7 4,698
Transportation 5.7 4,676
Short-Term Investments 5.0 4,164
_____ _______
Total Investment Portfolio 99.0 81,805
Other Assets Less Liabilities 1.0 822
_____ _______
Net Assets 100.0% $82,627
===== =======
Europe Fund
% of Net Market
Assets Value
- -------------------------------------------------------------------------------
(000)
Aerospace/Defense 3.1% $ 1,902
Automotive 1.6 979
Banking 19.5 11,793
Computer Services 1.3 767
Construction 1.1 655
Consumer Non-Durable Goods 2.0 1,191
Engineering 1.5 926
Finance 9.8 5,946
Insurance 7.9 4,771
Leisure 3.3 2,003
Manufacturing 1.7 1,016
Metals & Mining 1.3 792
Miscellaneous Services 1.1 678
Multi-lndustry 1.6 951
Oil & Gas 8.0 4,826
Pharmaceuticals and Health Care 13.0 7,886
Publishing 2.6 1,557
Real Estate 1.0 626
Retail Sales 9.4 5,718
Telecommunications 7.4 4,460
Transportation 1.4 871
Utilities 3.5 2,138
_____ _______
Total Investment Portfolio 103.1 62,452
Other Assets Less Liabilities (3.1) (1,872)
_____ _______
Net Assets 100.0% $60,580
===== =======
10
<PAGE>
STATEMENT OF NET ASSETS
Bartlett Basic Value Fund
As of December 31, 1997
(Amounts in Thousands)
Market
Shares Value
- -------------------------------------------------------------------------------
Common Stock -- 95.8%
- -------------------------------------------------------------------------------
Aerospace/Defense -- 1.8%
Lockheed Martin Corporation 23 $ 2,266
Raytheon Company 2 124
-------
2,390
- -------------------------------------------------------------------------------
Air Transportation -- 3.4%
AMR Corporation 36 4,568(A)
- -------------------------------------------------------------------------------
Automobiles &
Auto Parts -- 4.5%
Ford Motor Company 35 1,704
General Motors Corporation 39 2,395
Stewart & Stevenson
Services, Inc. 79 2,017
-------
6,116
- -------------------------------------------------------------------------------
Broadcasting -- 1.5%
Time Warner, Inc. 33 2,077
- -------------------------------------------------------------------------------
Chemicals -- 2.0%
Ferro Corporation 110 2,680
- -------------------------------------------------------------------------------
Construction & Building
Materials -- 0.4%
Martin Marietta Materials, Inc. 16 582
- -------------------------------------------------------------------------------
Diversified -- 7.0%
Canadian Pacific Ltd. (ADR) 58 1,581
Loews Corp. 40 4,245
Tyco International Ltd. 82 3,695
-------
9,521
- -------------------------------------------------------------------------------
Electronics -- 3.1%
Pioneer Standard
Electronics, Inc. 204 3,114
UCAR, International Inc. 28 1,118(A)
------
4,232
- -------------------------------------------------------------------------------
Energy -- 8.1%
Cabot Oil & Gas Corporation 55 1,069
Phillips Petroleum Company 48 2,334
Total SA (ADR) 30 1,665
Triton Energy Ltd. 94 2,744(A)
Western Resources Inc. 75 3,225
------
11,037
- -------------------------------------------------------------------------------
Financial Services -- 9.6%
Fannie Mae 90 5,136
H & R Block, Inc. 70 3,137
U.S. Trust Corp. 21 1,340
Washington Federal, Inc. 110 3,446
------
13,059
- -------------------------------------------------------------------------------
Market
Shares Value
- -------------------------------------------------------------------------------
Food, Beverage &Tobacco-- 8.8%
Archer-Daniels-Midland Co. 140 $ 3,032
McDonald's Corporation 74 3,534
RJR Nabisco Holdings Corp. 65 2,438
UST, Inc. 80 2,955
- -------------------------------------------------------------------------------
11,959
- -------------------------------------------------------------------------------
Health Care -- 1.3%
Columbia/HCA Healthcare
Corporation 60 1,778
- -------------------------------------------------------------------------------
Insurance -- 3.4%
Frontier Insurance Group Inc. 81 1,862
Travelers Group Inc. 52 2,785
------
4,647
- -------------------------------------------------------------------------------
Investment Companies -- 2.9%
Royce Value Trust, Inc. 191 2,870
United Asset Management Corp. 44 1,075
------
3,945
- -------------------------------------------------------------------------------
Machinery -- 6.6%
Kaydon Corp. 170 5,546
York International Corporation 85 3,363
------
8,909
- -------------------------------------------------------------------------------
Metals & Mining -- 1.7%
Potash Corporation of
Saskatchewan Inc. (ADR) 28 2,291
- -------------------------------------------------------------------------------
Manufactured Housing -- 3.5%
Fleetwood Enterprises, Inc. 113 4,795
- -------------------------------------------------------------------------------
Office Automation &
Equipment -- 0.7%
Pitney Bowes, Inc. 10 899
- -------------------------------------------------------------------------------
Railroads -- 7.4%
GATX Corporation 50 3,628
Kansas City Southern
Industries Inc. 204 6,477
------
10,105
- -------------------------------------------------------------------------------
Real Estate Investment
Trusts (REITs) -- 3.9%
Chateau Communities, Inc. 93 2,921
United Dominion Realty
Trust, Inc. 170 2,369
------
5,290
- -------------------------------------------------------------------------------
11
<PAGE>
Bartlett Basic Value Fund (Cont.)
As of December 31, 1997
Market
Shares Value
- -------------------------------------------------------------------------------
Retail -- 8.1%
Federated Dept. Stores, Inc. 70 $ 3,014(A)
Jostens, Inc. 150 3,459
Lowe's Companies 25 1,192
Toys `R' Us, Inc. 105 3,310(A)
-------
10,975
- -------------------------------------------------------------------------------
Services -- 1.8%
First Data Corporation 83 2,428
- -------------------------------------------------------------------------------
Telecommunications -- 2.6%
AT&T Corporation 58 3,553
- -------------------------------------------------------------------------------
Utilities -- 1.7%
Kansas City Power & Light 43 1,259
TNP Enterprises, Inc. 30 998
------
2,257
- -------------------------------------------------------------------------------
Total Common Stock $130,093
- -------------------------------------------------------------------------------
(Identified Cost -- $85,512)
- -------------------------------------------------------------------------------
Face Market
Amount Value
- -------------------------------------------------------------------------------
Commercial Paper -- 2.9%
- -------------------------------------------------------------------------------
Ford Motor Credit Corporation
5.95%, 1/6/98 $2,000 $ 1,999
General Motors Acceptance
Corporation
6.05%, 1/6/98 2,000 1,998
- -------------------------------------------------------------------------------
Total Commercial Paper $ 3,997
- -------------------------------------------------------------------------------
(Identified Cost -- $3,997)
- -------------------------------------------------------------------------------
Repurchase Agreement -- 1.2%
- -------------------------------------------------------------------------------
State Street Bank & Trust Company
4.25%, dated 12/31/97, to be
repurchased at $1,657 on
1/2/98 (Collateral: $1,690
United States Treasury Notes,
5.625% due 11/30/99,
value $1,697) 1,657 1,657
- -------------------------------------------------------------------------------
Total Repurchase Agreement $ 1,657
- -------------------------------------------------------------------------------
(Identified Cost -- $1,657)
- -------------------------------------------------------------------------------
Total Investments
At Value-- 99.9% $135,747
- -------------------------------------------------------------------------------
(Identified Cost -- $91,166)
- -------------------------------------------------------------------------------
Other Assets
Less Liabilities-- 0.1% 111
- -------------------------------------------------------------------------------
Net Assets-- 100.0% $135,858
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Net Assets Consist of:
Capital shares:
Class A shares $84,774
Class C shares 390
Class Y shares 2,708
Overdistributions of
net investment income (90)
Undistributed net realized
gains from security
transactions 3,495
Net unrealized appreciation
of investments and
foreign currency
transactions 44,581
- -------------------------------------------------------------------------------
Net Assets-- 100.0% $135,858
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Shares of beneficial interest
outstanding (unlimited
number of shares
authorized, no par value)
Class A shares 7,022
Class C shares 21
Class Y shares 127
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Net asset value and
redemption price
per share-- Class A $ 18.95
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Maximum offering price
per share -- Class A
(net asset value plus
sales charge of 4.75%
of offering price) $ 19.90
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Net asset value,
offering price and
redemption price
per share-- Class C $ 18.75
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Net asset value,
offering price and
redemption price
per share-- Class Y $ 18.87
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(A)Non-dividend paying investment.
