BARTLETT
MUTUAL FUNDS
ANNUAL REPORT
DECEMBER 31, 1998
BARTLETT
BASIC VALUE FUND
BARTLETT
VALUE INTERNATIONAL FUND
BARTLETT
EUROPE FUND
BARTLETT
FINANCIAL SERVICES FUND
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BARTLETT & CO.
PROFILE
[BARTLETT MUTUAL FUNDS GRAPHIC HERE]
Bartlett & Co., headquartered in Cincinnati, Ohio, is an asset management firm
which manages over $3.2 billion for individuals, family groups and institutions.
Established in 1898, Bartlett & Co. has built a reputation among individual and
institutional investors of strong performance and superior client service for
the last century.
Bartlett & Co. offers its clients a diversity of services through four business
divisions:
o MUTUAL FUNDS
o INSTITUTIONAL CLIENT SERVICES
o PRIVATE CLIENT SERVICES
o REAL ESTATE PROGRAMS
Our tradition of excellence, the breadth of our services and the depth of our
experience give Bartlett & Co. the capabilities to serve as your financial
advisor.
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<TABLE>
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CONTENTS
Pages
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Bartlett & Co. Profile Inside Cover
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President's Letter 2
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Reports to Shareholders
Bartlett Basic Value Fund 3
Bartlett Value International Fund 5
Bartlett Europe Fund 6
Bartlett Financial Services Fund 7
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Growth of a $10,000 Investment
Bartlett Basic Value Fund 8
Bartlett Value International Fund 10
Bartlett Europe Fund 11
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Industry Diversification 13
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Statements of Net Assets
Bartlett Basic Value Fund 14
Bartlett Value International Fund 16
Bartlett Europe Fund 18
Bartlett Financial Services Fund 20
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Statements of Operations 22
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Statements of Changes in Net Assets
Bartlett Basic Value Fund 23
Bartlett Value International Fund 24
Bartlett Europe Fund 25
Bartlett Financial Services Fund 26
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Financial Highlights
Bartlett Basic Value Fund 27
Bartlett Value International Fund 28
Bartlett Europe Fund 29
Bartlett Financial Services Fund 30
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Notes To Financial Statements 31
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Report of Independent Accountants 37
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Trustees and Officers Back Cover
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</TABLE>
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.
<PAGE>
PRESIDENT'S LETTER
Dear Shareholder,
We are pleased to provide you with the annual report for the Bartlett Capital
Trust, comprised of the Bartlett Basic Value Fund, the Bartlett Value
International Fund, the Bartlett Europe Fund and the recently introduced
Bartlett Financial Services Fund covering the year ended December 31, 1998.
During the quarter ended December 31, 1998, USequity markets rebounded strongly
from the third quarter selloff. Once again, though, the pattern of the last year
persisted, with good performance concentrated in a small group of the very
largest capitalization stocks.
During 1998, attention increasingly focused on the Year 2000 issue. As you may
know, the Year 2000 issue is a computer programming problem that affects the
ability of computers to correctly process dates of January 1, 2000, and beyond.
The Funds' Year 2000 project is well underway, and is designed to ensure
that the Year 2000 date change will have no adverse impact on our ability to
service our clients. The Funds are committed to taking those steps necessary to
protect our investors including efforts to determine that the Year 2000 problem
will not affect such vital service functions as shareholder transaction
processing and recordkeeping. In addition, we are continuously monitoring the
Year 2000 efforts of our vendors, and will perform tests with our critical
vendors throughout 1999. Although the Funds are taking steps to ensure that all
of their systems will function properly before, during, and after the Year 2000,
the Funds could be adversely affected by computer related problems associated
with the Year 2000. Contingency plans to ensure that functions critical to the
Funds' operations will continuing without interruption are under development. We
are on target to complete this important project and look forward to continuing
extensive testing (including industry-wide testing) with our industry peers,
regulators and vendors throughout 1999.
On the following pages, the portfolio managers for the four Funds discuss each
Fund's performance and the investment outlook.
The Board of Trustees approved the following dividends and distributions per
share which were payable to shareholders of record on November 24th for Basic
Value and Value International, and December 9th for Europe Fund:
<TABLE>
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Class A Class C Class Y
<S> <C> <C> <C>
Basic Value:
Ordinary Income Dividend $0.049 $0.031 $0.067
Long-term Capital Gain Distribution $0.636 $0.636 $0.636
Value International:
Ordinary Income Dividend $0.081 $0.024 $0.023
Europe Fund:
Ordinary Income Dividend $0.43 $0.36 $0.57
Short-term Capital Gain Distribution $1.92 $1.92 $1.92
Long-term Capital Gain Distribution $2.10 $2.10 $2.10
</TABLE>
We appreciate your support and we welcome your comments or questions.
Sincerely,
/S/ EDWARD A. TABER, III
------------------------
Edward A. Taber, III
President
<PAGE>
BARTLETT
BASIC VALUE
FUND REPORT
(BARTLETT MUTUAL FUNDS LOGO)
Enclosed is the December 31, 1998 appraisal of your investment portfolio
as well as performance data which covers the tenure of our management. Recent
investment results are summarized as follows:
Quarter Year
Ended Ended
12/31/98 12/31/98
Basic Value* 15.1% 3.8%
S&P 500 Index (large-cap) 21.3% 28.6%
BARRA Value Index1 17.4% 14.7%
Barra Mid-Cap Value Index 15.3% 4.7%
Russell 2000 Value Index (small-cap) 9.1% (6.5)%
EAFE (foreign) 20.7% 20.1%
The Chinese expression "May you live in interesting times" can be taken as
either a blessing or a curse. The capital markets in 1998 had elements of both
sentiments. Of course, every year has its list of winners and losers.
The year 1998 will go down as one of the most extreme examples of polarity
in the equity markets. Large stocks strongly outperformed small stocks while
growth stocks far outpaced value stocks. The noteworthy events in the world,
from impeachment hearings to the world financial crisis and the collapse of the
Russian economy, certainly helped to contribute to this ying and yang among
market sectors. Just as significant was that record volatility on a daily level
picked up to an extreme rarely seen since the 1930's. The numbers tell the story
best. THE WALL STREET JOURNAL reported that the average mutual fund investing in
large growth companies returned 35.7% in 1998 while small value funds LOST 6.6%.
Of course, our approach utilizes value stocks diversified across market cap
lines. Although we avoided some of the worst extremes of the market as noted
above, it continued to be difficult to perform well as a value investor without
substantial exposure to the largest U.S. companies. This was made apparent by
the fact that the fifty largest S&P 500 stocks were up 52% last year while the
smallest 100 were down 18%.
In spite of performance that paralleled a mid-cap value benchmark, we were
not satisfied with our stock selection in 1998. Our choices in technology and
energy were poor and several stocks, such as COLUMBIA HCA, TOYS "R" US and
WESTERN RESOURCES came up short of our
- --------------------------------------------------------------------------------
Measuring Both Risk and Return
Bartlett Basic Value Fund vs Standard & Poor's 500 Index
May 31, 1983 to December 31, 1998
(A bar graph appears here. See the table below for plot points.)
BARTLETT BASIC S&P 500
VALUE FUND INDEX
RETURN 12.7% 17.4%
RISK 12.1% 14.8%
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 December 31, 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.
- --------------------------------------------------------------------------------
*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 9.
3
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expectations. Nevertheless, there were several outstanding contributors to our
performance in 1998, most of which, not surprisingly, were the large companies:
TIME WARNER, FORD, TYCO, MCDONALD'S and KANSAS CITY SOUTHERN INDUSTRIES. Our
analysis and patience were amply rewarded for identifying these value stocks
that have strong growth characteristics.
There were very few transactions in the portfolio during the fourth
quarter. Positions in POTASH, H&R BLOCK and LOCKHEED MARTIN were increased. In
the case of POTASH and LOCKHEED MARTIN, these have been very successful
long-term investments for us and recent price declines have created compelling
values once again. H&R BLOCK is a more recent investment that we continue to
increase at appropriate prices. Its dominant share of a great business, tax
preparation, has been further enhanced by the offering of additional financial
planning products and services. Our position in MCDONALD'S was reduced as its
price earnings ratio and long-term growth prospects indicated increasingly less
value. It does remain a sizable holding due to its sustainable global growth
prospects and attractive financial characteristics. PIONEER STANDARD ELECTRONICS
was eliminated from the portfolio due to deteriorating financial strength and
negative business conditions.
We believe the advantage of including small- to mid-size stocks in a
diversified portfolio will once again become apparent and the valuation extremes
that exist today make us more confident that the issue is WHEN, and not if, this
will happen.
Thank you for your support and we wish you a healthy and prosperous New
Year.
Sincerely,
/s/ JAMES A. MILLER /s/ WOODROW H. UIBLE
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James A. Miller, CFA Woodrow H. Uible, CFA
Portfolio Manager Portfolio Manager
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(1) The BARRA Value Index is a capitalization-weighted index constructed by
dividing the stocks in an S&P index into two components (growth or value)
according to book-to-price ratios. The BARRA Value Index is comprised of
companies with higher book-to-price ratios, lower price-to-earnings ratios,
higher dividend yields, and lower historical and predicted earnings growth.
Largest Industry Allocations
Bartlett Basic Value Fund vs Standard & Poor's 500 Index
December 31, 1998
(A bar chart appears here. See the table below for plot points.)
Percent of Total Portfolio
Fund S&P 500
Finance 23% 18%
Transportation 15 1
Consumer Cyclical 15 13
Basic Insdustry 13 7
Consumer Sales 11 11
Technology Defense 9 22
4
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BARTLETT
VALUE INTERNATIONAL
FUND REPORT
(BARTLETT MUTUAL FUNDS LOGO)
Stock markets globally displayed the symptoms of a manic/depressive
disorder, moving from the extreme fear and risk aversion that characterized the
third quarter to the "irrational exuberance" that US and European investors have
grown to expect in the fourth quarter of 1998. Mr. Greenspan himself supplied
the St. John's Wort that was responsible for much of the party atmosphere, in
the form of three rapid fire interest rate cuts to try to ensure continued US
economic growth. European central banks followed with a small interest rate cut
of their own, and some of the beleaguered Asian economies were also able to
lower rates. The cuts, along with mega-merger activity among some of the world's
largest companies and continued optimism in US technology stocks, were enough to
restart markets in most parts of the world. The need for medication will
probably continue, as very low inflation and incipient weakness in some of the
world's largest economies continue to generate uncertainty.
Asian and European markets contributed about equally to the Europe,
Australia, and Far East (EAFE) Index's fourth quarter rise of 20.7%. The Morgan
Stanley Capital International All Country ex US (MSCI AC ex US) Index rose
19.8%, indicating a more cautious recovery in emerging markets, especially in
Latin America. Japan's market rose 26.8% in dollar terms, almost totally due to
the increase in the value of the yen against the dollar. For the calendar year
1998, the EAFE increased by 20.1%, slightly less than the fourth quarter's gain,
while the MSCI AC ex US rose a more muted 12%, restrained by less exposure to
European stocks and more in emerging markets. Japan's market rose 5.1% for the
year, with yen strength offsetting market price decline. Stocks with exposure to
energy, commodities or more cyclical industries continued to lag markets, while
consumer, finance and technology-related stocks did well. Valuations in basic
materials and industrial sectors are very low, but in a deflationary
environment, there is little to trigger any improvement in these areas.
