BARTLETT
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MUTUAL FUNDS
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SEMI-ANNUAL REPORT
JUNE 30, 1998
BARTLETT
BASIC VALUE FUND
BARTLETT
VALUE INTERNATIONAL FUND
BARTLETT
EUROPE FUND
<PAGE>
BARTLETT & CO.
PROFILE
[BARTLETT MUTUAL FUNDS LOGO] Bartlett & Co., headquartered in Cincinnati,
Ohio, is an asset management firm which
manages over $3.1 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.
<PAGE>
CONTENTS
Pages
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Bartlett & Co. Profile Inside Cover
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President's Letter 2
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Reports to Shareholders
Bartlett 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 7
Bartlett Value International Fund 8
Bartlett Europe Fund 8
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Industry Diversification 9
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Statements of Net Assets
Bartlett Basic Value Fund 10
Bartlett Value International Fund 12
Bartlett Europe Fund 14
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Statements of Operations 16
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Statements of Changes in Net Assets
Bartlett Basic Value Fund 17
Bartlett Value International Fund 18
Bartlett Europe Fund 19
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Financial Highlights
Bartlett Basic Value Fund 20
Bartlett Value International Fund 21
Bartlett Europe Fund 22
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Notes To Financial Statements 23
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Trustees and Officers 29
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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 Shareholder,
We are pleased to provide you with the semi-annual report for the Bartlett
Capital Trust, comprised of the Bartlett Basic Value Fund, the Bartlett Value
International Fund and the Bartlett Europe Fund covering the six months ended
June 30, 1998.
During the quarter ended June 30, 1998, USequity markets continued their upward
progress. Once again, though, the pattern of the last year persisted, with good
performance concentrated in a small group of the very largest capitalization
stocks. European equity markets also continued their very positive performance
while Asian markets continued to decline.
We have a change to report with respect to Bartlett Europe. Ronnie Armist, who
skillfully guided the Fund's good performance over the last few years, has
assumed overall responsibility for Lombard Odier International Portfolio
Management's ("LOIPM") operations in London. William Lovering and Neil Worsley,
who have worked with Ronnie on the Fund, have become the Fund's co-portfolio
managers.
Neil Worsley began his career in the investment world almost 20 years ago and
has worked for LOIPMsince 1990. He has worked on Bartlett Europe Fund since 1992
when the Fund first began its focus on Europe. He is Director and Head of
Pan-European equities at LOIPM. William Lovering began his career managing
equities for UKpension funds in 1986. He joined LOIPM in 1994 and has been
involved with the Fund since then. He is an Assistant Director of European
equities.
We will miss Mr. Armist's day-to-day involvement with the Fund but we have every
confidence in Mr. Worsley and Mr. Lovering. They have contributed significantly
to the Fund's performance over the last several years and we are optimistic that
this will continue.
On the following pages, the portfolio managers for the three Funds discuss each
Fund's performance and the investment outlook.
The Board of Trustees has approved the following dividends and distributions per
share which are payable August 21, 1998 to shareholders of record August 19,
1998:
<TABLE>
<CAPTION>
Short-term Long-term
Ordinary Income Capital Gain Capital Gain
Dividend Distribution Distribution
<S><C>
Basic Value:
Class A $.087 $.048 $.462
Class C $.053 $.048 $.462
Class Y $.062 $.048 $.462
Value International:
Class A $ .12 $.094 $.281
Class C $ .11 $.094 $.281
Class Y $ .14 $.094 $.281
Bartlett Europe:
Class A None $.173 $.115
Class C None $.173 $.115
Class Y None $.173 $.115
</TABLE>
We appreciate your support and we welcome your comments or questions.
Sincerely,
/s/ Edward A. Taber, III
________________________
Edward A. Taber, III
President
2
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BARTLETT
BASIC VALUE
FUND REPORT
Quarter Year
Ended Ended
6/30/98 6/30/98
Basic Value* (3.4)% 23.2%
S&P 500 Index (large-cap) 3.3% 30.2%
BARRA Value Index (large-cap) 0.5% 25.1%
S&P 400 Index (mid-cap) (2.1)% 27.0%
Russell 2000 Index (small-cap) (4.7)% 16.5%
[BARTLETT MUTUAL FUNDS LOGO] Many equity fund investors must feel as if they
are chasing the rabbit. That is not to imply that
the funds they own are dogs, but that catching
up with the S&P 500 is truly a difficult task in
this extraordinarily narrow market. Although earnings of the giant companies are
under pressure due to weak foreign economies and currencies, investors seem to
prefer the perceived safety of mega-cap stocks. Of course, the large mutual
funds with enormous cash inflows embrace these large-cap stocks because they
trade more easily and could be liquidated when the market declines and cash
flows reverse. This helps to explain why the largest fifty companies in the S&P
500 returned 28.3% year-to-date while the other 450 companies returned under
10%. The fact that the largest fifty companies represent more than 50% of the
S&P 500 market value indicates that superior performance can be dependent on
heavy exposure to these largest of the large companies.
This superior performance is not supported by more attractive valuations,
as the largest companies have price/earnings multiples nearly 50% higher than
the smaller group while having nearly the same outlook for growth. Obviously,
our focus on value and wide diversification by market cap has been a strong
headwind in keeping up with the large-company market indices. Ultimately this
over emphasis on "safe" large-cap companies will prove to be disappointing as
investors will learn, once again, that ignoring value can be perilous. Values
among smaller companies are actually more compelling today than in 1990, which
represented a low point during the last twenty years. Those who bought or stayed
the course at that time were amply rewarded in the ensuing years.
In view of the market conditions described above, it is not surprising that
many of our best performing stocks for the quarter were among the larger
companies: Ford
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Measuring Both Risk and Return
Bartlett Basic Value Fund vs Standard & Poor's 500 Index
May 31, 1983 to June 30, 1998
[PERCENTAGE GRAPH APPEARS HERE -- SEE PERCENTAGES BELOW]
Bartlett
Basic S&P
Value 500
Fund Index
Return 13.3%* 17.3%
Risk 11.2% 14.1%
This chart compares the historical average annual total return and the risk
(as measured by the standard deviation) of the Bartlett Basic Value Fund and
the Standard & Poor's 500 Index from May 31, 1983 to June 30, 1998. 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.
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*Reflects return on Class A Shares, excluding the 4.75% maximum sales charge
effective July 21, 1997. Return information for the other share classes may
be found on page 20.
3
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Motor (+37.1%), Time Warner (+18.7%), AMR (+16.3%), Tyco (+15.3%) and McDonald's
(+15.0%).
The biggest declines in the portfolio came from RJR Nabisco (-24.2%), Toys
`R' Us (-21.6%), Union Pacific (-21.5%), and Potash Corporation (-16.6%).
We added incrementally to our positions in H&R Block, Martin Marietta
Materials, AT&T, Western Resources, and more substantially to Union Pacific.
Union Pacific continues to struggle with congestion on its Houston rail line due
to track maintenance and upgrades. These difficulties may penalize earnings for
the next quarter or two, but may be necessary for their long-term growth
strategy. We believe the company will have significantly improved normalized
earning power as these challenges are overcome. In addition, Union Pacific
represents the only economically feasible transportation alternative for many of
its customers.
We eliminated a number of stocks from the portfolio during the quarter.
Lowe's, Associates First Capital, Federated Department Stores, and Stewart &
Stevenson were sold. Associates First stock was received as a distribution from
our holding of Ford and we did not choose to own it independently. Federated and
Lowe's reached our price target. Stewart and Stevenson was sold because our
original premise for owning this company was no longer valid.
In a market environment in which investors are paying ever larger premiums
for size and stability, our approach is finding plenty of challenges.
Historically, however, when valuation disparities have reached these levels, our
approach has proven to be very rewarding.
Sincerely,
/s/ James A. Miller /s/ Woodrow H. Uible
___________________ ____________________
James A. Miller, CFA Woodrow H. Uible, CFA
Portfolio Manager Portfolio Manager
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Largest Industry Allocations
Bartlett Basic Value Fund vs Standard & Poor's 500 Index
June 30, 1998
[PERCENTAGE GRAPH APPEARS HERE -- SEE PERCENTAGES BELOW]
Percent of Total Portfolio Fund S&P 500
Finance 19% 20%
Transportation 15% 1%
Basic Industry 15% 9%
Consumer Cyclical 13% 13%
Technology/Defense 9% 17%
Utilities 8% 7%
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4
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BARTLETT
VALUE INTERNATIONAL
FUND REPORT
[BARTLETT MUTUAL FUNDS LOGO] International market performance in the second
quarter of 1998 continued the trends that have
been present over the last year. The overall
Europe, Australia, Far East (EAFE) Index* rose
slightly, by 1.1%, mainly on the strength of European markets, while Pacific
markets continued to sink. The broader-based Morgan Stanley All Country ex US
Index fell 2.2%. Hong Kong, Malaysia and Singapore markets were especially weak,
falling at least by a third, while Japan continued its slide by another 4.6%.
