<PAGE>
MARTIN CURRIE BUSINESS TRUST
EMEA FUND
ANNUAL REPORT
APRIL 30, 1999
<PAGE>
MCBT EMEA FUND
- ------------------------------------------------------------------------------
PROFILE AT APRIL 30, 1999
<TABLE>
<S> <C> <C>
OBJECTIVE Capital appreciation through investment primarily
in equity securities of issuers located in the
emerging markets and developing economies in
Central and Eastern Europe, the Middle East and
Africa.
LAUNCH DATE June 25, 1997
FUND SIZE $29.1m
PERFORMANCE Total return from May 1, 1998 through April 30,
1999
- MCBT - EMEA Fund (excluding all transaction fees) -16.2%
- MCBT - EMEA Fund (including all transaction fees) -18.3%
- Morgan Stanley Capital International - EMEA -20.0%
Annualized total return from June 25, 1997 through April 30, 1999
- MCBT - EMEA Fund (excluding all transaction fees) -4.0%
- MCBT - EMEA Fund (including all transaction fees) -5.3%
The graph below represents the annualized total
return of the portfolio including all transaction
fees through September 30, 1998, versus the Morgan
Stanley Capital International Emerging Markets
Free Index from July 1, 1997 through April 30,
1999.
- MCBT - EMEA Fund (excluding all transaction fees) -4.4%
- MCBT - EMEA Fund (including all transaction fees) -5.7%
- Morgan Stanley Capital International - EMEA -6.5%
</TABLE>
[CHART]
<TABLE>
<S> <C> <C>
MCBT EMEA Fund 4/30/99 $8,983
MSCI EMEA Index 4/30/99 $7,487
</TABLE>
(a) Performance for the benchmark is not available from June 25, 1997
(commencement of investment operations). For that reason, performance is
shown from July 1, 1997.
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
prior to October 1, 1998, reflects a transaction fee of 125 basis points on
purchase and 125 basis points on redemption. Transaction fees are paid to the
Fund to cover trading costs. Transaction fees were eliminated effective
October 1, 1998. Past performance is not indicative of future performance.
1
<PAGE>
MCBT EMEA FUND
- ------------------------------------------------------------------------------
PROFILE AT APRIL 30, 1999
PORTFOLIO COMMENTS EMEA stock markets fell into three categories during
the period. Those which were most vulnerable to the
crises of 1997 and 1998 were the most volatile.
Default on debt and the collapse of the trouble led to
a 62% decline in the Russian index(1). TURKEY's chronic
fiscal deficit left it exposed to fluctuations in the
risk premium applied to emerging markets. And without
the prop of adequate central bank reserves, the South
African rand was easy prey for currency traders.
The second group of countries continued to enjoy
reasonable economic growth, but deteriorating current
accounts held back their stock markets. Central Europe
was caught between evaporating exports to the east and
disappointing demand from the west. Low oil prices and
tourism receipts left EGYPT with a foreign exchange
shortfall.
The only markets to produce positive returns were
those supported by falling interest rates. GREECE's
impending entry into EMU sucked in capital and
encouraged individual investors to switch deposits
into equities. After a set-back last summer, Israeli
inflation and interest rates resumed their downward
path.
Although we missed rallies in RUSSIA and Turkey early
in 1999, our decision to underweight the first group
of markets assisted in the fund's out performance.
Contribution from stock selection was positive,
particularly in Greece where our bank holdings gained
between 60% and 140%.
OUTLOOK
We are most positive on the MIDDLE EAST. An improving
political climate, falling real interest rates and
undervalued technology stocks justify an overweight
position in ISRAEL. We expect privatization and
foreign direct investment to lift the brake on EGYPT,
the cheapest market in our universe.
We suspect that current account worries in POLAND and
HUNGARY are overstated. Stronger German demand would
be helpful. But in the meantime, long term capital
flows will cover the deficits. Telecommunication
companies and banks are the best way to play renewed
interest from foreign portfolio and strategic
investors. The Greek `convergence' story is on track,
but is already in the price.
SOUTH AFRICA is our preferred choice in the more risky
markets. A mix of depressed domestic demand and
resurgent exports to Asia has taken pressure off the
rand, leaving room for further interest rate cuts.
- --------------------------
(1) All price and index changes expressed in US dollars
2
<PAGE>
MCBT EMEA FUND
- ------------------------------------------------------------------------------
PROFILE AT APRIL 30, 1999
INVESTMENT Chris Butler manages the Fund, assisted by Dariusz
MANAGER PROFILE Sliwinski.