See accompanying notes to financial statements.
12
<PAGE>
STATEMENT OF NET ASSETS
Bartlett Value International Fund
As of December 31, 1997
(Amounts in Thousands)
Market
Shares Value
- -------------------------------------------------------------------------------
Common Stock -- 91.3%
- -------------------------------------------------------------------------------
Argentina --5.2%
IRSA Inversiones y
Representaciones S.A. (ADR) 63 $ 2,359
YPF Sociedad Anonima SA (ADR) 58 1,969
-------
4,328
- -------------------------------------------------------------------------------
Australia -- 5.6%
Brambles Industries Ltd. 122 2,413
National Australia Bank (ADR) 31 2,191
-------
4,604
- -------------------------------------------------------------------------------
Canada -- 4.0%
Hudson's Bay Co. 70 1,556
Potash Corporation of
Saskatchewan Inc. (ADR) 21 1,743(A)
-------
3,299
- -------------------------------------------------------------------------------
Finland -- 5.4%
Kemira Oyj 245 2,320(A)
Metra Oyj 92 2,160
-------
4,480
- -------------------------------------------------------------------------------
France --7.6%
Michelin 46 2,306
Cie de Saint Gobain 13 1,795
Total SA 3 326
Total SA (ADR) 34 1,893
-------
6,320
- -------------------------------------------------------------------------------
Germany -- 2.7%
Deutsche Lufthansa AG 118 2,263
- -------------------------------------------------------------------------------
HongKong -- 2.6%
Swire Pacific Ltd.-B 394 2,161
- -------------------------------------------------------------------------------
India -- 2.5%
Morgan Stanley India
Investment Fund 250 2,097(A)
- -------------------------------------------------------------------------------
Ireland -- 2.1%
Allied Irish Banks PLC (ADR) 29 1,699
- -------------------------------------------------------------------------------
Italy -- 2.7%
Istituto Mobiliare SpA (ADR) 62 2,206
- -------------------------------------------------------------------------------
Market
Shares Value
- -------------------------------------------------------------------------------
Japan -- 13.9%
Canon Inc. 49 $ 1,141
Fujitsu Ltd. 137 1,469
Ito-Yokado (ADR) 7 1,527
Matsushita Electric Industrial
Company Ltd. 109 1,594
Rohm Company 17 1,732
Secom Co., Ltd. 34 2,172
Sumitomo Warehouse 516 1,841
-------
11,476
- -------------------------------------------------------------------------------
Korea -- 1.8%
Korea Fund Inc. 219 1,448
- -------------------------------------------------------------------------------
Malaysia -- 2.0%
Perlis Plantations Bhd 1,145 1,620
- -------------------------------------------------------------------------------
Netherlands -- 3.2%
New Holland NV (ADR) 100 2,634(A)
- -------------------------------------------------------------------------------
Norway --7.6%
Elkem ASA 172 2,277
Kvaerner ASA 36 1,853
Norsk Hydro ASA (ADR) 42 2,142
-------
6,272
- -------------------------------------------------------------------------------
Portugal -- 1.8%
Portugal Fund Inc. 91 1,447
- -------------------------------------------------------------------------------
Singapore -- 1.9%
Dairy Farm International
Holdings Ltd. 1,496 1,616
- -------------------------------------------------------------------------------
Spain -- 2.4%
Repsol SA (ADR) 46 1,949
- -------------------------------------------------------------------------------
Sweden -- 7.2%
AGA 175 2,314(A)
AssiDoman AB 80 2,038
Cardo AB 61 1,596
-------
5,948
- -------------------------------------------------------------------------------
Taiwan -- 1.7%
Taiwan Fund Inc. 87 1,431
- -------------------------------------------------------------------------------
13
<PAGE>
Bartlett Value International Fund (Cont.)
As of December 31, 1997
Market
Shares Value
- -------------------------------------------------------------------------------
United Kingdom -- 7.4%
Cadbury Schweppes PLC (ADR) 40 $ 1,655
Diageo PLC (ADR) 28 1,071
Tomkins PLC (ADR) 125 2,389
Tyco International Ltd. 22 991(A)
-------
6,106
- -------------------------------------------------------------------------------
Total Common Stock $75,404
(Identified Cost-- $69,197)
- -------------------------------------------------------------------------------
Face Market
Amount Value
- -------------------------------------------------------------------------------
Convertible Bond -- 2.7%
Canada -- 2.7%
Magna International $ 1,900 2,237
5%, 10/15/02
- --------------------------------------------------------------------------------
Total Convertible Bond $ 2,237
- --------------------------------------------------------------------------------
(Identified Cost -- $2,232)
- --------------------------------------------------------------------------------
Repurchase Agreement -- 5.0%
- --------------------------------------------------------------------------------
State Street Bank & Trust Company
4.25%, dated 12/31/97, to be
repurchased at $4,165 on
1/2/98 (Collateral: $4,240
United States Treasury
Notes, 7%, due 11/30/99,
value $4,256) 4,164 4,164
- -------------------------------------------------------------------------------
Total Repurchase Agreement $ 4,164
- -------------------------------------------------------------------------------
(Identified Cost -- $4,164)
- -------------------------------------------------------------------------------
Total Investments
At Value-- 99.0% $81,805
- -------------------------------------------------------------------------------
(Identified Cost -- $75,593)
- -------------------------------------------------------------------------------
Other Assets Less Liabilities-- 1.0% 822
- -------------------------------------------------------------------------------
Net Assets Consist of:
Capital shares:
Class A shares $57,176
Class C shares 1,004
Class Y shares 17,218
Overdistributions of
net investment income (1,081)
Undistributed net realized
gains from security
transactions 2,100
Net unrealized appreciation
of investments and
foreign currency
transactions 6,210
- -------------------------------------------------------------------------------
NET ASSETS-- 100.0% $82,627
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Shares of beneficial interest
outstanding (unlimited
number of shares
authorized, no par value)
Class A shares 5,516
Class C shares 73
Class Y shares 1,061
- -------------------------------------------------------------------------------
Net asset value and
redemption price
per share -- Class A $12.45
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Maximum offering price
per share -- Class A
(net asset value plus
sales charge of 4.75%
of offering price) $13.07
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Net asset value,
offering price and
redemption price
per share -- Class C $12.30
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Net asset value,
offering price and
redemption price
per share -- Class Y $12.33
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(A)Non-dividend paying investment.
See accompanying notes to financial statements.
