<PAGE>
MARTIN CURRIE BUSINESS TRUST
EMERGING ASIA FUND
ANNUAL REPORT
APRIL 30, 1998
<PAGE>
MCBT EMERGING ASIA FUND
- -------------------------------------------------------------------------------
PROFILE AT APRIL 30, 1998
<TABLE>
<S> <C>
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 $21.1m
PERFORMANCE Total return from May 1, 1997 through April 30, 1998
- MCBT - Emerging Asia Fund (excluding all transaction fees) -73.1%
- MCBT - Emerging Asia Fund (including all transaction fees) -74.0%
- The Morgan Stanley Capital International - Emerging Free Asia Index -44.0%
Annualized total return from March 24, 1995 through April 30, 1998
- MCBT - Emerging Asia Fund (excluding all transaction fees) -34.3%
- MCBT - Emerging Asia Fund (including all transaction fees) -35.0%
The graph below represents the annualized total return of the
portfolio including all transaction fees versus the Morgan Stanley
Capital International Emerging Free Asia Index from April 1, 1995
through April 30, 1998.
- MCBT - Emerging Asia Fund (excluding all transaction fees) -34.7%
- MCBT - Emerging Asia Fund (including all transaction fees) -35.4%
- The Morgan Stanley Capital International - Emerging Free Asia Index -16.5%
</TABLE>
<TABLE>
<CAPTION>
4/1/95(a) 4/30/95 4/30/96 4/30/97 4/30/98
<S> <C> <C> <C> <C> <C>
MCBT Emerging Asia Fund $10,000 $9,541 $11,957 $ 9,664 $2,598
MCBT Emerging Free Asia Index $10,000 $9,850 $11,682 $10,246 $5,737
</TABLE>
(a) Performance for the benchmark is not available from March 24, 1995
(commencement of investment operations). For that reason, performance is
shown from April 1, 1995.
Performance shown is net of all fees after reimbursement from the Manager.
Returns and net asset values of fund investments will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original cost. The total returns would have been lower had certain expenses
not been waived during the period shown. Each performance figure including
all transaction fees assumes purchase at the beginning and redemption at the
end of the stated period and is calculated using an offering price which
reflects a transaction fee of 175 basis points on purchase and 175 basis
points on redemption. Transaction fees are paid to the Fund to cover trading
costs. Past performance is not indicative of future performance.
1
<PAGE>
MCBT EMERGING ASIA FUND
- -------------------------------------------------------------------------------
PROFILE AT APRIL 30, 1998
PORTFOLIO There has been a complete collapse in stockmarkets and
COMMENTS currencies of emerging Asian countries. This has brought
about a dramatic economic slowdown which will see an
escalation of bad news over the next few months. High
unemployment, bankruptcies, shrinking money supply and debt
restructuring will be common to many countries and in some,
social unrest is a real possibility. Although the issue of
deteriorating current account deficits is being resolved,
that is because import demand has disappeared rather than
because export growth is particularly robust.
However, bleak as the general outlook is, stockmarkets have
already fallen a long way and in many cases share prices
have been sold down indiscriminately. There are therefore
areas of interest to the Asian investor.
In the semi-annual report, six months ago, we stated our
intention to remain in Indonesia. However, the situation
there has deteriorated to such an extent that we have sold
out of Indonesia altogether and have moved funds into the
north of the region, principally Taiwan, and also reentered
the Thai stockmarket.
Taiwan's economy will certainly be affected by the slowdown
in Japan and South East Asia. However, its current account
surplus, and healthy balance of foreign exchange reserves
will provide better liquidity conditions than elsewhere in
Asia. Furthermore Taiwan's asset bubble (both property and
stockmarket) was burst early in the 1990's and its banking
system is in better shape than those in some ASEAN
countries. We have a portfolio in Taiwan with an emphasis
in the electronics, banking and construction sectors.
Thailand and South Korea have taken some steps to address
their economic problems. While we believe the economic
recovery is still some way off, we believe it is a good time
to start reinvesting in these countries, having identified
companies that will survive the economic downturn. We have
purchased Pohang Iron and Steel in Korea, the world's second
largest steel manufacturer. We also participated in the
recapitalisation of Thailand's two largest banks, Bangkok
Bank and Thai Farmers Bank.
Outlook
-------
As stated above, the economic outlook remains bleak for the
region as a whole. However, the slowdown in China and
Taiwan will be less significant than elsewhere in Asia.
Companies in these countries which have superior product and
management, can continue to grow their profits. Buying the
recovery in the crisis areas of Asia will increasingly come
to the fore in our investment strategy over the next twelve
months.
