<PAGE>
MARTIN CURRIE BUSINESS TRUST
GLOBAL EMERGING MARKETS FUND
SEMI-ANNUAL
OCTOBER 31, 1997
(UNAUDITED)
<PAGE>
MCBT GLOBAL EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
PROFILE AT OCTOBER 31, 1997 (Unaudited)
OBJECTIVE Long-term capital appreciation through active management of
a diversified portfolio of equities in countries with
emerging markets and developing economies.
LAUNCH DATE February 14, 1997
FUND SIZE $45.4m
PERFORMANCE Total return from May 1, 1997 through October 31, 1997
- MCBT - Global Emerging Markets Fund
(excluding all transaction fees) -9.8%
- MCBT - Global Emerging Markets Fund
(including all transaction fees) -11.6%
- Morgan Stanley Capital International -
Emerging Markets Free Index -17.5%
Total return from February 14, 1997 through October 31, 1997
- MCBT - Global Emerging Markets Fund
(excluding all transaction fees) -9.6%
- MCBT - Global Emerging Markets Fund
(including all transaction fees) -11.4%
- Morgan Stanley Capital International -
Emerging Markets Free Index -19.6%
(from March 1, 1997 through October 31, 1997)
PORTFOLIO A committed, disciplined approach to emerging markets remains
COMMENTS our guiding principle. This means investing only where we
see a long term investment case. And as recent events in
Asia have proved, selectivity has never been more
important.
Latin America remains our largest position, although
Brazil's fall has affected our performance. Even so, the
region as a whole continues to respond positively to low
inflation and falling interest rates. Mexico, up 5.4%
over the period, has held up well. Growth in regional
economies is accelerating and governments are deregulating.
We remain positive on the outlook for the EMEA markets
(Europe, Middle East and Africa). The main element in our
weighting to this region is our exposure to the Middle
East. The gradual deregulation of markets like EGYPT,
JORDAN and the LEBANON is creating investment
opportunities in areas previously closed to us. Our
exposure in Central Europe is limited to HUNGARY and
RUSSIA, where we identify earnings growth and economic
transformation. Kenya presents long term potential with
exceptionally low valuations - although the market is very
volatile.
Asia's crisis has worsened over the period, and we have
responded by cutting our weightings. Our emphasis is now
on CHINA and INDIA. Reforms in India and the freeing up
of the Chinese economy and stock market open many
opportunities.
OUTLOOK
We continue to believe that the US presents a benign
background. Steady growth and low inflation there provide
excellent support for developing markets. But Asia has
mountains to climb. In Latin America, by contrast, the
future looks positive. Economic resurgence is being met
with a new corporate and political ideology. Our strategy
does and will continue to emphasise this, favouring Mexico
in particular. Our commitment to Asia will remain low and
focus on opportunities in China and India. Elsewhere, we
will maintain a portfolio in Egypt, Russia and selected
investments in Africa.
1
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MCBT GLOBAL EMERGING MARKETS FUND
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PROFILE AT OCTOBER 31, 1997 (Unaudited)
INVESTMENT All funds are managed on a team basis with a named director
MANAGER PROFILE heading each team.
James Fairweather, Chief Investment Officer, oversees the
management of the MCBT Global Emerging Markets Fund. The
Fund is managed by Tristan Clube.
Tristan who graduated from Christ Church, Oxford with a
degree in Earth Sciences, gained a PhD in Geophysics from
Edinburgh University in 1985 and was awarded a Royal
Society Fellowship to pursue scientific interests at a
research institute in France. Tristan joined Martin
Currie's Far East team in 1987, was appointed Director of
Martin Currie Investment Management Ltd. in 1991, and
became head of the Pacific Basin team in 1993. He was
appointed head of the Emerging Markets team in 1995.
