<PAGE>
MARTIN CURRIE BUSINESS TRUST
ASIA PACIFIC EX JAPAN FUND
SEMI-ANNUAL REPORT
OCTOBER 31, 1998
(UNAUDITED)
<PAGE>
MCBT ASIA PACIFIC EX JAPAN FUND
- -------------------------------------------------------------------------------
PROFILE AT OCTOBER 31, 1998 (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 $33.2m
PERFORMANCE Total return from May 1, 1998 through October 31, 1998
<TABLE>
<CAPTION>
<S><C> <C>
- MCBT - Emerging Asia Fund (excluding all transaction fees) -25.0%
- MCBT - Emerging Asia Fund (including all transaction fees) -26.9%
- The Morgan Stanley Capital International -
Emerging Asia ex Japan Index -29.5%
Annualized total return from March 24, 1995 through October 31, 1998
- MCBT - Emerging Asia Fund (excluding all transaction fees) -35.6%
- MCBT - Emerging Asia Fund (including all transaction fees) -36.1%
- The Morgan Stanley Capital International -
Emerging Asia ex Japan Index (from April 1, 1995
through October 31, 1998) -22.3%
</TABLE>
PORTFOLIO The last six months have been marked by continued
COMMENTS deterioration in the emerging Asian economies. They
have contracted as domestic demand has collapsed and the
number of bankruptcies and unemployed has risen. Much
of this has been reflected in the stockmarkets, with the
benchmark MSCI Emerging Asia ex Japan index down 29.5%
and this fund down by 25.0%.
While markets have been sold aggressively, there are areas
of interest for Asian investors. But there is growing
distinction between those markets that are implementing
reform and those that are not. The introduction of capital
controls in MALAYSIA has effectively closed that market to
foreign investment. In contrast SOUTH KOREA and THAILAND,
which have done the most to reform their banking systems and
economies, have seen capital in-flows.
We have increased our weighting in South Korea and Thailand.
The former we bought Medison, a leading exporter of medical
imaging equipment, and added to existing positions. In
Thailand we have bought Bangkok Expressway, a toll road
company, and PTTEP, an oil and gas exploration company.
In the last two months currencies have stabilized and
stockmarkets across the region have enjoyed a rally. This
has been led by improving liquidity as interest rates have
fallen. The surprise cut in US interest rates in October
shifted expectations of a global cut in interest rates.
Additionally the build up of current account surpluses has
allowed central banks leeway to reduce rates.
Change in mandate
-----------------
As emerging Asian markets have contracted, so has the
investible universe. This has resulted in our portfolio
having to take larger and larger bets against the index in
fewer stocks. To manage this portfolio risk better, the
fund's mandate has been broadened to include the developed
Asian markets. This will provide us with a wider stock
universe and allows us to better diversify risk.
As of November 1998, the MCBT Emerging Asia Fund became the
MCBT Asia Pacific ex Japan Fund.
1
<PAGE>
MCBT ASIA PACIFIC EX JAPAN FUND
- -------------------------------------------------------------------------------
PROFILE AT OCTOBER 31, 1998 (Unaudited)
Outlook
-------
Asia will continue to face a difficult economic environment.
Domestic demand will remain weak and exports will slow as
global demand falters. But currencies will stabilise as
countries continue to generate current account surpluses.
This will help interest rates remain at these lower levels
and provide an environment for eventual Asian recovery.
INVESTMENT James Fairweather is Chief Investment Officer. All funds
MANAGER are managed on a team basis, with a named director heading
PROFILE each team.
Adrian Mowat manages the MCBT Emerging Asia ex Japan Fund.
Adrian graduated from Edinburgh University in 1988 with a
degree in Electronic and Electrical Engineering. He joined
Martin Currie in 1988 and has worked in our Far East and
American investment teams. Adrian was promoted to investment
manager in 1993 and became a director of Martin Currie in
1994. He was appointed head of the Pacific Basin team in
September 1998.
The international strategy group sets limits for regional
allocation. The managers of the funds are responsible for
the selection of stocks.