Chris graduated from Edinburgh University in 1989 with
a degree in French and European history. He joined
Martin Currie's continental European team in 1989 and
moved to the UK investment team in 1991. Chris was
appointed investment manager in 1993, became asset
controller in the emerging markets team in 1995 and
was promoted to assistant director in 1997. He is a
member of the Institute of Investment Management and
Research.
Dariusz Sliwinski gained degrees in business
administration, European studies and electronic
engineering at universities in Poland and Italy. He
worked in a number of different industries before
becoming an investment manager with Bank Gospodarczy
Investment Fund Ltd in Poland in 1994. He moved to
Warsaw-based Consortium Raiffeisen Atkins in 1995 as a
senior investment manager. He joined Martin Currie in
1997 as an investment manager in the emerging markets
team.
3
<PAGE>
MCBT EMEA FUND
- ------------------------------------------------------------------------------
PROFILE AT APRIL 30, 1999
ASSET ALLOCATION
(% of net assets)
[PIE CHART]
<TABLE>
<S> <C>
Europe 35%
Africa 31%
Middle East 27%
Other Areas 4%
Other Net Assets 3%
</TABLE>
<TABLE>
<CAPTION>
LARGEST HOLDINGS
BY REGION/COUNTRY % OF NET ASSETS
<S> <C> <C>
EUROPE
Alpha Credit Bank (Greece) 5.9
Hellenic Telecommunication
Organization SA (OTE) (Greece) 5.0
Pliva D.D., GDR (Croatia) 3.3
Lukoil Holding, ADR (Russia) 3.1
AFRICA
Anglo American Corporation (South Africa) 4.6
Billiton, PLC (South Africa) 4.6
Sasol Limited (South Africa) 4.6
MIDDLE EAST
Orbotech (Israel) 5.0
EFG Hermes Holding SAE, GDR (Egypt) 3.4
Torah Portland Cement (Egypt) 3.3
OTHER AREAS
Near East Opportunities Fund (Investment Company) 3.7
</TABLE>
4
<PAGE>
MCBT EMEA FUND
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
APRIL 30, 1999
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
COMMON STOCK, RIGHTS, AND WARRANTS - 96.7%
AFRICA - 31.2%
KENYA - 3.0%
KENYA AIRWAYS 4,208,244 $ 497,649
KENYA COMMERCIAL BANK 550,738 366,344
------------
TOTAL KENYA - (COST $1,205,682) 863,993
------------
MAURITIUS - 1.7%
MAURITIUS COMMERCIAL BANK 133,258 507,928
------------
TOTAL MAURITIUS - (COST $587,130) 507,928
------------
SOUTH AFRICA - 26.5%
ANGLO AMERICAN CORPORATION 25,947 1,338,925
BILLITON, PLC 400,000 1,354,150
LIBERTY LIFE ASSOCIATION OF AFRICA LIMITED 56,000 807,099
NEDCOR LIMITED 59,500 1,300,493
SANLAM LIMITED * 800,000 784,881
SASOL LIMITED 190,000 1,342,646
SOUTH AFRICAN BREWERIES LIMITED * 94,000 787,839
------------
TOTAL SOUTH AFRICA - (COST $6,070,288) 7,716,033
------------
TOTAL AFRICA - (COST $7,863,100) 9,087,954
------------
EUROPE - 35.0%
CROATIA - 3.3%
PLIVA D.D., GDR 61,500 972,930
------------
TOTAL CROATIA - (COST $1,050,413) 972,930
------------
CZECH REPUBLIC - 2.6%
CESKE RADIOKOMUNIKACE * 20,860 766,605
------------
TOTAL CZECH REPUBLIC - (COST $448,490) 766,605
------------
GERMANY - 1.4%
BERENBERG HELLAS OLYMPIA FUND 4,177 417,298
------------
TOTAL GERMANY - (COST $228,965) 417,298
------------
GREECE - 12.4%
ALPHA CREDIT BANK, GDR 24,244 1,730,590
HELLENIC TELECOMMUNICATION ORGANIZATION SA (OTE) 63,000 1,461,551
NATIONAL BANK OF GREECE SA, GDR (A) 30,240 413,683
NATIONAL BANK OF GREECE SA, RIGHTS 5/28/1999 * 1,845 5,358
------------
TOTAL GREECE - (COST $2,522,697) 3,611,182
------------
HUNGARY - 4.6%
MAGYAR OLAJ-ES GAZIPARI RT., GDR 36,500 820,520
MATAV RT., ADR 18,000 506,250
------------
TOTAL HUNGARY - (COST $1,146,125) 1,326,770
------------
</TABLE>
See notes to financial statements.