The Bartlett Value International Fund gained 12.9%+ for the quarter, while
the year was a disappointing -2.9%.+ Lower exposure to European stocks earlier
in the year, along with some investment in medium and smaller sized companies in
cyclical sectors held back results. The Japanese holdings in the portfolio,
including SECOM, FUJITSU and ITO YOKADO, did well, while more cyclical companies
like BUDERUS, TOTAL and ASSIDOMAN fell in value. The rapid rebound in markets,
especially in the US and Europe, mean that stock valuations for the large, well
known companies have returned to new highs. At the same time, companies are
facing a climate of slower growth and more fragile financial and political
structures. The new year brings a number of new challenges to those in charge of
governments and economies -- a new currency in Europe, a search for growth in
Japan, and restructuring a financial system in Asia. These challenges could lead
to unforseen problems, but also open up new opportunities for investment in
areas that have been less popular in recent years.
/s/ Madelynn M. Matlock
Madelynn M. Matlock, CFA
Portfolio Manager
+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 pages 10 & 11.
PORTFOLIO COMPOSITION
BARTLETT VALUE INTERNATIONAL FUND VS
EUROPE/AUSTRALIA, FAR EAST (EAFE) INDEX*
DECEMBER 31, 1998
(A bar graph appears here. See the table below for plot points.)
Fund EAFE Index
Americas 17% 0%
Europe 53% 73%
Pacific 30% 27%
Japan 19% 21%
*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.
5
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BARTLETT
EUROPE
FUND REPORT
Quarter Year
Ended Ended
12/31/98 12/31/98
Bartlett Europe Fund* 23.0% 41.9%
MSCI Europe Index 5.1% 37.1%
MSCI EAFE Index 20.7% 20.1%
S&P 500 Index 21.3% 28.6%
Market Review
[BARTLETT MUTUAL FUNDS LOGO]
Our last report ended on an optimistic note. European investors enjoyed
good absolute performance during the first six months of the year as equity
markets powered to new highs. International events, notably in the Far East,
seemed to have paled away during the first half of the year, or at least have
been ring-fenced, and all appeared well with the world. However July's
exuberance proved short-lived. Cautious comments from Mr. Greenspan in his
semi-annual testimony to Congress prompted profit taking, which accelerated as
events unfolded through the third quarter, especially in August. The strong
fundamental story that spurred European markets in the first half of the year
had not changed dramatically. Indeed, it was the earlier ignored problems of
Southeast Asia and Japan that returned to torment investors. Add to this, events
in Russia, Brazil's debt funding problem, Venezuelan devaluation and the
emergence of over-leverage in the hedge fund Long-Term Capital Management
("LTCM"), then perhaps weakness should have been expected.
Within the European markets the contagion was most notably felt in the
banking and insurance sectors, which had been the first half's stockmarket
darlings. The falls in these two sectors were fairly indiscriminate. Institution
after institution revealed the extent of their exposure to either Russia, Latin
America, or LTCM, and even those institutions with the most prudent reputations
did not escape untarnished. There seemed little in the way of abatement in
bearish sentiment during September as the stockmarket weighed up several further
high profile profit warnings. Hand in hand with the downward spiral in prices
was the emergence of greater daily and indeed intra-day volatility, although
volumes in all the major European stock exchanges remained relatively subdued.
Against this backdrop, European bond markers continued to perform strongly,
reaching all time lows in yield terms.
The final quarter of the year was entered with some trepidation and by the
second week of October the second half's fall had wiped out the year's earlier
gain. However, this proved to be the low point in the quarter. Buoyed by
rebounds in other markets, notably America, the European indices turned around
to post gains just short of 20% for the final quarter. Concerted Central Bank
monetary easing, initiated by the US Federal Reserve, appeared to have resolved
or at least marginalised the events that had previously taken on cataclysmic
proportions. Indeed the newly formed European Central Bank and member countries
decided to bring European interest rate convergence forward a month to the end
of November rather than December. This was followed by a further cut in rates to
3% where Euro-rates finished the end of the year.
Despite the extreme top-down gyrations, the bottom- up fundamentals for
European equity prices remained compelling throughout the year. Whilst earnings
in aggregate were reduced very slightly to reflect the generally slower economic
conditions, on a global basis they remained considerably higher than the World
average. Companies exposed to the faster growing areas of peripheral Europe,
namely, Ireland, Italy, Spain and Portugal continued to offer better returns.
The corporate restructuring in the core markets of Germany, France and
Switzerland continued to gather momentum and this helped to offset the weaker
economic activity in performance terms. Significant European and global
alliances have been formed, most notably perhaps the mergers of BP AMOCO and
DAIMLERCHRYSLER, both of which the Fund owns. But as a general theme growth
stocks remained very much in vogue, particularly in the mobile telecommunication
sector irrespective of the country of domicile, and here again the Fund holds a
healthy weighting.
Outlook
Looking into 1999 we cannot ignore the fact that economically speaking the
year will be a much different one than we might have expected at the start of
1998. The well-documented "Goldilocks Scenario" has been dented and earnings
disappointments will be very much a feature of the coming months. However, we
expect that the birth of the new Euro currency can provide continued impetus to
prices and that liquidity flows will remain supportive. The safe haven status of
European equity markets was undoubtedly confirmed for the diversifying
international investor in 1998. The growth stimulated in the peripheral
economies by interest reductions is not a short-term phenomenon and the ongoing
restructuring of corporate Europe will take considerable time. In conclusion,
our confidence in the asset class is undiminished and we believe that our stock
selection process coupled to Europe's fundamental strength can provide further
positive returns in the coming year.
/s/ Neil Worsley Neil Worsley
/s/ William Lovering 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 12.
6
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BARTLETT
FINANCIAL SERVICES
FUND REPORT
(BARTLETT MUTUAL FUNDS LOGO)
The Bartlett Financial Services Fund has been up and running since the
middle of November. According to investment experts, funds introduced in the
last two months of the year generally don't attract many investors. However, we
have been quite pleased with our initial success as we ended 1998 with more than
$22 million in assets.
This asset accumulation has been most encouraging, as the market has not
been favorably disposed toward financial stocks. They continue to be hurt by
what we note as the "January Effect." We define the "January Effect" as that
period after year-end when Wall Street financial analysts always seem to
downgrade financial stocks because they don't believe in the managements'
earnings projections. As we move through the first quarter, analysts become more
positive as they see first quarter earnings being better than previously
expected. The "January Effect" has been noted since 1991, which marked the first
year of bank stocks' record performance. Also affecting recent market
performance has been the upward pressure on interest rates. This has occurred
because of the 5.6% GDP increase in the fourth quarter of 1998 which had much
stronger economic growth than originally anticipated. This pushed money out of
the bond market into the stock market, creating a moderate increase in long
rates and, consequently, an improved yield curve. Apparently unbeknownst to
investors, financial stocks, especially bank stocks, will do much better with a
positively sloping yield curve. We continue to believe that GDP growth in 1999
will fall between 2-3%, that there will be no Fed tightening in 1999, and that
inflation, which dropped to 0.8%, will not be a significant occurrence. Also,
while the Y2K issue will receive a lot of press this year, our research
indicates that financial stocks are at the top of the ladder in being prepared
for this event. A great deal of money has already been spent preparing for Y2K
and testing should be completed for most banks by June 30th.
Since the Fund is in its infancy, it is fruitless to talk about the changes
made to the portfolio but the industry breakdown of the Fund as of December 31,
1998 is:
Regional Banks 39.8%
Super-Regional Banks 7.4%
Savings and Loan 4.7%
Insurance 9.7%
Brokerage 5.9%
Financial Technology Co. 8.4%
Finance 1.1%
Miscellaneous 22.4%
We would anticipate that this breakdown will stay relatively constant.
Currently our regional bank holdings (our largest category) trade at
between 15x to 16x our 1999 earnings estimates, which compares to 29x for the
S&P 500. We are projecting double-digit earnings increases for our bank holdings
in 1999 and continue to be optimistic that market performance will follow
earnings performance. While January has been discouraging, we are nothing but
optimistic about the future, realizing of course that potential currency
devaluations and other as yet unforeseen problems have the potential to disrupt
our positive investment scenario.
Gray, Seifert & Co., Inc.
7
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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 each Fund for the periods indicated. Returns for Class A shares
reflect the maximum sales charge of 4.75% (the Average Annual Total Return table
within each Class A chart provides information both including and excluding the
effect of the maximum sales charge). A contingent deferred sales charge may be
imposed under certain circumstances on Class A and C shares. Please refer to the
prospectus for details. 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 Financial Services Fund since the
Fund only began operations on November 16, 1998 and the information would not be
meaningful.
Bartlett Basic Value Fund
Class A Shares
December 31, 1988 through December 31, 1998
Average Annual Total Returns
For periods ended December 31, 1998
- --------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years Life of the Fund
(since 5/5/83)
- --------------------------------------------------------------------------------
3.76%* 16.73%* 16.01%* 12.64%* 12.70%*
(1.19%) 14.86% 14.89% 12.09% 12.35%
- --------------------------------------------------------------------------------
(A bar graph appears here. See the table below for plot points.)
<TABLE>
<CAPTION>
12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
S&P 500 10,000 13,163 12,754 16,631 17,896 19,696 19,955 27,445 33,742 44,995 57,864
Basic Value Fund 9,525 10,635 9,614 12,110 13,350 14,906 14,966 19,689 23,217 30,184 31,313
</TABLE>
*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 in the
table 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.
8
<PAGE>
Bartlett Basic Value Fund
Class C Shares
September 12, 1997 through December 31, 1998
Average Annual Total Returns
For periods ended December 31, 1998
- --------------------------------------------------------------------------------
1 Year Life of the Fund
(since 9/12/97)
- --------------------------------------------------------------------------------
2.96% 6.99%
- --------------------------------------------------------------------------------
(A bar graph appears here. See the table below for plot points.)
<TABLE>
<CAPTION>
9/12/97 9/30/97 12/31/97 3/31/98 6/30/98 9/30/98 12/31/98
<S> <C> <C> <C> <C> <C> <C> <C>
S&P 500 Index 10,000 10,547 10,850 12,363 12,773 11,505 13,953
Basic Value Fund--
Class C 10,000 10,380 10,607 11,653 11,223 9,500 10,921
</TABLE>
The Standard & Poor's 500 Index is a broad-based unmanaged index of common
stocks commonly used to measure general stock market activity. Index returns are
for the periods beginning August 31, 1997.
Bartlett Basic Value Fund
Class Y Shares
August 15, 1997 through December 31, 1998
Average Annual Total Returns
For periods ended December 31, 1998
- --------------------------------------------------------------------------------
1 Year Life of the Fund
(since 8/15/97)
- --------------------------------------------------------------------------------
3.99% 9.65%
- --------------------------------------------------------------------------------
(A bar graph appears here. See the table below for plot points.)
<TABLE>
<CAPTION>
8/15/97 9/30/97 12/31/97 3/31/98 6/30/98 9/30/98 12/31/98
<S> <C> <C> <C> <C> <C> <C> <C>
S&P 500 Index 10,000 9,957 10,243 11,670 12,058 10,681 13,172
Basic Value Fund--
Class Y 10,000 10,651 10,922 12,022 11,622 9,859 11,359
</TABLE>
The Standard & Poor's 500 Index is a broad-based unmanaged index of common
stocks commonly used to measure general stock market activity. Index returns are
for the periods beginning July 31, 1997.