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
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MCBT GLOBAL EMERGING MARKETS FUND
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PROFILE AT OCTOBER 31, 1997 (Unaudited)
ASSET ALLOCATION
(% of net assets)
[CHART]
Africa 10%
Europe 7%
Latin America 38%
Middle East 8%
Pacific Basin 13%
Other Areas 15%
ST Investment 6%
Other Net Assets 3%
LARGEST HOLDINGS
BY REGION/COUNTRY % OF NET ASSETS
LATIN AMERICA
Compania de Telefonos de Chile, ADR (Chile) 3.7
Telefonos de Mexico, ADR (Mexico) 2.9
Telebras, ADR (Brazil) 1.9
OTHER AREAS
East Europe Development Fund (Investment Companies) 3.5
Taiwan Opportunities Fund (Investment Companies) 1.9
Brunswick Russian Growth Fund (Investment Companies) 1.7
Indian Opportunities Fund (Investment Companies) 1.6
PACIFIC BASIN
Guangdong Kelon Electrical (China) 1.8
MIDDLE EAST
MISR International Bank SAE, GDR (Egypt) 1.3
EUROPE
Hellenic Technodomiki, GDR (Greece) 1.3
AFRICA
Sasol (South Africa) 1.2
3
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MCBT GLOBAL EMERGING MARKETS FUND
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SCHEDULE OF INVESTMENTS
OCTOBER 31, 1997 (Unaudited)
SHARES VALUE
------ -----
COMMON AND PREFERRED STOCKS, RIGHTS, AND WARRANTS - 90.8%
AFRICA - 9.7%
KENYA - 0.5%
FIRESTONE EAST AFRICA 500,000 $ 167,916
KENYA AIRWAYS 600,000 67,948
-----------
TOTAL KENYA - (COST $396,545) 235,864
-----------
MAURITIUS - 0.6%
MAURITIUS COMMERCIAL BANK 61,776 273,989
-----------
TOTAL MAURITIUS - (COST $267,510) 273,989
-----------
SOUTH AFRICA - 7.2%
ANGLO AMERICAN CORPORATION 6,400 276,613
BILLITON, PLC * 114,000 334,005
ELLERINE HOLDINGS LIMITED 20,000 151,688
GENCOR LIMITED 22,800 51,167
LIBERTY LIFE ASSOCIATION OF AFRICA 15,000 374,026
NAMPAK LIMITED 159,000 495,584
NEW CLICKS HOLDINGS 290,000 379,636
PERSETEL Q DATA HOLDINGS LIMITED 40,686 255,741
SASOL 44,000 530,286
SOUTH AFRICAN BREWERIES LIMITED 16,000 425,558
-----------
TOTAL SOUTH AFRICA - (COST $3,628,782) 3,274,304
-----------
ZIMBABWE - 1.4%
MEIKLES AFRICA LIMITED 120,000 240,000
NMBZ HOLDINGS 60,000 140,400
TRANS ZAMBEZI INDUSTRIES 375,000 228,165
-----------
TOTAL ZIMBABWE - (COST $677,337) 608,565
-----------
TOTAL AFRICA - (COST $4,970,174) 4,392,722
-----------
EUROPE - 7.5%
GERMANY - 0.8%
UNIFIED ENERGY SYSTEMS * 11,000 350,969
-----------
TOTAL GERMANY - (COST $479,416) 350,969
-----------
GREECE - 2.5%
ALPHA CREDIT BANK 8,200 541,760
HELLENIC TECHNODOMIKI, GDR 61,900 585,433
-----------
TOTAL GREECE - (COST $1,122,593) 1,127,193
-----------
HUNGARY - 3.3%
GEDEON RICHTER, GDR 5,700 528,675
GRABOPLAST TEXTILE 8,300 448,106
MAGYAR OLAJ-ES GAZIPARI RT., GDS 18,000 390,600
OTP BANK, GDR * 5,000 152,000
-----------
TOTAL HUNGARY - (COST $1,285,521) 1,519,381
-----------
See notes to financial statements
4
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MCBT GLOBAL EMERGING MARKETS FUND
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SCHEDULE OF INVESTMENTS
OCTOBER 31, 1997 (Unaudited)
SHARES VALUE
------ -----
EUROPE - CONTINUED
RUSSIA - 0.9%
LUKOIL HOLDING, ADR 4,700 $ 406,503
-----------
TOTAL RUSSIA - (COST $299,625) 406,503
-----------
TOTAL EUROPE - (COST $3,187,155) 3,404,046
-----------
LATIN AMERICA - 37.5%
ARGENTINA - 5.4%
BANCO DE GALICIA, ADR 20,000 484,687
