<PAGE>
MARTIN CURRIE BUSINESS TRUST
EMERGING AMERICAS FUND
SEMI-ANNUAL REPORT
OCTOBER 31, 1997
(UNAUDITED)
<PAGE>
MCBT EMERGING AMERICAS FUND
- --------------------------------------------------------------------------------
PROFILE AT OCTOBER 31, 1997 (Unaudited)
OBJECTIVE Long-term capital appreciation through active management of
a diversified portfolio of equities in countries of the
Western Hemisphere with emerging markets and developing
economies.
LAUNCH DATE September 19, 1994
FUND SIZE $155.9m
PERFORMANCE Total return from May 1, 1997 through October 31, 1997
- MCBT - Emerging Americas Fund (excluding all
transaction fees) -8.8%
- MCBT - Emerging Americas Fund (including all
transaction fees) -12.0%
- The Morgan Stanley Capital International
Latin America (Free) Index -1.4%
Annualized total return from September 19, 1994 through
October 31, 1997
- MCBT - Emerging Americas Fund (excluding all
transaction fees) -4.4%
- MCBT - Emerging Americas Fund (including all
transaction fees) -5.5%
- The Morgan Stanley Capital International Latin
America (Free) Index 0.0%
(from October 1, 1994 through October 31, 1997)
PORTFOLIO Given events in Asia, it has been a difficult period for
COMMENTS Latin American equities. Brazil has been the worst
performing market over the six months, down 20.9%, and
Mexico the best, up 5.4%. The MSCI Latin America (Free)
Index began the period well, but then fell back to finish
the period down by 1.4%.
We retain a significant position in BRAZIL, even though we
halved our exposure to Telebras as the Asian currency crisis
hit in July. We bought and have held such other
privatisation stocks such as Telesp and Cemig. Asia's woes
focused attention on current account deficits, none more so
than Brazil's. The response of retail investors was to sell
aggressively. Volatility and lighter volumes characterised
the market, and its weakness has hurt our performance. But
it is, in our view, oversold.
In MEXICO, figures for GDP, industrial production and
employment have been very robust. Consumer sales are
picking up strongly, and the stock market held up very well
to fallout from Asia. The peso has weakened and interest
rates have stabilised. Our Mexican portfolio has continued
to favour such domestic stocks as Organization Soriana SA de
CV (supermarkets), Grupo Posadas (hotels), Pepsi - Gemex
(Pepsi bottler), and TV Azteca SA de CV (media).
Elsewhere, we sold Soquimich (fertilisers) in CHILE and
reduced our exposure to ARGENTINA ahead of October
elections. We sold Telefonica del Peru and came out of
COLOMBIA altogether because we see the economy slowing.
OUTLOOK
We are happy to remain overweight. It is very possible that
the new year may see flows from Asia going into Latin
America. Overall, the economic background is still very
supportive. Longer-term, economic growth of 4-5% across the
region, falling interest rates and deregulation make Latin
America attractive.
1
<PAGE>
MCBT EMERGING AMERICAS FUND
- --------------------------------------------------------------------------------
PROFILE AT OCTOBER 31, 1997 (Unaudited)
INVESTMENT James Fairweather is Chief Investment Officer. All funds
MANAGER are managed on a team basis with a named director heading
PROFILE each team.
James Fairweather has managed the MCBT Emerging Americas
Fund since inception.
He spent three years with Montague Loebl Stanley & Co. as an
institutional sales and economic assistant. Moved into
Eurobond sales for 18 months with Kleinwort Benson before
joining Martin Currie in 1984. He has worked in our Far
East, North American and Continental European investment
teams. Appointed a director in 1987, he became head of our
Continental Europe team in 1992. A member of the asset
allocation committee, James was appointed Deputy Chief
Investment Officer in 1994 with overall responsibility for
our investments in emerging markets. He was promoted to
Chief Investment Officer in 1997.