9
<PAGE>
Growth of a $10,000 Investment - continued
Bartlett Value International Fund
Class A Shares
October 6, 1989 through December 31, 1998
Average Annual Total Returns
For periods ended December 31, 1998
- --------------------------------------------------------------------------------
1 Year 3 Years 5 Years Life of the Fund
(since 10/6/89)
- --------------------------------------------------------------------------------
(2.88)%* 6.16%* 5.37%* 6.38%*
(7.49)% 4.46% 4.36% 5.82%
(A bar graph appears here. See the table below for plot points.)
<TABLE>
<CAPTION>
10/6/89 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Value International
Fund--Class A 9,525 9,696 8,288 10,070 9,885 12,984 12,916 14,098 16,361 17,336 16,865
EAFE Index 10,000 10,453 8,002 8,972 7,880 10,446 11,259 12,520 13,277 13,514 16,216
</TABLE>
*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 in the
table 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. Index returns are for the periods
beginning September 30, 1989.
Bartlett Value International Fund
Class C Shares
July 23, 1997 through December 31, 1998
Average Annual Total Returns
For periods ended December 31, 1998
- --------------------------------------------------------------------------------
1 Year Life of the Fund
(since 7/23/97)
- --------------------------------------------------------------------------------
(3.64)% (10.01)%
(A bar graph appears here. See the table below for plot points.)
<TABLE>
<CAPTION>
7/23/97 9/30/97 12/31/97 3/31/98 6/30/98 9/30/98 12/31/98
<S> <C> <C> <C> <C> <C> <C> <C>
EAFE Index 10,000 9,772 9,006 10,331 10,441 8,957 10,807
Value International
Fund--Class C 10,000 10,070 8,912 9,600 9,129 7,617 8,588
</TABLE>
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. Index returns are for the periods beginning August 31, 1997.
10
<PAGE>
Bartlett Value International Fund
Class Y Shares
August 15, 1997 through December 31, 1998
Average Annual Total Returns
For periods ended December 31, 1998
- --------------------------------------------------------------------------------
1 Year Life of the Fund
(since 8/15/97)
- --------------------------------------------------------------------------------
(2.65)% (9.80)%
(A bar graph appears here. See the table below for plot points.)
<TABLE>
<CAPTION>
8/15/97 9/30/97 12/31/97 3/31/98 6/30/98 9/30/98 12/31/98
<S> <C> <C> <C> <C> <C> <C> <C>
EAFE Index 10,000 9,772 9,006 10,331 10,441 8,957 10,807
Value International
Fund--Class Y 10,000 10,044 8,905 9,620 9,172 7,670 8,670
</TABLE>
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. Index returns are for the periods beginning July 31, 1997.
Bartlett Europe Fund
Class A Shares
December 31, 1988 through December 31, 1998
Average Annual Total Returns
For periods ended December 31, 1998
- --------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years Life of the Fund
(since 08/19/86)
- --------------------------------------------------------------------------------
41.85%* 29.92%* 20.29%* 11.25%* 10.01%*
35.09% 27.83% 19.12% 10.72% 9.58%
(A bar graph appears here. See the table below for plot points.)
<TABLE>
<CAPTION>
12/31/88 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MSCI Europe Index 10,000 12,851 12,357 13,977 13,319 17,219 17,612 21,420 25,937 32,111 41,271
Europe Fund--
Class A 9,525 10,712 8,510 9,111 8,458 10,988 10,523 12,618 16,597 19,505 27,674
</TABLE>
*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 in the
table 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.
11
<PAGE>
Growth of a $10,000 Investment - continued
Bartlett Europe Fund
Class C Shares
July 23, 1997 through December 31, 1998
Average Annual Total Returns
For periods ended December 31, 1998
- --------------------------------------------------------------------------------
1 Year Life of the Fund
(since 7/23/97)
- --------------------------------------------------------------------------------
40.48% 27.13%
(A bar graph appears here. See the table below for plot points.)
<TABLE>
<CAPTION>
7/23/97 9/30/97 12/31/97 3/31/98 6/30/98 9/30/98 12/31/98
<S> <C> <C> <C> <C> <C> <C> <C>
Europe Fund--
Class C 10,000 10,143 10,068 12,616 13,272 11,521 14,143
MSCI Europe Index 10,000 10,828 10,835 13,036 13,706 11,730 13,927
</TABLE>
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. Index returns are for the periods beginning August 31,
1997.
Bartlett Europe Fund
Class Y Shares
August 21, 1997 through December 31, 1998
Average Annual Total Returns
For periods ended December 31, 1998
- --------------------------------------------------------------------------------
1 Year Life of the Fund
(since 8/21/97)
- --------------------------------------------------------------------------------
42.51% 34.07%
<TABLE>
<CAPTION>
8/21/97 9/30/97 12/31/97 3/31/98 6/30/98 9/30/98 12/31/98
<S> <C> <C> <C> <C> <C> <C> <C>
Europe Fund--
Class Y 10,000 10,538 10,476 13,170 13,893 12,093 14,930
MSCI Europe Index 10,000 10,343 10,350 12,452 13,093 11,205 13,303
</TABLE>
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. Index returns are for the periods beginning September
30, 1997.
12
<PAGE>
INDUSTRY DIVERSIFICATION
------------------------
BARTLETT CAPITAL TRUST
DECEMBER 31, 1998
VALUE INTERNATIONAL FUND
% OF NET MARKET
ASSETS VALUE
- ------------------------------------------------
(000)
Automotive 4.9% $ 2,830
Banking 14.1 8,041
Chemicals 2.3 1,328
Computer Services 2.9 1,651
Construction 5.1 2,932
Consumer Durable Goods 11.9 6,814
Consumer Non-Durable Goods 1.7 950
Diversified 5.8 3,298
Electronics 4.5 2,578
Investment Companies 2.9 1,663
Metals & Mining 8.6 4,932
Miscellaneous Services 4.1 2,352
Oil & Gas 7.7 4,395
Real Estate 2.5 1,435
Retail Sales 8.3 4,749
Transportation 5.1 2,902
Short-Term Investments 7.2 4,091
----- ------
Total Investment Portfolio 99.6 56,941
Other Assets Less Liabilities 0.4 241
----- ------
Net Assets 100.0% $57,182
===== ======
EUROPE FUND
% OF NET MARKET
ASSETS VALUE
- ------------------------------------------------
(000)
Aerospace/Defense 2.8% $ 2,510
Automotive 3.7 3,345
Banking 12.0 10,784
Computer Services 3.6 3,211
Consumer Durable Goods 2.8 2,493
Diversified 3.4 3,052
Electronics 3.0 2,682
Finance 5.9 5,278
General Industry 2.9 2,585
Insurance 9.7 8,859
Leisure 1.2 1,117
Oil & Gas 6.3 5,681
Pharmaceuticals & Health Care 8.6 7,722
Publishing 1.2 1,101
Real Estate 2.0 1,782
Retail Sales 8.6 7,758
Telecommunications 13.4 12,050
Transportation 4.4 3,921
Short-Term Investments 3.2 2,844
----- ------
Total Investment Portfolio 98.7 88,775
Other Assets Less Liabilities 1.3 1,203
----- ------
Net Assets 100.0% $89,978
===== ======
13
<PAGE>
STATEMENT OF NET ASSETS
-----------------------
BARTLETT BASIC VALUE FUND
DECEMBER 31, 1998
(Amouts in Thousands)
MARKET
SHARES VALUE
- ----------------------------------------------------
Common Stock -- 98.3%
- ----------------------------------------------------
Advertising/Media -- 4.7%
A.H. Belo Corporation 167 $ 3,330
Time Warner, Inc. 40 2,482
-------
5,812
- ----------------------------------------------------
Aerospace/Defense -- 2.4%
Lockheed Martin Corporation 36 3,009
- ----------------------------------------------------
Automotive -- 2.5%
Ford Motor Company 35 2,054
General Motors Corporation 15 1,074
-------
3,128
- ----------------------------------------------------
Chemicals -- 2.5%
Ferro Corporation 120 3,120
- ----------------------------------------------------
Construction & Building
Materials -- 2.5%
Martin Marietta Materials, Inc. 50 3,109
- ----------------------------------------------------
Diversified -- 3.2%
Loews Corporation 40 3,930
- ----------------------------------------------------
Electronics -- 2.3%
Molex Incorporated 90 2,869
- ----------------------------------------------------
Energy -- 2.7%
Phillips Petroleum Company 48 2,046
Total SA ADR 27 1,343
-------
3,389
- ----------------------------------------------------
Financial Services -- 19.0%
Aetna Inc. 25 1,966
Charter One Financial, Inc. 157 4,364
Citigroup Inc. 77 3,811
Fannie Mae 84 6,216
H & R Block, Inc. 88 3,946
Washington Federal, Inc. 124 3,298
-------
23,601
- ----------------------------------------------------
Food, Beverage & Tobacco-- 10.2%
Anheuser-Busch Companies, Inc. 58 3,806
McDonald's Corporation 59 4,521
Philip Morris Companies, Inc. 35 1,873
UST, Inc. 70 2,441
-------
12,641
- ----------------------------------------------------
Health Care -- 0.7%
Columbia/HCA Healthcare
Corporation 35 $ 866
- ----------------------------------------------------
Investment Companies -- 2.0%
Royce Value Trust, Inc. 183 2,510
- ----------------------------------------------------
Manufacturing -- 8.8%
Fleetwood Enterprises, Inc. 107 3,718
Kaydon Corporation 125 5,008
Tyco International Ltd. 30 2,263
-------
10,989
- ----------------------------------------------------
Metals & Mining -- 2.2%
Potash Corporation of
Saskatchewan, Inc. ADR 42 2,683
- ----------------------------------------------------
Real Estate Investment
Trusts (REITs) -- 4.3%
Chateau Communities, Inc. 123 3,606
United Dominion Realty
Trust, Inc. 170 1,753
-------
5,359
- ----------------------------------------------------
Retail -- 4.2%
Jostens, Inc. 131 3,430
Toys 'R' Us, Inc. 105 1,777A
-------
5,207
- ----------------------------------------------------
Telecommunications -- 4.1%
AT&T Corporation 67 5,042
- ----------------------------------------------------
Transportation -- 14.6%
AMR Corporation 69 4,103A
GATX Corporation 90 3,409
Kansas City Southern
Industries, Inc. 125 6,148
Union Pacific Corporation 100 4,506
-------
18,166
- ----------------------------------------------------
Utilities -- 5.4%
Kansas City Power & Light
Company 85 2,518
TNP Enterprises, Inc. 30 1,138
Western Resources, Inc. 92 3,059
-------
6,715
- ----------------------------------------------------
Total Common Stock $122,145
- ----------------------------------------------------
(Identified Cost -- $79,324)
- ----------------------------------------------------
14
<PAGE>
FACE MARKET
AMOUNT VALUE
- ----------------------------------------------------
Repurchase Agreement -- 1.6%
- ----------------------------------------------------
State Street Bank & Trust Company
3.50%, dated 12/31/98, to be
repurchased at $1,981 on 1/4/99
(Collateral: $2,025 Freddie Mac
Mortgage-backed securities,
5.02% due 11/5/99,
value $2,064) $ 1,980 $ 1,980
- ----------------------------------------------------
Total Repurchase Agreement $ 1,980
- ----------------------------------------------------
(Identified Cost -- $1,980)
- ----------------------------------------------------
Total Investments
At Value-- 99.9% $ 124,125
- ----------------------------------------------------
(Identified Cost -- $81,304)
- ----------------------------------------------------
Other Assets Less Liabilities-- 0.1% $ 125
- ----------------------------------------------------
Net Assets Consisting of:
Capital shares $ 80,390
Undistributed
net investment income 362
Undistributed net realized gains
from security transactions and
foreign currency transactions 677
Net unrealized appreciation of
investments and foreign
currency transactions 42,821
- ----------------------------------------------------
Net Assets-- 100.0% $ 124,250
====================================================
- ----------------------------------------------------
Net asset value and
redemption price
per share -- Class A
($119,626 / 6,524 shs) $18.34
====================================================
Maximum offering price
per share -- Class A
(net asset value plus
sales charge of 4.75%
of offering price) $19.25
====================================================
Net asset value,
offering price and
redemption price
per share-- Class C
($2,228 / 123 shs) $18.03
====================================================
Net asset value,
offering price and
redemption price
per share-- Class Y
($2,396 / 131 shs) $18.31
====================================================
A Non-dividend paying investment.