2
<PAGE>
MCBT ASIA PACIFIC EX JAPAN FUND
- -------------------------------------------------------------------------------
PROFILE AT OCTOBER 31, 1998 (Unaudited)
ASSET ALLOCATION
(% of net assets)
[GRAPHIC]
[RAW DATA FOR PIE CHART]
China 2%
Hong Kong 9%
Korea 8%
Taiwan 16%
Thailand 1%
ST Investment 59%
Other Net Assets 5%
TOTAL: 100%
<TABLE>
<CAPTION>
LARGEST HOLDINGS
BY COUNTRY % OF NET ASSETS
<S> <C> <C>
TAIWAN
Bank SinoPac 1.8
Far Eastern Textile 1.8
CHINA
Guangdong Kelon Electrical 2.1
HONG KONG
China Telecom (Hong Kong) Limited 2.4
Johnson Electric Holdings 2.4
THAILAND
Bangkok Expressway Public
Company Limited 1.3
KOREA
Samsung Electronics America Incorporated 2.6
</TABLE>
3
<PAGE>
MCBT ASIA PACIFIC EX JAPAN FUND
- -------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
SHARES/PAR VALUE
---------- -----
<S> <C> <C>
COMMON STOCK AND CONVERTIBLE BONDS - 35.7%
CHINA - 2.1%
GUANGDONG KELON ELECTRICAL 820,000 $ 698,773
-----------
TOTAL CHINA - (COST $715,176) 698,773
-----------
HONG KONG - 8.7%
CHINA TELECOM (HONG KONG) LIMITED 430,000 807,812
HUANENG POWER INTERNATIONAL INCORPORATED 1,450,000 505,487
JOHNSON ELECTRIC HOLDINGS 340,000 790,187
ROAD KING INFRASTRUCTURE LIMITED 1,090,000 774,048
-----------
TOTAL HONG KONG - (COST $2,995,494) 2,877,534
-----------
KOREA - 7.9%
HOUSING & COMMERCIAL BANK, GDR 107,532 451,634
MEDISON COMPANY 49,185 544,222
POHANG IRON & STEEL COMPANY 17,810 782,857
SAMSUNG ELECTRONICS AMERICA INCORPORATED 21,027 860,522
-----------
TOTAL KOREA - (COST $3,272,884) 2,639,235
-----------
PHILIPPINES - 0.2%
MUSIC CORPORATION * 870,000 68,996
-----------
TOTAL PHILIPPINES - (COST $61,765) 68,996
-----------
TAIWAN - 15.5%
A.D.I. CORPORATION 728,000 413,113
ACER PERIPHERALS INCORPORATED 288,250 364,480
BANK SINOPAC 1,418,360 605,838
CHUNG HSING BILLS FINANCE CORPORATION 1,000,000 548,959
EVERGREEN MARINE CORPORATION 563,280 519,416
FAR EASTERN TEXTILE LIMITED 864,146 602,304
ORIENT SEMICONDUCTOR ELECTRONICS LIMITED, 1.500%, 02/26/2003 $ 650,000 561,730
PACIFIC CONSTRUCTION 1,404,000 549,909
PRESIDENT ENTERPRISES CORPORATION 497,000 424,577
TAIWAN SEMICONDUCTOR MANUFACTURING 274,935 555,381
-----------
TOTAL TAIWAN - (COST $6,438,568) 5,145,707
-----------
THAILAND - 1.3%
BANGKOK EXPRESSWAY PUBLIC COMPANY LIMITED * 470,000 428,494
-----------
TOTAL THAILAND - (COST $409,024) 428,494
-----------
TOTAL COMMON STOCK AND CONVERTIBLE
BONDS - (COST $13,892,911)+ 11,858,739
-----------
</TABLE>
See notes to financial statements.