Joanna Terrett assists James. Joanna, with 6 years
investment experience, graduated from Manchester University
in 1990 with a degree in European Studies and French. She
joined Martin Currie in the same year as a member of the
Continental Europe team and was appointed investment manager
in 1994. A Spanish speaker, Joanne lived in Argentina and
Venezuela for six years and in early 1996 she joined the
Emerging Markets team with responsibility for Latin America.
She was appointed assistant director in October, 1996.
The Global Asset Allocation Committee sets limits for
regional allocation. The managers of the funds are
responsible for the selection of countries within those
regions, sectors, and stocks.
2
<PAGE>
MCBT EMERGING AMERICAS FUND
- --------------------------------------------------------------------------------
PROFILE AT OCTOBER 31, 1997 (Unaudited)
ASSET ALLOCATION
(% of net assets)
Argentina 9%
Brazil 35%
Chile 7%
Mexico 36%
Other Areas 2%
ST Investment 11%
LARGEST HOLDINGS
BY COUNTRY % OF NET ASSETS
BRAZIL
Telebras, ADR 5.2
Eletrobras, ADR 4.2
MEXICO
Telofonos de Mexico, ADR 4.6
Corporacion Industrial Alfa, Cl A 4.1
Grupo Financiero Banamex, Cl B 3.9
CHILE
Compania de Telefonos de Chile 3.2
ARGENTINA
YPF Sociedad Anonima, ADR 3.1
Compania Perez Companc 2.1
VENEZUELA
Compania Anonima Nacional Telefonos, ADR, CL D 1.7
3
<PAGE>
MCBT EMERGING AMERICAS FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
COMMON AND PREFERRED STOCKS AND RIGHTS - 88.6%
ARGENTINA - 8.5%
ARGENTINA EQUITY INVESTMENTS 15,000 $ 1,094,400
BANCO DE GALICIA, ADR 114,098 2,765,094
COMPANIA PEREZ COMPANC 522,565 3,273,237
IMPORTADORA Y EXPORTADORA PATAGONIA 90,000 1,305,790
YPF SOCIEDAD ANONIMA, ADR 150,000 4,800,000
----------
TOTAL ARGENTINA - (COST $11,532,568) 13,238,521
----------
BRAZIL - 35.3%
BRAZIL FAST FOOD * 17,500 45,937
BRAZILIAN EQUITY INVESTMENTS * 44,000 1,444,520
CEMIG, ADR 85,063 3,317,457
CIA RIOGRANDENSE TELECOM * 5,000,000 3,855,050
COMPANHIA BRASILEIRA DE DISTRIBUICAO, GDR 150,000 2,775,000
COMPANHIA DE SANEAMENTO DO ESTADO DE SAO PAULO 18,000,000 3,330,763
COMPANIA VALE DO RIO DOCE, ADR 180,000 3,477,709
ELETROBRAS, ADR 16,328,000 6,590,739
ERICSSON TELECOMUNICACOES 94,400,000 2,782,893
LIGHT SERVICOS DE ELETRICIDADE 9,500,000 3,153,885
PETROBRAS PETROLEO BRASIL 30,295,000 5,633,339
TELEBRAS, ADR 80,445 8,165,167
TELEC DO RIO JANEIRO 25,500,000 2,428,682
TELEC DO RIO JANEIRO, RIGHTS, 11/12/97 * 988,736 13,453
TELECOMUNICACOES DE SAO PAULO 23,493,379 6,137,324
TELECOMUNICACOES DE SAO PAULO, RIGHTS, 11/12/97 * 1,058,334 720
TV FILME INC. * 300,000 1,800,000
----------
TOTAL BRAZIL - (COST $63,665,436) 54,952,638
----------
CHILE - 7.2%
COMPANIA DE TELEFONOS DE CHILE, ADR 178,000 4,939,500
DISTRIBUCION Y SERVICIO D & S * 130,000 2,283,125