14
<PAGE>
STATEMENT OF NET ASSETS
Bartlett Europe Fund
As of December 31, 1997
(Amounts in Thousands)
Market
Shares Value
- -------------------------------------------------------------------------------
Common Stock -- 98.1%
- -------------------------------------------------------------------------------
Austria -- 2.8%
Voest-Alpine Stahl AG 21 $ 793
VA Technologie AG 6 926
------
1,719
- -------------------------------------------------------------------------------
Finland -- 1.9%
Nokia Oyj 16 1,168
- -------------------------------------------------------------------------------
France -- 12.8%
Accor SA 7 1,285
Cap Gemini SA 9 766
Compagnie Financiere de Paribas 17 1,473
Guilbert SA 5 678
Pinault-Printemps-Redoute SA 3 1,734
Total SA 17 1,824
------
7,760
- -------------------------------------------------------------------------------
Germany -- 10.6%
Adidas AG 9 1,191
Allianz AG 8 2,097
Daimler-Benz AG 14 979
Dresdner Bank AG 28 1,272
Metro AG 24 861
------
6,400
- -------------------------------------------------------------------------------
Ireland -- 6.8%
Anglo Irish Bank Corporation plc 850 1,657
Bank of Ireland 117 1,810
Green Property plc 110 626
------
4,093
- -------------------------------------------------------------------------------
Italy -- 6.8%
Credito Italiano 501 1,546
ENI 224 1,269
Istituto Nazionale delle
Assicurazioni (INA) 655 1,327
------
4,142
- -------------------------------------------------------------------------------
Netherlands -- 9.5%
Aegon N.V. 15 1,348
ING Groep N.V. 33 1,377
Koninklijke Ahold NV 55 1,439
VNU-Verenigde Nederlandse
Uitgeversbedrijven Verenigd
Bezit 55 1,557
-------
5,721
- -------------------------------------------------------------------------------
Portugal -- 1.1%
Cimpor-Cimentos de Portugal,
SGPS, SA 25 655
- -------------------------------------------------------------------------------
Market
Shares Value
- -------------------------------------------------------------------------------
Spain -- 6.2%
Banco Bilbao Vizcaya, S.A. 37 $ 1,187
Banco Intercontinental Espanol
(Bankinter) 21 1,168
Telefonica de Espana 50 1,415
-------
3,770
- -------------------------------------------------------------------------------
Sweden -- 1.8%
Telefonaktiebolaget LM Ericsson 29 1,094
- -------------------------------------------------------------------------------
Switzerland -- 12.7%
Credit Suisse Group 9 1,409
Novartis 2 3,012
Roche Holding AG N.M. 2,263
Saurer AG 1 1,016(A)
-------
7,700
- -------------------------------------------------------------------------------
United Kingdom -- 25.1%
BBA Group plc 110 734
Barclays PLC 62 1,637
British Aerospace PLC 41 1,168
British Petroleum Company plc 131 1,733
Granada Group plc 47 718
Halifax plc 67 844(A)
Legal & General Group plc 124 1,083
Lloyds TSB Group plc 98 1,275
Next Plc 96 1,101
PizzaExpress PLC 48 582
SmithKline Beecham Plc 91 938
Stagecoach Holdings plc 63 871
Vodafone Group plc 108 784
Wassall PLC 173 951
Zeneca Group plc 22 762
------
15,181
- -------------------------------------------------------------------------------
Total Common Stock $59,403
- -------------------------------------------------------------------------------
(Identified Cost -- $48,368)
- -------------------------------------------------------------------------------
Preferred Stock -- 5.0%
- -------------------------------------------------------------------------------
Germany -- 1.5%
Fresenius AG 5 911
- -------------------------------------------------------------------------------
Italy -- 3.5%
Telecom Italia Mobile (TIM) SpA 752 2,138
- -------------------------------------------------------------------------------
Total Preferred Stock $ 3,049
- -------------------------------------------------------------------------------
(Identified Cost -- $2,060)
- -------------------------------------------------------------------------------
Total Investments at Value -- 103.1% $62,452
- -------------------------------------------------------------------------------
(Identified Cost -- $50,428)
- -------------------------------------------------------------------------------
Other Assets Less Liabilities-- (3.1%) (1,872)
- -------------------------------------------------------------------------------
Net Assets-- 100.0% $60,580
- -------------------------------------------------------------------------------
15
<PAGE>
Bartlett Europe Fund (Cont.)
As of December 31, 1997
- -------------------------------------------------------------------------------
Net Assets Consist of:
Capital Shares:
Class A shares $37,996
Class C shares 340
Class Y shares 9,378
Undistributed net realized
gain on investments and
foreign currency transactions 823
Unrealized appreciation
of investments and
foreign currency
transactions 12,043
- -------------------------------------------------------------------------------
Net Assets-- 100.0% $60,580
===============================================================================
SHARES OF BENEFICIAL INTEREST
outstanding (unlimited
number of shares
authorized, no par value)
Class A shares 2,492
Class C shares 14
Class Y shares 382
- -------------------------------------------------------------------------------
Net asset value and
redemption price
per share -- Class A $20.97
===============================================================================
Maximum offering price
per share -- Class A
(net asset value plus
sales charge of 4.75%
of offering price) $22.02
===============================================================================
Net asset value,
offering price and
redemption price
per share -- Class C $20.86
===============================================================================
Net asset value,
offering price and
redemption price
per share -- Class Y $21.01
===============================================================================
(A) Non-dividend paying investment.
N.M. - Not meaningful
See accompanying notes to financial statements.
16
<PAGE>
STATEMENTS OF OPERATIONS(dagger)
(Amounts in Thousands)
<TABLE>
<CAPTION>
Bartlett
Bartlett Bartlett Value Europe
Basic Value Fund International Fund Fund
-------------------- --------------------- -------
Nine Months Year Nine Months Year Year
Ended Ended Ended Ended Ended
12/31/97 3/31/97 12/31/97 3/31/97 12/31/97
- ------------------------------------------------------------------------------------------------------------
<S> <C>
Investment Income:
- ------------------------------------------------------------------------------------------------------------
Dividends $ 2,068 $ 2,586 $1,517 $ 1,970 $ 1,422
Less foreign taxes withheld (13) (38) (141) (244) (177)
Interest 106 422 46 190 46
- ------------------------------------------------------------------------------------------------------------
Total Investment Income 2,161 2,970 1,422 1,916 1,291
- ------------------------------------------------------------------------------------------------------------
Expenses(double dagger):
- ------------------------------------------------------------------------------------------------------------
Investment advisory fees 450 -- 517 -- 541
Management fee 439 1,469 492 1,430 306
Distribution and service fees 148 -- 88 -- 70
Custodian fees 40 -- 64 -- 197
Trustees' fees 30 -- 29 -- 59
Legal and audit fees 18 -- 21 -- 131
Reports to shareholders 15 -- 14 -- 46
Transfer agent and shareholder
servicing expense 12 -- 7 -- 35
Registration fees 8 -- 6 -- 14
Other expenses 1 -- 1 -- 50
Less: Expenses waived (61) -- (61) -- (54)
- ------------------------------------------------------------------------------------------------------------
Total Expenses 1,100 1,469 1,178 1,430 1,395
- ------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 1,061 1,501 244 486 (104)
- ------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized
Gain (Loss) on Investments:
Realized gain (loss) on:
Investments, options and futures 22,534 14,218 7,341 5,035 19,416
Foreign currency transactions -- -- (15) -- 365
Change in unrealized appreciation of:
Investments, options and futures 13,090 (1,663) (5,259) 5,827 (6,905)
Assets and liabilities denominated
in foreign currencies -- -- 2 -- 46
- ------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized
Gain (Loss) on Investments 35,624 12,555 2,069 10,862 12,922
- ------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets
from Operations $36,685 $14,056 $2,313 $11,348 $12,818
============================================================================================================
</TABLE>
(dagger) The year ends for Bartlett Basic Value and Bartlett Value
International Funds have been changed from March 31 to December
31.
(double dagger) Under the Management Agreements that were effective through
July 20, 1997, the Advisor paid all of the expenses of the
Bartlett Basic Value Fund and the Bartlett Value International
Fund, except brokerage, taxes, interest and extraordinary
expenses (See note 4).
See accompanying notes to financial statements.