4
<PAGE>
MCBT ASIA PACIFIC EX JAPAN FUND
- -------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------ -----
<S> <C> <C>
SHORT TERM INVESTMENT - 59.5%
STATE STREET BANK AND TRUST REPURCHASE AGREEMENT,
4.250%, 11/02/1998 (a) $1,813,000 $ 1,813,000
UNITED STATES TREASURY BILLS, 3.500%, 11/12/1998 18,000,000 17,980,750
-----------
TOTAL SHORT TERM INVESTMENT - (COST $19,793,750) 19,793,750
-----------
TOTAL INVESTMENTS - (COST $33,686,661) - 95.2% 31,652,489
CASH, RECEIVABLES AND OTHER ASSETS,
LESS LIABILITIES - 4.8% 1,589,310
-----------
NET ASSETS - 100.0% $33,241,799
-----------
-----------
</TABLE>
* Non-income producing security.
(a) The repurchase agreement, dated 10/30/98, $1,813,000 par due 11/2/98, is
collateralized by United States Treasury Notes, 7.250%, due 5/15/04, with
a market value of $1,854,450.
+ Percentages of long term investments are presented in the portfolio by
country. Percentages of long term investments by industry are as
follows: Banks 3.2%, Building & Construction 3.6%, Computers 2.3%, Drugs
& Health Care 1.6%, Electric Utilities 3.9%, Electronics 2.8%, Financial
Services 1.6%, Food & Beverages 1.3%, Household Appliances & Home
Furnishings 2.1%, Real Estate 1.7%, Semi-Conductor Manufacturing
Equipment 3.4%, Steel 2.4%,Telecommunications 2.4%, Textiles 1.8%,
Transportation 1.6%.
GDR Global Depositary Receipts.
See notes to financial statements.
5
<PAGE>
MCBT ASIA PACIFIC EX JAPAN FUND
- -------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments in securities, at value (cost $31,873,661) (Note B) $ 29,839,489
Investments in repurchase agreements, at value (Note B) 1,813,000
------------
Total Investments 31,652,489
Cash 140
Foreign currency, at value (cost $1,210,804) (Note B) 1,215,021
Receivable for investments sold 473,889
Dividend and interest receivable 10,563
Prepaid insurance expense 965
Deferred organization expenses (Note B) 3,365
------------
TOTAL ASSETS 33,356,432
------------
LIABILITIES
Payable for investments purchased 31,368
Management fee payable (Note C) 33,203
Administration fee payable (Note C) 11,179
Trustees fees payable (Note C) 1,463
Accrued expenses and other liabilities 37,420
------------
TOTAL LIABILITIES 114,633
------------
TOTAL NET ASSETS $ 33,241,799
------------
------------
COMPOSITION OF NET ASSETS
Paid-in-capital $ 98,875,054
Undistributed net investment loss (1,916,351)
Accumulated net realized loss on investment
and foreign currency transactions (61,691,204)
Net unrealized depreciation on investment
and foreign currency transactions (2,025,700)
------------
TOTAL NET ASSETS $ 33,241,799
------------
------------
NET ASSET VALUE PER SHARE $ 1.96
($33,241,799 / 16,998,393 shares of beneficial interest outstanding) ------------
------------
</TABLE>
See notes to financial statements.
6
<PAGE>
MCBT ASIA PACIFIC EX JAPAN FUND
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
SIX MONTHS ENDED OCTOBER 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C>
Interest income $ 56,324
Dividend income 128,585
Foreign taxes withheld (26,243)
-----------
TOTAL INVESTMENT INCOME 158,666
-----------
EXPENSES
Management fee (Note C) 115,766
Custodian fee 34,759
Administration fee (Note C) 27,725
Audit fee 12,602
Legal fees 707
Transfer agent fee 3,154
Trustee fees (Note C) 353
Amortization of deferred organization expenses 1,284
Miscellaneous expenses 5,986
Fees and expenses waived by the investment manager (Note C) (47,977)
-----------
TOTAL EXPENSES 154,359
-----------
NET INVESTMENT INCOME 4,307
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
Net realized loss on investments (6,373,641)
Net realized loss on foreign currency transactions (49,560)
Net unrealized appreciation on:
Investments (net of foreign taxes of ($602)) 1,702,652
Foreign currency transactions 9,690
-----------
NET GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS (4,710,859)
-----------
NET DECREASE IN NET ASSETS FROM OPERATIONS $(4,706,552)
-----------
-----------
</TABLE>
See notes to financial statements.