ENERSIS, ADR 60,400 1,993,200
LABORATORIO CHILE, ADR 82,300 2,067,788
----------
TOTAL CHILE - (COST $10,043,768) 11,283,613
----------
MEXICO - 35.8%
BUFETE INDUSTRIAL, ADR * 105,400 1,554,650
CIFRA SA DE CV, CL B 2,533,332 5,039,473
CORPORACION GEO, SERIES B * 430,000 2,317,949
CORPORACION INDUSTRIAL ALFA, CL A 877,244 6,402,783
FOMENTO ECONOMICO MEXICANO SA DE C.V. 600,000 4,221,825
GRUPO ELEKTRA SA DE C.V., GDR 160,000 4,390,000
GRUPO FINANCIERO BANAMEX, CL B * 3,100,000 6,137,150
GRUPO POSADAS * 2,812,000 1,509,123
INDUSTRIAS CH * 381,000 1,953,846
ORGANIZATION SORIANA SA DE CV 1,440,000 4,791,413
PEPSI-GEMEX, GDR 200,000 2,725,000
TELEFONOS DE MEXICO, ADR 166,000 7,179,500
TUBOS DE ACERO DE MEXICO, ADR * 179,400 3,621,637
TV AZTECA SA DE CV, ADR * 210,000 4,016,250
----------
TOTAL MEXICO - (COST $55,238,348) 55,860,599
----------
</TABLE>
See notes to financial statements.
4
<PAGE>
MCBT EMERGING AMERICAS FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
PERU - 0.1%
MINAS BUENAVENTURA, CL A 7,862 $ 68,340
MINAS BUENAVENTURA, CL B 1,965 18,166
-----------
TOTAL PERU - (COST $66,482) 86,506
-----------
VENEZUELA - 1.7%
COMPANIA ANONIMA NACIONAL TELEFONOS, ADR, CL D * 62,000 2,712,500
-----------
TOTAL VENEZUELA - (COST $1,499,174) 2,712,500
-----------
TOTAL COMMON AND PREFERRED STOCKS AND RIGHTS - (COST $142,045,776) + 138,134,377
-----------
PRINCIPAL
AMOUNT
---------
SHORT TERM INVESTMENT - 11.7%
STATE STREET BANK AND TRUST REPURCHASE AGREEMENT,
5.15%, 11/03/1997 (a) $18,238,000 18,238,000
-----------
TOTAL SHORT TERM INVESTMENT - (COST $18,238,000) 18,238,000
-----------
TOTAL INVESTMENTS - (COST $160,283,776) - 100.3% 156,372,377
CASH, RECEIVABLES AND OTHER ASSETS, LESS LIABILITIES - (0.3)% (443,520)
-----------
NET ASSETS - 100.0% $155,928,857
------------
------------
</TABLE>
* Non-income producing security.
(a) The repurchase agreement, dated 10/31/97, $18,238,000 par due 11/03/97, is
collateralized by United States Treasury Notes, 5.875%, due 8/15/98, with a
market value of $18,603,369.
+ Percentages of long term investments are presented in the portfolio by
country. Percentages of long term investments by industry are as follows:
Banks 1.8%, Brewery 2.7%, Construction and Building Materials 2.3%, Drugs &
Health Care 1.3%, Electric Utilities 9.7%, Engineering 1.0%, Financial
Services 3.9%, Food & Beverages 5.0%, Hotels & Restaurants 1.0%, Industrial
Machinery 1.3%, Insurance 4.1%, Investment Companies 1.6%, Manufacturing
1.5%, Mining 2.3%, Oil & Gas 6.7%, Petroleum Services 2.1%, Retail 3.7%,
Retail Trade 6.3%, Telecommunication 13.3%, Telecommunication Equipment
1.8%, Telecommunications Services 8.5%, Telephone 4.6%, Water Utilities
2.1%.
ADR American Depositary Receipts.
GDR Global Depositary Receipts.
See notes to financial statements.