These markets' trends continue to be reinforced by the positive sentiment for
European economies generated by the European Monetary Union process, coupled
with increasing gloom about the prospects for growth across Asia. Economic
sectors also had differing market performance, with the consumer goods, services
and finance groups posting good results, while the more cyclical areas, like
materials and capital equipment, were weak.
As a result of this disparate performance, the European component of the
EAFE has grown to nearly three-quarters of the total, while the Asian component
has shrunk to one quarter. The economic weight of these two regions in the
overall world economy, as measured by gross domestic product, has Europe at a
bit less than two thirds and Asia one third. In general, stock valuations in
most Asian markets compared to book value and cash flow are at very low
levels--levels not seen for at least a decade.
Bartlett Value International fell 4.7%(+) in the quarter, reflecting its
below-index weighting in European stocks and higher allocation to Asian
investments. Predictably, the stocks that aided performance were European.
Metra, the Finnish conglomerate, increased on the announcement that it would
split into three pieces that will be easier for markets to value correctly.
Lufthansa, the German airline, continued its gains on improving operations,
while Allied Irish Banks benefited further from the boom in financial stocks.
The worst performers included Swire Pacific, the Hong Kong conglomerate that
continues to suffer from weak market sentiment, Perlis Plantations in the very
weak Malaysian market, and Pohang Iron and Steel in Korea. These companies have
good quality operations and are sound financially, and will be retained in the
portfolio.
The current market situation is very reminiscent of conditions in 1989,
when the Japanese market reached its peak in terms of relative performance and
influence in the EAFE Index. At the time, Bartlett had no investment in Japanese
stocks, which made keeping up with the market indexes almost impossible. We
found the valuations in the Japanese market at that time to be too high to
invest in, and the level of euphoria around the market too frothy to last. That
was indeed the outcome, and we see many of the same sentiments floating around
the European markets right now. Although many positive developments have
occurred in Europe due to corporate restructuring and the progress to European
Monetary Union, we believe that some caution is in order, especially as stock
valuations become stretched. We think that market principles still apply, and
that a portfolio that is more diversified regionally than is the current EAFE
Index is a prudent course in a global economy that is clearly beginning to slow.
Finally, the continued strength of the US market and the lofty valuations of US
stocks are also indicators that more globally diversified equity portfolios will
perform better in the future.
/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.
(+)Return information is for Class A shares, excluding the 4.75% maximum sales
charge, effective July 21, 1997. Return information for the other share classes
may be found on page 21.
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Portfolio Composition
Bartlett Value International Fund vs
Europe, Australia, Far East (EAFE) Index
June 30, 1998
[PERCENTAGE GRAPH APPEARS HERE -- SEE PERCENTAGES BELOW]
Percent of Total Portfolio Fund EAFE Index
Americas 14% 0%
Latin America 4%
Canada 5%
Cash Equivalents 5%
Europe 51% 74%
Pacific 35% 26%
Japan 19% 21%
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5
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BARTLETT
EUROPE
FUND REPORT
Quarter Year
Ended Ended
6/30/98 6/30/98
Bartlett Europe Fund* 5.5% 39.6%
MSCI Europe Index 5.1% 37.1%
MSCI EAFE Index 1.1% 6.1%
S&P 500 Index 3.3% 30.2%
Market Review
[BARTLETT MUTUAL FUNDS LOGO] US and European markets began 1998 in the
same vein as they ended 1997. Excellent
inflation data in the US and indications that
Federal Reserve policy may have changed
following the events in Japan and Southeast
Asia drove global bond yields down to record lows. Nearly all European markets
continued to move up into new territory during the first quarter, taking the
lead from the US where the Dow set further records despite an apparent slowing
in earnings growth and profit warnings from names such as Intel, Compaq and
Motorola. Investor confidence and liquidity remains in abundance and the safe
haven attractions of the US and the European markets in a global context
continued to keep the pot boiling.
The peripheral European markets of Italy, Spain and Ireland were the best
performers in the period ended June 30, 1998, buoyed by the theme of European
Monetary Union ("EMU") convergence which translates into lower interest rates
for those economies outside core Europe. In these markets it was the interest
sensitive stocks that performed best, driving the markets higher. These markets
paused for breath during the second quarter of the year as investors took part
of their considerable profit, although the prospects for enhanced future
performance are undimmed. A feature of these peripheral markets has not only
been the amount of international-sourced liquidity pumped into these markets but
the growth in domestic equity investment. Historically, locals have held the
majority of their assets in cash instruments (although returns in some cases
have more than halved, leaving individuals to seek alternate homes for their
savings). Equity returns have encouraged increased participation, and inflows
into mutual funds, particularly in Italy, are large enough to almost rival
inflows in the US savings market.
The Irish economy and stockmarket deserves particular mention. For some time,
this economy has been the strongest performer in Europe. Growth is expected to
maintain at present prevailing rates in excess of 7% per annum and central
European interest rates are to be set at levels certainly lower than would be
appropriate for the Irish economy in isolation. Irish earnings growth is set to
continue well above European trend levels, particularly the financials which
will benefit from corporation tax change. Irish corporation rates are to be
harmonised with those currently prevailing in the Irish industrial sector, i.e.
12.5%. At present, financials pay on aggregate nearer to 30%. This alone assures
reported earnings growth of between 4% and 5% until 2003.
The economic situation in France has improved through the year. The consumer is
picking up, unemployment has now peaked and disposable income is a little more
robust. Inflation, however, remains subdued running at the lowest annual rate in
40 years at 1.1%. In Germany, elections in lower Saxony resulted in an increased
vote for the Socialist Democratic Party. As a result, Herr Schroder was
nominated to challenge Chancellor Kohl in the September general elections.
Ironically, Chancellor Kohl, the long-term advocator of EMU, may well not lead
Germany into the new system, although Germany is still seen as a dominant player
in the new order.
Speculation gathered momentum ahead of the crucial May 1st deadline for EMU
qualification. Debate centered over whether some of the peripheral members would
qualify under the Maastricht Treaty guidelines, in fact, all did. However, the
surprise news was that the previously overlooked Greece would enter the Exchange
Rate Mechanism and would seek full membership in the European club at the
earliest opportunity. The Greek equity market responded well to the news.
Inflation generally has been helped by lower commodity and particularly oil
price weakness. The Asian situation will probably determine base commodity price
movements but our view is that the price of oil has probably reached a floor.
Consequently, we feel that we can draw the same conclusion for the oil majors
which have been poor performers for the period in question.
OUTLOOK
Although European bourses have performed strongly, the bull case for the markets
remains intact. The Asian crisis probably is yet to reach its nadir in terms of
effect, although the relative enhancement of the attractions of European
equities should not diminish. Global slowdown means that Euro rates will
converge at the low end of the forecast range below 4%. Couple this with the
strong corporate restructuring story within Europe's large companies and the
relative valuation is compelling.
Our strategy has been to overweight the peripheral regions and we would expect
to maintain this stance through the second half of the year, providing strong
bottom up investments justify. It is still probably too early to foray into the
more economically sensitive areas affected by the Far East although the rate of
change in profits generated internally in Europe does offset such worries in
some cases. Superior stock selection will remain the key to ensuring performance
and on that basis we are confident that our rigorous investment approach will be
rewarded.
Neil Worsley
William Lovering
Co-portfolio Managers
*Reflects return on Class A Shares, excluding the 4.75% maximum sales charge
effective July 21, 1997. Return information for the other share classes may be
found on page 22.
6
<PAGE>
GROWTH OF A $10,000 INVESTMENT
[BARTLETT MUTUAL FUNDS LOGO] 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 Average Annual
Total Return table within each chart provides information both including and
excluding the effect of the maximum sales charge). 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.
*This line reflects return information on Class A Shares excluding the maximum
4.75% sales charge which became effective July 21, 1997. The second line
reflects return information including the sales charge.
The Standard & Poor's 500 Index is a broad-based unmanaged index of common
stocks commonly used to measure general stock market activity.
