<PAGE>
MARTIN CURRIE BUSINESS TRUST
EMERGING ASIA FUND
SEMI-ANNUAL REPORT
OCTOBER 31, 1997
(UNAUDITED)
<PAGE>
MCBT EMERGING ASIA FUND
- --------------------------------------------------------------------------------
PROFILE AT OCTOBER 31, 1997 (Unaudited)
OBJECTIVE Long term capital appreciation through active management of a
diversified portfolio of equities in Asian countries with
emerging markets and developing economies.
LAUNCH DATE March 24, 1995
FUND SIZE $33.0m
PERFORMANCE Total return from May 1, 1997 through October 31, 1997
- MCBT - Emerging Asia Fund (excluding all
transaction fees) -54.2%
- MCBT - Emerging Asia Fund (including all
transaction fees) -55.8%
- The Morgan Stanley Capital International -
Emerging Free Asia Index -36.5%
Annualized total return from March 24, 1995 through October
31, 1997
- MCBT - Emerging Asia Fund (excluding all
transaction fees) -25.6%
- MCBT - Emerging Asia Fund (including all
transaction fees) -26.6%
- The Morgan Stanley Capital International -
Emerging Free Asia Index -15.3%
(from April 1, 1995 through October 31, 1997)
PORTFOLIO Smaller Asian markets have had a torrid time over the last
COMMENTS six months. The Fund has under performed the MSCI Emerging Free
Asia Index. Following considerable economic problems and the
enforced devaluation of the Thai baht in July, stock markets and
currencies in Malaysia, Thailand, Indonesia, the Philippines and
Singapore have continued to slide. Interest rates have risen in
attempts to support currencies, and now acute problems in South
Korea have made a difficult situation worse.
INDONESIA was a good market for us - until August. Then the
rupiah depreciated rapidly and the stock market collapsed. But
we regard Indonesia's problems as less acute than those in
several other south-east Asian countries, and we are not leaving
the market. After strong gains, we sold our holdings in TAIWAN
in February and only since the end of this reporting period have
we begun to re-enter the market. Because it held up relatively
well as the region's other markets tumbled, our performance has
suffered.
We sold our positions in THAILAND in October 1996. Events have
more than justified our decision to stay out. We became
increasingly concerned with the outlook for Malaysia during the
period, and have sold out of the market completely. The
PHILIPPINES has been disappointing. Our decision in June to sell
two of our main stocks, Seacem (a cement company), and Piltel
(the mobile phone operator), proved the right one, as both have
continued to fall.
OUTLOOK
The region faces fundamental problems. Despite the intercession
of the IMF, it remains far from clear that the countries
concerned have the political will to reform. China will become
increasingly important as the region's driver and we are adding
to our investments there. As long term investors, we believe
that it is not too early to try and identify the next 'nifty
fifty' companies in Asia. That search is one we have begun.
1
<PAGE>
MCBT EMERGING ASIA 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.