5
<PAGE>
MCBT EMERGING AMERICAS FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997 (Unaudited)
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $142,045,776) (Note B) $ 138,134,377
Investments in repurchase agreements, at value (Note B) 18,238,000
--------------
Total Investments 156,372,377
Receivable for investments sold 8,336,201
Dividend and interest receivable 93,979
Foreign tax reclaims receivable 1,570
Prepaid insurance 7,667
Deferred organization expenses (Note B) 4,808
--------------
TOTAL ASSETS 164,816,602
--------------
LIABILITIES
Payable for investments purchased 3,983,664
Payable for currency purchased 10,349
Due to custodian 6,925
Due to foreign custodian, at value (cost $4,171,459) (Note B) 4,171,480
Management fee payable (Note C) 666,254
Administration fee payable (Note C) 12,447
Trustees fees payable (Note C) 2,429
Accrued expenses and other liabilities 34,197
--------------
TOTAL LIABILITIES 8,887,745
--------------
TOTAL NET ASSETS $ 155,928,857
--------------
--------------
COMPOSITION OF NET ASSETS:
Paid-in-capital $ 145,510,321
Undistributed net investment income 443,136
Accumulated net realized gain on investment and foreign currency transactions 13,887,216
Net unrealized depreciation on investment and foreign currency transactions (3,911,816)
--------------
TOTAL NET ASSETS $ 155,928,857
--------------
--------------
NET ASSET VALUE PER SHARE $ 8.60
($155,928,857 / 18,137,128 shares of beneficial interest outstanding) --------------
--------------
</TABLE>
See notes to financial statements.
6
<PAGE>
MCBT EMERGING AMERICAS FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
SIX MONTHS ENDED OCTOBER 31, 1997 (Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest income $ 285,586
Dividend income 1,654,576
Foreign taxes withheld (209,508)
--------------
TOTAL INVESTMENT INCOME 1,730,654
--------------
EXPENSES
Management fee (Note C) 1,307,559
Custodian fee 105,682
Administration fee (Note C) 63,213
Audit fee 12,536
Legal fees 10,755
Transfer agent fee 3,409
Trustees fees (Note C) 3,539
Amortization of deferred organization expenses 1,277
Miscellaneous expenses 12,879
--------------
TOTAL EXPENSES 1,520,849
--------------
NET INVESTMENT INCOME 209,805
--------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS AND FOREIGN CURRENCY
Net realized gain on investments 24,088,671
Net realized loss on foreign currency transactions (402,502)
Net unrealized depreciation on:
Investments (40,633,847)
Foreign currency transactions (235)
--------------
NET LOSS ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS (16,947,913)
--------------
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (16,738,108)
--------------
--------------
</TABLE>
See notes to financial statements.
7
<PAGE>
MCBT EMERGING AMERICAS FUND
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months
Ended Year
October 31, 1997 Ended
(Unaudited) April 30, 1997
---------------- --------------
<S> <C> <C>
NET ASSETS at beginning of period $ 194,596,827 $ 89,599,602
-------------- -------------
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income 209,805 885,447
Net realized gain on investment transactions 24,088,671 1,359,144
Net realized loss on foreign currency transactions (402,502) (70,475)
Net unrealized appreciation (depreciation) on:
Investments (40,633,847) 31,143,844
Foreign currency transactions (235) 330
-------------- -------------
Net increase (decrease) in net assets from operations (16,738,108) 33,318,290
-------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income 0 (581,714)
-------------- -------------
Total distributions 0 (581,714)
-------------- -------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 34,003,606 73,420,567
Reinvestment of dividends and distributions to shareholders 0 564,807
Cost of shares repurchased (57,539,000) (3,086,300)
Paid in capital from subscription and redemption fees 1,605,532 1,361,575
-------------- -------------
Total increase (decrease) in net assets from capital share transactions (21,929,862) 72,260,649
-------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS (38,667,970) 104,997,225
-------------- -------------
NET ASSETS at end of period (net of accumulated net investment income of $ 155,928,857 $ 194,596,827
$443,136 and $233,331, respectively) -------------- -------------
-------------- -------------
OTHER INFORMATION:
CAPITAL SHARE TRANSACTIONS:
Shares sold 3,331,040 9,227,999
Shares issued in reinvestment of distributions to shareholders 0 69,729
Less shares repurchased (5,840,253) (351,983)
-------------- -------------
Net share transactions (2,509,213) 8,945,745
-------------- -------------
-------------- -------------
</TABLE>
See notes to financial statements.