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Growth of a $10,000 Investment
Bartlett Basic Value Fund
May 31, 1983 through June 30, 1998
- --------------------------------------------------------------
Average Annual Total Returns
For periods ended June 30, 1998
- --------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years Life of the Fund
(since 05/05/83)
- --------------------------------------------------------------
23.19%* 22.19%* 18.17%* 13.56%* 13.33%*
17.33% 20.22% 17.03% 13.01% 12.96%
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[LINE GRAPH APPEARS HERE -- SEE PLOT POINTS BELOW]
Bartlett Basic
Value Fund S&P 500 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
6/98 63,451 111,461
7
<PAGE>
Growth of a $10,000 Investment (Cont.)
Growth of a $10,000 Investment
Bartlett Value International Fund
October 31, 1989 through June 30, 1998
- --------------------------------------------------
Average Annual Total Returns
For periods ended June 30, 1998
- --------------------------------------------------
1 Year 3 Years 5 Years Life of the Fund
(since 10/06/89)
- --------------------------------------------------
-6.44%* 9.76%* 10.69%* 7.46%*
-10.89% 8.00% 9.62% 6.87%
- --------------------------------------------------
[LINE GRAPH APPEARS HERE -- SEE 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
6/98 17,867 16,458
*This line reflects return information on Class A shares excluding the maximum
4.75% sales charge which became effective July 21, 1997. The second line
reflects return information including the sales charge.
The Europe, Australia, Far East (EAFE) Index is a broad-based unmanaged 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 June 30, 1998
- -----------------------------------------------------------
Average Annual Total Returns
For periods ended June 30, 1998
- -----------------------------------------------------------
1 Year 3 Years 5 Years 10 Years Life of the Fund
(since 08/19/86)
- -----------------------------------------------------------
39.59%* 30.66%* 23.07%* 11.15%* 9.83%*
32.97% 28.56% 21.88% 10.61% 9.38%
- -----------------------------------------------------------
[LINE GRAPH APPEARS HERE -- SEE PLOT POINTS BELOW]
Bartlett
Europe Fund MSCI Europe Index
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
6/98 28,988 49,078
*This line reflects return information on Class A shares excluding the maximum
4.75% sales charge which became effective July 21, 1997. The second line
reflects return information including the sales charge.
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.
8
<PAGE>
INDUSTRY DIVERSIFICATION
Bartlett Capital Trust
June 30, 1998 (Unaudited)
Value International Fund
% of Net Market
Assets Value
- ------------------------------------------------------
(000)
Automotive 3.0% $ 2,415
Banking 6.6 5,309
Chemicals 5.6 4,496
Computer Services 2.5 1,996
Construction 7.2 5,796
Consumer Durable Goods 11.4 9,143
Consumer Non-Durable Goods 3.3 2,619
Diversified 7.2 5,741
Electronics 4.4 3,510
Investment Companies 6.6 5,319
Metals & Mining 7.5 6,057
Miscellaneous Services 7.6 6,066
Oil & Gas 7.3 5,817
Real Estate 2.3 1,826
Retail Sales 7.9 6,322
Transportation 4.9 3,899
Short-Term Investments 4.5 3,629
----- -------
Total Investment Portfolio 99.8 79,960
Other Assets Less Liabilities 0.2 187
----- -------
Net Assets 100.0% $80,147
===== =======
Europe Fund
% of Net Market
Assets Value
- ------------------------------------------------------
(000)
Aerospace/Defense 1.8% $ 1,479
Automotive 1.4 1,125
Banking 21.3 17,465
Computer Services 3.1 2,572
Construction 4.7 3,870
Consumer Durable Goods 1.7 1,362
Diversified 2.4 1,964
Finance 3.0 2,453
Insurance 9.4 7,700
Leisure 3.1 2,547
Oil & Gas 4.1 3,397
Pharmaceuticals and Health Care 5.0 4,110
Publishing 1.7 1,407
Real Estate 1.3 1,093
Retail Sales 5.8 4,742
Telecommunications 10.9 8,929
Transportation 3.1 2,501
Utilities 2.0 1,666
Short-Term Investments 12.4 10,214
----- -------
Total Investment Portfolio 98.2 80,596
Other Assets Less Liabilities 1.8 1,475
----- -------
Net Assets 100.0% $82,071
===== =======
9
<PAGE>
STATEMENT OF NET ASSETS
Bartlett Basic Value Fund
June 30, 1998 (Unaudited)
(Amounts in Thousands)
Market
Shares Value
- ------------------------------------------------------
Common Stock -- 97.7%
- ------------------------------------------------------
Aerospace/Defense -- 1.7%
Lockheed Martin Corporation 23 $ 2,435
- ------------------------------------------------------
Air Transportation -- 4.2%
AMR Corporation 71 5,919(A)
- ------------------------------------------------------
Automobiles &
Auto Parts -- 3.3%
Ford Motor Company 35 2,065
General Motors Corporation 37 2,472
--------
4,537
- ------------------------------------------------------
Broadcasting -- 2.0%
Time Warner, Inc. 32 2,734
- ------------------------------------------------------
Chemicals -- 1.9%
Ferro Corporation 107 2,715
- ------------------------------------------------------
Construction & Building
Materials -- 1.5%
Martin Marietta Materials, Inc. 46 2,085
- ------------------------------------------------------
Diversified -- 4.2%
Loews Corporation 40 3,485
Tyco International Ltd. 38 2,413
--------
5,898
- ------------------------------------------------------
Electronics -- 3.0%
Pioneer Standard
Electronics, Inc. 180 1,732
UCAR International, Inc. 84 2,452(A)
--------
4,184
- ------------------------------------------------------
Energy -- 10.1%
Cabot Oil & Gas Corporation 55 1,100
Phillips Petroleum Company 48 2,313
Total SA (ADR) 30 1,961
Triton Energy Ltd. 146 5,214(A)
Western Resources Inc. 92 3,571
--------
14,159
- ------------------------------------------------------
Financial Services -- 12.9%
Aetna Inc. 28 2,132
Charter One Financial, Inc. 108 3,638
Fannie Mae 90 5,468
H & R Block, Inc. 81 3,399
Washington Federal, Inc. 121 3,330
--------
17,967
- ------------------------------------------------------
Market
Shares Value
- ------------------------------------------------------
Food, Beverage & Tobacco-- 8.2%
Archer-Daniels-Midland Company 138 $ 2,670
McDonald's Corporation 74 5,106
RJR Nabisco Holdings Corp. 65 1,544
UST, Inc. 80 2,160
--------
11,480
- ------------------------------------------------------
Health Care -- 1.3%
Columbia/HCA Healthcare
Corporation 60 1,747
- ------------------------------------------------------
Insurance -- 3.5%
Frontier Insurance Group Inc. 79 1,787
Travelers Group 52 3,134
--------
4,921
- ------------------------------------------------------
Investment Companies -- 2.2%
Royce Value Trust, Inc. 182 3,012
- ------------------------------------------------------
Machinery -- 5.7%
Kaydon Corporation 120 4,237
York International Corporation 85 3,703
--------
7,940
- ------------------------------------------------------
Metals & Mining -- 1.5%
Potash Corporation of
Saskatchewan Inc. (ADR) 28 2,086
- ------------------------------------------------------
Manufactured Housing -- 3.1%
Fleetwood Enterprises, Inc. 109 4,360
- ------------------------------------------------------
Office Automation &
Equipment -- 0.7%
Pitney Bowes, Inc. 20 963
- ------------------------------------------------------
Railroads -- 10.8%
GATX Corporation 92 4,037
Kansas City Southern
Industries, Inc. 128 6,352
Union Pacific Corporation 106 4,677
--------
15,066
- ------------------------------------------------------
Real Estate Investment
Trusts (REITs) -- 4.2%
Chateau Communities, Inc. 121 3,471
United Dominion Realty
Trust, Inc. 170 2,359
--------
5,830
- ------------------------------------------------------
10
<PAGE>
Market
Shares Value
- ------------------------------------------------------
Retail -- 4.3%
Jostens, Inc. 150 $ 3,581
Toys `R' Us, Inc. 105 2,481(A)
--------
6,062
- -----------------------------------------------------
Services -- 2.0%
First Data Corporation 83 2,765
- -----------------------------------------------------
Telecommunications -- 3.0%
AT&T Corporation 74 4,227
- -----------------------------------------------------
Utilities -- 2.4%
Kansas City Power & Light Company 85 2,465
TNP Enterprises, Inc. 30 926
--------
3,391
- ------------------------------------------------------
Total Common Stock $136,483
- ------------------------------------------------------
(Identified Cost -- $94,003)
- ------------------------------------------------------
Face
Amount
- ------------------------------------------------------
Repurchase Agreement -- 1.8%
- ------------------------------------------------------
State Street Bank & Trust Company
4.25%, dated 6/30/98, to be
repurchased at $2,487 on 7/1/98
(Collateral: $1,620 United States
Treasury Notes, 10.625% due
8/15/15, value $2,607) $ 2,487 2,487
- ------------------------------------------------------
Total Repurchase Agreement $ 2,487
- ------------------------------------------------------
(Identified Cost -- $2,487)
- ------------------------------------------------------
Total Investments
At Value-- 99.5% $138,970
- ------------------------------------------------------
(Identified Cost -- $96,490)
- ------------------------------------------------------
Other Assets Less Liabilities-- 0.5% $ 669
- ------------------------------------------------------
Net Assets-- 100.0% $139,639
======================================================
- ------------------------------------------------------
Net Assets Consisting of:
Capital shares:
Class A shares $ 78,808
Class C shares 1,731
Class Y shares 2,757
Undistributed
net investment income 580
Undistributed net realized
gains from security
transactions 13,283
Net unrealized appreciation
of investments and
foreign currency
transactions 42,480
- ------------------------------------------------------
Net Assets-- 100.0% $139,639
======================================================
Shares of beneficial interest
outstanding (unlimited
number of shares
authorized, no par value)
Class A shares 6,717
Class C shares 89
Class Y shares 129
======================================================
Net asset value and
redemption price
per share-- Class A $ 20.14
======================================================
Maximum offering price
per share -- Class A
(net asset value plus
sales charge of 4.75%
of offering price) $ 21.14
======================================================
Net asset value,
offering price and
redemption price
per share-- Class C $ 19.84
======================================================
Net asset value,
offering price and
redemption price
per share-- Class Y $ 20.08
======================================================
(A) Non-dividend paying investment.