Tom Walker manages the MCBT Emerging Asia Fund. With ten years
investment experience, Tom has been appointed head of the Pacific
Basin team. He graduated from Magdalene College, Cambridge with
a degree in Law and completed a diploma in accounting at Heriot
Watt University in 1983. He qualified as a chartered accountant
in 1986 at Peat Marwick before spending six years with Edinburgh
Fund Managers plc. He then moved to Hong Kong in 1993 as an
investment manager with Barings Asset Management (Asia) Ltd. and
joined Martin Currie Investment Management LTD as a director in
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 ASIA FUND
- --------------------------------------------------------------------------------
PROFILE AT OCTOBER 31, 1997 (Unaudited)
ASSET ALLOCATION
(% of net assets)
[PIE CHART]
- - China 9%
- - Indonesia 59%
- - Hong Kong 7%
- - Philippines 18%
- - ST Investment 4%
- - Other Net Assets 3%
LARGEST HOLDINGS
BY COUNTRY % OF NET ASSETS
INDONESIA
Telekominikasi Indonesia 7.6
Indorama Synthetics 6.8
CHINA
Qingling Motors 5.3
PHILIPPINES
Filinvest Land 5.2
HONG KONG
First Tractor Limited 3.5
3
<PAGE>
MCBT EMERGING ASIA FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
SHARES VALUE
---------------- ----------------
<S> <C> <C>
COMMON STOCK AND WARRANTS - 93.1%
CHINA - 8.8%
GUANGSHEN RAILWAY 3,700,000 $ 1,148,548
QINGLING MOTORS 2,700,000 1,763,565
----------------
TOTAL CHINA - (COST $2,871,843) 2,912,113
----------------
HONG KONG - 6.9%
ANGANG NEW STEEL LIMITED 5,000,000 1,105,866
FIRST TRACTOR LIMITED 1,500,000 1,164,069
----------------
TOTAL HONG KONG - (COST $2,008,938) 2,269,935
----------------
INDONESIA - 58.8%
BANK INTERNATIONAL INDONESIA 4,249,500 913,554
CITRAMARGA NUSAPHALA PERSADA 5,384,000 1,530,818
GULF INDONESIA RESOURCES LIMITED * 80,177 1,683,717
HANJAYA MANDALA SAMPOERNA 779,000 1,355,957
INDAH KIAT PULP & PAPER 4,500,000 1,716,366
INDORAMA SYNTHETICS 3,700,000 2,232,316
KALBE FARMA 2,378,500 1,451,512
LIPPO BANK 3,600,000 998,613
LIPPO LIFE INSURANCE 8,700,000 1,146,325
LONDON SUMATRA INDONESIA 1,000,000 1,074,896
PT BANK BIRA 6,019,200 834,840
RAMAYANA LESTARI SENTOSA 1,150,000 1,945,908
TELEKOMUNIKASI INDONESIA 2,720,000 2,527,601
----------------
TOTAL INDONESIA - (COST $33,581,696) 19,412,423
----------------
KOREA - 0.6%
SHINHAN BANK 27,542 211,203
----------------
TOTAL KOREA - (COST $392,273) 211,203
----------------
PHILIPPINES - 18.0%
BELLE CORPORATION * 16,100,000 1,453,315
BELLE CORPORATION, WARRANTS * 3,220,000 400
FILINVEST LAND 19,200,000 1,733,145
METRO BANK & TRUST 207,600 1,434,753
METRO PACIFIC 19,733,000 1,313,678
----------------
TOTAL PHILIPPINES - (COST $15,164,570) 5,935,291
----------------
TOTAL COMMON STOCK AND WARRANTS - (COST $54,019,320) + 30,740,965
----------------
<CAPTION>
PRINCIPAL
AMOUNT
----------------
<S> <C> <C>
SHORT TERM INVESTMENT - 3.9%
STATE STREET BANK AND TRUST REPURCHASE AGREEMENT,
5.150%, 11/03/1997 (a) $ 1,295,000 1,295,000
----------------
TOTAL SHORT TERM INVESTMENT - (COST $1,295,000) 1,295,000
----------------
TOTAL INVESTMENTS - (COST $55,314,320) - 97.0% 32,035,965
CASH, RECEIVABLES AND OTHER ASSETS, LESS LIABILITIES - 3.0% 1,004,717
----------------
NET ASSETS - 100.0% $ 33,040,682
----------------
----------------
</TABLE>
See notes to financial statements.
4
<PAGE>
MCBT EMERGING ASIA FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1997 (Unaudited)
* Non-income producing security.
(a) The repurchase agreement, dated 10/31/97, $1,295,000 par due 11/03/97, is
collateralized by United States Treasury Notes, 5.875%, due 8/31/99, with a
market value of $1,320,963.