PEREZ COMPANC, ADR 45,000 556,875
TELEFONICA DE ARGENTINA, ADR 20,000 562,500
YPF SOCIEDAD ANONIMA, ADR 26,500 848,000
-----------
TOTAL ARGENTINA - (COST $2,831,129) 2,452,062
-----------
BRAZIL - 12.6%
CEMIG, ADR 21,800 850,200
COMPANHIA BRASILEIRA DE DISTRIBUICAO, GDR 30,000 555,000
ELETROBRAS, ADR 37,000 814,000
ERICSSON TELECOMUNICACOES 11,500,000 339,018
LIGHT SERVICOS DE ELETRICIDADE 1,189,176 394,792
PETROBRAS PETROLEO BRASIL 3,516,383 653,870
TELEBRAS, ADR 8,700 883,050
TELEC DO RIO JANEIRO 4,062,404 386,913
TELEC DO RIO JANEIRO, RIGHTS, 11/12/97 * 157,515 2,143
TELECOMUNICACOES DE SAO PAULO 3,227,938 843,255
TELECOMUNICACOES DE SAO PAULO,RIGHTS, 11/12/97 * 107,934 73
-----------
TOTAL BRAZIL - (COST $6,603,906) 5,722,314
-----------
CHILE - 6.0%
BANCO SANTANDER CHILE, ADR 39,000 507,000
COMPANIA DE TELEFONOS DE CHILE, ADR 60,000 1,665,000
ENERSIS, ADR 17,000 561,000
-----------
TOTAL CHILE - (COST $3,007,645) 2,733,000
-----------
MEXICO - 12.0%
APASCO SA DE CV 66,000 401,431
CIFRA SA DE CV, CL A 37,051 67,960
CIFRA SA DE CV, CL B 52,607 104,649
CORPORACION GEO, SERIES B * 140,000 754,681
EMPRESAS ICA SOCIEDAD, ADR 45,000 599,063
GRUPO FINANCIERO BANAMEX, CL B * 210,000 415,742
PEPSI-GEMEX, GDR 43,000 585,875
TELEFONOS DE MEXICO, ADR 30,000 1,297,500
TUBOS DE ACERO DE MEXICO, ADR * 35,000 706,563
TV AZTECA SA DE CV, ADR * 27,000 516,375
-----------
TOTAL MEXICO - (COST $5,855,016) 5,449,839
-----------
See notes to financial statements
5
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MCBT GLOBAL EMERGING MARKETS FUND
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SCHEDULE OF INVESTMENTS
OCTOBER 31, 1997 (Unaudited)
SHARES VALUE
------ -----
LATIN AMERICA - CONTINUED
VENEZUELA - 1.5%
COMPANIA ANONIMA NACIONAL TELEFONOS, ADR, CL D * 15,000 $ 656,250
-----------
TOTAL VENEZUELA - (COST $469,220) 656,250
-----------
TOTAL LATIN AMERICA - (COST $18,766,916) 17,013,465
-----------
MIDDLE EAST - 7.8%
EGYPT - 4.5%
AL-AHRAM BEVERAGES, GDR * 17,500 481,250
COMMERCIAL INTERNATIONAL BANK, GDR 25,000 540,750
MISR INTERNATIONAL BANK SAE, GDR * 37,900 611,327
NORTH CAIRO MILLS 9,100 395,827
-----------
TOTAL EGYPT - (COST $1,936,396) 2,029,154
-----------
ISRAEL - 3.3%
ECI TELECOMMUNICATIONS 17,000 469,625
TADIRAN TELECOMMUNICATIONS 27,000 610,875
TEVA PHARMACEUTICAL INDUSTRIES LIMITED, ADR 9,500 444,125
-----------
TOTAL ISRAEL - (COST $1,433,934) 1,524,625
-----------
TOTAL MIDDLE EAST - (COST $3,370,330) 3,553,779
-----------
PACIFIC BASIN - 13.1%
CHINA - 4.0%
GUANGDONG KELON ELECTRICAL 650,000 823,902
QINGLING MOTORS 900,000 587,855
TINGYI HOLDINGS 2,400,000 403,544
-----------
TOTAL CHINA - (COST $1,542,931) 1,815,301
-----------
HONG KONG - 1.8%
ANGANG NEW STEEL LIMITED 1,000,000 221,173
CHINA SOUTHERN AIRLINES 205,000 90,813
CITIC PACIFIC 105,000 502,490
-----------
TOTAL HONG KONG - (COST $852,398) 814,476
-----------
INDONESIA - 4.7%
GULF INDONESIA RESOURCES LIMITED * 13,984 293,664
HANJAYA MANDALA SAMPOERNA 135,000 234,986
INDAH KIAT PULP & PAPER 1,050,000 400,486
KALBE FARMA 470,000 286,824
LIPPO BANK 880,000 244,105
LIPPO LIFE INSURANCE 1,189,000 156,664
TELEKOMUNIKASI INDONESIA 550,000 511,096
-----------
TOTAL INDONESIA - (COST $4,212,733) 2,127,825
-----------
See notes to financial statements.