7
<PAGE>
MCBT ASIA PACIFIC EX JAPAN FUND
- -------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months
Ended Year
October 31, 1998 Ended
(Unaudited) April 30, 1998
----------- --------------
<S> <C> <C>
NET ASSETS at beginning of period $21,072,974 $84,384,554
----------- -----------
DECREASE IN NET ASSETS FROM OPERATIONS:
Net investment income (loss) 4,307 (40,188)
Net realized loss on investment transactions (6,373,641) (44,893,511)
Net realized loss on foreign currency transactions (49,560) (2,054,320)
Net unrealized appreciation (depreciation) on:
Investments 1,702,652 (4,450,434)
Foreign currency transactions 9,690 (15,262)
----------- -----------
Net decrease in net assets from operations (4,706,552) (51,453,715)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 18,501,093 8,136,783
Cost of shares repurchased (1,655,000) (20,466,078)
Paid in capital from subscription and redemption fees 29,284 471,430
----------- -----------
Total increase (decrease) in net assets from capital share transactions 16,875,377 (11,857,865)
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS 12,168,825 (63,311,580)
----------- -----------
NET ASSETS at end of period (includes undistributed net investment $33,241,799 $21,072,974
losses of ($1,916,351) and ($2,054,320), respectively) ----------- -----------
----------- -----------
OTHER INFORMATION:
CAPITAL SHARE TRANSACTIONS:
Shares sold 9,583,666 2,782,687
Less shares repurchased (710,300) (3,417,299)
----------- -----------
Net share transactions (8,873,366) (634,612)
----------- -----------
----------- -----------
</TABLE>
See notes to financial statements.
8
<PAGE>
MCBT ASIA PACIFIC EX JAPAN FUND
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING FOR THE PERIOD
<TABLE>
<CAPTION>
Six Months
Ended Year Year (4) Year (4) March 24, 1995 *
October 31, 1998 Ended Ended Ended through
(Unaudited) April 30, 1998 April 30, 1997 April 30, 1996 April 30, 1995
----------- -------------- -------------- -------------- --------------
<S> <S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- -------------------------------
Net asset value, beginning of period $ 2.590 $ 9.630 $ 12.360 $ 9.980 $ 10.000
----------- ----------- ----------- ------------ -----------
Net investment income(loss) 0.124 (0.227) (0.101) (0.029) 0.009
Net realized and unrealized gain(loss)
on investment and foreign currency
transactions (0.756) (6.871) (2.503) 2.446 (0.029)
----------- ----------- ----------- ------------ -----------
Total from investment operations (0.632) (7.098) (2.604) 2.417 (0.020)
----------- ----------- ----------- ------------ -----------
Less distributions:
In excess of net investment income 0.000 0.000 (0.009) 0.000 0.000
Net realized gains 0.000 0.000 0.000 (0.209) 0.000
In excess of net realized gains 0.000 0.000 (0.305) 0.000 0.000
----------- ----------- ----------- ------------ -----------
Total distributions 0.000 0.000 (0.314) (0.209) 0.000
----------- ----------- ----------- ------------ -----------
Paid in capital from subscription and
redemption fees (Note B) 0.002 0.058 0.188 0.172 0.000
----------- ----------- ----------- ------------ -----------
Net asset value, end of period $1.960 $2.590 $9.630 $12.360 $9.980
----------- ----------- ----------- ------------ -----------
----------- ----------- ----------- ------------ -----------
TOTAL INVESTMENT RETURN (1) (2) (24.32)% (73.10)% (19.82)% 26.30% (0.20)%
- ----------------------- ----------- ----------- ----------- ------------ -----------
----------- ----------- ----------- ------------ -----------
RATIOS AND SUPPLEMENTAL DATA
- ----------------------------
Net assets, end of period $33,241,799 $21,072,974 $84,384,554 $129,326,397 $42,027,699
Operating expenses, net, to
average net assets (Note C) 2.00%(3) 2.00% 1.89% 1.93% 1.85%(3)
Operating expenses, gross, to average
net assets (Note C) 2.62%(3) 2.23% 1.98% 2.18% 2.57%(3)
Net investment income(loss)
to average net assets 0.06%(3) (0.09)% (0.89)% (0.27)% 0.96%(3)
Portfolio turnover rate 28% 162% 118% 65% 0%
Per share amount of fees waived (Note C) $0.695 $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 ASIA PACIFIC EX JAPAN 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,
Asia Pacific ex Japan Fund (formerly "Emerging Asia Fund") and EMEA Fund,
(the "Funds"). The MCBT Asia Pacific ex Japan 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 ASIA PACIFIC EX JAPAN 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 October 31, 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 six months ended
October 31, 1998, $322 was collected in purchase premiums and $28,962 was
collected in redemption fees.