8
<PAGE>
MCBT EMERGING AMERICAS FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING FOR THE PERIOD
<TABLE>
<CAPTION>
Six Months
Ended Year Year Sept. 19, 1994 *
October 31, 1997 Ended Ended through
(Unaudited) April 30, 1997 April 30, 1996 April 30, 1995
---------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 9.430 $ 7.660 $ 6.850 $ 10.000
Net investment income (loss) 0.013 0.040 0.025 (0.004)
Net realized and unrealized gain (loss) on investment
and foreign currency transactions (0.951) 1.688 0.720 (3.298)
------------ ------------ ----------- -----------
Total from investment operations (0.938) 1.728 0.745 (3.302)
------------ ------------ ----------- -----------
Less distributions:
Dividends from net investment income 0.000 (0.029) (0.040) 0.000
------------ ------------ ----------- -----------
Paid in capital from subscription and
redemption fees (Note B) 0.108 0.071 0.105 0.152
------------ ------------ ----------- -----------
Net asset value, end of period $ 8.600 $ 9.430 $ 7.660 $ 6.850
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
TOTAL INVESTMENT RETURN (1) (2) (8.80)% 23.55% 12.48% (31.50)%
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $155,928,857 $194,596,827 $89,599,602 $39,833,637
Operating expenses, net, to average
net assets (Note C) 1.74% (3) 1.70% 1.70% 1.80% (3)
Operating expenses, gross, to average
net assets (Note C) 1.74% (3) 1.77% 1.95% 1.80% (3)
Net investment income(loss) to average net assets 0.24% (3) 0.62% 0.88% (0.11)% (3)
Portfolio turnover rate 67% 50% 61% 89%
Average commission rate per share (4) $ 0.0019 $ 0.0002 $ 0.0001 N/A
Per share amount of fees waived (Note C) $ 0.000 $ 0.005 $ 0.007 $ 0.000
</TABLE>
- -----------------------------------------------------------------------------
* Commencement of investment operations.
(1) Total return at net asset value assuming all distributions reinvested and
no purchase premiums or redemption fees.
(2) Periods less than one year are not annualized.
(3) Annualized.
(4) The average commission rate paid is applicable for Funds that invest
greater than 10% of average net assets in equity transactions on which
commissions are charged. This disclosure is required for fiscal periods
beginning on or after September 1, 1995.
See notes to financial statements.
9
<PAGE>
MCBT EMERGING AMERICAS FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE A - ORGANIZATION
Martin Currie Business Trust ("MCBT") (the "Trust") is registered under the
Investment Company Act of 1940, as amended (the 1940 Act), as an open-end
management investment company organized as a Massachusetts business trust on May
20, 1994. The Trust offers seven funds which have differing investment
objectives and policies: Global Growth Fund, Opportunistic EAFE Fund, Global
Emerging Markets Fund, Japan Small Companies Fund, Emerging Americas Fund,
Emerging Asia Fund and the EMEA Fund, (the "Funds"). The MCBT Emerging Americas
Fund (the "Fund") commenced investment operations on September 19, 1994. The
Fund's Declaration of Trust permits the Board of Trustees to issue an unlimited
number of full and fractional shares of beneficial interest, without par value.