6
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MCBT GLOBAL EMERGING MARKETS FUND
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SCHEDULE OF INVESTMENTS
OCTOBER 31, 1997 (Unaudited)
SHARES VALUE
------ -----
PACIFIC BASIN - CONTINUED
PHILIPPINES - 2.6%
BELLE CORPORATION * 3,400,000 $ 306,911
BELLE CORPORATION, WARRANTS * 680,000 85
FILINVEST LAND 2,650,000 239,210
METRO BANK & TRUST 48,000 331,735
METRO PACIFIC 4,389,000 292,187
-----------
TOTAL PHILIPPINES - (COST $3,169,267) 1,170,128
-----------
TOTAL PACIFIC BASIN - (COST $9,777,329) 5,927,730
-----------
OTHER AREAS - 15.2%
INDIA - 4.5%
HINDALCO INDUSTRIES LIMITED, GDR 13,600 393,040
RANBAXY LABORATORIES, GDR 16,000 364,800
RELIANCE INDUSTRIES LIMITED, GDR 18,000 378,000
TATA ELECTRIC COMPANIES, GDR 1,410 331,350
VIDESH SANCHAR NIGAM LIMITED, GDR (c)* 44,000 607,200
-----------
TOTAL INDIA - (COST $2,343,655) 2,074,390
-----------
SRI LANKA - 1.1%
NATIONAL DEVELOPMENT BANK 125,000 501,882
-----------
TOTAL SRI LANKA - (COST $556,828) 501,882
-----------
INVESTMENT COMPANIES - 9.6%
BRUNSWICK RUSSIAN GROWTH FUND * 2,279 781,819
EAST EUROPE DEVELOPMENT FUND * 25,000 1,581,835
INDIAN OPPORTUNITIES FUND (a)* 70,000 709,800
NEAR EAST OPPORTUNITIES FUND (b)* 25,000 432,750
TAIWAN OPPORTUNITIES FUND (b)* 65,000 841,750
-----------
TOTAL INVESTMENT COMPANIES - (COST $3,799,750) 4,347,954
-----------
TOTAL OTHER AREAS - (COST $6,700,233) 6,924,226
-----------
COMMON AND PREFERRED STOCKS,
RIGHTS, AND WARRANTS - (COST $46,772,137)+ 41,215,968
-----------
PRINCIPAL
AMOUNT
SHORT TERM INVESTMENT - 6.4% ------
STATE STREET BANK AND TRUST REPURCHASE AGREEMENT,
5.15%, 11/03/1997 (d) $ 2,878,000 2,878,000
-----------
TOTAL SHORT TERM INVESTMENT - (COST $2,878,000) 2,878,000
-----------
TOTAL INVESTMENTS - (COST $49,650,137) - 97.2% 44,093,968
CASH, RECEIVABLES AND OTHER ASSETS, LESS LIABILITIES - 2.8% 1,283,374
-----------
NET ASSETS - 100.0% $ 45,377,342
-----------
-----------
See notes to financial statements.
7
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MCBT GLOBAL EMERGING MARKETS FUND
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SCHEDULE OF INVESTMENTS
OCTOBER 31, 1997 (Unaudited)
* Non-income producing security.