See accompanying notes to financial statements.
15
<PAGE>
STATEMENT OF NET ASSETS
-----------------------
BARTLETT VALUE INTERNATIONAL FUND
DECEMBER 31, 1998
(Amounts in Thousands)
Market
Shares Value
- ----------------------------------------------------
Common Stock -- 90.2%
- ----------------------------------------------------
Argentina -- 5.2%
IRSA Inversiones y
Representaciones S.A. GDR 52 $ 1,435
YPF Sociedad Anonima SA ADR 55 1,537
-------
2,972
- ----------------------------------------------------
Australia -- 5.0%
Brambles Industries Ltd. 57 1,379
National Australia Bank ADR 20 1,490
-------
2,869
- ----------------------------------------------------
Canada -- 2.0%
Hudson's Bay Co. 45 567
Potash Corporation of
Saskatchewan, Inc. ADR 9 588
-------
1,155
- ----------------------------------------------------
Finland -- 2.7%
Kemira Oyj 100 712
Metra Oyj 48 823
-------
1,535
- ----------------------------------------------------
France -- 6.4%
Cie de Saint Gobain 9 1,289
Michelin 35 1,399
Total SA ADR 19 950
-------
3,638
- ----------------------------------------------------
Germany -- 7.8%
Buderus AG 4 1,366
DaimlerChrysler AG 16 1,545A
Deutsche Lufthansa AG 69 1,523
-------
4,434
- ----------------------------------------------------
India -- 0.4%
Morgan Stanley India
Investment Fund 34 230A
- ----------------------------------------------------
Ireland -- 2.7%
Allied Irish Banks PLC ADR 14 1,567
- ----------------------------------------------------
Italy -- 3.3%
Istituto Bancario San Paolo di
Torino ADR 53 1,894
- ----------------------------------------------------
Japan -- 18.9%
Canon, Inc. 59 1,260
Fujitsu Ltd. 124 1,651
Ito-Yokado ADR 20 1,401
Matsumotokiyoshi 41 1,585
Market
Shares Value
- ----------------------------------------------------
Japan -- continued
Matsushita Electric Industrial
Company Ltd. 84 $ 1,485
Rohm Company Ltd. 12 1,092
Secom Co., Ltd. 22 1,822
Sumitomo Warehouse 121 531
-------
10,827
- ----------------------------------------------------
Korea -- 1.8%
Korea Fund, Inc. 32 291A
Pohang Iron & Steel Company
Ltd. ADR 43 726
-------
1,017
- ----------------------------------------------------
MalaysiaB -- 0.7%
Perlis Plantations Bhd 546 392
- ----------------------------------------------------
Netherlands -- 2.8%
New Holland NV ADR 116 1,590
- ----------------------------------------------------
Norway -- 2.7%
Elkem ASA 79 941
Norsk Hydro ASA ADR 18 616
-------
1,557
- ----------------------------------------------------
Portugal -- 2.9%
Banco Comercial Portugues, SA ADR37 1,124
Portugal Fund Inc. 33 508
-------
1,632
- ----------------------------------------------------
Singapore -- 2.1%
Dairy Farm International
Holdings Ltd. 1,040 1,196
- ----------------------------------------------------
Spain -- 2.8%
Repsol SA ADR 29 1,601
- ----------------------------------------------------
Sweden -- 4.8%
AGA AB 96 1,258A
AssiDoman Ab 44 692
Cardo AB 50 820
-------
2,770
- ----------------------------------------------------
Switzerland -- 3.4%
Novartis 1 1,965
- ----------------------------------------------------
Taiwan -- 1.1%
Taiwan Fund Inc. 51 634
- ----------------------------------------------------
United Kingdom -- 10.7%
Cadbury Schweppes PLC ADR 25 1,731
Diageo PLC ADR 37 1,732
16
<PAGE>
MARKET
SHARES VALUE
- ----------------------------------------------------
United Kingdom -- continued
Rio Tinto plc ADR 24 $ 1,087
Tomkins PLC ADR 77 1,540
-------
6,090
- ----------------------------------------------------
Total Common Stock $51,565
- ----------------------------------------------------
(Identified Cost -- $45,987)
- ----------------------------------------------------
FACE
AMOUNT
- ----------------------------------------------------
Convertible Bond -- 2.2%
- ----------------------------------------------------
Canada -- 2.2%
Magna International Inc.
5%, 10/15/02 $1,285 1,285
- ----------------------------------------------------
Total Convertible Bond $ 1,285
- ----------------------------------------------------
(Identified Cost -- $1,120)
- ----------------------------------------------------
Repurchase Agreement -- 7.2%
- ----------------------------------------------------
State Street Bank & Trust Company
3.50%, dated 12/31/98, to be repurchased
at $4,093 on 01/4/99 (Collateral: $4,180
Freddie Mac Mortgage-backed securities,
5.02% due 11/5/99, value $4,247) 4,091 4,091
- ----------------------------------------------------
Total Repurchase Agreement $ 4,091
- ----------------------------------------------------
(Identified Cost -- $4,091)
- ----------------------------------------------------
Total Investments
At Value-- 99.6% $56,941
- ----------------------------------------------------
(Identified Cost -- $51,198)
- ----------------------------------------------------
Other Assets Less Liabilities -- 0.4% $ 241
- ----------------------------------------------------
Net Assets -- 100.0% $57,182
====================================================
- ----------------------------------------------------
Net Assets Consisting of:
Capital shares $56,130
Distributions in excess of
net investment income (822)
Overdistributions of net realized
gains (losses) from security
transactions and foreign
currency transactions (3,869)
Net unrealized appreciation
of investments and foreign
currency transactions 5,743
- ----------------------------------------------------
Net Assets-- 100.0% $57,182
====================================================
Net asset value and
redemption price
per share -- Class A
($47,856 4 4,161 shs) $11.50
====================================================
Maximum offering
price per share -- Class A
(net asset value plus
sales charge of 4.75%
of offering price) $12.07
====================================================
Net asset value,
offering price and
redemption price
per share -- Class C
($3,916 4 345 shs) $11.34
====================================================
Net asset value,
offering price and
redemption price
per share -- Class Y
($5,410 4 472 shs) $11.46
====================================================
A Non-dividend paying investment.
B As of September 1, 1998, the repatriation of proceeds received from the sale
of Malaysian securities cannot be accomplished until at least 9/1/99. The
Fund's Malaysian securities are therefore considered illiquid and are being
fair valued using methods determined in good faith by the Board of Trustees.
See accompanying notes to financial statements.
17
<PAGE>
STATEMENT OF NET ASSETS
-----------------------
BARTLETT EUROPE FUND
DECEMBER 31, 1998
(Amounts in Thousands)
MARKET
SHARES VALUE
- ----------------------------------------------------
Common Stock -- 90.7%
- ----------------------------------------------------
Finland -- 4.1%
Nokia Oyj 30 $ 3,682
- ----------------------------------------------------
France -- 13.3%
Accor SA 5 1,117
Cap Gemini SA 9 1,500
Castorama Dubois 6 1,403
Elf Aquitaine SA 23 2,689
Pinault-Printemps-Redoute SA 10 1,977
STMicroelectronics 18 1,420A
Vivendi 7 1,878
-------
11,984
- ----------------------------------------------------
Germany -- 10.1%
Allianz AG 4 1,584
DaimlerChrysler AG 25 2,483A
Deutsche Lufthansa AG 60 1,323
HypoVereinsbank 14 1,110
Mannesmann AG 23 2,585
-------
9,085
- ----------------------------------------------------
Greece -- 1.6%
Alpha Credit Bank 14 1,462
- ----------------------------------------------------
Ireland -- 6.9%
Allied Irish Banks plc 142 2,536
Anglo Irish Bank Corporation
plc 661 1,908
Green Property plc 307 1,781
-------
6,225
- ----------------------------------------------------
Italy -- 8.9%
Assicurazioni Generali 42 1,734
Istituto Nazionale delle
Assicurazioni (INA) 675 1,782
Olivetti S.p.A. 717 2,493A
Unicredito Italiano SpA 341 2,023
-------
8,032
- ----------------------------------------------------
MARKET
SHARES VALUE
- ----------------------------------------------------
Netherlands -- 8.5%
AEGON N.V. 17 $ 2,094
ING Groep N.V. 21 1,249
Koninklijke Ahold NV 51 1,892
Koninklijke (Royal) Philips
Electronics N.V. 19 1,261
VNU NV 29 1,101
-------
7,597
- ----------------------------------------------------
PORTUGAL -- 1.0%
Portugal Telecom SA 19 855
- ----------------------------------------------------
SPAIN -- 3.7%
Argentaria, Caja Postal y Banco
Hipotecario de Espana, SA 68 1,745
Telefonica S.A. 35 1,567
Telefonica S.A.--rights 35 32
-------
3,344
- ----------------------------------------------------
Switzerland -- 7.5%
Novartis 2 3,966
UBS-Union Bank of Switzerland 4 1,096
Zurich Allied AG 2 1,667A
-------
6,729
- ----------------------------------------------------
United Kingdom -- 25.1%
British Aerospace PLC 295 2,510
British Petroleum Company plc 201 2,992
Cable & Wireless plc 130 1,590A
Granada Group plc 67 1,174
Kingfisher plc 230 2,486
Lloyds TSB Group plc 95 1,346
National Westminster Bank PLC 82 1,587
Railtrack Group PLC 45 1,167
SmithKline Beecham Plc 271 3,756
Stagecoach Holdings plc 357 1,431
Vodafone Group plc 158 2,567
-------
22,606
- ----------------------------------------------------
Total Common Stock $81,601
- ----------------------------------------------------
(Identified Cost -- $60,079)
- ----------------------------------------------------
18
<PAGE>
MARKET
SHARES VALUE
- ----------------------------------------------------
Preferred Shares -- 4.8%
- ----------------------------------------------------
Germany -- 2.9%
Porsche Ag N.M. $ 862
SAP AG 4 1,711
-------
2,573
- ----------------------------------------------------
Italy -- 1.9%
Telecom Italia Mobile (TIM) SpA 373 1,757
- ----------------------------------------------------
Total Preferred Shares $ 4,330
- ----------------------------------------------------
(Identified Cost -- $3,452)
- ----------------------------------------------------
FACE
AMOUNT
- ----------------------------------------------------
Repurchase Agreement -- 3.2%
State Street Bank & Trust Company
3.50%, dated 12/31/98, to be
repurchased at $2,845 on 1/4/99
(Collateral: $2,910 Freddie Mac
Mortgage-backed securities, 5.02%
due 11/5/99, value $2,934) $2,844 2,844
- ----------------------------------------------------
Total Repurchase Agreement $ 2,844
- ----------------------------------------------------
(Identified Cost -- $2,844)
- ----------------------------------------------------
Total Investments At Value -- 98.7% $88,775
- ----------------------------------------------------
(Identified Cost -- $66,375)
- ----------------------------------------------------
Other Assets Less Liabilities-- 1.3% $ 1,203
- ----------------------------------------------------
Net Assets Consisting of:
Capital Shares $ 68,345
Distributions in excess of
net investment income (836)
Undistributed net realized
gain on investments and
foreign currency transactions 66
Unrealized appreciation of
investments and foreign
currency transactions 22,403
- ----------------------------------------------------
Net Assets-- 100.0% $89,978
====================================================
- ----------------------------------------------------
Net asset value,
redemption price
per share -- Class A
($57,406 / 2,318 shs) $24.77
====================================================
Maximum offering price
per share -- Class A
(net asset value plus
sales charge of 4.75%
of offering price) $26.01
====================================================
Net asset value,
offering price and
redemption price
per share -- Class C
($32,325 / 1,325 shs) $24.39
====================================================
Net asset value,
offering price and
redemption price
per share -- Class Y
($247 / 10 shs) $24.78
====================================================
A Non-dividend paying investment.