17
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
Bartlett Basic Value Fund
<TABLE>
<CAPTION>
Nine Months
Ended Years Ended
12/31/97(dagger) 3/31/97 3/31/96
- --------------------------------------------------------------------------------------------------------------
<S> <C>
From Operations:
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) $ 1,061 $ 1,501 $ 2,085
Net realized gain (loss) on investments and
currency transactions 22,534 14,218 7,904
Change in unrealized appreciation of investments
and currency transactions 13,090 (1,663) 14,980
- --------------------------------------------------------------------------------------------------------------
Change in net assets resulting
from operations 36,685 14,056 24,969
- --------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:
- --------------------------------------------------------------------------------------------------------------
From net investment income:
Class A shares (1,339) (1,781) (1,618)
Class C shares (1) N/A N/A
Class Y shares (20) N/A N/A
In excess of net investment income -- -- --
From net realized gains on security transactions:
Class A shares (27,451) (8,971) (5,714)
Class C shares (7) N/A N/A
Class Y shares (518) N/A N/A
- --------------------------------------------------------------------------------------------------------------
Decrease in net assets from
distributions to shareholders (29,336) (10,752) (7,332)
- --------------------------------------------------------------------------------------------------------------
From Fund Share Transactions:
- --------------------------------------------------------------------------------------------------------------
Proceeds from shares sold:
Class A shares 5,649 38,457 111,024
Class C shares 392 N/A N/A
Class Y shares 2,501 N/A N/A
Net asset value of shares issued in reinvestment
of shareholder distributions:
Class A shares 28,078 10,364 7,149
Class C shares 8 N/A N/A
Class Y shares 538 N/A N/A
Payment for shares redeemed:
Class A shares (27,524) (58,553) (112,895)
Class C shares (10) N/A N/A
Class Y shares (331) N/A N/A
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) from Fund share
transactions 9,301 (9,732) 5,278
- --------------------------------------------------------------------------------------------------------------
Change in Net Assets 16,650 (6,428) 22,915
Net Assets:
Beginning of period 119,208 125,636 102,721
- --------------------------------------------------------------------------------------------------------------
End of period $135,858 $119,208 $125,636
- --------------------------------------------------------------------------------------------------------------
Under/(over)distributed net investment income $ (90) $ 210 $ 489
==============================================================================================================
</TABLE>
(dagger) The year end for Bartlett Basic Value Fund has been changed from March
31 to December 31.
See accompanying notes to financial statements.
18
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
Bartlett Value International Fund
<TABLE>
<CAPTION>
Nine Months
Ended Years Ended
12/31/97(dagger) 3/31/97 3/31/96
- --------------------------------------------------------------------------------------------------------------
<S> <C>
From Operations:
- --------------------------------------------------------------------------------------------------------------
Net investment income (loss) $ 244 $ 486 $ 705
Net realized gain (loss) on investments and
currency transactions 7,326 5,035 5,092
Change in unrealized appreciation of investments
and currency transactions (5,257) 5,827 1,972
- --------------------------------------------------------------------------------------------------------------
Change in net assets resulting
from operations 2,313 11,348 7,769
- --------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:
- --------------------------------------------------------------------------------------------------------------
From net investment income:
Class A shares (973) (486) (710)
Class C shares (11) N/A N/A
Class Y shares (326) N/A N/A
In excess of net investment income -- (47) (56)
From net realized gains on security transactions:
Class A shares (6,780) (4,403) (2,033)
Class C shares (54) N/A N/A
Class Y shares (1,741) N/A N/A
- --------------------------------------------------------------------------------------------------------------
Decrease in net assets from
distributions to shareholders (9,885) (4,936) (2,799)
- --------------------------------------------------------------------------------------------------------------
From Fund Share Transactions:
- --------------------------------------------------------------------------------------------------------------
Proceeds from shares sold:
Class A shares 27,946 37,235 24,746
Class C shares 994 N/A N/A
Class Y shares 20,134 N/A N/A
Net asset value of shares issued in reinvestment
of shareholder distributions:
Class A shares 6,969 3,770 2,116
Class C shares 65 N/A N/A
Class Y shares 2,067 N/A N/A
Payment for shares redeemed:
Class A shares (46,911) (35,484) (17,455)
Class C shares (55) N/A N/A
Class Y shares (4,983) N/A N/A
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) from Fund share
transactions 6,226 5,521 9,407
- --------------------------------------------------------------------------------------------------------------
Change in Net Assets (1,346) 11,933 14,377
Net Assets:
Beginning of period 83,973 72,040 57,663
- --------------------------------------------------------------------------------------------------------------
End of period $ 82,627 $ 83,973 $72,040
- --------------------------------------------------------------------------------------------------------------
Under/(over)distributed net investment income $ (1,081) $ -- $ --
==============================================================================================================
</TABLE>
(dagger) The year end for Bartlett Value International Fund has been changed
from March 31 to December 31.
See accompanying notes to financial statements.
19
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
Bartlett Europe Fund
<TABLE>
<CAPTION>
Years Ended
12/31/97(dagger) 12/31/96 (double dagger)
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
From Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income (loss) $ (104) $ 55
Net realized gain (loss) on investments
and currency transactions 19,781 9,795
Change in unrealized appreciation of investments
and currency transactions (6,859) 8,729
- ---------------------------------------------------------------------------------------------------------------
Change in net assets resulting
from operations 12,818 18,579
- ---------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income:
Class A shares -- --
Class C shares -- N/A
Class Y shares -- N/A
In excess of net investment income -- --
From net realized gains on security transactions:
Class A shares (16,941) (9,518)
Class C shares (49) N/A
Class Y shares (1,741) N/A
- ---------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (18,731) (9,518)
- ---------------------------------------------------------------------------------------------------------------
From Fund Share Transactions:
- ---------------------------------------------------------------------------------------------------------------
Proceeds from shares sold:
Class A shares 1,137 N/A
Class C shares 328 N/A
Class Y shares 7,693 N/A
Net asset value of shares issued in reinvestment
of shareholder distributions:
Class A shares 19,433 N/A
Class C shares 49 N/A
Class Y shares 1,741 N/A
Payment for shares redeemed or repurchased:
Class A shares (34,844) (319)
Class C shares (35) N/A
Class Y shares N/A N/A
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) from Fund share transactions (4,498) (319)
- ---------------------------------------------------------------------------------------------------------------
Change in Net Assets (10,411) 8,742
Net Assets:
Beginning of year 70,991 62,249
- ---------------------------------------------------------------------------------------------------------------
End of year $ 60,580 $70,991
- ---------------------------------------------------------------------------------------------------------------
Under/(over)distributed net investment income $ -- $ (183)
===============================================================================================================
</TABLE>
(dagger) Includes financial information for Bartlett Europe Fund and its
predecessor, Worldwide Value Fund (See note 6).
(double dagger) The financial information for the year ended December 31, 1996
is for the Worldwide Value Fund, Bartlett Europe Fund's
predecessor. Prior to July 1, 1997 the Worldwide Value Fund
operated as a closed end fund (See note 6).
See accompanying notes to financial statements.