(a) The Indian Opportunities Fund is managed by Martin Currie Bermuda Ltd., an
affiliate of Martin Currie Inc.
(b) Martin Currie Investment Management Ltd., which is affiliated to Martin
Currie Inc., provides investment management services to the Indian
Opportunities Fund, Near East Opportunities and Taiwan Opportunities Funds.
(c) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $607,200 or 1.3% of net
assets.
(d) The repurchase agreement, dated 10/31/97, $2,878,000 par, due 11/03/97, is
collateralized by United States Treasury Notes, 5.875%, due 8/31/99, with a
market value of $2,940,534.
+ Percentages of long term investments are presented in the portfolio by
country. Percentages of long term investments by industry are as follows:
Air Travel 0.3%, Automobiles 1.3%, Banks 9.5%, Brewery 0.9%, Building
Construction 1.3%, Cement 0.9%, Computers 0.6%, Conglomerates 1.8%,
Construction & Building Materials 1.6%, Construction & Mining Equipment
1.3%, Containers & Glass 1.1%, Diversified 3.3%, Drugs & Health Care 3.6%,
Electric Utilities 7.3%, Financial Services 1.5%, Food & Beverages 4.5%,
Hotels & Restaurants 0.5%, Household Appliances & Home Furnishings 1.8%,
Insurance 1.2%, Investment Companies 9.6%, Manufacturing 2.7%, Metals 1.4%,
Mining 0.8%, Miscellaneous 0.9%, Oil & Gas 6.9%, Paper 0.9%, Real Estate
1.2%, Retail 0.3%, Retail Trade 0.4%, Telecommunication 5.8%,
Telecommunications Equipment 3.1%, Telecommunications Services 7.5%,
Telephone 4.1%, Tires & Rubber 0.4%, Tobacco 0.5%.
ADR American Depositary Receipts.
GDR Global Depositary Receipts.
GDS Global Depositary Shares.
See notes to financial statements.
8
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MCBT GLOBAL EMERGING MARKETS FUND
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STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997 (Unaudited)
ASSETS
Investments in securities, at value (cost $46,772,137) (Note B) $41,215,968
Investments in repurchase agreements, at value (Note B) 2,878,000
-----------
Total Investments 44,093,968
Cash 951
Foreign currency, at value (cost $742,997) (Note B) 741,349
Receivable for investments sold 1,344,748
Receivable for foreign currency sold 342
Dividend and interest receivable 22,670
Prepaid insurance 2,125
Foreign tax reclaims receivable 233
Deferred organization expenses (Note B) 10,898
-----------
TOTAL ASSETS 46,217,284
-----------
LIABILITIES
Payable for investments purchased 700,684
Management fee payable (Note C) 103,405
Administration fee payable (Note C) 5,022
Trustees fees payable (Note C) 333
Accrued expenses and other liabilities 30,498
-----------
TOTAL LIABILITIES 839,942
-----------
TOTAL NET ASSETS $45,377,342
-----------
-----------
COMPOSITION OF NET ASSETS:
Paid-in-capital $50,200,000
Undistributed net investment income 428,568
Accumulated net realized loss on investment and foreign currency
transactions 306,663
Net unrealized depreciation on investment and foreign currency
transactions (5,557,889)
-----------
TOTAL NET ASSETS $45,377,342
-----------
-----------
NET ASSET VALUE PER SHARE $ 9.04
($45,377,342 / 5,019,002 shares of beneficial interest outstanding) -----------
-----------
See notes to financial statements.