See accompanying notes to financial statements.
11
<PAGE>
STATEMENT OF NET ASSETS
Bartlett Value International Fund
June 30, 1998 (Unaudited)
(Amounts in Thousands)
Market
Shares Value
- ------------------------------------------------------
Common Stock -- 92.3%
- ------------------------------------------------------
Argentina --4.3%
IRSA Inversiones y
Representaciones S.A. (GDR) 63 $ 1,826
YPF Sociedad Anonima SA (ADR) 55 1,653
-------
3,479
- ------------------------------------------------------
Australia -- 4.6%
Brambles Industries Ltd. 82 1,605
National Australia Bank (ADR) 31 2,050
-------
3,655
- ------------------------------------------------------
Canada -- 2.1%
Hudson's Bay Co. 45 1,026
Potash Corporation of
Saskatchewan Inc. (ADR) 9 695
-------
1,721
- ------------------------------------------------------
Finland -- 5.8%
Kemira Oyj 255 2,643
Metra Oyj 62 2,036
-------
4,679
- ------------------------------------------------------
France --7.1%
Michelin 35 2,020
Cie de Saint Gobain 6 1,045
Total SA 3 390
Total SA (ADR) 34 2,229
-------
5,684
- ------------------------------------------------------
Germany -- 5.8%
Buderus AG 5 2,346
Deutsche Lufthansa AG 91 2,293
-------
4,639
- ------------------------------------------------------
Hong Kong -- 2.7%
Swire Pacific Ltd.-B 572 2,159
- ------------------------------------------------------
India -- 1.7%
Morgan Stanley India
Investment Fund 212 1,365(A)
- ------------------------------------------------------
Ireland -- 2.1%
Allied Irish Banks PLC (ADR) 19 1,648
- ------------------------------------------------------
Italy -- 2.0%
Istituto Mobiliare SpA (ADR) 34 1,612
- ------------------------------------------------------
Market
Shares Value
- ------------------------------------------------------
Japan -- 18.7%
Canon Inc. 77 $ 1,754
Fujitsu Ltd. 189 1,996
Ito-Yokado (ADR) 41 1,938
Matsumotokiyoshi 53 1,870
Matsushita Electric Industrial
Company Ltd. 109 1,758
Rohm Company 17 1,752
Secom Co., Ltd. 34 1,970
Sumitomo Warehouse 516 1,937
-------
14,975
- ------------------------------------------------------
Korea -- 1.9%
Korea Fund Inc. 107 679(A)
Pohang Iron & Steel Company
Ltd. (ADR) 67 804
-------
1,483
- ------------------------------------------------------
Malaysia -- 1.2%
Perlis Plantations Bhd 1,145 994
- ------------------------------------------------------
Netherlands -- 2.8%
New Holland NV (ADR) 116 2,270
- ------------------------------------------------------
Norway --6.7%
Elkem ASA 191 2,288
Kvaerner ASA 36 1,235
Norsk Hydro ASA (ADR) 42 1,853
-------
5,376
- ------------------------------------------------------
Portugal -- 2.3%
Portugal Fund Inc. 91 1,841
- ------------------------------------------------------
Singapore -- 1.9%
Dairy Farm International
Holdings Ltd. 1,390 1,487
- ------------------------------------------------------
Spain -- 2.4%
Repsol SA (ADR) 35 1,930
- ------------------------------------------------------
Sweden -- 7.6%
AGA AB 146 2,233(A)
AssiDoman AB 80 2,342
Cardo AB 61 1,481
-------
6,056
- ------------------------------------------------------
Taiwan -- 1.8%
Taiwan Fund Inc. 107 1,434
- ------------------------------------------------------
12
<PAGE>
Market
Shares Value
- ------------------------------------------------------
United Kingdom -- 6.8%
Cadbury Schweppes PLC (ADR) 30 $ 1,849
Diageo PLC (ADR) 24 1,178
Tomkins PLC (ADR) 105 2,402
-------
5,429
- ------------------------------------------------------
Total Common Stock $73,916
- ------------------------------------------------------
(Identified Cost -- $68,921)
- ------------------------------------------------------
Face
Amount
- ------------------------------------------------------
Convertible Bond -- 3.0%
- ------------------------------------------------------
Canada -- 3.0%
Magna International Inc.
5%, 10/15/02 $ 1,900 2,415
- ------------------------------------------------------
Total Convertible Bond $ 2,415
- ------------------------------------------------------
(Identified Cost -- $2,022)
- ------------------------------------------------------
Repurchase Agreement -- 4.5%
- ------------------------------------------------------
State Street Bank & Trust Company
4.25%, dated 6/30/98, to be
repurchased at $3,629 on 7/1/98
(Collateral: $2,360 United States
Treasury Notes, 10.625%
due 8/15/15, value $3,798) 3,629 3,629
- ------------------------------------------------------
Total Repurchase Agreement $ 3,629
- ------------------------------------------------------
(Identified Cost -- $3,629)
- ------------------------------------------------------
Total Investments
At Value-- 99.8% $79,960
- ------------------------------------------------------
(Identified Cost -- $74,572)
- ------------------------------------------------------
Other Assets Less Liabilities-- 0.2% $ 187
- ------------------------------------------------------
Net Assets-- 100.0% $80,147
======================================================
- ------------------------------------------------------
Net Assets Consisting of:
Capital shares:
Class A shares $ 53,424
Class C shares 4,083
Class Y shares 13,169
Distributions in excess of
net investment income (615)
Undistributed net realized
gains from security
transactions 4,702
Net unrealized appreciation
of investments and
foreign currency
transactions 5,384
- ------------------------------------------------------
Net Assets-- 100.0% $80,147
======================================================
Shares of beneficial interest
outstanding (unlimited
number of shares
authorized, no par value)
Class A shares 5,231
Class C shares 313
Class Y shares 728
- ------------------------------------------------------
Net asset value and
redemption price
per share-- Class A $ 12.80
======================================================
Maximum offering price
per share -- Class A
(net asset value plus
sales charge of 4.75%
of offering price) $ 13.44
======================================================
Net asset value,
offering price and
redemption price
per share-- Class C $ 12.60
======================================================
Net asset value,
offering price and
redemption price
per share-- Class Y $ 12.70
======================================================
(A) Non-dividend paying investment.
See accompanying notes to financial statements.