5
<PAGE>
MCBT EMEA FUND
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
APRIL 30, 1999
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
EUROPE - CONTINUED
LUXEMBOURG - 2.9%
MINORCO SA 33,000 $ 828,661
------------
TOTAL LUXEMBOURG - (COST $567,838) 828,661
------------
POLAND - 2.9%
TELEKOMUNIKACJA POLSKA SA , GDR * 135,000 837,000
------------
TOTAL POLAND - (COST $601,300) 837,000
------------
RUSSIA - 3.8%
BRUNSWICK RUSSIAN GROWTH FUND * 2,465 200,744
LUKOIL HOLDING, ADR 24,000 906,375
------------
TOTAL RUSSIA - (COST $1,620,000) 1,107,119
------------
UNITED KINGDOM - 1.1%
ORYX FUND * 25,500 331,500
------------
TOTAL UNITED KINGDOM - (COST $459,000) 331,500
------------
TOTAL EUROPE - (COST $8,644,828) 10,199,065
------------
MIDDLE EAST - 26.8%
EGYPT - 13.2%
EFG HERMES HOLDING SAE, GDR * 93,575 989,088
EGYPT TRUST 16,500 180,675
EGYPTIAN COMPANY FOR MOBILE SERVICES * 44,321 591,719
HELIOPOLIS HOUSING & DEVELOPMENT COMPANY 8,545 431,904
INTERNATIONAL FOODS COMPANY * 14,800 173,903
ORASCOM CONSTRUCTION INDUSTRIES * 30,000 385,621
THE EGYPT FUND * 8,912 129,224
TORAH PORTLAND CEMENT 48,421 963,356
------------
TOTAL EGYPT - (COST $4,614,555) 3,845,490
------------
ISRAEL - 10.7%
BANK LEUMI LE-ISREAL, WARRANTS 12/31/1999 * 480,000 117,321
DISCOUNT INVESTMENT CORPORATION 20,307 734,993
ECI TELECOMMUNICATIONS 13,500 497,813
I.T. INTERNATIONAL THEATRES LIMITED * 28,000 305,200
ORBOTECH LIMITED * 30,500 1,464,000
------------
TOTAL ISRAEL - (COST $2,991,712) 3,119,327
------------
TURKEY - 2.9%
CARSI BUYUK MAGAZACILIK 4,909,000 266,208
DOGAN YAYIN HOLDING * 80,000,000 592,048
------------
TOTAL TURKEY - (COST $1,089,504) 858,256
------------
TOTAL MIDDLE EAST - (COST $8,695,771) 7,823,073
------------
</TABLE>
See notes to financial statements.
6
<PAGE>
MCBT EMEA FUND
- ------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
APRIL 30, 1999
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
OTHER AREAS - 3.7%
INVESTMENT COMPANIES - 3.7%
NEAR EAST OPPORTUNITIES FUND (b)* 70,000 $ 1,089,900
------------
TOTAL INVESTMENT COMPANIES - (COST $1,086,400) 1,089,900
------------
TOTAL OTHER AREAS - (COST $1,086,400) 1,089,900
------------
COMMON STOCK, RIGHTS, AND WARRANTS - (COST $26,290,099) + 28,199,992
------------
TOTAL INVESTMENTS - (COST $26,290,099) - 96.7% 28,199,992
CASH, RECEIVABLES AND OTHER ASSETS, LESS LIABILITIES - 3.3% 949,337
------------
NET ASSETS - 100.0% $ 29,149,329
------------
------------
</TABLE>
* Non-income producing security.
(a) 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 this security amounted to $413,683 or 1.4% of
net assets.
(b) Martin Currie Investment Management Ltd., which is affiliated to
Martin Currie Inc., provides investment management services to the
Near East Opportunities Fund. Martin Currie Inc. does not receive
advisory fees on the portion of net assets represented by affiliated
investment companies.
+ Percentages of long term investments are presented in the portfolio by
country. Percentages of long term investments by industry are as
follows: Air Travel 1.7%, Banks 15.2%, Brewery 2.7%, Broadcasting
2.6%, Building & Construction 1.3%, Cement 3.3%, Diversified 4.6%,
Drugs & Health Care 3.3%, Electronics 5.0%, Financial Services 3.4%,
Food & Beverages 0.6%, Insurance 5.5%, Investment Companies 8.1%,
Mining 12.1%, Miscellaneous 1.5%, Oil & Gas 10.5%, Retail
0.9%,Telecommunications 13.4%, Theaters 1.0%.
ADR American Depositary Receipts.
GDR Global Depositary Receipts.
See notes to financial statements.