INCOME TAXES - Each Fund of the Trust is treated as a separate entity for
U.S. federal income tax purposes. Each Fund intends to qualify each year as
a regulated investment company under Subchapter M of the Internal Revenue
Code of 1986, as amended. By so qualifying, the Funds will not be subject to
federal income taxes to the extent that they distribute substantially all of
their taxable income, including realized capital gains, if any, for the
fiscal year. In addition, by distributing substantially all of their net
investment income, realized capital gains and certain other amounts, if any,
during the calendar year, the Funds will not be subject to a federal excise
tax.
11
<PAGE>
MCBT ASIA PACIFIC EX JAPAN FUND
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
The Fund may be subject to taxes imposed by countries in which it invests.
Such taxes are generally based on income and/or capital gains earned or
repatriated. Taxes are accrued and applied to net investment income, net
realized gains and unrealized appreciation as such income and/or gains are
earned.
ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and income and expenses at the date of the financial statements.
Actual results could differ from these estimates.
NOTE C - AGREEMENTS AND FEES
The Fund has entered into a Management Contract with Martin Currie Inc. (the
"Investment Manager"), a wholly owned subsidiary of Martin Currie Ltd. Under
the Management Contract, the Fund pays the Investment Manager a quarterly
management fee at the annual rate of 1.50% of the Fund's average net assets.
Prior to September 20, 1996 the Investment Manager had voluntarily agreed to
limit its fee to 1.25% of the Fund's average net assets.
The Investment Manager has also voluntarily undertaken to reduce its fee
until further notice to the extent necessary to limit the Fund's annual
expenses (including the management fee but excluding brokerage commissions,
transfer taxes, and extraordinary expenses) to 2.00% of the Fund's average
net assets on an annualized basis. For the six months ended October 31,
1998, the Investment Manager has waived $47,977 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, 1998 were
$3,725,673 and $6,642,750 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, 1998 were as follows:
<TABLE>
<CAPTION>
IDENTIFIED GROSS UNREALIZED NET UNREALIZED
COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
---------- ------------ -------------- --------------
<S> <C> <C> <C>
$33,686,661 $621,391 $(2,655,563) $(2,034,172)
</TABLE>
NOTE E - PRINCIPAL SHAREHOLDERS
As of October 31, 1998 there were three shareholders who owned greater than
10% of the Fund's outstanding shares, representing 53% of the Fund.
12
<PAGE>
MCBT ASIA PACIFIC EX JAPAN 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 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.
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13
<PAGE>
MARTIN CURRIE BUSINESS TRUST
-----------------
TRUSTEES AND OFFICERS
C. James P. Dawnay, TRUSTEE AND PRESIDENT *
Simon D. Eccles, TRUSTEE
Patrick R. Wilmerding, TRUSTEE
Colin Winchester, VICE PRESIDENT AND TREASURER
J. Grant Wilson, VICE PRESIDENT
Julian M.C. Livingston, CLERK
* INTERESTED TRUSTEE
-----------------
INVESTMENT MANAGER
Martin Currie, Inc.
Saltire Court
20 Castle Terrace
Edinburgh EH1 2ES
011-44-131-229-5252
Regulated by IMRO
Registered Investment Adviser with the SEC
-----------------
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| The information contained in this report is intended for general |
| informational purposes only. This report is not authorized for |
| distribution to prospective investors unless preceded or accompanied |
| by a current Private Placement Memorandum which contains important |
| information concerning the Fund and its current offering of shares. |
----------------------------------------------------------------------