13
<PAGE>
STATEMENT OF NET ASSETS
Bartlett Europe Fund
June 30, 1998 (Unaudited)
(Amounts in Thousands)
Market
Shares Value
- ------------------------------------------------------
Common Stock -- 82.4%
- ------------------------------------------------------
Finland -- 2.7%
Nokia Oyj 33 $ 2,236
- ------------------------------------------------------
France -- 13.2%
Accor SA 6 1,682
Banque Nationale de Paris 17 1,387
Cap Gemini SA 9 1,469
Compagnie Financiere de Paribas 7 718
Elf Aquitaine SA 11 1,514
Lafarge SA 18 1,904
Pinault-Printemps-Redoute SA 2 1,733
Rhodia Inc. 15 427(A)
-------
10,834
- ------------------------------------------------------
Germany -- 9.5%
Adidas-Salomon AG 8 1,362
Allianz AG 5 1,598
Bayerische Vereinsbank AG 9 722
Deutsche Bank AG 18 1,522
Deutsche Telekom AG 54 1,490
Mannesmann AG 11 1,114
-------
7,808
- ------------------------------------------------------
Greece -- 1.9%
Alpha Credit Bank 19 1,522
Alpha Credit Bank--Rights 19 32(A)
-------
1,554
- ------------------------------------------------------
Hungary -- 0.8%
OTP Bank Rt. 14 687
- ------------------------------------------------------
Ireland -- 5.6%
Allied Irish Banks plc 117 1,705
Anglo Irish Bank Corporation plc 661 1,778
Green Property plc 157 1,093
-------
4,576
- ------------------------------------------------------
Italy -- 6.9%
Assicurazioni Generali 42 1,352
Credito Italiano 323 1,691
Fiat SpA 257 1,125
Istituto Nazionale delle
Assicurazioni (INA) 539 1,532
-------
5,700
- ------------------------------------------------------
Market
Shares Value
- ------------------------------------------------------
Netherlands -- 8.4%
Aegon N.V. 24 $ 2,105
ING Groep N.V. 26 1,735
Koninklijke Ahold NV 49 1,580
VNU-Verenigde Nederlandse
Uitgeversbedrijven Verenigd
Bezit 39 1,407
--------
6,827
- ------------------------------------------------------
Portugal -- 2.3%
Cimpor-Cimentos de Portugal,
SGPS, SA 25 879
Portugal Telecom SA 19 988
--------
1,867
- ------------------------------------------------------
Spain -- 3.7%
Banco Bilbao Vizcaya, S.A. 27 1,411
Telefonica de Espana 35 1,632
--------
3,043
- ------------------------------------------------------
Sweden -- 2.1%
Telefonaktiebolaget LM Ericsson 58 1,700
- ------------------------------------------------------
Switzerland -- 6.0%
Novartis 2 2,572
Union Bank of Switzerland 3 1,253
Zurich Versicherungs-Gesellschaft 2 1,113
--------
4,938
- ------------------------------------------------------
United Kingdom -- 19.3%
Arriva PLC 146 850
Barclays PLC 40 1,140
Berkeley Group plc 104 1,087
British Aerospace PLC 193 1,479
British Petroleum Company plc 129 1,883
Granada Group plc 47 865
Kingfisher PLC 89 1,430
Lloyds TSB Group plc 82 1,148
National Westminster Bank 82 1,466
Railtrack Group PLC 57 1,392
SmithKline Beecham Plc 91 1,111
Stagecoach Holdings plc 52 1,109
Vodafone Group plc 70 883
--------
15,843
- ------------------------------------------------------
Total Common Stock $67,613
- ------------------------------------------------------
(Identified Cost -- $48,719)
- ------------------------------------------------------
14
<PAGE>
Market
Shares Value
- ------------------------------------------------------
Preferred Shares -- 3.4%
- ------------------------------------------------------
Germany -- 1.4%
Systeme, Anwendungen,
Produkte in der Datenverarbeitung 2 $ 1,103
- ------------------------------------------------------
Italy -- 2.0%
Telecom Italia Mobile (TIM) SpA 493 1,666
- ------------------------------------------------------
Total Preferred Shares $ 2,769
- ------------------------------------------------------
(Identified Cost -- $1,713)
- ------------------------------------------------------
Face
Amount
- ------------------------------------------------------
Repurchase Agreement -- 12.4%
- ------------------------------------------------------
State Street Bank & Trust Company
4.25%, dated 6/30/98, to be
repurchased at $10,215 on 7/1/98
(Collateral: $6,640 United States
Treasury Notes, 10.625%
due 8/15/15, value $10,423) $10,214 10,214
- ------------------------------------------------------
Total Repurchase Agreement $10,214
- ------------------------------------------------------
(Identified Cost -- $10,214)
- ------------------------------------------------------
Total Investments at Value -- 98.2 % $80,596
- ------------------------------------------------------
(Identified Cost -- $60,646)
- ------------------------------------------------------
Other Assets Less Liabilities-- 1.8% $ 1,475
- ------------------------------------------------------
Net Assets Consisting of:
Capital Shares:
Class A shares $29,292
Class C shares 14,343
Class Y shares 7,826
Undistributed net investment income 213
Undistributed net realized
gain on investments and
foreign currency transactions 10,445
Unrealized appreciation
of investments and
foreign currency
transactions 19,952
- ------------------------------------------------------
Net Assets-- 100.0% $82,071
======================================================
- ------------------------------------------------------
Shares of beneficial interest
outstanding (unlimited
number of shares
authorized, no par value)
Class A shares 2,098
Class C shares 542
Class Y shares 317
======================================================
Net asset value,
redemption price
per share -- Class A $ 27.81
======================================================
Maximum offering price
per share -- Class A
(net asset value plus
sales charge of 4.75%
of offering price) $ 29.20
======================================================
Net asset value,
offering price and
redemption price
per share -- Class C $ 27.49
======================================================
Net asset value,
offering price and
redemption price
per share -- Class Y $ 27.84
======================================================
(A) Non-dividend paying investment.
See accompanying notes to financial statements.
15
<PAGE>
STATEMENTS OF OPERATIONS
For the six months ended June 30, 1998 (Unaudited)
(Amounts in Thousands)
<TABLE>
<CAPTION>
Bartlett
Bartlett Bartlett Value Europe
Basic Value Fund International Fund Fund
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Investment Income:
- ---------------------------------------------------------------------------------------------------------------------------
Dividends $ 1,380 $ 1,379 $ 819
Less foreign taxes withheld (7) (147) (93)
Interest 55 (38) 104
- ---------------------------------------------------------------------------------------------------------------------------
Total Investment Income 1,428 1,194 830
- ---------------------------------------------------------------------------------------------------------------------------
Expenses:
- ---------------------------------------------------------------------------------------------------------------------------
Investment advisory fees 522 519 342
Distribution and service fees 175 102 95
Custodian fees 44 73 89
Trustees' fees 26 24 27
Legal and audit fees 23 22 25
Registration fees 15 14 18
Transfer agent and shareholder
servicing expense 14 8 18
Reports to shareholders 12 8 13
Other expenses 3 2 53
Less expenses waived (76) (44) (63)
- ---------------------------------------------------------------------------------------------------------------------------
Total Expenses 758 728 617
- ---------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 670 466 213
- ---------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized
Gain (Loss) on Investments:
Realized gain (loss) on:
Investments 9,788 2,609 9,614
Foreign currency transactions -- (7) 8
Change in unrealized appreciation of:
Investments (2,101) (825) 7,927
Assets and liabilities denominated
in foreign currencies -- (1) (18)
- ---------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized
Gain (Loss) on Investments 7,687 1,776 17,531
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase in Net Assets
from Operations $ 8,357 $ 2,242 $17,744
===========================================================================================================================
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
Bartlett Basic Value Fund
<TABLE>
<CAPTION>
Six Months Nine Months Year
Ended Ended Ended
6/30/98 12/31/97(A) 3/31/97
(Unaudited)
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
From Operations:
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) $ 670 $ 1,061 $ 1,501
Net realized gain (loss) on investments and foreign
currency transactions 9,788 22,534 14,218
Change in unrealized appreciation of investments
and assets and liabilities denominated
in foreign currencies (2,101) 13,090 (1,663)
- ---------------------------------------------------------------------------------------------------------------------------
Change in net assets resulting
from operations 8,357 36,685 14,056
- ---------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:
- ---------------------------------------------------------------------------------------------------------------------------
From net investment income:
Class A shares -- (1,339) (1,781)
Class C shares -- (1) N/A
Class Y shares -- (20) N/A
From net realized gains on security transactions:
Class A shares -- (27,451) (8,971)
Class C shares -- (7) N/A
Class Y shares -- (518) N/A
- ---------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from
distributions to shareholders -- (29,336) (10,752)
- ---------------------------------------------------------------------------------------------------------------------------
From Fund Share Transactions:
- ---------------------------------------------------------------------------------------------------------------------------
Proceeds from shares sold:
Class A shares 4,883 5,649 38,457
Class C shares 1,399 392 N/A
Class Y shares 55 2,501 N/A
Net asset value of shares issued in reinvestment
of shareholder distributions:
Class A shares -- 28,078 10,364
Class C shares -- 8 N/A
Class Y shares -- 538 N/A
Payment for shares redeemed:
Class A shares (10,849) (27,524) (58,553)
Class C shares (58) (10) N/A
Class Y shares (6) (331) N/A
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from Fund share
transactions (4,576) 9,301 (9,732)
- ---------------------------------------------------------------------------------------------------------------------------
Change in Net Assets 3,781 16,650 (6,428)
Net Assets:
Beginning of period 135,858 119,208 125,636
- ---------------------------------------------------------------------------------------------------------------------------
End of period $139,639 $135,858 $119,208
- ---------------------------------------------------------------------------------------------------------------------------
Under/(over)distributed net investment income $ 580 $ (90) $ 210
===========================================================================================================================
</TABLE>
(A) The year end for Bartlett Basic Value Fund was changed from March 31 to
December 31.