N.M. Not Meaningful
See accompanying notes to financial statements.
19
<PAGE>
STATEMENT OF NET ASSETS
-----------------------
BARTLETT FINANCIAL SERVICES FUND
DECEMBER 31, 1998
(Amounts in Thousands)
MARKET
SHARES VALUE
- ----------------------------------------------------
Common Stock -- 99.4%
- ----------------------------------------------------
Brokerage Firms -- 5.9%
A.G. Edwards, Inc. 7 $ 261
EVEREN Capital Corporation 10 228
Morgan Keegan, Inc. 11 207
Paine Webber Group Inc. 6 220
Ragen Mackenzie Group Incorporated11 131A
Raymond James Financial, Inc. 12 253
-------
1,300
- ----------------------------------------------------
Finance -- 1.1%
Financial Federal Corporation 10 247A
- ----------------------------------------------------
Financial Technology Companies-- 8.4%
DST Systems, Inc. 4 200A
Fiserv, Inc. 5 257A
HNC Software Inc. 6 243A
INSpire Insurance Solutions, Inc. 6 101A
Jack Henry & Associates, Inc. 4 199
SunGard Data Systems Inc. 7 258A
The BISYS Group, Inc. 5 273A
Transaction Systems
Architects, Inc. 6 310A
-------
1,841
- ----------------------------------------------------
Insurance -- 9.7%
American Bankers Insurance
Group, Inc. 6 266
Jefferson-Pilot Corporation 3 225
Nationwide Financial
Services, Inc. 5 279
Protective Life Corporation 8 299
ReliaStar Financial Corp. 7 314
SunAmerica Inc. 3 268
The Progressive Corporation 2 254
UNUM Corporation 4 233
-------
2,138
- ----------------------------------------------------
Miscellaneous -- 22.4%
Abbott Laboratories 5 245
American Stores Company 7 259
Bergen Brunswig Corporation 8 279
Campbell Soup Company 5 247
CVS Corporation 5 247
Dean Foods Company 5 212
Eli Lilly and Company 3 276
Miscellaneous
Furniture Brands
International, Inc. 10 259A
Hannaford Bros. Co. 5 238
Hershey Foods Corporation 4 274
Hillenbrand Industries, Inc. 5 256
Hooper Holmes, Inc. 8 217
Johnson & Johnson 3 260
Maytag Corporation 4 268
Medtronic, Inc. 3 238
Pfizer Inc. 2 251
Riviana Foods, Inc. 6 148
Safeway Inc. 5 274A
Walgreen Co. 5 264
Wm. Wrigley Jr. Company 3 224
-------
4,936
- ----------------------------------------------------
Regional Banks -- 39.8%
AmSouth Bancorporation 6 265
Associated Banc-Corp 5 171
BancWest Corporation 5 216
Bank of Commerce 10 167
BB&T Corporation 6 254
Cascade Bancorp 7 123
CCB Financial Corporation 5 256
Centennial Bancorp 12 225A
Centura Banks, Inc. 3 245
Colorado Business
Bankshares, Inc. 10 109A
Commerce Bancshares, Inc. 7 276
Community First Bankshares, Inc. 10 211
Crestar Financial Corporation 4 252
Cullen/Frost Bankers, Inc. 4 225
Fifth Third Bancorp 4 250
First American Corporation 6 266
First Security Corporation 10 234
Firstar Corporation 3 308
Greater Bay Bancorp 6 216
Hibernia Corporation 10 174
Marshall and IIsley Corporation 4 205
Mercantile Bancorporation Inc. 6 277
Mid-State Bancshares 7 196A
20
<PAGE>
MARKET
SHARES VALUE
- ----------------------------------------------------
Regional Banks -- continued
Mississippi Valley
Bancshares, Inc. 4 $ 135
North Fork Bancorporation, Inc. 12 287
Pacific Century Financial
Corporation 10 244
Santa Barbara Bancorp 7 180
Seacoast Banking Corporation
of Florida 6 170
SierraWest Bancorp 9 211
Silicon Valley Bancshares 8 136
SouthTrust Corporation 6 233
Southwest Bancorporation of
Texas, Inc. 11 197A
State Street Corporation 4 243
Summit Bancorp 6 240
TCF Financial Corporation 12 278
Texas Regional Bancshares, Inc. 8 200
West Coast Bancorp 9 189
Westamerica Bancorporation 5 184
Western Bancorp 8 219
Zions Bancorporation 5 312
-------
8,779
- ----------------------------------------------------
Savings and Loan -- 4.7%
First Washington Bancorp, Inc. 7 168
FirstBank Corp. 12 179
Harbor Florida Bancshares, Inc. 15 168
Peoples Heritage Financial
Group, Inc. 11 220
Washington Mutual, Inc. 8 305
-------
1,040
- ----------------------------------------------------
Super- Regional Banks --7.4%
BankAmerica Corporation 4 253
Fleet Financial Group, Inc. 7 290
National City Corporation 3 239
Northern Trust Corporation 3 244
U.S. Bancorp 9 320
Wells Fargo Company 7 280
-------
1,626
- ----------------------------------------------------
Total Common Stock $21,907
- ----------------------------------------------------
(Identified Cost -- $20,890)
- ----------------------------------------------------
Total Investments
At Value-- 99.4% $ 21,907
- ----------------------------------------------------
(Identified Cost -- $20,890)
- ----------------------------------------------------
Other Assets Less Liabilities-- 0.6% $ 142
- ----------------------------------------------------
Net Assets Consisting of:
Capital shares $ 21,032
Net unrealized appreciation
of investments 1,017
- ----------------------------------------------------
Net Assets-- 100.0% $22,049
====================================================
Net asset value and
redemption price
per share -- Class A
($7,451 / 704 shs) $10.58
====================================================
Maximum offering price
per share -- Class A
(net asset value plus
sales charge of 4.75%
of offering price) $11.11
====================================================
Net asset value,
offering price and
redemption price
per share -- Class C
($14,598 / 1,381 shs) $10.57
====================================================
A Non-dividend paying investment.
N.M. Not Meaningful
See accompanying notes to financial statements.
21
<PAGE>
STATEMENTS OF OPERATIONS
------------------------
For the year ended December 31, 1998
(Amounts in Thousands)
<TABLE>
<CAPTION>
Bartlett Value Bartlett Bartlett
Bartlett International Europe Financial
Basic Value Fund Fund Fund Services Fund
- ------------------------------------------------------------------------------------------------------------------------
Investment Income:
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dividends $2,665 $1,745 $1,186 $ 32
Less foreign taxes withheld (9) (177) (136) --
Interest 140 -- 184 2
- ------------------------------------------------------------------------------------------------------------------------
Total Investment Income 2,796 1,568 1,234 34
- ------------------------------------------------------------------------------------------------------------------------
Expenses:
- ------------------------------------------------------------------------------------------------------------------------
Investment advisory fees 988 936 734 20
Distribution and service fees 335 191 276 14
Custodian fees 87 133 187 4
Legal and audit fees 47 43 48 3
Trustees' fees 41 39 48 --
Registration fees 32 28 33 --
Reports to shareholders 26 19 38 --
Transfer agent and shareholder
servicing expense 22 16 44 1
Other expenses 7 1 64 --
Less expenses waived (161) (103) (59) (3)
- ------------------------------------------------------------------------------------------------------------------------
Total Expenses 1,424 1,303 1,413 39
- ------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 1,372 265 (179) (5)
- ------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized
Gain (Loss):
Realized gain (loss) on:
Investments 4,845 (2,633) 13,020 --
Foreign currency transactions N.M. (7) 54 --
Change in unrealized appreciation of:
Investments (1,760) (469) 10,376 1,017
Assets and liabilities denominated
in foreign currencies N.M. 2 (16) --
- ------------------------------------------------------------------------------------------------------------------------
Net Realized and Unrealized
Gain (Loss) 3,085 (3,107) 23,434 1,017
- ------------------------------------------------------------------------------------------------------------------------
Change in Net Assets Resulting
from Operations $4,457 $(2,842) $23,255 $1,012
========================================================================================================================
</TABLE>
N.M. Not meaningful
See accompanying notes to financial statements.
22
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
-----------------------------------
BARTLETT BASIC VALUE FUND
(Amounts in Thousands)
<TABLE>
<CAPTION>
YEAR NINE MONTHS YEAR
ENDED ENDED ENDED
12/31/98 12/31/97A 3/31/97
- ------------------------------------------------------------------------------------------------------------------------
From Operations:
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net investment income (loss) $ 1,372 $ 1,061 $ 1,501
Net realized gain (loss) on investments and foreign
currency transactions 4,845 22,534 14,218
Change in unrealized appreciation/depreciation
of investments and assets and liabilities denominated
in foreign currencies (1,760) 13,090 (1,663)
Change in net assets resulting
from operations 4,457 36,685 14,056
- ------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:
- ------------------------------------------------------------------------------------------------------------------------
From net investment income:
Class A shares (889) (1,339) (1,781)
Class C shares (8) (1) N/A
Class Y shares (16) (20) N/A
From net realized gains on security transactions:
Class A shares (7,398) (27,451) (8,971)
Class C shares (128) (7) N/A
Class Y shares (144) (518) N/A
- ------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from
distributions to shareholders (8,583) (29,336) (10,752)
- ------------------------------------------------------------------------------------------------------------------------
From Fund Share Transactions:
- ------------------------------------------------------------------------------------------------------------------------
Proceeds from shares sold:
Class A shares 11,170 5,649 38,457
Class C shares 2,334 392 N/A
Class Y shares 153 2,501 N/A
Net asset value of shares issued in reinvestment
of shareholder distributions:
Class A shares 8,032 28,078 10,364
Class C shares 135 8 N/A
Class Y shares 160 538 N/A
Payment for shares redeemed:
Class A shares (28,706) (27,524) (58,553)
Class C shares (526) (10) N/A
Class Y shares (234) (331) N/A
- ------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from Fund share
transactions (7,482) 9,301 (9,732)
- ------------------------------------------------------------------------------------------------------------------------
Change in Net Assets (11,608) 16,650 (6,428)
Net Assets:
Beginning of year 135,858 119,208 125,636
- ------------------------------------------------------------------------------------------------------------------------
End of year $124,250 $135,858 $119,208
- ------------------------------------------------------------------------------------------------------------------------
Under/(over) distributed net investment income $ 362 $ (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.