INVESTMENT James Fairweather is Chief Investment Officer. All
MANAGER funds are managed on a team basis, with a named
PROFILE director heading 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 APRIL 30, 1998
ASSET ALLOCATION
(% of net assets)
<TABLE>
<CAPTION>
EMERGING ASIA IG06
- ------------- ----
<S> <C>
China 4%
Hong Kong 21%
Korea 12%
Philippines 7%
Taiwan 42%
Thailand 7%
ST Investment 3%
Other Net Assets 4%
----
TOTAL: 100%
</TABLE>
<TABLE>
<CAPTION>
LARGEST HOLDINGS
BY COUNTRY % OF NET ASSETS
<S> <C>
TAIWAN
Evergreen Marine Corporation 4.3
Teco Electric & Machine, 2.750%, 04/15/2004 4.2
CHINA
Guangdong Kelon Electrical 4.0
PHILIPPINES
Belle Corporation 3.3
HONG KONG
Road King Infrastructure Limited 4.8
Qingling Motors 4.7
THAILAND
Thai Farmers Bank 2.8
KOREA
Samsung Electronics America Incorporated 4.7
</TABLE>
3
<PAGE>
MCBT EMERGING ASIA FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
APRIL 30, 1998
<TABLE>
<CAPTION>
SHARES/PAR VALUE
---------- -----
<S> <C> <C>
COMMON STOCK, WARRANTS, RIGHTS AND
CONVERTIBLE BONDS - 92.3%
CHINA - 4.0%
GUANGDONG KELON ELECTRICAL 820,000 $ 841,596
-----------
TOTAL CHINA - (COST $715,177)
HONG KONG - 20.5%
CHEUNG KONG HOLDINGS 135,000 897,560
FIRST TRACTOR LIMITED 1,100,000 614,188
HUANENG POWER INTERNATIONAL INCORPORATED 1,450,000 814,291
QINGLING MOTORS 2,300,000 994,707
ROAD KING INFRASTRUCTURE LIMITED 1,090,000 1,013,168
-----------
TOTAL HONG KONG - (COST $4,586,525) 4,333,914
-----------
KOREA - 11.7%
HOUSING & COMMERCIAL BANK, GDR 107,532 652,719
POHANG IRON & STEEL COMPANY 17,000 794,987
SAMSUNG ELECTRONICS AMERICA INCORPORATED * 17,702 980,133
SAMSUNG ELECTRONICS AMERICA INCORPORATED, RIGHTS 06/01/1998 * 1,408 27,180
-----------
TOTAL KOREA - (COST $2,693,274) 2,455,019
-----------
PHILIPPINES - 7.5%
BELLE CORPORATION * 16,100,000 705,754
BELLE CORPORATION, WARRANTS 10/06/2000 * 3,220,000 10,025
JOLLIBEE FOODS, WARRANTS 03/25/2003 * 1,290,000 586,364
METRO BANK & TRUST 34,600 269,302
-----------
TOTAL PHILIPPINES - (COST $4,010,127) 1,571,445
-----------
TAIWAN - 41.5%
A.D.I. CORPORATION 650,000 504,632
ACER INCORPORATED 113,000 188,479
ACER PERIPHERALS INCORPORATED 461,000 838,830
BANK SINO PAC 1,180,000 858,845
BES ENGINEERING CORPORATION 900,000 742,392
CHINATRUST COMMERCIAL BANK 335,000 393,168
EVERGREEN MARINE CORPORATION 895,000 895,692
FAR EASTERN TEXTILE LIMITED 771,559 701,960
ORIENT SEMICONDUCTOR ELECTRONICS LIMITED, 1.500%, 02/26/2003 650,000 661,830
PACIFIC CONSTRUCTION 1,300,000 737,236
TAIWAN SEMICONDUCTOR MANUFACTURING 189,611 819,408
TECO ELECTRIC & MACHINE, 2.750%, 04/15/2004 1,300,000 879,580
UNITED MICROELECTRONICS LIMITED 278,165 523,017
-----------
TOTAL TAIWAN - (COST $9,346,212) 8,745,069
-----------
THAILAND - 7.1%
BANGKOK BANK 195,600 490,898
SIAM COMMERCIAL BANK 353,000 420,129
THAI FARMERS BANK 257,000 588,473
-----------
TOTAL THAILAND - (COST $1,831,450) 1,499,500
-----------
</TABLE>
See notes to financial statements.