20
<PAGE>
FINANCIAL HIGHLIGHTS
Bartlett Basic Value Fund
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Class A
----------------------------------------------------------------------
Years Ended March 31,
--------------------------------------------
Nine Months
Ended
12/31/97(dagger) 1997 1996 1995
==========================================================================================================
<S> <C>
Net asset value,
Beginning of period $18.33 $17.94 $15.39 $14.89
- ----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .19(A) .22 .30 .27
Net realized and
unrealized gains
on investments 5.59 1.82 3.32 1.53
- ----------------------------------------------------------------------------------------------------------
Total from investment
operations 5.78 2.04 3.62 1.80
- ----------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (.22) (.26) (.24) (.27)
Distributions from
realized gains (4.94) (1.39) (.83) (1.03)
- ----------------------------------------------------------------------------------------------------------
Total distributions (5.16) (1.65) (1.07) (1.30)
- ----------------------------------------------------------------------------------------------------------
Net asset value,
End of period $18.95 $18.33 $17.94 $15.39
==========================================================================================================
Total return(D) 33.14%(E) 11.30% 24.05% 12.67%
==========================================================================================================
Ratios / Supplemental Data:
- ---------------------------------
Net assets, end of period (000's) $133,076 $119,208 $125,636 $102,721
Ratio of net expenses
to average net assets 1.13%(A,F) 1.16% 1.17% 1.20%
Ratio of net investment
income to average net assets 1.15%(A,F) 1.18% 1.79% 1.81%
Portfolio turnover rate 42%(F) 23% 25% 26%
Average commission
rate paid(G) $.0723 $.0655 -- --
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class A Class C Class Y
----------------------------------------------------------------------------------
Sept. 12, Aug. 15
Years Ended March 31, 1997(double dagger) 1997(double dagger)
--------------------------- to to
Dec. 31 Dec. 31,
1994 1993 1997 1997
=====================================================================================================================
<S> <C>
Net asset value,
Beginning of period $14.76 $13.47 $22.84 $21.92
- ---------------------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income .22 .30 .24(B) .18(C)
Net realized and
unrealized gains
on investments .28 1.57 .88 1.94
- ---------------------------------------------------------------------------------------------------------------------
Total from investment
operations .50 1.87 1.12 2.12
- ---------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (.23) (.30) (.27) (.23)
Distributions from
realized gains (.14) (.28) (4.94) (4.94)
- ---------------------------------------------------------------------------------------------------------------------
Total distributions (.37) (.58) (5.21) (5.17)
- ---------------------------------------------------------------------------------------------------------------------
Net asset value,
End of period $14.89 $14.76 $18.75 $18.87
=====================================================================================================================
Total return(D) 3.42% 14.22% 6.07%(E) 10.97%(E)
=====================================================================================================================
Ratios / Supplemental Data:
- ---------------------------------
Net assets, end of period (000's) $94,289 $103,507 $395 $2,387
Ratio of net expenses
to average net assets 1.20% 1.21% 1.90%(B,F) .86%(C,F)
Ratio of net investment
income to average net assets 1.48% 2.14% 1.11%(B,F) 1.51%(C,F)
Portfolio turnover rate 33% 43% 42%(F) 42%(F)
Average commission
rate paid(G) -- -- $.0723 $.0723
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(dagger) The year end for Bartlett Basic Value Fund has been changed from
March 31 to December 31.
(double dagger) Commencement of operations of this Class.
(A) Net of fees waived pursuant to a voluntary expense limitation of
1.15%. If no fees had been waived, the annualized ratio of
expenses to average daily net assets would have been 1.19%.
(B) Net of fees waived pursuant to a voluntary expense limitation of
1.90%. If no fees had been waived, the annualized ratio of
expenses to average daily net assets would have been 2.00%.
(C) Net of fees waived pursuant to a voluntary expense limitation of
0.90%. If no fees had been waived, the annualized ratio of
expenses to average daily net assets would have been 0.96%.
(D) Excluding sales charge
(E) Not Annualized
(F) Annualized
(G) Pursuant to SEC regulations effective
for fiscal years beginning after September 1, 1995, this is the
average commission rate paid on securities purchased and sold by
the fund.
See accompanying notes to financial statements.
21
<PAGE>
FINANCIAL HIGHLIGHTS
Bartlett Value International Fund
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------------------------------
Years Ended March 31,
------------------------------------------------------------
Nine Months
Ended
12/31/97(dagger) 1997 1996 1995 1994 1993
=================================================================================================================
<S> <C>
Net asset value,
Beginning of period $13.64 $12.59 $11.64 $12.46 $10.08 $9.93
- -----------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income (loss) .05(B) .08 .13 .09 .07(A) .12
Net realized and
unrealized gains
(losses) on investments and
foreign currency transactions .31 1.81 1.33 (.21) 2.38 .15
- -----------------------------------------------------------------------------------------------------------------
Total from investment
operations .36 1.89 1.46 (.12) 2.45 .27
- -----------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (.17) (.08) (.13) (.09) (.07) (.10)
In excess of net
investment income -- (.01) (.01) -- -- --
Distributions from
realized gains (1.38) (.75) (.37) (.61) -- (.02)
- ----------------------------------------------------------------------------------------------------------------
Total distributions (1.55) (.84) (.51) (.70) (.07) (.12)
- ----------------------------------------------------------------------------------------------------------------
Net asset value,
End of period $12.45 $13.64 $12.59 $11.64 $12.46 $10.08
================================================================================================================
Total return(E) 2.79%(F) 15.45% 12.76% (1.18%) 24.42% 2.71%
================================================================================================================
Ratios / Supplemental Data:
- ----------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's) $68,648 $83,973 $72,041 $57,664 $49,607 $29,572
Ratio of net expenses
to average net assets 1.78%(B,G) 1.81% 1.83% 1.83% 1.88%(A) 2.00%
Ratio of net investment
income to average net assets .49%(B,G) .62% 1.06% .80% .55%(A) 1.13%
Portfolio turnover rate 44%(G) 31% 38% 24% 19% 19%
Average commission
rate paid(H) $.0227 $.0296 -- -- -- --
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class C Class Y
--------------------------------------
July 23, Aug. 15,
1997(double dagger) 1997(double dagger)
to to
Dec. 31, Dec. 31,
1997 1997
==============================================================================
<S> <C>
Net asset value,
Beginning of period $15.70 $15.27
- ------------------------------------------------------------------------------
Income from investment
operations:
Net investment income (loss) .08(C) (.11)(D)
Net realized and
unrealized gains
(losses) on investments and
foreign currency transactions (1.82) (1.21)
- -------------------------------------------------------------------------------
Total from investment
operations (1.74) (1.32)
- -------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (.28) (.24)
In excess of net
investment income -- --
Distributions from
realized gains (1.38) (1.38)
- ---------------------------------------------------------------------------------
Total distributions (1.66) (1.62)
- ---------------------------------------------------------------------------------
Net asset value,
End of period $12.30 $12.33
- ---------------------------------------------------------------------------------
Total return(E) (10.87%)(F) (8.38%)(F)
- ---------------------------------------------------------------------------------
Ratios / Supplemental Data:
- ---------------------------
Net assets, end of period (000's) $895 $13,084
Ratio of net expenses
to average net assets 2.55%(C,G) 1.44%(D,G)
Ratio of net investment
income to average net assets (1.68%)(C,G) (.75%)(D,G)
Portfolio turnover rate 44%(G) 44%(G)
Average commission
rate paid(H) $.0227 $.0227
- ----------------------------------------------------------------------------------
</TABLE>
(dagger) The year end for Bartlett Value International Fund has been
changed from March 31 to December 31.
(double dagger) Commencement of operations of this Class.
(A) The Advisor has periodically absorbed expenses of the Bartlett
Value International Fund through management fee waivers. If the
Advisor had not waived any fees, the ratio of net expenses to
average net assets would have been 1.94%.
(B) Net of fees waived pursuant to a voluntary expense limitation of
1.80%. If no fees had been waived, the annualized ratio of
expenses to average daily net assets would have been 1.95%.
(C) Net of fees waived pursuant to a voluntary expense limitation of
2.55%. If no fees had been waived, the annualized ratio of
expenses to average daily net assets would have been 2.70%.
(D) Net of fees waived pursuant to a voluntary expense limitation of
1.55%. If no fees had been waived, the annualized ratio of
expenses to average daily net assets would have been 1.59%.
(E) Excluding sales charge
(F) Not Annualized (G) Annualized (H) Pursuant to SEC regulations
effective for fiscal years beginning after September 1, 1995,
this is the average commission rate paid on securities purchased
and sold by the fund.
See accompanying notes to financial statements.