See accompanying notes to financial statements.
17
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
Bartlett Value International Fund
<TABLE>
<CAPTION>
Six Months Nine Months Year
Ended Ended Ended
6/30/98 12/31/97(A) 3/31/97
(Unaudited)
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
From Operations:
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) $ 466 $ 244 $ 486
Net realized gain (loss) on investments and foreign
currency transactions 2,602 7,326 5,035
Change in unrealized appreciation of investments
and assets and liabilities denominated
in foreign currencies (826) (5,257) 5,827
- ---------------------------------------------------------------------------------------------------------------------------
Change in net assets resulting
from operations 2,242 2,313 11,348
- ---------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:
- ---------------------------------------------------------------------------------------------------------------------------
From net investment income:
Class A shares -- (973) (486)
Class C shares -- (11) N/A
Class Y shares -- (326) N/A
In excess of net investment income -- -- (47)
From net realized gains on security transactions:
Class A shares -- (6,780) (4,403)
Class C shares -- (54) N/A
Class Y shares -- (1,741) N/A
- ---------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from
distributions to shareholders -- (9,885) (4,936)
- ---------------------------------------------------------------------------------------------------------------------------
From Fund Share Transactions:
- ---------------------------------------------------------------------------------------------------------------------------
Proceeds from shares sold:
Class A shares 4,987 27,946 37,235
Class C shares 3,269 994 N/A
Class Y shares 276 20,134 N/A
Net asset value of shares issued in reinvestment
of shareholder distributions:
Class A shares -- 6,969 3,770
Class C shares -- 65 N/A
Class Y shares -- 2,067 N/A
Payment for shares redeemed:
Class A shares (8,739) (46,911) (35,484)
Class C shares (190) (55) N/A
Class Y shares (4,325) (4,983) N/A
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from Fund share
transactions (4,722) 6,226 5,521
- ---------------------------------------------------------------------------------------------------------------------------
Change in Net Assets (2,480) (1,346) 11,933
Net Assets:
Beginning of period 82,627 83,973 72,040
- ---------------------------------------------------------------------------------------------------------------------------
End of period $80,147 $ 82,627 $ 83,973
- ---------------------------------------------------------------------------------------------------------------------------
Under/(over)distributed net investment income $ (615) $ (1,081) $ --
===========================================================================================================================
</TABLE>
(A) The year end for Bartlett Value International Fund was changed from March 31
to December 31.
See accompanying notes to financial statements.
18
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
Bartlett Europe Fund
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
6/30/98 12/31/97(A)
(Unaudited)
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
From Operations:
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) $ 213 $ (104)
Net realized gain (loss) on investments and foreign currency transactions 9,622 19,781
Change in unrealized appreciation of investments
and assets and liabilities denominated in foreign currencies 7,909 (6,859)
- ---------------------------------------------------------------------------------------------------------------------------
Change in net assets resulting
from operations 17,744 12,818
- ---------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:
- ---------------------------------------------------------------------------------------------------------------------------
From net realized gains on security transactions:
Class A shares -- (16,941)
Class C shares -- (49)
Class Y shares -- (1,741)
- ---------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders -- (18,731)
- ---------------------------------------------------------------------------------------------------------------------------
From Fund Share Transactions:
- ---------------------------------------------------------------------------------------------------------------------------
Proceeds from shares sold:
Class A shares 3,094 1,137
Class C shares 14,500 328
Class Y shares 157 7,693
Net asset value of shares issued in reinvestment
of shareholder distributions:
Class A shares -- 19,433
Class C shares -- 49
Class Y shares -- 1,741
Payment for shares redeemed or repurchased:
Class A shares (11,798) (34,844)
Class C shares (497) (35)
Class Y shares (1,709) N/A
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from Fund share transactions 3,747 (4,498)
Change in Net Assets 21,491 (10,411)
Net Assets:
Beginning of period 60,580 70,991
- ---------------------------------------------------------------------------------------------------------------------------
End of period $ 82,071 $ 60,580
- ---------------------------------------------------------------------------------------------------------------------------
Under/(over)distributed net investment income $ 213 $ --
===========================================================================================================================
</TABLE>
(A) Includes financial information for Bartlett Europe Fund and its predecessor,
Worldwide Value Fund (See note 6).
See accompanying notes to financial statements.
19
<PAGE>
FINANCIAL HIGHLIGHTS
Bartlett Basic Value Fund
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Investment Operations: Distributions From:
-------------------------------------- --------------------
Net Asset Net Realized Total Net Asset
Value, Net and Unrealized From Net Value,
Beginning Investment Gains on Investment Investment Realized Total End of
of Period Income Investments Operations Income Gains Distributions Period
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Class A Shares
Six Months Ended
June 30, 1998 $18.95 $0.10(A) $1.09 $1.19 $ -- $ -- $ -- $20.14
Nine Months Ended
Dec. 31, 1997(+) 18.33 0.19(A) 5.59 5.78 (0.22) (4.94) (5.16) 18.95
Years Ended March 31,
1997 17.94 0.22 1.82 2.04 (0.26) (1.39) (1.65) 18.33
1996 15.39 0.30 3.32 3.62 (0.24) (0.83) (1.07) 17.94
1995 14.89 0.27 1.53 1.80 (0.27) (1.03) (1.30) 15.39
1994 14.76 0.22 0.28 0.50 (0.23) (0.14) (0.37) 14.89
1993 13.47 0.30 1.57 1.87 (0.30) (0.28) (0.58) 14.76
Class C Shares
Six Months Ended
June 30, 1998 $18.75 $0.06(B) $1.03 $1.09 $ -- $ -- $ -- $19.84
Year Ended Dec. 31,
1997(H) 22.84 0.24(B) 0.88 1.12 (0.27) (4.94) (5.21) 18.75
Class Y Shares
Six Months Ended
June 30, 1998 $18.87 $0.12(C) $1.09 $1.21 $ -- $ -- $ -- $20.08
Year Ended Dec. 31,
1997(I) 21.92 0.18(C) 1.94 2.12 (0.23) (4.94) (5.17) 18.87
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratios/Supplemental Data:
------------------------------------------------------------------------
Net
Investment Average Net Assets,
Expenses Income Portfolio Commission End of
Total to Average to Average Turnover Rate Period
Return(D) Net Assets Net Assets Rate Paid(G) (000's)
- -------------------------------------------------------------------------------------------------
<S><C>
Class A Shares
Six Months Ended
June 30, 1998 6.28%(E) 1.09%(A,F) 0.97%(A,F) 30%(F) $0.0764 $135,281
Nine Months Ended
Dec. 31, 1997(+) 33.14%(E) 1.13%(A,F) 1.15%(A,F) 42%(F) 0.0723 133,076
Years Ended March 31,
1997 11.30% 1.16% 1.18% 23% 0.0655 119,208
1996 24.05% 1.17% 1.79% 25% -- 125,636
1995 12.67% 1.20% 1.81% 26% -- 102,721
1994 3.42% 1.20% 1.48% 33% -- 94,289
1993 14.22% 1.21% 2.14% 43% -- 103,507
Class C Shares
Six Months Ended
June 30, 1998 5.81%(E) 1.90%(B,F) 0.26%(B,F) 30%(F) 0.0764 $ 1,769
Year Ended Dec. 31,
1997(H) 6.07%(E) 1.90%(B,F) 1.11%(B,F) 42%(F) 0.0723 395
Class Y Shares
Six Months Ended
June 30, 1998 6.41%(E) 0.83%(C,F) 1.24%(C,F) 30%(F) $0.0764 $ 2,589
Year Ended Dec. 31,
1997(I) 10.97%(E) 0.86%(C,F) 1.51%(C,F) 42%(F) 0.0723 2,387
- -------------------------------------------------------------------------------------------------
</TABLE>
(+) The year end for Bartlett Basic Value Fund was changed from March 31 to
December 31.