+ Percentages of long term investments are presented in the portfolio by
country. Percentages of long term investments by industry are as follows:
Agricultural Machinery 3.5%, Agricultural Operations 3.3%, Automobiles
5.3%, Banks 13.3%, Commercial Services 4.6%, Conglomerates 4.0%, Drugs &
Health Care 4.4%, Insurance 3.5%, Metals 3.3%, Oil & Gas 5.1%, Paper 5.2%,
Real Estate 9.6%, Retail 5.9%, Telecommunications Services 7.7%, Textiles
6.8%, Tobacco 4.1%, Transportation 3.5%.
See notes to financial statements.
5
<PAGE>
MCBT EMERGING ASIA FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Investments in securities, at value (cost $54,019,320) (Note B) $ 30,740,965
Investments in repurchase agreements, at value (Note B) 1,295,000
----------------
Total Investments 32,035,965
Cash 606,295
Foreign currency, at value (cost $158,421) (Note B) 144,266
Receivable for investments sold 478,369
Dividend and interest receivable 185
Prepaid insurance 5,401
Deferred organization expenses (Note B) 5,912
----------------
TOTAL ASSETS 33,276,393
----------------
LIABILITIES
Management fee payable (Note C) 159,499
Administration fee payable (Note C) 1,349
Trustees fees payable (Note C) 1,492
Accrued expenses and other liabilities 73,371
----------------
TOTAL LIABILITIES 235,711
----------------
TOTAL NET ASSETS $ 33,040,682
----------------
----------------
COMPOSITION OF NET ASSETS:
Paid-in-capital $ 81,744,576
Undistributed net investment income 1,403
Accumulated net realized loss on investment and foreign currency transaction (25,408,094)
Net unrealized depreciation on investment and foreign currency transactions (23,297,203)
----------------
TOTAL NET ASSETS $ 33,040,682
----------------
----------------
NET ASSET VALUE PER SHARE $ 4.41
($33,040,682 / 7,495,423 shares of beneficial interest outstanding) ----------------
----------------
</TABLE>
See notes to financial statements.
6
<PAGE>
MCBT EMERGING ASIA FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
SIX MONTHS ENDED OCTOBER 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT INCOME
Interest income $ 89,222
Dividend income 757,212
Foreign taxes withheld (119,596)
----------------
TOTAL INVESTMENT INCOME 726,838
----------------
EXPENSES
Management fee (Note C) 482,035
Custodian fee 159,340
Administration fee (Note C) 25,595
Audit fee 12,602
Legal fees 4,915
Transfer agent fee 3,579
Trustee fees (Note C) 1,343
Amortization of deferred organization expenses 1,284
Miscellaneous expenses 10,396
Fees and expenses waived by the investment manager (Note C) (58,335)
----------------
TOTAL EXPENSES 642,754
----------------
NET INVESTMENT INCOME 84,084
----------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS AND FOREIGN CURRENCY
Net realized loss on investments (14,899,935)
Net realized loss on foreign currency transactions (133,663)
Net unrealized depreciation on:
Investments (23,990,236)
Foreign currency transactions (34,621)
----------------
NET LOSS ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS (39,058,455)
----------------
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (38,974,371)
----------------
----------------
</TABLE>
See notes to financial statements.
7
<PAGE>
MCBT EMERGING ASIA 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 $ 84,384,554 $ 129,326,397
DECREASE IN NET ASSETS FROM OPERATIONS:
Net investment income (loss) 84,084 (1,132,121)
Net realized loss on investment transactions (14,899,935) (10,462,605)
Net realized loss on foreign currency transactions (133,663) (251,855)
Net unrealized appreciation (depreciation) on:
Investments (23,990,236) (10,666,199)
Foreign currency transactions (34,621) 17,243
---------------- ----------------
Net decrease in net assets from operations (38,974,371) (22,495,537)
---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS:
In excess of net investment income 0 (119,214)
In excess of net realized gains 0 (3,999,558)
---------------- ----------------
Total distributions 0 (4,118,772)
---------------- ----------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 593,526 33,631,104
Reinvestment of dividends and distributions to shareholders 0 4,115,185
Cost of shares repurchased (13,193,000) (57,682,075)
Paid in capital from subscription and redemption fees 229,973 1,608,252
---------------- ----------------
Total decrease in net assets from capital share transactions (12,369,501) (18,327,534)
---------------- ----------------
NET DECREASE IN NET ASSETS (51,343,872) (44,941,843)
---------------- ----------------
NET ASSETS at end of period (includes undistributed net $ 33,040,682 $ 84,384,554
investment income (loss) of $1,403 and $(82,681), ---------------- ----------------
respectively) ---------------- ----------------
OTHER INFORMATION:
CAPITAL SHARE TRANSACTIONS:
Shares sold 62,201 2,990,256
Shares issued in reinvestment of distributions to shareholders 0 381,036
Less shares repurchased (1,326,417) (5,074,489)
---------------- ----------------
Net share transactions (1,264,216) (1,703,197)
---------------- ----------------
---------------- ----------------
</TABLE>
See notes to financial statements.