7
<PAGE>
MCBT EMEA FUND
- ------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $26,290,099) (Note B) $ 28,199,992
Foreign currency, at value (cost $2,893,964) (Note B) 2,873,900
Receivable for investments sold 1,127,295
Receivable for currency sold 1,570,907
Dividend and interest receivable 109,155
--------------
TOTAL ASSETS 33,881,249
--------------
LIABILITIES
Payable to custodian bank 2,566,516
Payable for investments purchased 399,000
Payable for currency purchased 1,567,274
Management fee payable (Note C) 149,940
Administration fee payable (Note C) 4,775
Trustees fees payable (Note C) 1,087
Accrued expenses and other liabilities 43,328
--------------
TOTAL LIABILITIES 4,731,920
--------------
TOTAL NET ASSETS $ 29,149,329
--------------
--------------
COMPOSITION OF NET ASSETS:
Paid-in-capital $ 36,158,518
Undistributed net investment loss (58,942)
Accumulated net realized loss on investment and foreign currency transactions (8,839,139)
Net unrealized appreciation on investment and foreign currency transactions 1,888,892
--------------
TOTAL NET ASSETS $ 29,149,329
--------------
--------------
NET ASSET VALUE PER SHARE $ 8.48
--------------
--------------
($29,149,329 / 3,438,208 shares of beneficial interest outstanding)
</TABLE>
See notes to financial statements.
8
<PAGE>
MCBT EMEA FUND
- ------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED APRIL 30, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest income $ 77,108
Dividend income 1,404,390
Foreign taxes withheld (85,150)
--------------
TOTAL INVESTMENT INCOME 1,396,348
--------------
EXPENSES
Management fee (Note C) 669,841
Custodian fee 182,689
Administration fee (Note C) 55,818
Audit fee 24,793
Legal fees 5,553
Transfer agent fee 6,545
Trustees fees (Note C) 2,777
Miscellaneous expenses 17,032
--------------
TOTAL EXPENSES 965,048
--------------
NET INVESTMENT INCOME 431,300
--------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
Net realized loss on investments (8,264,440)
Net realized loss on foreign currency transactions (372,629)
Net unrealized appreciation (depreciation) on:
Investments (2,430,849)
Foreign currency transactions 3,157
--------------
NET LOSS ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS (11,064,761)
--------------
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (10,633,461)
--------------
--------------
</TABLE>
See notes to financial statements.
9
<PAGE>
MCBT EMEA FUND
- ------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year June 25, 1997*
Ended Through
April 30, 1999 April 30, 1998
-------------- ---------------
<S> <C> <C>
NET ASSETS at beginning of period $ 78,938,181 $ 0
-------------- ---------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income 431,300 407,606
Net realized gain (loss) on investment transactions (8,264,440) 3,158,791
Net realized loss on foreign currency transactions (372,629) (114,819)
Net unrealized appreciation (depreciation) on:
Investments (2,430,849) 4,340,742
Foreign currency transactions 3,157 (24,158)
-------------- ---------------
Net increase (decrease) in net assets from operations (10,633,461) 7,768,162
-------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (587,624) (138,147)
In excess of net investment income (241,285) -
Net realized gains (1,950,436) (1,216,047)
-------------- ---------------
Total distributions (2,779,345) (1,354,194)
-------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 1,691,242 84,237,826
Reinvestment of dividends and distributions to shareholders 2,754,167 1,345,957
Cost of shares repurchased (41,098,987) (13,910,000)
Paid in capital from subscription and redemption fees 277,532 850,430
-------------- ---------------
Total increase (decrease) in net assets from capital share transactions (36,376,046) 72,524,213
-------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS (49,788,852) 78,938,181
-------------- ---------------
NET ASSETS at end of period (includes undistributed net investment
income (loss) of $(58,942) and $156,324, respectively) $ 29,149,329 $ 78,938,181
-------------- ---------------
-------------- ---------------
OTHER INFORMATION:
CAPITAL SHARE TRANSACTIONS:
Shares sold 220,107 8,454,754
Shares issued in reinvestment of distributions to shareholders 375,739 140,350
Less shares repurchased (4,430,285) (1,322,457)
-------------- ---------------
Net share transactions (3,834,439) 7,272,647
-------------- ---------------
-------------- ---------------
</TABLE>
*Commencement of investment operations
See notes to financial statements.