9
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MCBT GLOBAL EMERGING MARKETS FUND
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STATEMENT OF OPERATIONS
SIX MONTHS ENDED OCTOBER 31, 1997 (Unaudited)
INVESTMENT INCOME
Interest income $ 23,076
Dividend income 483,400
Foreign taxes withheld (31,557)
-----------
TOTAL INVESTMENT INCOME 474,919
-----------
EXPENSES
Management fee (Note C) 203,493
Custodian fee 67,748
Administration fee (Note C) 24,408
Audit fee 12,602
Legal fees 2,950
Transfer agent fee 3,226
Trustees fees (Note C) 930
Amortization of deferred organization expenses 1,284
Miscellaneous expenses 5,485
-----------
TOTAL EXPENSES 322,126
-----------
NET INVESTMENT INCOME 152,793
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
Net realized gain on investments 323,015
Net realized loss on foreign currency transactions (22,036)
Net unrealized appreciation (depreciation) on:
Investments (5,370,769)
Foreign currency transactions (1,517)
-----------
NET LOSS ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS (5,071,307)
-----------
NET DECREASE IN NET ASSETS FROM OPERATIONS $(4,918,514)
-----------
-----------
See notes to financial statements.
10
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MCBT GLOBAL EMERGING MARKETS FUND
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STATEMENT OF CHANGES IN NET ASSETS
Six Months
Ended February 14, 1997*
October 31, 1997 Through
(Unaudited) April 30, 1997
----------- --------------
NET ASSETS at beginning of period $ 50,095,856 $ 0
------------- -------------
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income 152,793 292,369
Net realized gain on investment transactions 323,015 5,684
Net realized loss on foreign currency
transactions (22,036) (16,594)
Net unrealized depreciation on:
Investments (5,370,769) (185,400)
Foreign currency transactions (1,517) (203)
------------- -------------
Net increase (decrease) in net assets
from operations (4,918,514) 95,856
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 198,000 50,000,000
Paid in capital from subscription and
redemption fees 2,000 155,930
------------- -------------
Total increase in net assets from
capital share transactions 200,000 50,000,000
------------- -------------
NET INCREASE (DECREASE) IN NET ASSETS (4,718,514) 50,095,856
------------- -------------
NET ASSETS at end of period (includes
undistributed net investment $ 45,377,342 $ 50,095,856
income of $428,568 and $275,775, ------------- -------------
respectively) ------------- -------------
OTHER INFORMATION:
CAPITAL SHARE TRANSACTIONS:
Shares sold 19,002 5,000,000
------------- -------------
Net share transactions 19,002 5,000,000
------------- -------------
------------- -------------
See notes to financial statements.
11
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MCBT GLOBAL EMERGING MARKETS FUND
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FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING FOR THE PERIOD
<TABLE>
<CAPTION>
Six Months
Ended February 14, 1997*
October 31, 1997 Through
(Unaudited) April 30, 1997
----------- --------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 10.020 $ 10.000
Net investment income 0.030 0.055
Net realized and unrealized loss on investment
and foreign currency transactions (1.010) (0.035)
------------- --------------
Total from investment operations (0.980) 0.020
------------- --------------
Net asset value, end of period $ 9.040 $ 10.020
------------- --------------
------------- --------------
TOTAL INVESTMENT RETURN (1) (2) (9.78)% 0.20%
------------- --------------
------------- --------------
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 45,377,342 $ 50,095,856
Operating expenses to average net
assets (Note C) 1.20% (3) 1.33% (3)
Net investment income to average net assets 0.57% (3) 2.83% (3)
Portfolio turnover rate 51% 0%
Average commission rate per share $ 0.0023 $ 0.0022
</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.
See notes to financial statements.
12
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MCBT GLOBAL EMERGING MARKETS FUND
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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 Global Emerging
Markets Fund (the "Fund") commenced investment operations on February 14, 1997.
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.
13
<PAGE>
MCBT GLOBAL EMERGING MARKETS 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 1.00% of the amount invested and a redemption fee
on cash redemptions of 1.00% 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, $2,000 was
collected in purchase premiums.
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.
14
<PAGE>
MCBT GLOBAL EMERGING MARKETS 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 0.80% of the Fund's average net assets.
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 $25,722,943
and $28,767,668, 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
-------------- ------------ -------------- --------------
$ 49,650,137 $ 2,990,028 $ (8,546,197) $ (5,556,169)
NOTE E - PRINCIPAL SHAREHOLDERS
As of October 31, 1997, 99% of the Fund's outstanding shares were held by one
shareholder.
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.
15
<PAGE>
MCBT GLOBAL EMERGING MARKETS FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
CONCENTRATION OF RISK (CONTINUED) - 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.
16
<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
Scotland
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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