8
<PAGE>
MCBT EMERGING ASIA FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING FOR THE PERIOD
<TABLE>
<CAPTION>
Six Months
Ended Year (5) Year (5) March 24, 1995 *
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 $ 9.630 $ 12.360 $ 9.980 $ 10.000
Net investment income(loss) 0.010 (.101) (0.029) 0.009
Net realized and unrealized gain(loss) on
investment and foreign currency transactions (5.315) (2.503) 2.446 (0.029)
---------------- ---------------- ---------------- ----------------
Total from investment operations (5.305) (2.604) 2.417 (0.020)
---------------- ---------------- ---------------- ----------------
Less distributions:
In excess of net investment income 0.000 (0.009) 0.000 0.000
Net realized gains 0.000 0.000 (0.209) 0.000
In excess of net realized gains 0.000 (0.305) 0.000 0.000
---------------- ---------------- ---------------- ----------------
Total distributions 0.000 (0.314) (0.209) 0.000
---------------- ---------------- ---------------- ----------------
Paid in capital from subscription and
redemption fees (Note B) 0.085 0.188 0.172 0.000
---------------- ---------------- ---------------- ----------------
Net asset value, end of period $ 4.410 $ 9.630 $ 12.360 $ 9.980
---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ----------------
TOTAL INVESTMENT RETURN (1) (2) (54.21)% (19.82)% 26.30% (0.20)%
---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ----------------
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 33,040,682 $ 84,384,554 $ 129,326,397 $ 42,027,699
Operating expenses, net, to average net
assets (Note C) 2.00% (3) 1.89% 1.93% 1.85%(3)
Operating expenses, gross, to average
net assets (Note C) 2.18% (3) 1.98% 2.18% 2.57%(3)
Net investment income(loss) to average net assets 0.26% (3) (0.89)% (0.27)% 0.96%(3)
Portfolio turnover rate 72% 118% 65% 0%
Average commission rate per share (4) $ 0.0055 $ 0.0079 $ 0.0124 N/A
Per share amount of fees waived (Note C) $ 0.007 $ 0.011 $ 0.027 $ 0.007
</TABLE>
- --------------------------------------------------------------------------------
* Commencement of investment operations.
(1) Total return at net asset value assuming all distributions reinvested and
no purchase premiums or redemption fees. Total return would have been lower
had certain expenses not been waived.
(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.
(5) The per share amounts were computed using a monthly average number of
shares outstanding during the year.
See notes to financial statements.
9
<PAGE>
MCBT EMERGING ASIA 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 Asia
Fund (the "Fund") commenced investment operations on March 24, 1995. 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 ASIA 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, $4,783 was
collected in purchase premiums and $225,190 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.
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.
11
<PAGE>
MCBT EMERGING ASIA FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
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, the Investment
Manager has waived $58,335 of its 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 $41,412,839
and $54,263,488, 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) DEPRECIATION
----------- ------------- -------------- --------------
$55,314,320 $ 950,401 $ (24,228,756) $ (23,278,355)
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 28% of the Fund.
12
<PAGE>
MCBT EMERGING ASIA 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
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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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