23
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
-----------------------------------
BARTLETT VALUE INTERNATIONAL FUND
(Amounts in Thousands)
<TABLE>
<CAPTION>
YEAR NINE MONTHS YEAR
ENDED ENDED ENDED
12/31/98 12/31/97A 3/31/97
- ------------------------------------------------------------------------------------------------------------------------
From Operations:
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net investment income (loss) $ 265 $ 244 $ 486
Net realized gain (loss) on investments and foreign
currency transactions (2,640) 7,326 5,035
Change in unrealized appreciation/depreciation
of investments and assets and liabilities denominated
in foreign currencies (467) (5,257) 5,827
Change in net assets resulting
from operations (2,842) 2,313 11,348
- ------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:
- ------------------------------------------------------------------------------------------------------------------------
From net investment income:
Class A shares (947) (973) (486)
Class C shares (46) (11) N/A
Class Y shares (94) (326) N/A
In excess of net investment income -- -- (47)
From net realized gains on security transactions:
Class A shares (1,860) (6,780) (4,403)
Class C shares (128) (54) N/A
Class Y shares (260) (1,741) N/A
- ------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from
distributions to shareholders (3,335) (9,885) (4,936)
- ------------------------------------------------------------------------------------------------------------------------
From Fund Share Transactions:
- ------------------------------------------------------------------------------------------------------------------------
Proceeds from shares sold:
Class A shares 7,184 27,946 37,235
Class C shares 3,966 994 N/A
Class Y shares 328 20,134 N/A
Net asset value of shares issued in reinvestment of
shareholder distributions:
Class A shares 2,519 6,969 3,770
Class C shares 163 65 N/A
Class Y shares 203 2,067 N/A
Payment for shares redeemed:
Class A shares (25,562) (46,911) (35,484)
Class C shares (639) (55) N/A
Class Y shares (7,430) (4,983) N/A
- ------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from Fund share
transactions (19,268) 6,226 5,521
- ------------------------------------------------------------------------------------------------------------------------
Change in Net Assets (25,445) (1,346) 11,933
Net Assets:
Beginning of year 82,627 83,973 72,040
- ------------------------------------------------------------------------------------------------------------------------
End of year $57,182 $ 82,627 $ 83,973
- ------------------------------------------------------------------------------------------------------------------------
Under/(over) distributed net investment income $ (822) $ (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.
24
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
-----------------------------------
BARTLETT EUROPE FUND
(Amounts in Thousands)
<TABLE>
<CAPTION>
Year Year
Ended Ended
12/31/98 12/31/97A
- ------------------------------------------------------------------------------------------------------------------------
From Operations:
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income (loss) $ (179) $ (104)
Net realized gain (loss) on investments and foreign currency transactions 13,074 19,781
Change in unrealized appreciation of investments
and assets and liabilities denominated in foreign currencies 10,360 (6,859)
- ------------------------------------------------------------------------------------------------------------------------
Change in net assets resulting
from operations 23,255 12,818
- ------------------------------------------------------------------------------------------------------------------------
Distributions to Shareholders:
- ------------------------------------------------------------------------------------------------------------------------
From net income:
Class A shares (862) --
Class C shares (355) --
Class Y shares (4) --
From net realized gains on security transactions:
Class A shares (8,621) (16,941)
Class C shares (4,213) (49)
Class Y shares (31) (1,741)
- ------------------------------------------------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholders (14,086) (18,731)
- ------------------------------------------------------------------------------------------------------------------------
From Fund Share Transactions:
- ------------------------------------------------------------------------------------------------------------------------
Proceeds from shares sold:
Class A shares 10,886 1,137
Class C shares 33,629 328
Class Y shares 219 7,693
Net asset value of shares issued in reinvestment of shareholder
distributions:
Class A shares 6,156 19,433
Class C shares 4,541 49
Class Y shares 35 1,741
Payment for shares redeemed:
Class A shares (20,632) (34,844)
Class C shares (4,162) (35)
Class Y shares (10,443) N/A
- ------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from Fund share transactions 20,229 (4,498)
- ------------------------------------------------------------------------------------------------------------------------
Change in Net Assets 29,398 (10,411)
Net Assets:
Beginning of year 60,580 70,991
- ------------------------------------------------------------------------------------------------------------------------
End of year $ 89,978 $ 60,580
- ------------------------------------------------------------------------------------------------------------------------
Under/(over) distributed net investment income $ (836) $ --
========================================================================================================================
</TABLE>
A Includes financial information for Bartlett Europe Fund and its predecessor,
Worldwide Value Fund (See note 8).
See accompanying notes to financial statements.
25
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
-----------------------------------
BARTLETT FINANCIAL SERVICES FUND
(Amounts in Thousands)
<TABLE>
<CAPTION>
PERIOD
ENDED
12/31/98A
- ------------------------------------------------------------------------------------------------------------------------
From Operations:
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net investment income (loss) $ (5)
Net realized gain (loss) on investments and foreign
currency transactions --
Change in unrealized appreciation of investments
and assets and liabilities denominated
in foreign currencies 1,017
- ------------------------------------------------------------------------------------------------------------------------
Change in net assets resulting
from operations 1,012
- ------------------------------------------------------------------------------------------------------------------------
From Fund Share Transactions:
- ------------------------------------------------------------------------------------------------------------------------
Proceeds from shares sold:
Class A shares 7,112
Class C shares 14,009
Class Y shares --
Net asset value of shares issued in reinvestment of shareholder
distributions:
Class A shares --
Class C shares --
Class Y shares --
Payment for shares redeemed:
Class A shares (15)
Class C shares (70)
Class Y shares --
- ------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from Fund share
transactions 21,036
- ------------------------------------------------------------------------------------------------------------------------
Change in Net Assets 22,048
Net Assets:
Beginning of period 1
- ------------------------------------------------------------------------------------------------------------------------
End of period $22,049
- ------------------------------------------------------------------------------------------------------------------------
Under/(over) distributed net investment income $ --
========================================================================================================================
</TABLE>
A For the period November 16, 1998 (commencement of operations) to December 31,
1998.
See accompanying notes to financial statements.
26
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------
BARTLETT BASIC VALUE FUND
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Investment Operations Distributions
------------------------------------- ------------------------------------
Net Asset Net Realized Total From From Net Asset
Value, Net and Unrealized From Net Net Value,
Beginning Investment Gains on Investment Investment Realized Total End of
of Year Income Investments Operations Income Gains Distributions Year
- ------------------------------------------------------------------------------------------------------------------------------
Class A Shares
Year Ended Dec. 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1998 $18.95 $0.20b $0.48 $0.68 $(0.14) $(1.15) $(1.29) $18.34
Nine Months Ended
Dec. 31, 1997A 18.33 0.19B 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
Class C Shares
Years Ended Dec. 31,
1998 $18.75 $0.10C $0.41 $0.51 $(0.08) $(1.15) $(1.23) $18.03
1997F 22.84 0.24C 0.88 1.12 (0.27) (4.94) (5.21) 18.75
Class Y Shares
Years Ended Dec. 31,
1998 $18.87 $0.25D $0.47 $0.72 $(0.13) $(1.15) $(1.28) $18.31
1997G 21.92 0.18D 1.94 2.12 (0.23) (4.94) (5.17) 18.87
- ------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
-----------------------------------------------------------------
Net
Investment Net Assets,
Expenses Income(Loss) Portfolio End of
Total to Average to Average Turnover Year
ReturnE Net Assets Net Assets Rate (in thousands)
- --------------------------------------------------------------------------------------------
Class A Shares
Year Ended Dec. 31,
1998 3.76% 1.08%B 1.05%B 28% $119,626
Nine Months Ended
Dec. 31, 1997A 33.14%H 1.13%B,I 1.15%B,I 42%I 133,076
Years Ended March 31,
1997 11.30% 1.16% 1.18% 23% 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
Class C Shares
Years Ended Dec. 31,
1998 2.96% 1.90%C 0.29%C 28% $ 2,228
1997F 6.07%H 1.90%C,I 1.11%C,I 42%I 395
Class Y Shares
Years Ended Dec. 31,
1998 3.99% 0.82%D 1.31%D 28% $ 2,396
1997G 10.97%H 0.86%D,I 1.51%D,I 42%I 2,387
- --------------------------------------------------------------------------------------------
</TABLE>
A The year end for Bartlett Basic Value Fund was changed from March 31 to
December 31.
B 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: 1997, 1.19%; 1998, 1.20%.
C 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, 2.02%.
D 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, 0.94%.
E Excluding sales charge
F For the period September 12, 1997 (commencement of operations of this class)
to December 31, 1997.
G For the period August 15, 1997 (commencement of operations of this class) to
December 31, 1997.
H Not annualized
I Annualized
See accompanying notes to financial statements.
27
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------
BARTLETT VALUE INTERNATIONAL FUND
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Investment Operations Distributions
------------------------------------- -----------------------------------------------------
Net Asset Net Realized Total From In Excess From
Value, Net and Unrealized From Net of Net Net
Beginning Investment Gains on Investment Investment Investment Realized Total
of Year Income Investments Operations Income Income Gains Distributions
- ------------------------------------------------------------------------------------------------------------------------------------
Class A Shares
Year Ended Dec. 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1998 $ 12.45 $(0.02)C $ (0.35) $ (0.37) $(0.20) $ -- $ (0.38) $ (0.58)
Nine Months Ended
Dec. 31, 1997A 13.64 0.05C 0.31 0.36 (0.17) -- (1.38) (1.55)
Years Ended March 31,
1997 12.59 0.08 1.81 1.89 (0.08) (0.01) (0.75) (0.84)
1996 11.64 0.13 1.33 1.46 (0.13) (0.01) (0.37) (0.51)
1995 12.46 0.09 (0.21) (0.12) (0.09) -- (0.61) (0.70)
1994 10.08 0.07B 2.38 2.45 (0.07) -- -- (0.07)
Class C Shares
Years Ended Dec. 31,
1998 $ 12.30 $ 0.10D$ (0.55) $ (0.45) $(0.13) -- $ (0.38) $ (0.51)
1997G 15.70 0.08D (1.82) (1.74) (.028) -- (1.38) (1.66)
Class Y Shares
Years Ended Dec. 31,
1998 $ 12.33 $(0.37)E $0.04 $ (0.33) $(0.16) -- $ (0.38) $ (0.54)
1997H 15.27 (0.11)E (1.21) (1.32) (0.24) -- (1.38) (1.62)
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
-----------------------------------------------------------------
Net
Net Asset Investment Net Assets,
Value, Expenses Income(Loss) Portfolio End of
End of Total to Average to Average Turnover Year
Year ReturnE Net Assets Net Assets Rate (in thousands)
- ----------------------------------------------------------------------------------------------------
Class A Shares
Year Ended Dec. 31,
1998 $ 11.50 (2.88)% 1.73%C 0.37%C 27% $47,856
Nine Months Ended
Dec. 31, 1997A 12.45 2.79%I 1.78%C, J 0.49%C, J 44% J 68,648
Years Ended March 31,
1997 13.64 15.45% 1.81% 0.62% 31% 83,973
1996 12.59 12.76% 1.83% 1.06% 38% 72,041
1995 11.64 (1.18)% 1.83% 0.80% 24% 57,664
1994 12.46 24.42% 1.88%B 0.55%B 19% 49,607
Class C Shares
Years Ended Dec. 31,
1998 $ 11.34 (3.64)% 2.55%D (0.55)%D 27% $ 3,916
1997G 12.30 (10.87)%I 2.55%D, J (1.68)%D, J 44% J 895
Class Y Shares
Years Ended Dec. 31,
1998 $ 11.46 (2.65)% 1.47%E 0.61%E 27% $ 5,410
1997H 12.33 (8.38)%I 1.44%E, J (0.75)%E, J 44% J 13,084
- ----------------------------------------------------------------------------------------------------
</TABLE>
A The year end for Bartlett Value International Fund was changed from March 31
to December 31.