(++) 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 for each period would have been as follows: for the nine months
ended December 1997, 1.19%; for the six months ended June 1998, 1.20%.
(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 for each period would have been as follows: 1997, 2.00%; 1998,
2.01%.
(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 for each period would have been as follows: 1997, 0.96%; 1998,
.94%.
(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.
(H) For the period September 12, 1997 (commencement of operations of this
class) to December 31, 1997.
(I) For the period August 15, 1997 (commencement of operations of this class)
to December 31, 1997.
See accompanying notes to financial statements.
20
<PAGE>
FINANCIAL HIGHLIGHTS
Bartlett Value International Fund
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Investment Operations: Distributions From:
-------------------------------------- ----------------------------------
Net Asset Net Realized Total In Excess Net Asset
Value, Net and Unrealized From Net of Net Value,
Beginning Investment Gains on Investment Investment Investment Realized Total End of
of Period Income Investments Operations Income Income Gains Distributions Period
- ------------------------------------------------------------------------------------------------------------------------------------
<S><C>
Class A Shares
Six Months Ended
June 30, 1998 $12.45 $ 0.06(B) $ 0.29 $ 0.35 $ -- $ -- $ -- $ -- $12.80
Nine Months Ended
Dec. 31, 1997(+) 13.64 0.05(B) 0.31 0.36 (0.17) -- (1.38) (1.55) 12.45
Years Ended March 31,
1997 12.59 0.08 1.81 1.89 (0.08) (0.01) (0.75) (0.84) 13.64
1996 11.64 0.13 1.33 1.46 (0.13) (0.01) (0.37) (0.51) 12.59
1995 12.46 0.09 (0.21) (0.12) (0.09) -- (0.61) (0.70) 11.64
1994 10.08 0.07(A) 2.38 2.45 (0.07) -- -- (0.07) 12.46
1993 9.93 0.12 0.15 0.27 (0.10) -- (0.02) (0.12) 10.08
Class C Shares
Six Months Ended
June 30, 1998 $12.30 $ 0.18(C) $ 0.12 $ 0.30 $ -- $ -- $ -- $ -- $12.60
Year Ended Dec. 31,
1997(I) 15.70 0.08(C) (1.82) (1.74) (0.28) -- (1.38) (1.66) 12.30
Class Y Shares
Six Months Ended
June 30, 1998 $12.33 $(0.05)(D) $ 0.42 $ 0.37 $ -- $ -- $ -- $ -- $12.70
Year Ended Dec. 31,
1997(J) 15.27 (0.11)(D) (1.21) (1.32) (0.24) -- (1.38) (1.62) 12.33
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratios/Supplemental Data:
------------------------------------------------------------------------
Net
Investment Average Net Assets,
Expenses Income Portfolio Commission End of
Total to Average to Average Turnover Rate Period
Return(E) Net Assets Net Assets Rate Paid(H) (000's)
- -------------------------------------------------------------------------------------------------
<S><C>
June 30, 1998 2.89%(F) 1.76%(B,G) 1.08%(B,G) 30%(G) $0.0421 $66,959
Nine Months Ended
Dec. 31, 1997(+) 2.79%(F) 1.78%(B,G) 0.49%(B,G) 44%(G) 0.0227 68,648
Years Ended March 31,
1997 15.45% 1.81% 0.62% 31% 0.0296 83,973
1996 12.76% 1.83% 1.06% 38% -- 72,041
1995 (1.18)% 1.83% 0.80% 24% -- 57,664
1994 24.42% 1.88%(A) 0.55%(A) 19% -- 49,607
1993 2.71% 2.00% 1.13% 19% -- 29,572
Class C Shares
Six Months Ended
June 30, 1998 2.44%(F) 2.55%(C,G) 0.59%(C,G) 30%(G) $0.0421 $ 3,942
Year Ended Dec. 31,
1997(I) (10.87)%(F) 2.55%(C,G) (1.68)%(C,G) 44%(G) 0.0227 895
Class Y Shares
Six Months Ended
June 30, 1998 3.00%(F) 1.49%(D,G) 1.26%(D,G) 30%(G) $0.0421 $ 9,246
Year Ended Dec. 31,
1997(J) (8.38)%(F) 1.44%(D,G) (0.75)%(D,G) 44%(G) 0.0227 13,084
- -------------------------------------------------------------------------------------------------
</TABLE>
(+) The year end for Bartlett Value International Fund was changed from March
31 to December 31.
(++) 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 for each period would have been as follows: for the nine months
ended December 1997, 1.95%; for the six months ended June 1998, 1.87%.
(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 for each period would have been as follows: 1997, 2.70%; 1998,
2.66%.
(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 for each period would have been as follows: 1997, 1.59%; 1998,
1.60%.
(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.
(I) For the period July 23, 1997 (commencement of operations of this class) to
December 31, 1997.
(J) For the period August 15, 1997 (commencement of operations of this class)
to December 31, 1997.
See accompanying notes to financial statements.
21
<PAGE>
FINANCIAL HIGHLIGHTS
Bartlett Europe Fund(+)
For a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Investment Operations: Distributions From:
-------------------------------------- ----------------------------------
Net Realized
and Unrealized
Net Asset Net Gains (Losses) on Total In Excess Net Asset
Value, Investment Investments and From Net of Net Value,
Beginning Income Foreign Currency Investment Investment Investment Realized Total End of
of Period (Loss) Transactions Operations Income Income Gains Distributions Period
- ------------------------------------------------------------------------------------------------------------------------------------
<S><C>
Class A Shares
Six Months Ended
June 30, 1998 $20.97 $0.05(A) $ 6.79 $ 6.84 $ -- $ -- $ -- $ -- $27.81
Years Ended Dec. 31,
1997 24.24 (0.05)(A) 4.11 4.06 -- -- (7.33) (7.33) 20.97
1996 21.13 0.02 6.34 6.36 -- -- (3.25) (3.25) 24.24
1995 17.68 0.01 3.50 3.51 (0.06) -- -- (0.06) 21.13
1994 18.46 (0.03) (0.75) (0.78) -- -- -- -- 17.68
1993 14.29 0.14 4.13 4.27 (0.05) (0.05) -- (0.10) 18.46
Class C Shares
Six Months Ended
June 30, 1998 $20.86 $0.17(B) $ 6.46 $ 6.63 $ -- $ -- $ -- $ -- $27.49
Year Ended Dec. 31,
1997(I) 26.56 (0.10)(B) 0.23 0.13 -- -- (5.83) (5.83) 20.86
Class Y Shares
Six Months Ended
June 30, 1998 $21.01 $0.09(C) $ 6.74 $ 6.83 $ -- $ -- $ -- $ -- $27.84
Year Ended Dec. 31,
1997(J) 25.61 (0.04)(C) 1.27 1.23 -- -- (5.83) (5.83) 21.01
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratios/Supplemental Data:
------------------------------------------------------------------------
Net
Investment Average Net Assets,
Expenses Income Portfolio Commission End of
Total to Average to Average Turnover Rate Period
Return(D,E) Net Assets Net Assets Rate Paid(H) (000's)
- -------------------------------------------------------------------------------------------------
<S><C>
Class A Shares
Six Months Ended
June 30, 1998 32.6%(F) 1.79%(A,G) 0.57%(A,G) 113%(G) $0.0526 $58,332
Years Ended Dec. 31,
1997 17.5% 1.90%(A) (0.12)%(A) 123% 0.0374 52,253
1996 31.5% 2.00% 0.10% 109% 0.0313 70,991
1995 19.9% 2.10% 0.10% 148% -- 62,249
1994 (3.7)% 2.10% -- 75% -- 53,135
1993 29.9% 2.10% 0.90% 67% -- 55,486
Class C Shares
Six Months Ended
June 30, 1998 31.8%(F) 2.50%(B,G) 0.68%(B,G) 113%(G) $0.0526 $14,899
Year Ended Dec. 31,
1997(I) 0.7%(F) 2.50%(B,G) (1.79)%(B,G) 123% 0.0374 302
Class Y Shares
Six Months Ended
June 30, 1998 32.6%(F) 1.48%(C,G) 0.82%(C,G) 113%(G) $0.0526 $ 8,840
Year Ended Dec. 31,
1997(J) 4.9%(F) 1.31%(C,G) (0.60)%(C,G) 123% 0.0374 8,025
- -------------------------------------------------------------------------------------------------
</TABLE>
(+) 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 21,
1997, the Worldwide Value Fund operated as a closed-end fund (See note 6).