22
<PAGE>
FINANCIAL HIGHLIGHTS
Bartlett Europe Fund(dagger)
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Class A Class C Class Y
-----------------------------------------------------------------------------------------------
July 23, Aug. 21,
Years Ended December 31, 1997(double dagger) 1997(double dagger)
------------------------------------------------- to to
Dec. 31, Dec. 31,
1997 1996 1995 1994 1993 1997 1997
===================================================================================================================================
<S> <C>
Net asset value,
Beginning of period $24.24 $21.13 $17.68 $18.46 $14.29 $26.56 $25.61
- -----------------------------------------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income (loss) (.05)(A) .02 .01 (.03) .14 (.10)(B) (.04)(C)
Net realized and
unrealized gains
(losses) on investments and
foreign currency transactions 4.11 6.34 3.50 (.75) 4.13 .23 1.27
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment
operations 4.06 6.36 3.51 (.78) 4.27 .13 1.23
- -----------------------------------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income -- -- (.06) -- (.05) -- --
In excess of net
investment income -- -- -- -- (.05) -- --
Distributions from
realized gains (7.33) (3.25) -- -- -- (5.83) (5.83)
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions (7.33) (3.25) (.06) -- (.10) (5.83) (5.83)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value,
End of period $20.97 $24.24 21.13 $17.68 $18.46 $20.86 $21.01
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Market value per share
End of period N/A $22.00 $16.88 $14.25 $16.63 N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Total return (market value) N/A 49.5% 18.8% (14.3%) 39.3% N/A N/A
Total return(D,E) (NAV) 17.5% 31.5% 19.9% (3.7%) 29.9% .7%(F) 4.9%(F)
===================================================================================================================================
Ratios / Supplemental Data:
- ---------------------------
Net assets, end of
period (000's) $52,253 $70,991 $62,249 $53,135 $55,486 $ 302 $8,025
Ratio of net expenses
to average net assets 1.90%(A) 2.0% 2.1% 2.1% 2.1% 2.50%(B,G) 1.31%(C,G)
Ratio of net investment
income to average net assets (.12%)(A) .1% .1% -- .9% (1.79%)(B,G) (.60%)(C,G)
Portfolio turnover rate 123% 109% 148% 75% 67% 123% 123%
Average commission
rate paid(H) $.0374 $.0313 -- -- -- $.0374 $.0374
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(dagger) The financial information in this table for the years ended
December 31, 1993 through 1996 is for the Worldwide Value Fund,
Bartlett Europe Fund's predecessor. The financial information
for the year ended December 31, 1997 is for Bartlett Europe Fund
and Worldwide Value Fund. Prior to July 1, 1997 the Worldwide
Value Fund operated as a closed end fund (See note 6).
(double dagger) Commencement of operations of this Class.
(A) The expense ratio shown reflects both the operations of Bartlett
Europe Fund's predecessor, Worldwide Value Fund, prior to its
merger with Bartlett Europe Fund on July 18, 1997 and Bartlett
Europe Fund's operations through December 31, 1997. For the
period July 19 to December 31, 1997, the Fund's annualized
expense ratio was 1.71%, net of fees waived pursuant to a
voluntary expense limitation of 1.75%. If no fees had been
waived, the annualized ratio of expenses to average daily net
assets would have been 2.08%.
(B) Net of fees waived pursuant to a voluntary expense limitation of
2.50%. If no fees had been waived, the annualized ratio of
expenses to average daily net assets would have been 2.68%.
(C) Net of fees waived pursuant to a voluntary expense limitation of
1.50%. If no fees had been waived, the annualized ratio of
expenses to average daily net assets would have been 1.49%.
(D) Prior to July 18, 1997, total return for Worldwide Value Fund, a
closed-end fund, was calculated using market value per share.
(E) Excluding sales charge
(F) Not Annualized
(G) Annualized
(H) Pursuant to SEC regulations effective for fiscal years beginning
after September 1, 1995, this is the average commission rate
paid on securities purchased and sold by the fund.
See accompanying notes to financial statements.
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS
As of December 31, 1997 (Amounts in Thousands)
1 Significant Accounting Policies
Bartlett Capital Trust ("the Trust") is registered under the Investment Company
Act of 1940, as amended, as a diversified, open-end management investment
company. Bartlett Capital Trust was established as a Massachusetts business
trust under a Declaration of Trust dated October 31, 1982. The Declaration of
Trust, as amended, permits the Trustees to issue an unlimited number of shares
of the Bartlett Value International Fund, Bartlett Basic Value Fund and Bartlett
Europe Fund (each separately referred to as a "Fund" and collectively as the
"Funds").
Each of the Funds consist of three classes of shares: Class A, offered
since 1983 for Basic Value, since 1989 for Value International, and since July
21, 1997 for Europe Fund, Class C offered since July 21, 1997, and Class Y
offered to certain institutional investors since July 21, 1997. 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
(NYSE). On July 18, 1997, Europe Fund, which had no previous operating history,
acquired the assets and assumed the liabilities of Worldwide Value Fund, Inc.
The income and expenses of each of these Funds is allocated proportionately to
the three classes of shares based on daily net assets, except for Rule 12b-1
distribution fees, which are charged only on Class A and Class C shares, and
transfer agent and shareholder servicing expenses, which are determined
separately for each class.
The following is a summary of the investment objectives followed by the
Funds:
Bartlett Basic Value Fund seeks capital appreciation by investing primarily
in common stocks or securities convertible into common stocks that are believed
by Bartlett & Co. ("Advisor") to be attractively priced relative to their
intrinsic value. Income is a secondary consideration.
Bartlett Value International Fund seeks capital appreciation by investing
primarily in foreign equity securities believed by the Advisor to be
attractively priced relative to their intrinsic value. Income is a secondary
consideration.
Bartlett Europe Fund seeks long-term growth of capital by investing at
least 65% of its total assets in equity securities of European issuers.
The following is a summary of the significant accounting policies of
Bartlett Capital Trust:
Security Valuation - 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.
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 the 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. Fixed income securities having a maturity of less
than 60 days are valued at amortized cost.
Foreign Currency Translation - The books and records of the Funds are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars on the following basis:
(i) market value of investment securities, assets and liabilities at the
closing daily rate of exchange, and
(ii) purchases and sales of investment securities, interest income and
expenses at the rate of exchange prevailing on the respective date of
such transactions.
The effect of changes in foreign exchange rates on realized and unrealized
security gains or losses are reflected as a component of such gains or losses.
Share Valuation - The net asset value per share is calculated daily by
dividing the total value of each Fund's investments and other assets, less
liabilities, by the total number of shares outstanding.
Investment Income and Distributions to Shareholders - Interest income and
expenses are accrued as earned. Dividend income is recorded on the ex-dividend
date. Distributions to shareholders from net investment income are declared and
paid quarterly for Basic Value and Value International and annually for Europe
Fund, and are recorded on the ex-dividend date. Net realized capital gains, if
any, are distributed to shareholders at least once a year.
24
<PAGE>
Security Transactions - Security transactions are accounted for on a trade
date basis, which is the date the order to buy or sell is executed. Securities
sold are recorded on a specific identification basis.
Federal Income Taxes - No provision for federal income or excise taxes is
required since the Funds intend to continue to qualify as regulated investment
companies and distribute all of their taxable income to their shareholders.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires the Funds to make
estimates and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those estimates.
2 Financial Instruments
As part of its investment program, each Fund may utilize options, futures,
forward currency exchange contracts and repurchase agreements. The nature and
risks of these financial instruments and the reasons for using them are set
forth more fully in the Trust's Prospectuses and Statement of Additional
Information.
Emerging Markets - Value International and Europe Fund may invest in
securities of issuers based in emerging markets. Future economic or political
developments could adversely affect the liquidity or value, or both, of such
securities.
Options and Futures - Upon the purchase of a put option or a call option by
a fund, the premium paid is recorded as an investment, the value of which is
marked-to-market daily. When a purchased option expires, the fund will realize a
loss in the amount of the cost of the option. When a fund enters into a closing
sale transaction, the fund will realize a gain or loss depending on whether the
proceeds from the closing sale transaction are greater or less than the cost of
the option. When a fund exercises a put option, it will realize a gain or loss
from the sale of the underlying security and the proceeds from such sale will be
decreased by the premium originally paid. When a fund exercises a call option,
the cost of the security which the fund purchases upon exercise will be
increased by the premium originally paid.
When a fund writes a call option or a put option, an amount equal to the
premium received by the fund is recorded as a liability, the value of which is
marked-to-market daily. When a written option expires, the fund realizes a gain
equal to the amount of the premium received. When a fund enters into a closing
purchase transaction, the fund realizes a gain (or loss if the cost of the
closing purchase transaction exceeds the premium received when the option was
sold) without regard to any unrealized gain or loss on the underlying security,
and the liability related to the option is eliminated. When a written call
option is exercised, the fund realizes a gain or loss from the sale of the
underlying security and the proceeds from such sale are increased by the premium
originally received. When a written put option is exercised, the amount of the
premium originally received will reduce the cost of the security that the fund
purchased upon exercise.