NOTE B - SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
VALUATION OF INVESTMENTS - The Fund's portfolio securities traded on a
securities exchange are valued at the last quoted sale price, or, if no sale
occurs, at the mean of the most recent quoted bid and asked prices. Unlisted
securities for which market quotations are readily available are valued at
the mean of the most recent quoted bid and asked prices. Prices for
securities which are primarily traded in foreign markets are furnished by
quotation services expressed in the local currency's value and are translated
into U.S. dollars at the current rate of exchange. Short-term securities and
debt securities with a remaining maturity of 60 days or less are valued at
their amortized cost. Options and futures contracts are valued at the last
sale price on the market where such options or futures contract is
principally traded. Options traded over-the-counter are valued based upon
prices provided by market makers in such securities or dealers in such
currencies. Securities for which current market quotations are unavailable
or for which quotations are not deemed by the investment adviser to be
representative of market values are valued at fair value as determined in
good faith by the Trustees of the Fund, or by persons acting pursuant to
procedures established by the Trustees.
REPURCHASE AGREEMENTS - In connection with transactions in repurchase
agreements, the Fund's custodian takes possession of the underlying
collateral securities, the value or market price of which is at least equal
to the principal amount, including interest, of the repurchase transaction.
To the extent that any repurchase transaction exceeds one business day, the
value of the collateral is marked-to-market on a daily basis to ensure the
adequacy of the collateral. In the event of default of the obligation to
repurchase, the Fund has the right to liquidate the collateral and apply the
proceeds in satisfaction of the obligation. Under certain circumstances, in
the event of default or bankruptcy by the other party to the agreement,
realization and/or retention of the collateral or proceeds may be subject to
legal proceedings that could delay or increase the cost of such realization
or retention.
INVESTMENT TRANSACTIONS - Investment security transactions are recorded on
the date of purchase or sale. Realized gains and losses from security
transactions are determined on the basis of identified cost.
INVESTMENT INCOME - Dividend income is recorded on the ex-dividend date.
Interest income is accrued as earned. Investment income is recorded net of
foreign taxes withheld where recovery of such taxes is uncertain.
FOREIGN CURRENCY TRANSLATIONS - The records of the Fund are maintained in
U.S. dollars. Foreign currency amounts are translated into U.S. dollars at a
current rate of exchange of such currency to determine the value of
investments, other assets and liabilities on the date of any determination of
net asset value of the Fund. Purchases and sales of securities and income
and expenses are converted at the prevailing rate of exchange on the
respective dates of such transactions.
The Fund may realize currency gains or losses between the trade and
settlement dates on security transactions. To minimize such currency gains
or losses, the Fund may enter into forward foreign currency contracts.
The net U.S. dollar value of foreign currency underlying all contractual
commitments held by the Fund on each day and the resulting net unrealized
appreciation, depreciation and related net receivable or payable amounts are
determined by using forward currency exchange rates supplied by a quotation
service.
10
<PAGE>
MCBT EMERGING AMERICAS FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
FOREIGN CURRENCY TRANSLATIONS (CONTINUED) - Reported net realized gains and
losses on foreign currency transactions represent net gains and losses from
sales and maturities of forward currency contracts, disposition of foreign
currencies, currency gains and losses realized between the trade and
settlement dates on security transactions, and the difference between the
amount of net investment income accrued and the U.S. dollar amount actually
received. The effects of changes in foreign currency exchange rates on
investments in securities are not segregated in the Statement of Operations
from the effects of changes in market prices of those securities, and are
included with the net realized and unrealized gain or loss on investment
securities.
FORWARD FOREIGN CURRENCY CONTRACTS - A forward foreign currency contract
("Forward") is an agreement between two parties to buy and sell a currency at
a set price on a future date. The market value of the Forward fluctuates
with changes in currency exchange rates. The Forward is marked-to-market
daily and the change in the market value is recorded by the Fund as an
unrealized gain or loss. When the Forward is closed, the Fund records a
realized gain or loss equal to the difference between the value at the time
it was opened and the value at the time it was closed. The Fund could be
exposed to risk if a counterparty is unable to meet the terms of the contract
or if the value of the currency changes unfavorably. The Fund may enter into
Forwards in connection with planned purchases and sales of securities, to
hedge specific receivables or payables against changes in future exchange
rates or to hedge the U.S. dollar value of portfolio securities denominated
in a foreign currency.