(++) 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 21, 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% until April 30, 1998; and 1.85% until
May 1, 1999. If no fees had been waived, the annualized ratio of expenses
to average daily net assets for each period would have been as follows:
1997, 2.08%; 1998, 1.97%.
(B) Net of fees waived pursuant to a voluntary expense limitation of 2.50%
until April 30, 1998; and 2.60% until May 1, 1999. If no fees had been
waived, the annualized ratio of expenses to average daily net assets for
each period would have been as follows: 1997, 2.68%; 1998, 2.68%.
(C) Net of fees waived pursuant to a voluntary expense limitation of 1.50%
until April 30, 1998; and 1.60% until May 1, 1999. If no fees had been
waived, the annualized ratio of expenses to average daily net assets for
each period would have been as follows: 1997, 1.49%; 1998, 1.66%.
(D) Prior to July 21, 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.
(I) For the period July 23, 1997 (commencement of operations of this class) to
December 31, 1997.
(J) For the period August 21, 1997 (commencement of operations of this class)
to December 31, 1997.
See accompanying notes to financial statements.
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1998 (Unaudited)
(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 a "Fund").
Each Fund consists 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 21, 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 21, 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. ("Adviser") 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 Adviser 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 that its
sub-adviser, Lombard Odier International Portfolio Management Limited ("Lombard
Odier"), believes are undervalued.
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 and options 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.
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.
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS (cont.)
Security Transactions - Security transactions are accounted for on a trade
date basis, which is the date the order to buy or sell is executed.
Federal Income Taxes - No provision for federal income or excise taxes is
required since each Fund intends to continue to qualify as a regulated
investment company and distribute all of its taxable income to its 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 six months ended June 30,
1998.
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
24
<PAGE>
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 fund may not be able to enter into a closing transaction because of an
illiquid secondary market. There were no open futures contracts at June 30,
1998.
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 adviser 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.
For the six months ended June 30, 1998, Basic Value, Value International,
and Bartlett Europe 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 Adviser.
At June 30, 1998, receivables for securities sold but not yet delivered and
payables for securities purchased but not yet received for each Fund were as
follows:
Receivable for Payable for
Securities Sold Securities Purchased
- ---------------------------------------------------------------
Basic Value $ 541 $ --
- ---------------------------------------------------------------
Value International -- --
- ---------------------------------------------------------------
Europe Fund 1,816 1,277
- ---------------------------------------------------------------
3 Investment Transactions
Investment transactions (excluding short-term securities) were as follows
for the six months ended June 30, 1998:
Basic Value Europe
Value International Fund
- -------------------------------------------------------------------------
Purchases of investment securities $20,077 $11,675 $35,847
- -------------------------------------------------------------------------
Proceeds from sales and maturities
of investment securities $21,373 $14,559 $45,442
- -------------------------------------------------------------------------
The following amounts are based on cost for both financial reporting and
federal income tax purposes as of June 30, 1998:
Basic Value Europe
Value International Fund
- ------------------------------------------------------------------
Unrealized appreciation $46,590 $16,023 $20,672
Unrealized depreciation (4,110) (10,635) (722)
- ------------------------------------------------------------------
Net unrealized appreciation
(depreciation) $42,480 $ 5,388 $19,950
- ------------------------------------------------------------------
Federal income tax cost
of investments $96,490 $74,572 $60,646
- ------------------------------------------------------------------
4 Transactions with Affiliates and Related Parties
The officers of the Trust are shareholders or employees of the Adviser or
Legg Mason Wood Walker, Incorporated ("LMWW"). LMWW is affiliated with the
Adviser through their common parent company, Legg Mason, Inc. The Adviser became
a wholly owned subsidiary of Legg Mason, Inc. in January 1996. Bartlett
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS (cont.)
Capital Trust's investments were managed by the Adviser under the terms of a
Management Agreement. Under the Management Agreement that was effective through
July 20, 1997, the Adviser 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 Adviser 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 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 an
Investment Management and Administration Agreement ("Agreement"). Under the
Agreement, the Adviser 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
Adviser (not Europe Fund) a monthly fee at the rate of 60% of the monthly fee
actually paid to the Adviser by Europe Fund under the Agreement, taking into
account any fee waiver arrangements in effect.
The Adviser has agreed to waive fees to the extent the expenses
attributable to Class A, C and Y shares (exclusive of taxes, interest, brokerage
and extraordinary expenses) exceed during any month annual rates based on each
respective class' average daily net assets as follows: 1.15%, 1.90% and 0.90%,
respectively, for Basic Value; 1.80%, 2.55% and 1.55%, respectively, for Value
International; and 1.85%, 2.60% and 1.60%, respectively, for Europe Fund. Fees
in excess of these limits will be waived through May 1, 1999. For the six months
ended June 30, 1998, advisory fees of $76, $44 and $63 were waived for all
classes of Basic Value, Value International and Europe Fund, respectively. At
June 30, 1998, amounts due to the Adviser were as follows: Basic Value, $75;
Value International, $51; and Europe Fund, $59.
LM Financial Partners, Inc., distributor of the Funds, and an affiliate of
the Adviser, 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 distribution and
service fees at an annual rate of 0.75% and 0.25%, respectively, of average
daily net assets of each Fund's Class C shares. These fees are calculated daily
and paid monthly.
LMWW 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 six months ended June 30, 1998: Basic Value, $4; Value
International, $3; and Europe Fund, $5.
26
<PAGE>
5 Line of Credit
The Funds, along with certain other Legg Mason funds, participate in a $150
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 six months ended June 30, 1998, the Funds had
no borrowings under the line of credit.
6 Reorganization of Worldwide Value Fund, Inc.
On July 18, 1997, 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:
27
<PAGE>
NOTES TO FINANCIAL STATEMENTS (cont.)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Basic Value Value International Europe Fund
For the Six For the Nine For the Six For the Nine For the Six For the Period
Months Ended Months Ended Months Ended Months Ended Months Ended 7/21/97 through
Class A 6/30/98 12/31/97 6/30/98 12/31/97 6/30/98 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Shares sold 243 273 398 1,960 114 27
Shares issued in reinvestment
of distributions -- 1,550 -- 565 -- 890
- ---------------------------------------------------------------------------------------------------------------------------
243 1,823 398 2,525 114 917
Less shares redeemed (548) (1,305) (683) (3,164) (508) (1,354)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in shares outstanding (305) 518 (285) (639) (394) (437)
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Basic Value Value International Europe Fund
For the Six For the Period For the Six For the Period For the Six For the Period
Months Ended 9/12/97 through Months Ended 7/23/97 through Months Ended 7/23/97 through
Class C 6/30/98 12/31/97 6/30/98 12/31/97 6/30/98 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Shares sold 71 21 255 72 546 13
Shares issued in reinvestment
of distributions -- 1 -- 5 -- 2
- ---------------------------------------------------------------------------------------------------------------------------
71 22 255 77 546 15
Less shares redeemed (3) (1) (15) (4) (18) (1)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in shares outstanding 68 21 240 73 528 14
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Basic Value Value International Europe Fund
For the Six For the Period For the Six For the Period For the Six For the Period
Months Ended 8/15/97 through Months Ended 8/15/97 through Months Ended 8/21/97 through
Class Y 6/30/98 12/31/97 6/30/98 12/31/97 6/30/98 12/31/97
- ---------------------------------------------------------------------------------------------------------------------------
<S><C>
Shares sold 2 112 16 1,295 6 299
Shares issued in reinvestment
of distributions -- 30 -- 170 -- 83
- ---------------------------------------------------------------------------------------------------------------------------
2 142 16 1,465 6 382
Less shares redeemed -- (15) (349) (404) (71) --
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease)
in shares outstanding 2 127 (333) 1,061 (65) 382
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
TRUSTEES AND OFFICERS
<TABLE>
<S><C>
- --------------------------------------------------------------------------------------
Lorrence T. Kellar Chairman of the Board and Trustee
Edward A. Taber, III President
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
- --------------------------------------------------------------------------------------
Investment Adviser 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 PricewaterhouseCoopers LLP
Baltimore, Maryland
Legal Counsel Kirkpatrick & Lockhart LLP
Washington, DC
- --------------------------------------------------------------------------------------
</TABLE>
Bartlett & Co.
------------------------------
REGISTERED INVESTMENT ADVISORS
- --------------------------------------------------------------------------------
36 East Fourth Street, Cincinnati, OH 45202-3896 o 513-345-6212
800-800-3609 o FAX 513-621-6462
29