The risk associated with purchasing options is limited to the premium
originally paid. Options written by a fund involve, to varying degrees, risk of
loss in excess of the option value reflected in the Statement of Net Assets. The
risk in writing a covered call option is that a fund may forego the opportunity
for profit if the market price of the underlying security increases and the
option is exercised. The risk in writing a covered put option is that a fund may
incur a loss if the market price of the underlying security decreases and the
option is exercised. In addition, there is the risk that a fund may not be able
to enter into a closing transaction because of an illiquid secondary market or,
for over-the-counter options, because of the counterparty's inability to
perform. There were no options written during the year ended December 31, 1997.
Upon entering into a futures contract, the fund is required to deposit with
the broker an amount of cash or cash equivalents equal to a certain percentage
of the contract amount. This is known as the "initial margin." Subsequent
payments ("variation margin") are made or received by the fund each day,
depending on the daily fluctuation of the value of the contract. The daily
changes in contract value are recorded as unrealized gains or losses and the
fund recognizes a realized gain or loss when the contract is closed. Futures
contracts are valued daily at the settlement price established by the board of
trade or exchange on which they are traded.
The Funds enter into futures contracts as a hedge against anticipated
changes in interest rates. There are several risks in connection with the use of
futures contracts as a hedging device. Futures contracts involve, to varying
degrees, risk of loss in excess of amounts reflected in the financial
statements. The change in the value of futures contracts primarily corresponds
with the value of their underlying instruments, which may not correlate with the
change in the value of the hedged instruments. In addition, there is the risk
that a
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS (cont.)
fund may not be able to enter into a closing transaction because of an
illiquid secondary market. There were no open futures contracts at December 31,
1997.
Forward Foreign Currency Exchange Contracts - Forward foreign currency
exchange contracts are marked-to-market daily using foreign currency exchange
rates supplied by an independent pricing service. The change in a contract's
market value is recorded by a fund as an unrealized gain or loss. When the
contract is closed or delivery is taken, the fund records a realized gain or
loss equal to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
The use of forward foreign currency exchange contracts does not eliminate
fluctuations in the underlying prices of a fund's securities, but it does
establish a rate of exchange that can be achieved in the future. These forward
foreign currency exchange contracts involve market risk in excess of amounts
reflected in the financial statements. Although forward foreign currency
exchange contracts used for hedging purposes limit the risk of loss due to a
decline in the value of the hedged currency, they also limit any potential gain
that might result should the value of the currency increase. In addition, the
Funds could be exposed to risks if the counterparties to the contracts are
unable to meet the terms of their contracts. Each Fund's advisor will enter into
forward foreign currency exchange contracts only with parties approved by the
Board of Trustees because there is a risk of loss to the Funds if the
counterparties do not complete the transaction.
At December 31, 1997, open forward currency exchange contracts for Europe
Fund were as follows:
Settlement Contract to Unrealized
_____________________
Date Receive Deliver Gain/(Loss)
=============================================================================
3/10/98 USD 3,000 IEP* 2,073 $51
- -----------------------------------------------------------------------------
*Irish punt
For the year ended December 31, 1997, Basic Value and Value International
had not entered into any forward currency contracts.
Repurchase Agreements - Repurchase agreements are valued at cost plus
accrued interest which approximates market value. It is the policy of each Fund
that its custodian take possession of the underlying collateral securities.
Collateral is marked-to-market daily to ensure that the market value of the
underlying assets equals or exceeds the value of the seller's repurchase
obligation. In the event of a bankruptcy or other default of the seller of a
repurchase agreement, a fund could experience both delays in liquidating the
underlying securities and losses. The loss would equal the amount by which the
carrying value of the repurchase agreement(s) exceeded the proceeds received in
liquidation of the underlying collateral securities. To minimize the possibility
of loss, the Funds enter into repurchase agreements only with institutions
deemed to be creditworthy by the Advisor, including banks that serve as
custodian for the Funds, banks having assets in excess of $1 billion or primary
government securities dealers.
At December 31, 1997, receivables for securities sold and not yet delivered
and payables for securities purchased and not yet received for each of the Funds
were as follows:
Receivable for Payable for
Securities Sold Securities Purchased
===============================================================================
Basic Value $-- $--
- -------------------------------------------------------------------------------
Value International -- --
- -------------------------------------------------------------------------------
Europe Fund 288 682
===============================================================================
3 Investment Transactions
Investment transactions (excluding short-term securities) are as follows for the
nine months and the year ended December 31, 1997:
Bartlett Bartlett
Basic Value Bartlett
Value International Europe
Fund Fund Fund
================================================================================
Purchases of investment securities $39,406 $27,873 $ 90,897
================================================================================
Proceeds from sales and maturities
of investment securities $60,602 $33,350 $118,992
================================================================================
The following amounts are based on cost for both financial reporting and
federal income tax purposes as of December 31, 1997:
Bartlett Bartlett
Basic Value Bartlett
Value International Europe
Fund Fund Fund
================================================================================
Unrealized appreciation $47,430 $12,918 $12,292
Unrealized depreciation (2,849) (8,254) (586)
- --------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) $44,581 $ 4,664 $11,706
================================================================================
Federal income tax cost
of investments $91,166 $77,141 $50,746
================================================================================
26
<PAGE>
4 Transactions with Affiliates and Related Parties
The officers of the Trust are shareholders or employees of the Advisor or
Legg Mason Wood Walker, Incorporated (LMWW). LMWW is affiliated with the Advisor
through their common parent company, Legg Mason, Inc. The Advisor became a
wholly owned subsidiary of Legg Mason, Inc. in January 1996. Bartlett Capital
Trust's investments are managed by the Advisor under the terms of a Management
Agreement, except with respect to Europe Fund where it has delegated that
responsibility to Lombard Odier International Portfolio Management Limited
("Lombard Odier"). Under the Management Agreement that was effective through
July 20, 1997, the Advisor paid all of the expenses of Basic Value and Value
International except brokerage, taxes, interest and extraordinary expenses. As
compensation for investment advisory services and the agreement to pay the above
Fund expenses, each of those Funds paid the Advisor a fee computed and accrued
daily and paid monthly. The fee for Basic Value was computed at an annual rate
of 2% of the average daily net assets of the Fund up to and including $10,000,
1.50% of such assets from $10,000 up to and including $30,000 and 1% of such
assets in excess of $30,000. The fee for Value International was computed at an
annual rate of 2% of the average daily net assets of the Fund up to and
including $20,000, 1.75% of such assets from $20,000 up to and including
$200,000 and 1.25% of such assets in excess of $200,000.
The Worldwide Value Fund, Inc. ("Worldwide", predecessor to Europe Fund)
had an investment advisory agreement with Lombard Odier for which Lombard Odier
received a monthly fee at an annual rate of 1% of Worldwide's net assets, based
on the net assets on the last business day of each month. This rate was reduced
on net asset values in excess of $100 million. Lombard Odier has managed
Worldwide's portfolio since its inception in 1986.
Worldwide had an administration contract with Legg Mason Fund Adviser, Inc.
("Administrator") for which the Administrator received from Worldwide a monthly
fee at an annual rate of .20% of Worldwide's net assets, based on the net assets
on the last business day of each month. This rate was reduced on net asset
values in excess of $100 million.
Effective July 21, 1997, the shareholders of the Trust approved changes to
the Investment Management and Administration Agreement ("Agreement"). Under the
revised agreements, the Advisor receives for its services an advisory fee from
each Fund, computed daily and payable monthly at annual rates of each Fund's
average daily net assets as follows: Basic Value, .75%, Value International,
1.25%, and Europe Fund, 1.00%.