EXPENSES - Expenses directly attributable to the Fund are charged to the
Fund. Expenses not directly attributable to a particular Fund are either
split evenly among the affected Funds, allocated on the basis of relative
average net assets, or otherwise allocated among the Funds as the Board of
Trustees may direct or approve. Certain costs incurred in connection with
the organization of the Trust and each Fund have been deferred and are being
amortized on a straight line basis over a five year period starting on each
Fund's commencement of operations.
DISTRIBUTIONS TO SHAREHOLDERS - The Fund declares and distributes dividends
from net investment income, if any, and distributes its net realized capital
gains, if any, at least annually. All distributions will be reinvested in
shares of the Fund at the net asset value unless the shareholder elects in
the subscription agreement either to receive cash in respect of all
distributions or to receive cash with respect to distributions of income and
to reinvest in shares of the Fund with respect to distributions of realized
capital gains. Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. These differences are primarily due to
differing treatments for passive foreign investment companies (PFIC's),
foreign currency transactions, losses deferred due to wash sales, post
October 31 losses and excise tax regulations. Permanent book and tax
differences relating to shareholder distributions will result in
reclassifications to paid-in-capital. Distributions are recorded on the
ex-dividend date.
PURCHASES AND REDEMPTIONS OF FUND SHARES - There is a purchase premium for
cash investments into the Fund of 1.75% of the amount invested and a
redemption fee on cash redemptions of 1.75% of the amount redeemed. All
purchase premiums and redemption fees are paid to and retained by the Fund
and are recorded as paid-in-capital by the Fund. These fees are intended to
offset brokerage and transaction costs arising in connection with the
purchase and redemption. The purchase and redemption fees may be waived by
the Manager, however, if these brokerage and transaction costs are minimal or
in other circumstances at the Manager's discretion. For the six months ended
October 31, 1997, $602,100 was collected in purchase premiums and $1,003,432
was collected in redemption fees.
INCOME TAXES - Each Fund of the Trust is treated as a separate entity for
U.S. federal income tax purposes. Each Fund intends to qualify each year as
a regulated investment company under Subchapter M of the Internal Revenue
Code of 1986, as amended. By so qualifying, the Funds will not be subject to
federal income taxes to the extent that they distribute substantially all of
their taxable income, including realized capital gains, if any, for the
fiscal year. In addition, by distributing substantially all of their net
investment income, realized capital gains and certain other amounts, if any,
during the calendar year, the Funds will not be subject to a federal excise
tax.
11
<PAGE>
MCBT EMERGING AMERICAS FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
INCOME TAXES (CONTINUED) - The Fund may be subject to taxes imposed by
countries in which it invests. Such taxes are generally based on income
and/or capital gains earned or repatriated. Taxes are accrued and applied to
net investment income, net realized gains and unrealized appreciation as such
income and/or gains are earned.
ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and income and expenses at the date of the financial statements.
Actual results could differ from these estimates.
NOTE C - AGREEMENTS AND FEES
The Fund has entered into a Management Contract with Martin Currie Inc. (the
"Investment Manager"), a wholly owned subsidiary of Martin Currie Ltd. Under
the Management Contract, the Fund pays the Investment Manager a quarterly
management fee at the annual rate of 1.50% of the Fund's average net assets.
Prior to September 20, 1996 the Investment Manager had voluntarily agreed to
limit its fee to 1.25% of the Fund's average net assets.
The Investment Manager has also voluntarily undertaken to reduce its fee
until further notice to the extent necessary to limit the Fund's annual
expenses (including the management fee but excluding brokerage commissions,
transfer taxes, and extraordinary expenses) to 2.00% of the Fund's average
net assets on an annualized basis. For the six months ended October 31,
1997, it was not necessary for the Investment Manager to waive any additional
fees.
State Street Bank and Trust Company (the "Administrator") serves as
administrator of the Fund. The Administrator performs certain administrative
services for the Fund. The Fund pays the Administrator a fee at the rate of
0.08% of the Fund's average net assets up to $125 million, 0.06% of the next
$125 million, and 0.04% of those assets in excess of $250 million, subject to
certain minimum requirements, plus certain out of pocket costs. State Street
Bank and Trust Company also receives fees and compensation of expenses for
certain custodian and transfer agent services.