4
<PAGE>
MCBT EMERGING ASIA FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
APRIL 30, 1998
<TABLE>
<CAPTION>
VALUE
-----
<S> <C> <C>
TOTAL COMMON STOCK, WARRANTS, RIGHTS AND
CONVERTIBLE BONDS - (COST $23,182,765)+ $ 19,446,543
-----------
PRINCIPAL
AMOUNT
---------
SHORT TERM INVESTMENT - 3.4%
STATE STREET BANK AND TRUST REPURCHASE AGREEMENT,
5.150%, 05/01/1998 (a) $ 711,000 711,000
-----------
TOTAL SHORT TERM INVESTMENT - (COST $711,000) 711,000
-----------
TOTAL INVESTMENTS - (COST $23,893,765) - 95.7% 20,157,543
CASH, RECEIVABLES AND OTHER ASSETS, LESS LIABILITIES - 4.3% 915,431
-----------
NET ASSETS - 100.0% $ 21,072,974
-----------
-----------
</TABLE>
* Non-income producing security.
(a) The repurchase agreement, dated 4/30/98, $711,000 par due 5/1/98, is
collateralized by United States Treasury Bonds, 6.00%, due 2/15/26, with a
market value of $725,736.
+ Percentages of long term investments are presented in the portfolio by
country. Percentages of long term investments by industry are as follows:
Agricultural Machinery 2.9%, Automobiles 4.7%, Banks 17.4%, Building &
Construction 8.3%, Computers 7.3%, Electric Utilities 3.9%, Electrical
Equipment 4.2%, Electronics 7.3%, Food & Beverages 2.8%, Household
Appliances & Home Furnishings 4.0%, Real Estate 11.2%, Semi-Conductor
Manuf. Equip. 7.0%, Steel 3.8%, Textiles 3.3%, Transportation 4.2%.
GDR Global Depositary Receipts.
See notes to financial statements.
5
<PAGE>
MCBT EMERGING ASIA FUND
- -------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $23,182,765) (Note B) $ 19,446,543
Investments in repurchase agreements, at value (Note B) 711,000
----------------
Total Investments 20,157,543
Cash 852
Foreign currency, at value (cost $992,049) (Note B) 992,557
Dividend and interest receivable 26,638
Prepaid insurance expense 202
Deferred organization expenses (Note B) 4,649
----------------
TOTAL ASSETS 21,182,441
----------------
LIABILITIES
Management fee payable (Note C) 73,199
Administration fee payable (Note C) 6,371
Trustees fees payable (Note C) 1,467
Accrued expenses and other liabilities 28,430
----------------
TOTAL LIABILITIES 109,467
----------------
TOTAL NET ASSETS $ 21,072,974
----------------
----------------
COMPOSITION OF NET ASSETS:
Paid-in-capital $ 81,999,677
Undistributed net investment loss (1,920,658)
Accumulated net realized loss on investment and foreign
currency transactions (55,268,003)
Net unrealized depreciation on investment and foreign currency transactions (3,738,042)
----------------
TOTAL NET ASSETS $ 21,072,974
----------------
----------------
NET ASSET VALUE PER SHARE $ 2.59
($21,072,974 / 8,125,027 shares of beneficial interest outstanding) ----------------
----------------
</TABLE>
See notes to financial statements.
6
<PAGE>
MCBT EMERGING ASIA FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
APRIL 30, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest income $ 148,078
Dividend income 786,674
Foreign taxes withheld (120,577)
------------
TOTAL INVESTMENT INCOME 814,175
------------
EXPENSES
Management fee (Note C) 640,772
Custodian fee 183,786
Administration fee (Note C) 58,118
Audit fee 25,802
Legal fees 3,329
Transfer agent fee 7,099
Trustee fees (Note C) 2,380
Amortization of deferred organization expenses 2,547
Miscellaneous expenses 27,024
Fees and expenses waived by the investment manager (Note C) (96,494)
------------
TOTAL EXPENSES 854,363
------------
NET INVESTMENT LOSS (40,188)
------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS AND FOREIGN CURRENCY
Net realized loss on investments (44,893,511)
Net realized loss on foreign currency transactions (2,054,320)
Net unrealized depreciation on:
Investments (net of foreign taxes of ($2,331)) (4,450,434)
Foreign currency transactions (15,262)
------------
NET LOSS ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS (51,413,527)
------------
NET DECREASE IN NET ASSETS FROM OPERATIONS $(51,453,715)
------------
------------
</TABLE>
See notes to financial statements.