Lombard Odier 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 receives from the
Advisor (not Europe Fund) a monthly fee at the rate of 60% of the monthly fee
actually paid to the Advisor by the Trust under the Investment Management and
Administration Agreement, taking into account any fee waiver arrangements in
effect for Europe Fund.
The Advisor has agreed to waive fees to the extent the expenses
attributable to Class A, C, and Y shares, respectively, (exclusive of taxes,
interest, brokerage and extraordinary expenses) exceed during any month annual
rates based on each respective class' average daily net assets of 1.15%, 1.90%
and 0.90% for Basic Value; 1.80%, 2.55% and 1.55% for Value International; and
1.75%, 2.50% and 1.50% for Europe Fund. Fees in excess of these limits will be
waived through July 31, 1998. For the period July 21, 1997 through December 31,
1997, advisory fees of $61, $61 and $54, respectively, were waived for all
classes of Basic Value, Value International and Europe Fund. At December 31,
1997, amounts due to the Advisor were as follows: Basic Value, $86; Value
International, $71; and Europe Fund, $59.
LM Financial Partners, Inc., distributor of the Funds, and affiliate of the
Advisor, receives from each Fund an annual service fee of 0.25% of the average
daily net assets of each Fund's Class A shares and dis-
27
<PAGE>
NOTES TO FINANCIAL STATEMENTS (cont.)
tribution and service fees at an annual rate of 0.75% and 0.25%, respectively,
of average daily net assets of each Fund's Class C shares. These fees are
calculated daily and paid monthly.
LMWW (affiliate of the Advisor) has an agreement with the Funds' transfer
agent to assist it with some of its duties. For this assistance LMWW was paid
the following amounts by the transfer agent for the nine months ended December
31, 1997: Basic Value, $5; Value International, $4; and for the year ended
December 31, 1997: Europe Fund, $3.
5 Line of Credit
The Funds, along with certain other Legg Mason funds, participate in a $75
million line of credit ("Credit Agreement") to be utilized as an emergency
source of cash in the event of unanticipated, large redemption requests by
shareholders. Pursuant to the Credit Agreement, each participating fund is
liable only for principal and interest payments related to borrowings made by
that fund. Borrowings under the line of credit bear interest at prevailing
short-term interest rates. For the year ended December 31, 1997, the Funds had
no borrowings under the line of credit.
6 Reorganization of Worldwide Value Fund, Inc.
On July 18, 1997, the Bartlett Europe Fund, a series of the Bartlett
Capital Trust, an open-end management investment company, acquired all the net
assets of Worldwide Value Fund, Inc. pursuant to a plan of reorganization
approved by Worldwide's shareholders on April 30, 1997. The acquisition was
accomplished by a tax-free exchange of 3,357 shares of Worldwide (valued at
$88,660) outstanding on July 18, 1997. The net assets of Worldwide ($88,660,
including $18,092 of unrealized appreciation and $12,991 of undistributed net
capital gain) were merged into the newly-created Bartlett Europe Fund. Prior to
the reorganization, Worldwide Value Fund, Inc. was a closed-end mutual fund
whose shares traded on the New York Stock Exchange.
7 Fund Share Transactions
Proceeds and payments on shares of the Funds as shown in the Statements of
Changes in Net Assets are the result of the share transactions on the following
page:
28
<PAGE>
<TABLE>
<CAPTION>
Bartlett Basic Bartlett Value Bartlett
Value Fund International Fund Europe Fund
For the Nine Year For the Nine Year For the Period
Months Ended Ended Months Ended Ended 7/21/97 through
Class A 12/31/97 3/31/97 12/31/97 3/31/97 12/31/97
===========================================================================================================================
<S> <C>
Shares sold 273 2,066 1,960 2,833 27
Shares issued in reinvestment
of distributions 1,550 558 565 293 890
- ---------------------------------------------------------------------------------------------------------------------------
1,823 2,624 2,525 3,126 917
Less shares redeemed (1,305) (3,123) (3,164) (2,692) (1,354)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in shares outstanding 518 (499) (639) 434 (437)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Bartlett Basic Bartlett Value Bartlett
Value Fund International Fund Europe Fund
For the Period For the Period For the Period
9/12/97 through 7/23/97 through 7/23/97 through
Class C 12/31/97 12/31/97 12/31/97
===========================================================================================================================
<S> <C>
Shares sold 21 72 13
Shares issued in reinvestment
of distributions 1 5 2
- ---------------------------------------------------------------------------------------------------------------------------
22 77 15
Less shares redeemed (1) (4) (1)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding 21 73 14
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Bartlett Basic Bartlett Value Bartlett
Value Fund International Fund Europe Fund
For the Period For the Period For the Period
8/15/97 through 8/15/97 through 8/21/97 through
Class Y 12/31/97 12/31/97 12/31/97
===========================================================================================================================
<S> <C>
Shares sold 112 1,295 299
Shares issued in reinvestment
of distributions 30 170 83
- ---------------------------------------------------------------------------------------------------------------------------
142 1,465 382
Less shares redeemed (15) (404) --
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding 127 1,061 382
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of the
Bartlett Capital Trust:
We have audited the accompanying statements of net assets of the Bartlett
Basic Value Fund, the Bartlett Value International Fund and the Bartlett Europe
Fund (formerly the Worldwide Value Fund) ("the Funds") as of December 31, 1997,
and the related statement of operations, statement of changes in net assets and
financial highlights for the nine month period then ended, for the Bartlett
Basic Value Fund and the Bartlett Value International Fund, and the related
statement of operations for the year then ended, the statements of changes in
net assets for the two years in the period then ended and the financial
highlights for the five years in the period then ended for the Bartlett Europe
Fund. These financial statements and financial highlights are the responsibility
of the Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The
statements of changes in net assets and financial highlights for each of the
preceding periods presented for the Bartlett Basic Value Fund and Bartlett Value
International Fund were audited by other auditors, whose report, dated April 30,
1997, expressed an unqualified opinion thereon.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at December
31, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Bartlett Basic Value Fund, the Bartlett Value International Fund and the
Bartlett Europe Fund as of December 31, 1997, and the results of their
operations, their changes in their net assets, and their financial highlights
for each of the periods stated in the first paragraph, in conformity with
generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Baltimore, Maryland
January 30, 1998
30
<PAGE>
TRUSTEES AND OFFICERS
<TABLE>
<S> <C>
======================================================================================
Lorrence T. Kellar Chairman of the Board and Trustee
Dale H. Rabiner, CFA President and Trustee
A. John W. Campbell Trustee
Edmund J. Cashman, Jr. Trustee
Henri Deegenaar Trustee
Ian F.H. Grant Trustee
Alan R. Schriber Trustee
William P. Sheehan Trustee
Prinz Wolfgang E. Ysenburg Trustee
Madelynn M. Matlock, CFA Vice President
James A. Miller, CFA Vice President
Donna M. Prieshoff Vice President
James B. Reynolds, CFA Vice President
Woodrow H. Uible, CFA Vice President
Kathi D. Bair Secretary
Marie K. Karpinski, CPA Treasurer and Vice President
Thomas A. Steele, CPA Assistant Treasurer and Assistant Secretary
======================================================================================
</TABLE>
Investment Advisor Bartlett & Co.
Cincinnati, Ohio
Investment Sub-Adviser to Europe Fund Lombard Odier International Portfolio
Management Limited
London, England
Custodian State Street Bank & Trust Company
Boston, Massachusetts
Sub-Custodian for Europe Fund The Chase Manhattan Bank, N.A.
Bournemouth, England
Transfer Agent Boston Financial Data Services
Boston, Massachusetts
Independent Accountants Coopers & Lybrand, L.L.P.
Baltimore, Maryland
Legal Counsel Kirkpatrick &Lockhart LLP
Washington, DC
Bartlett & Co.
-----------------------------------------------------------------------
REGISTERED INVESTMENT ADVISORS
- --------------------------------------------------------------------------------
36 East Fourth Street, Cincinnati, OH 45202-3896 (bullet) 513-345-6212
(bullet) 800-800-3609 (bullet) FAX 513-621-6462
31
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