Trustees of the Trust who are not interested persons receive aggregate annual
fees of $20,000 ($10,000 per Trustee).
NOTE D - INVESTMENT TRANSACTIONS
Purchases and proceeds from sales and maturities of investments, excluding
short-term securities for the six months ended October 31, 1997 were
$106,394,047 and $136,460,024, respectively.
The identified cost of investments in securities and repurchase agreements owned
for federal income tax purposes and their respective gross unrealized
appreciation and depreciation at October 31, 1997 were as follows:
IDENTIFIED GROSS UNREALIZED NET UNREALIZED
COST APPRECIATION (DEPRECIATION) APPRECIATION
------------ ------------ ------------- --------------
$160,283,776 $14,482,050 $(18,393,449) $(3,911,399)
NOTE E - PRINCIPAL SHAREHOLDERS
As of October 31, 1997 there was one shareholder who owned greater than 10% of
the Fund's outstanding shares, representing 27% of the Fund.
12
<PAGE>
MCBT EMERGING AMERICAS FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE F - CONCENTRATION OF RISK
The Fund will invest extensively in foreign securities (i.e., those which are
not listed on a United States securities exchange) in emerging markets.
Investing in foreign securities involves risks not typically found in investing
in U.S. markets. These include risks of adverse change in foreign economic,
political, regulatory and other conditions, and changes in currency exchange
rates, exchange control regulations (including currency blockage), expropriation
of assets or nationalization, imposition of withholding taxes on dividend or
interest payments and capital gains, and possible difficulty in obtaining and
enforcing judgments against foreign entities. Furthermore, issuers of foreign
securities are subject to different, and often less comprehensive, accounting,
reporting and disclosure requirements than domestic issuers. The securities of
some foreign companies and foreign securities markets are less liquid and at
times more volatile than securities of comparable U.S. companies and U.S.
securities markets.
The risks of investing in foreign securities may be heightened in the case of
investments in emerging markets or countries with limited or developing
capital markets. Security prices in emerging markets can be significantly
more volatile than in the more developed nations of the world, reflecting the
greater uncertainties of investing in less established markets and economies.
In particular, countries with emerging markets may have relatively unstable
governments, present the risk of nationalization, restrictions on foreign
ownership, imposition of withholding taxes on dividend or interest payments
and capital gains, or prohibitions on repatriation of assets, and may have
less protection for property rights than more developed countries. Political
change or instability may adversely affect the economies and securities
markets of such countries. The economies of individual countries may differ
favorably or unfavorably and significantly form the U. S. economy in such
respects as growth of gross domestic product or gross national product,
diversification, rate of inflation, currency depreciation, capital
reinvestment, resource self-sufficiency, dependence on foreign assistance,
vulnerability to change in trade conditions, structural unemployment and
balance of payments position.
13
<PAGE>
MARTIN CURRIE BUSINESS TRUST
--------------------
TRUSTEES AND OFFICERS
C. James P. Dawnay, TRUSTEE AND PRESIDENT *
Simon D. Eccles, TRUSTEE
Patrick R. Wilmerding, TRUSTEE
Colin Winchester, VICE PRESIDENT AND TREASURER
J. Grant Wilson, VICE PRESIDENT
Julian M.C. Livingston, CLERK
* INTERESTED TRUSTEE
--------------------
INVESTMENT MANAGER
Martin Currie, Inc.
Saltire Court
20 Castle Terrace
Edinburgh EH1 2ES
011-44-131-229-5252
Regulated by IMRO
Registered Investment Adviser with the SEC
--------------------
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The information contained in this report is intended for general
informational purposes only. This report is not authorized for
distribution to prospective investors unless preceded or accompanied
by a current Private Placement Memorandum which contains important
information concerning the Fund and its current offering of shares.
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