7
<PAGE>
MCBT EMERGING ASIA FUND
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
APRIL 30, 1998 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 loss (40,188) (1,132,121)
Net realized loss on investment transactions (44,893,511) (10,462,605)
Net realized loss on foreign currency transactions (2,054,320) (251,855)
Net unrealized depreciation on:
Investments (4,450,434) (10,666,199)
Foreign currency transactions (15,262) 17,243
------------- --------------
Net decrease in net assets from operations (51,453,715) (22,495,537)
------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
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 8,136,783 33,631,104
Reinvestment of dividends and distributions to shareholders 0 4,115,185
Cost of shares repurchased (20,466,078) (57,682,075)
Paid in capital from subscription and redemption fees 471,430 1,608,252
------------- --------------
Total decrease in net assets from capital share transactions (11,857,865) (18,327,534)
------------- --------------
NET DECREASE IN NET ASSETS (63,311,580) (44,941,843)
------------- --------------
NET ASSETS at end of period (includes undistributed
net investment losses of $1,920,658 and $82,681, respectively) $ 21,072,974 $ 84,384,554
------------- --------------
------------- --------------
OTHER INFORMATION:
CAPITAL SHARE TRANSACTIONS:
Shares sold 2,782,687 2,990,256
Shares issued in reinvestment of distributions to shareholders 0 381,036
Less shares repurchased (3,417,299) (5,074,489)
------------- --------------
Net share transactions (634,612) (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>
YEAR YEAR (4) YEAR (4) MARCH 24, 1995 *
ENDED ENDED ENDED THROUGH
APRIL 30,1998 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) (0.227) (.101) (0.029) 0.009
Net realized and unrealized gain (loss)
on investment and foreign currency
transactions (6.871) (2.503) 2.446 (0.029)
----------- ------------ ----------- -----------
Total from investment operations (7.098) (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) 0.058 0.188 0.172 0.000
----------- ------------ ----------- -----------
Net asset value, end of period $ 2.590 $ 9.630 $ 12.360 $ 9.980
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
TOTAL INVESTMENT RETURN (1) (73.10)% (19.82)% 26.30% (0.20)%(2)
- ----------------------- ----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
RATIOS AND SUPPLEMENTAL DATA
- ----------------------------
Net assets, end of period $21,072,974 $84,384,554 $129,326,397 $42,027,699
----------- ------------ ----------- -----------
----------- ------------ ----------- -----------
Operating expenses, net, to average net
assets (Note C) 2.00% 1.89% 1.93% 1.85%(3)
Operating expenses, gross, to average
net assets (Note C) 2.23% 1.98% 2.18% 2.57%(3)
Net investment income (loss) to
average net assets (0.09)% (0.89)% (0.27)% 0.96%(3)
Portfolio turnover rate 162% 118% 65% 0%
Per share amount of fees waived (Note C) $ 0.552 $ 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 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 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 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. There were no open forward foreign currency contracts
at April 30, 1998.
Although forward currency contracts limit the risk of loss due to a decline
in the value of hedged currency, they also limit any potential gain that
might result should the value of the currency increase. In addition, the
Funds could be exposed to additional risks if the counterparties to the
contracts are unable to meet the terms of their contracts.
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 year ended
April 30, 1998, $128,716 was collected in purchase premiums and $342,714 was
collected in redemption fees.
11
<PAGE>
MCBT EMERGING ASIA FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
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. As of April 30, 1998, the Fund has a realized capital loss carryforward,
for Federal income tax purposes, of $23,016,785 ($3,928,107 expires April 30,
2005, $19,088,678 expires April 30, 2006), available to be used to offset
future realized capital gains. As of April 30, 1998, the Fund has elected for
Federal income tax purposes to defer a $32,249,612 current year post October
31 capital loss and a $1,920,658 post October 31 currency loss current year
as though the losses were incurred on the first day of the next fiscal year.
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 year ended April 30, 1998, the Investment Manager
has waived $96,494 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).
12
<PAGE>
MCBT EMERGING ASIA FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE D - INVESTMENT TRANSACTIONS
Purchases and proceeds from sales and maturities of investments, excluding
short-term securities for the year ended April 30, 1998 were $62,052,897 and
$76,834,697 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 April 30, 1998 were as follows:
<TABLE>
<CAPTION>
IDENTIFIED GROSS UNREALIZED NET UNREALIZED
COST APPRECIATION (DEPRECIATION) DEPRECIATION
------------- ------------ -------------- --------------
<S> <C> <C> <C>
$ 23,895,371 $ 323,622 $ (4,061,450) $ (3,737,828)
</TABLE>
NOTE E - PRINCIPAL SHAREHOLDERS
As of April 30, 1998 there were three shareholders who owned greater than 10% of
the Fund's outstanding shares, representing 47% of the Fund.
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 from 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>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of the
Martin Currie Business Trust - Emerging Asia Fund
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Emerging Asia
Fund (the "Fund") at April 30, 1998, and the results of its operations, the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting principles.
These financial statements and the financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that our audits,
which included confirmation of securities at April 30, 1998 by correspondence
with the custodian, provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Boston, Massachusetts
June 16, 1998
14
<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
____________________
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.