B The Advisor has periodically absorbed expenses of the Bartlett Value
International Fund through management fee waivers. If the Advisor had not
waived any fees, the ratio of net expenses to average net assets would have
been 1.94% and the ratio of net investment income to average net assets would
have been 0.49% for the period ended March 31, 1994.
C 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: 1997, 1.95%; 1998, 1.87%.
D 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, 2.69%.
E 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, 1.61%.
F Excluding sales charge
G For the period July 23, 1997 (commencement of operations of this class) to
December 31, 1997.
H For the period August 15, 1997 (commencement of operations of this class) to
December 31, 1997.
I Not annualized
J Annualized
See accompanying notes to financial statements.
28
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------
BARTLETT EUROPE FUND(A)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Investment Operations Distributions
------------------------------------------- --------------------------------------
Net Realized
and Unrealized
Net Asset Net Gains (Losses) on Total From From
Value, Investment Investments and From Net Net
Beginning Income Foreign Currency Investment Investment Realized Total
of Year (Loss) Transactions Operations Income Gains Distributions
- -----------------------------------------------------------------------------------------------------------------------------
Class A SharesA
Years Ended Dec. 31,
<S> <C> <C> <C> <C> <C> <C> <C>
1998 $20.97 $ 0.02B$ $ 8.52 $ 8.54 $(0.43) $ (4.31) $ (4.74)
1997 24.24 (0.05)B 4.11 4.06 -- (7.33) (7.33)
1996 21.13 0.02 6.34 6.36 -- (3.25) (3.25)
1995 17.68 0.01 3.50 3.51 (0.06) -- (0.06)
1994 18.46 (0.03) (0.75) (0.78) -- -- --
Class C Shares
Years Ended Dec. 31,
1998 $20.86 $ 0.11C $ 8.09 $ 8.20 $(0.36) $ (4.31) $ (4.67)
1997F 26.56 (0.10)C 0.23 0.13 -- (5.83) (5.83)
Class Y Shares
Years Ended Dec. 31,
1998 $21.01 $ 0.22D $ 8.37 $ 8.59 $(0.51) $ (4.31) $ (4.82)
1997G 25.61 (0.04)D 1.27 1.23 -- (5.83) (5.83)
- -----------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
-----------------------------------------------------------------
Net
Net Asset Investment Net Assets,
Value, Expenses Income(Loss) Portfolio End of
End of Total to Average to Average Turnover Year
Year ReturnE Net Assets Net Assets Rate (in thousands)
- -------------------------------------------------------------------------------------------------------
Class A SharesA
Years Ended Dec. 31,
1998 $24.77 41.9% 1.81%B (0.10)%B 103% $57,406
1997 20.97 17.5% 1.90%B (0.12)%B 123% 52,253
1996 24.24 31.5% 2.00% 0.10% 109% 70,991
1995 21.13 19.9% 2.10% 0.10% 148% 62,249
1994 17.68 (4.2)% 2.10% -- 75% 53,135
Class C Shares
Years Ended Dec. 31,
1998 $24.39 40.5% 2.51%C (1.15)%C 103% $32,325
1997F 20.86 0.7%H 2.50%C, I (1.79)%C, I 123% 302
Class Y Shares
Years Ended Dec. 31,
1998 $24.78 42.5% 1.55%D 1.31%D 103% $ 247
1997G 21.01 4.9%H 1.31%D, I (0.60)%D, I 123% 8,025
- -------------------------------------------------------------------------------------------------------
</TABLE>
A The financial information in this table for the years ended December 31, 1994
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 8).
B 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 21 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, 1.89%.
C 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, 2.59%.
D 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, 1.63%.
E Excluding sales charge
F For the period July 23, 1997 (commencement of operations of this class) to
December 31, 1997.
G For the period August 21, 1997 (commencement of operations of this class) to
December 31, 1997.
H Not annualized
I Annualized
See accompanying notes to financial statements.
29
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------
BARTLETT FINANCIAL SERVICES FUND
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
Investment Operations Distributions
------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Net Realized Total From From Net Asset
Value, Net and Unrealized From Net Net Value,
Beginning Investment Gains on Investment Investment Realized Total End of
of Period Income Investments Operations Income Gains Distributions Period
- ---------------------------------------------------------------------------------------------------------------------------------
Class A Shares
Year Ended Dec. 31,
1998D $10.00 $ -- B $ 0.58 $ 0.58 $ -- $ -- $ -- $10.58
Class C Shares
Year Ended Dec. 31,
1998D $10.00 $ (0.01)C $ 0.58 $ 0.57 $ -- $ -- $ -- $10.57
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
-----------------------------------------------------------------
Net
Investment Net Assets,
Expenses Income(Loss) Portfolio End of
Total to Average to Average Turnover Period
ReturnE Net Assets Net Assets Rate (in thousands)
- --------------------------------------------------------------------------------------------
Class A Shares
Year Ended Dec. 31,
1998D 5.80%E 1.50%B,F 0.22%B,F -- $ 7,451
Class C Shares
Year Ended Dec. 31,
1998D 5.70%E 2.25%C,F (0.11)%C,F -- $14,598
- --------------------------------------------------------------------------------------------
</TABLE>
A Excluding sales charge
B Net of fees waived pursuant to a voluntary expense limitation of 1.50%. If no
fees had been waived, the annualized ratio of expenses to average daily net
assets would have been 1.65%.
C Net of fees waived pursuant to a voluntary expense limitation of 2.25%. If no
fees had been waived, the annualized ratio of expenses to average daily net
assets would have been 2.40%.
D For the period November 16, 1998 (commencement of operations of each class) to
December 31, 1998.
E Not annualized
F Annualized
See accompanying notes to financial statements.
30
<PAGE>
NOTES TO FINANCIAL STATEMENTS
-----------------------------
December 31, 1998
(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 Basic Value Fund, Bartlett
Value International Fund, Bartlett Europe Fund and Bartlett Financial Services
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,
since 1997 for Europe Fund and since November 16, 1998 for Financial Services
Fund; Class C offered since 1997 for Basic Value Fund, Value International Fund
and Europe Fund and since November 16, 1998 for Financial Services Fund; and
Class Y offered to certain institutional investors since 1997 for Basic Value
Fund, Value International Fund and Europe Fund. As of the date of this report,
Class Y shares of Financial Services Fund have no operating history.
The income and expenses of each of these Funds are 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.
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 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.
Bartlett Financial Services Fund seeks long-term growth of capital by
investing primarily in securities of issuers in the financial services industry
which its sub-adviser, Gray, Seifert & Co., Inc., ("Gray, Seifert") believes are
attractively priced relative to their intrinsic value.
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 the respective sub-adviser, 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.
31
<PAGE>
INVESTMENT INCOME AND DISTRIBUTIONS TO SHAREHOLDERS - Interest income and
expenses are recorded on the accrual basis. Bond premiums are amortized for
financial reporting and federal income tax purposes. Bond discounts, other than
original issue and zero-coupon bonds, are not amortized. Dividend income and
distributions to shareholders are allocated at the class level and are recorded
on the ex-dividend date. Dividends from net investment income, if available,
will be paid quarterly for Basic Value and Value International, and annually for
Europe Fund and Financial Services Fund. Net capital gain distributions, which
are calculated at the composite level, are declared and paid after the end of
the tax year in which the gain is realized. Distributions are determined in
accordance with income tax regulations which may differ from generally accepted
accounting principles; accordingly, periodic reclassifications are made within
the Funds' capital accounts to reflect income and gains available for
distribution under income tax regulations.
SECURITY TRANSACTIONS - Security transactions are recorded on the trade
date. Realized gains and losses from security transactions are reported on an
identified cost basis for both financial reporting and federal income tax
purposes.
At December 31, 1998, receivables for securities sold but not yet settled
and payables for securities purchased but not yet settled for each Fund were as
follows:
FINANCIAL
BASIC VALUE EUROPE SERVICES
VALUE INTERNATIONAL FUND FUND
- -----------------------------------------------------------------------------
Receivable for
Securities Sold $382 $ 20 $-- $ --
- -----------------------------------------------------------------------------
Payable for
Securities Purchased 540 -- -- 549
- -----------------------------------------------------------------------------
FEDERAL INCOME TAXES - No provision for federal income or excise taxes is
required since each Fund intends to qualify or to continue to qualify as a
regulated investment company and distribute all of its taxable income to its
shareholders. Value International has unused capital loss carryforwards for
federal income tax purposes of $3,503 which will expire in 2006.
USE OF ESTIMATES - The preparation of the financial statements in
accordance with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those estimates.
[2] INVESTMENT TRANSACTIONS
For the year ended December 31, 1998, investment transactions (excluding
short-term securities) were as follows:
FINANCIAL
BASIC VALUE EUROPE SERVICES
VALUE INTERNATIONAL FUND FUND
- --------------------------------------------------------------------------------
Purchases of
investment securities $35,529 $18,562 $71,021 $20,890
- --------------------------------------------------------------------------------
Proceeds from sales
and maturities of
investment securities $46,457 $39,712 $70,936 $ --
- --------------------------------------------------------------------------------
At December 31, 1998, cost, aggregate gross unrealized appreciation and
gross unrealized depreciation based on the cost of securities for federal income
tax purposes for each Fund were as follows:
FINANCIAL
BASIC VALUE EUROPE SERVICES
VALUE INTERNATIONAL FUND FUND
- --------------------------------------------------------------------------------
Unrealized appreciation $45,187 $10,335 $23,008 $ 1,359
Unrealized depreciation (2,366) (6,200) (1,559) (342)
- --------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) $42,821 $ 4,135 $21,449 $ 1,017
- --------------------------------------------------------------------------------
Federal income tax cost
of investments $81,304 $52,806 $67,326 $20,890
- --------------------------------------------------------------------------------
[3] REPURCHASE AGREEMENTS
All repurchase agreements are fully collateralized by obligations issued by the
U.S. Government or its agencies and such collateral is in the possession of the
Funds' custodian. The value of such collateral includes accrued interest. Risks
arise from the possible delay in recovery or potential loss of rights in the
collateral should the issuer of the repurchase agreement fail financially. The
Funds' investment adviser, acting under the supervision of the Board of
Trustees, reviews the value of the collateral and the creditworthiness of those
banks and dealers with which the Funds enter into repurchase agreements to
evaluate potential risks.