10
<PAGE>
MCBT EMEA FUND
- ------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING FOR THE PERIOD
<TABLE>
<CAPTION>
Year June 25, 1997*
Ended through
April 30, 1999 April 30, 1998
----------------- -----------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $ 10.850 $ 10.000
----------------- -----------------
Net investment income 0.119 0.041
Net realized and unrealized gain (loss) on investment
and foreign currency transactions (2.041) 0.887
----------------- -----------------
Total from investment operations (1.922) 0.928
----------------- -----------------
Less distributions:
Net investment income (0.112) (0.020)
In excess of net investment income (0.046) -
Net realized gains (0.371) (0.175)
----------------- -----------------
Total distributions (0.529) (0.195)
----------------- -----------------
Paid in capital from subscription and redemption fees (Note B) 0.081 0.117
----------------- -----------------
Net asset value, end of period $ 8.480 $ 10.850
----------------- -----------------
----------------- -----------------
TOTAL INVESTMENT RETURN (1) (2) (16.20)% 10.71%
----------------- -----------------
----------------- -----------------
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period $ 29,149,329 $ 78,938,181
Operating expenses, net, to average net assets (Note C) 2.13% 1.93%(3)
Operating expenses, gross, to average net assets (Note C) 2.13% 1.93%(3)
Net investment income to average net assets 0.95% 0.84%(3)
Portfolio turnover rate 117% 81%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Commencement of investment operations.
(1) Total return at net asset value assuming all distributions reinvested
and no purchase premiums or redemption fees.
(2) Periods less than one year are not annualized.
(3) Annualized.
See notes to financial statements.
11
<PAGE>
MCBT EMEA 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 five funds which have differing investment
objectives and policies: Opportunistic EAFE Fund, Global Emerging Markets
Fund, Japan Small Companies Fund, Asia Pacific ex Japan Fund (formerly
"Emerging Asia Fund") and EMEA Fund, (the "Funds"). The MCBT EMEA Fund (the
"Fund") commenced investment operations on June 25, 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.
12
<PAGE>
MCBT EMEA 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.
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. There were no open
forward foreign currency contracts at April 30, 1999.
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.
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 - Effective through September 30,
1998, there was a purchase premium for cash investments into the Fund of
1.25% of the amount invested and a redemption fee on cash redemptions of
1.25% of the amount redeemed. All purchase premiums and redemption fees were
paid to and retained by the Fund and recorded as paid-in-capital. These fees
were intended to offset brokerage and transaction costs arising in connection
with the purchase and redemption. The purchase and redemption fees could be
waived by the Manager, however, if these brokerage and transaction costs were
minimal or in other circumstances at the Manager's discretion. Effective
October 1, 1998, the Fund eliminated all such fees. For the period ended
September 30, 1998, $1,363 was collected in purchase premiums and $276,169
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.
13
<PAGE>
MCBT EMEA FUND
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NOTES TO FINANCIAL STATEMENTS (Continued)
INCOME TAXES (CONTINUED) - The Fund may be subject to taxes imposed by
countries in which it invests. Such taxes are generally based on income
and/or capital gains earned or repatriated. Taxes are accrued and applied to
net investment income, net realized gains and unrealized appreciation as such
income and/or gains are earned. As of April 30, 1999, the Fund has a realized
capital loss carryforward, for Federal income tax purposes, of $7,932,761
(expires April 30, 2007), available to be used to offset future realized
capital gains. As of April 30, 1999, the Fund has elected for Federal income
tax purposes to defer a $906,378 current year post October 31 capital loss as
though the loss was incurred on the first day of the next fiscal year.
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.
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 year ended April 30, 1999 were $48,429,811 and
$83,015,070, 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, 1999, were as follows:
<TABLE>
<CAPTION>
IDENTIFIED GROSS UNREALIZED NET UNREALIZED
COST APPRECIATION (DEPRECIATION) APPRECIATION
--------------- ------------ -------------- ---------------
<S> <C> <C> <C>
$ 26,871,512 $ 4,331,341 $ (3,002,861) $ 1,328,480
</TABLE>
NOTE E - PRINCIPAL SHAREHOLDERS
As of April 30, 1999, there were three shareholders who owned greater than
10% of the Fund's outstanding shares, representing 55% 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.
14
<PAGE>
MCBT EMEA 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 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.
- ------------------------------------------------------------------------------
ADDITIONAL FEDERAL TAX INFORMATION - (UNAUDITED)
The Fund intends to make an election under Internal Revenue Code 853 to pass
through foreign taxes paid by the Fund to its shareholders. During the year
ended April 30, 1999, the total amount of foreign taxes that will be passed
through to the shareholders and the foreign source income for information
reporting purposes will be $83,963 (of the total $85,150 taxes withheld) and
$1,193,121, respectively.
15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of the
Martin Currie Business Trust - EMEA 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 EMEA Fund
(the "Fund") at April 30, 1999, 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, 1999 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
June 24, 1999
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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