[4] OPTIONS AND FUTURES
As part of their investment programs, Basic Value, Value International and
Europe Fund may utilize options and futures. Options may be written (sold) or
purchased by these Funds. When a Fund purchases a put or call option, the
premium paid is recorded as an investment and its value is marked-to-market
daily. When a Fund writes a call or put option an amount equal to the premium
received by the Fund is recorded as a liability and its value is
marked-to-market daily.
32
<PAGE>
When options, whether written or purchased, expire, are exercised or are
closed (by entering into a closing purchase or sale transaction), the Fund
realizes a gain or loss as described in the chart below:
<TABLE>
<CAPTION>
<S> <C>
PURCHASED OPTION: IMPACT ON THE FUND:
The option expires Realize a loss in the amount of the cost of the option.
- ------------------------------------------------------------------------------------------------------------------------
The option is closed through a closing Realize a gain or loss depending on whether the
sale transaction sale transaction proceeds from the closing are greater
or less than the cost of the option.
- ------------------------------------------------------------------------------------------------------------------------
The Fund exercises a The cost of the security purchased through the exercise of
call option the option will be increased by the premium originally paid
to purchase the option.
- ------------------------------------------------------------------------------------------------------------------------
The Fund exercises Realize a gain or loss from the sale of the underlying
a put option security. The proceeds of that sale will be reduced by
the premium originally paid to purchase the put option.
- ------------------------------------------------------------------------------------------------------------------------
WRITTEN OPTION: IMPACT ON THE FUND:
The option expires Realize a gain equal to the amount of the premium
received.
- ------------------------------------------------------------------------------------------------------------------------
The option is closed through a closing Realize a gain or loss without regard to any unrealized
purchasing transaction gain or loss on the underlying security and eliminate
the option liability. The Fund will realize a loss in
this transaction if the cost of the closing purchase
exceeds the premium received when the option was written.
- ------------------------------------------------------------------------------------------------------------------------
A written call option is exercised by the Realize a gain or loss from the sale of the underlying
option purchaser security. The proceeds of that sale will be increased by
the premium originally received when the option was
written.
- ------------------------------------------------------------------------------------------------------------------------
A written put option is exercised by the The amount of the premium originally received will
option purchaser reduce the cost of the security that the Fund purchased
when the option was exercised.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
There were no options written during the year ended December 31, 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 in 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 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 call option is that a Fund may forego the opportunity of
profit if the market price of the underlying security increases and the option
is exercised. The risk in writing a 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 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.
The Funds enter into futures contracts as a hedge against currency risks.
There are several risks in connection with the use of futures contracts as a
hedging device. Futures contracts involve, to varying degrees, the
33
<PAGE>
NOTES TO FINANCIAL STATEMENTS (cont.)
risk of loss in excess of amounts reflected in the financial statements. The
change in the value of futures contracts primarily corresponds with the value of
their underlying instruments, which may not correlate with the change in the
value of the hedged instruments. In addition, there is the risk that a Fund may
not be able to enter into a closing transaction because of an illiquid secondary
market.
There were no open futures contracts at December 31, 1998.
[5] FINANCIAL INSTRUMENTS
EMERGING MARKET SECURITIES - Value International and Europe Fund may invest in
securities denominated in the currencies of emerging market countries, as well
as in securities issued by companies located in emerging market countries.
Future economic or political developments could adversely affect the liquidity
or value, or both, of such securities.
FORWARD FOREIGN CURRENCY CONTRACTS - Forward foreign currency 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 contracts does not eliminate
fluctuations in the underlying prices of the Fund's securities, but it does
establish a rate of exchange that can be achieved in the future. These forward
foreign currency contracts involve market risk in excess of amounts reflected in
the Financial Statements. Although forward foreign currency 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
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 year ended December 31, 1998, Basic Value, Value International, and
Bartlett Europe had not entered into any forward currency contracts.
[6] 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 year ended December 31, 1998, the Funds had
no borrowings under the line of credit.
[7] 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 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 2.00% 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 2.00% 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 from its inception in 1986.
34
<PAGE>
Worldwide had an administration contract with Legg Mason Fund Adviser, Inc.
("LMFA") for which LMFA 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.
On July 15, 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.
The Adviser has agreed to waive its fees to the extent each Fund's expenses
attributable to Class A, C and Y shares (exclusive of taxes, interest, brokerage
and extraordinary expenses) exceed during any month certain annual rates. The
following chart shows annual rates of advisory fees and expense limits.
FINANCIAL
BASIC VALUE EUROPE SERVICES
VALUE INTERNATIONAL FUND FUND
- --------------------------------------------------------------------------------
Advisory Fee 0.75% 1.25% 1.00% 1.00%
================================================================================
Expense Limitation
Class A 1.15% 1.80% 1.85% 1.50%
Class C 1.90% 2.55% 2.60% 2.25%
Class Y 0.90% 1.55% 1.60% 1.25%
================================================================================
Fees in excess of these limits will be waived through May 1, 2000. For all
classes of the Funds, advisory fees waived for the year ended December 31, 1998
and amounts due to the Adviser at December 31, 1998 were as follows:
FINANCIAL
BASIC VALUE EUROPE SERVICES
VALUE INTERNATIONAL FUND FUND
- --------------------------------------------------------------------------------
Advisory Fees Waived $161 $103 $59 $3
================================================================================
Advisory Fees Payable 53 51 61 13
================================================================================
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.
Gray, Seifert serves as investment sub-adviser to Financial Services Fund
pursuant to a Sub-Advisory Agreement, which was approved by the Board of
Trustees. For its services under the Sub-Advisory Agreement, Gray, Seifert
receives from the Adviser (not Financial Services Fund) a monthly fee at the
rate of 60% of the monthly fee actually paid to the Adviser by Financial
Services Fund under the Agreement, taking into account any fee waiver
arrangements in effect.
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 year ended December 31, 1998: Basic Value, $7; Value
International, $5; Europe Fund, $12; and Financial Services Fund, $0.
[8] 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.
[9] FUND SHARE TRANSACTIONS
The Trust is authorized to issue an unlimited number of shares of beneficial
interest of separate series, all without par value. Shares of four series,
consisting of the Funds, have been authorized. The shares of beneficial interest
of each Fund are divided into three classes, designated Class A, Class C and
Class Y shares. Share transactions are shown on the following page.
35
<PAGE>
NOTES TO FINANCIAL STATEMENTS (cont.)
<TABLE>
<CAPTION>
REINVESTMENT
SOLD OF DISTRIBUTIONS REPURCHASED NET CHANGE
---------------- ---------------- ----------------- -----------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------
BASIC VALUE
-- Class A Shares
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Year Ended December 31, 1998 602 $ 11,170 447 $ 8,032 (1,547) $ (28,706) (498) $(9,504)
Period Ended December 31, 1997A 273 5,649 1,550 28,078 (1,305) (27,524) 518 6,203
-- Class C Shares
Year Ended December 31, 1998 124 2,334 7 135 (29) (526) 102 1,943
Period Ended December 31, 1997B 21 392 1 8 (1) (10) 21 390
-- Class Y Shares
Year Ended December 31, 1998 7 153 9 160 (12) (234) 4 79
Period Ended December 31, 1997C 112 2,501 30 538 (15) (331) 127 2,708
VALUE INTERNATIONAL
-- Class A Shares
Year Ended December 31, 1998 583 7,184 220 2,519 (2,158) (25,562)(1,355) (15,859)
Period Ended December 31, 1997A 1,960 27,946 565 6,969 (3,164) (46,911) (639) (11,996)
-- Class C Shares
Year Ended December 31, 1998 313 3,966 15 163 (56) (639) 272 3,490
Period Ended December 31, 1997D 72 994 5 65 (4) (55) 73 1,004
-- Class Y Shares
Year Ended December 31, 1998 20 328 18 203 (627) (7,430) (589) (6,899)
Period Ended December 31, 1997C 1,295 20,134 170 2,067 (404) (4,983) 1,061 17,218
EUROPE FUND
-- Class A Shares
Year Ended December 31, 1998 415 10,886 253 6,156 (842) (20,632) (174) (3,590)
Period Ended December 31, 1997E 27 1,137 890 19,433 (1,354) (34,844) (437) (14,274)
-- Class C Shares
Year Ended December 31, 1998 1,279 33,629 194 4,541 (162) (4,162) 1,311 34,008
Period Ended December 31, 1997D 13 328 2 49 (1) (35) 14 342
-- Class Y Shares
Year Ended December 31, 1998 9 219 1 35 (382) (10,443) (372) (10,189)
Period Ended December 31, 1997F 299 7,693 83 1,741 -- -- 382 9,434
FINANCIAL SERVICES FUND
-- Class A Shares
Period Ended December 31, 1998G 706 7,112 -- -- (2) (15) 704 7,097
-- Class C Shares
Period Ended December 31, 1998G 1,388 14,009 -- -- (7) (70) 1,381 13,939
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
A For the period April 1, 1997 to December 31, 1997.
B For the period September 12, 1997 (commencement of operations of this class)
to December 31, 1997.
C For the period August 15, 1997 (commencement of operations of this class) to
December 31, 1997.
D For the period July 23, 1997 (commencement of operations of this class) to
December 31, 1997.
E For the period July 21, 1997 (commencement of operations of this class) to
December 31, 1997.
F For the period August 21, 1997 (commencement of operations of this class) to
December 31, 1997.
G For the period November 16, 1998 (commencement of operations of this class) to
December 31, 1998.
36
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees of
Bartlett Capital Trust:
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Bartlett Basic Value Fund, Bartlett Value International Fund, Bartlett Europe
Fund and Bartlett Financial Services Fund (comprising Bartlett Capital Trust,
hereafter referred to as the "Funds") at December 31, 1998, and the results of
each of their operations, the changes in each of their net assets and the
financial highlights for each of the fiscal periods presented, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1998, by
correspondence with custodians and brokers, provide a reasonable basis for the
opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Baltimore, Maryland
February 5, 1999
37
<PAGE>
TRUSTEES AND OFFICERS
<TABLE>
<CAPTION>
<S> <C>
- --------------------------------------------------------------------------------------
Lorrence T. Kellar Chairman of the Board and Trustee
Edward A. Taber, III President and Trustee
A. John W. Campbell Trustee
Edmund J. Cashman, Jr. Trustee
Henri Deegenaar Trustee
Ian F.H. Grant Trustee
Alan R. Schriber Trustee
William P. Sheehan Trustee
Prinz Wolfgang E. Ysenburg Trustee
Marie K. Karpinski, CPA Vice President and Treasurer
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
Thomas A. Steele, CPA Assistant Treasurer and Assistant Secretary
- --------------------------------------------------------------------------------------
Investment Adviser Bartlett & Co.
Cincinnati, Ohio
Investment Sub-Adviser to Lombard Odier International Portfolio
Europe Fund Management Limited
London, England
Investment Sub-Adviser to Gray, Seifert & Co., Inc.
Financial Services Fund New York, New York
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
513-345-6212 o 800-800-3609 O FAX 513-621-6462
