<PAGE>
MARTIN CURRIE BUSINESS TRUST
EMEA FUND
SEMI-ANNUAL REPORT
OCTOBER 31, 1998
(UNAUDITED)
<PAGE>
MCBT EMEA FUND
- -------------------------------------------------------------------------------
PROFILE AT OCTOBER 31, 1998 (Unaudited)
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 $37.7m
PERFORMANCE Total return from May 1, 1998 through October 31, 1998
- MCBT - EMEA Fund (excluding all transaction fees) -32.6%
- MCBT - EMEA Fund (including all transaction fees) -34.2%
- Morgan Stanley Capital International - EMEA -33.4%
Annualized total return from June 25, 1997 through
October 31, 1998
- MCBT - EMEA Fund (excluding all transaction fees) -19.4%
- MCBT - EMEA Fund (including all transaction fees) -20.9%
- Morgan Stanley Capital International - EMEA -24.1%
(from July 1, 1997 through October 31, 1998)
PORTFOLIO The six month period was overshadowed by financial collapses
COMMENTS in ASIA and RUSSIA and the risk of devaluation or default in
BRAZIL. Rising spreads on emerging market debt put pressure
on equity prices. Raising fears of a 'credit crunch', banks
began to curtail lending to emerging markets. In this
context, the MSCI EMEA index fell by 33.4% over the period
and this fund by 32.6%.
TURKEY and SOUTH AFRICA were most vulnerable to such a risk
averse climate. The Turkish government had made progress
with tax reform and privatisation, even achieving a primary
surplus in the first half of 1998. But the good work has
been undone by higher debt service costs. Weak commodity
prices and capital flight exposed the South African Reserve
Bank's inability to protect the rand. The consequent hike in
real interest rates has pushed the economy into recession.
More recently, US-led monetary easing has relieved some of
the pressure on high risk currencies and given scope for
interest rates to fall. We have added to our positions in
Turkey and South Africa. But in the absence of sufficient
political will to push ahead with economic reforms, we
remain cautious.
Relative outperformance has been achieved by concentrating
the portfolio in the MIDDLE EAST and those countries which
are committed to membership of the European Union. The
Middle East has benefited from its limited dependence on
western capital. Local and regional investors dominate the
capital markets and are also responsible for the majority of
direct investment flows.
1
<PAGE>
MCBT EMEA FUND
- -------------------------------------------------------------------------------
PROFILE AT OCTOBER 31, 1998 (Unaudited)
OUTLOOK
High real interest rates have weakened ISRAEL's domestic
economy, but the export sector contains many investment
opportunities. They will also benefit from a competitive
shekel exchange rate. EGYPT can boast some of the best
economic statistics in the emerging market universe.
Non-inflationary GDP growth in excess of 5% is driven by a
resurgent private sector and by infrastructure spending
(the fiscal deficit is less than 1% of GDP). The market is
underpinned by dividend yields as high as 12%.
GREECE, HUNGARY and POLAND have demonstrated a clear
commitment to take the necessary steps towards EU
membership. Control of inflation and budget deficits will
sustain progressive interest rate reductions -- good news
for bond and equity markets.
INVESTMENT Assisted by Dariusz Sliwinski, Chris Butler manages the
MANAGER PROFILE Fund.
Chris graduated from Edinburgh University in 1989 with a
degree in French with 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 a masters degree 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, the firm managing assets of the IVth National Fund,
in 1995 as a senior investment manager. He joined Martin
Currie in 1997 as an investment manager in the Emerging
Markets team.
The international strategy group 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 EMEA FUND
- -------------------------------------------------------------------------------
PROFILE AT OCTOBER 31, 1998 (Unaudited)
ASSET ALLOCATION
(% of net assets)
[GRAPHIC]
[RAW DATA FOR PIE CHART]
Africa 5%
Europe 40%
Middle East 34%
Other Areas 3%
ST Investment 17%
Other Net Assets 1%
TOTAL: 100%
<TABLE>
<CAPTION>
LARGEST HOLDINGS
BY REGION/COUNTRY % OF NET ASSETS
<S> <C> <C> <C>
MIDDLE EAST
NICE-Systems Limited (Israel) 3.2
Orbotech (Israel) 3.2
EFG Hermes Holding SAE (Egypt) 3.1
Teva Pharmaceutical
Industries Limited, ADR (Israel) 3.0
Dogan Yayin Holding (Turkey) 2.6
AFRICA
Mauritius Commercial Bank (Mauritius) 1.8
Kenya Commercial Bank (Kenya) 1.4
EUROPE
Magyar Olaj-es Gazipari
Rt., GDR (Hungary) 6.1
Elektrim (Poland) 6.0
</TABLE>
3
<PAGE>
MCBT EMEA FUND
- -------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
COMMON STOCK AND WARRANTS - 81.3%
AFRICA - 4.8%
KENYA - 2.7%
KENYA AIRWAYS 4,208,244 $ 493,842
KENYA COMMERCIAL BANK 550,738 544,737
----------
TOTAL KENYA - (COST $1,206,616) 1,038,579
----------
MAURITIUS - 1.8%
MAURITIUS COMMERCIAL BANK 149,906 665,577
----------
TOTAL MAURITIUS - (COST $664,124) 665,577
----------
SOUTH AFRICA - 0.3%
BILLITON, PLC 49,000 119,928
----------
TOTAL SOUTH AFRICA - (COST $117,968) 119,928
----------
TOTAL AFRICA - (COST $1,988,708) 1,824,084
----------
EUROPE - 39.5%
CROATIA - 2.5%
PLIVA D.D., GDR 62,500 920,000
----------
TOTAL CROATIA - (COST $943,908) 920,000
----------
CZECH REPUBLIC - 4.4%
CESKE RADIOKOMUNIKACE * 54,000 1,647,000
----------
TOTAL CZECH REPUBLIC - (COST $1,177,200) 1,647,000
----------
GERMANY - 2.5%
BERENBERG HELLAS OLYMPIA FUND * 14,000 921,980
----------
TOTAL GERMANY - (COST $767,421) 921,980
----------
GREECE - 11.3%
ALPHA CREDIT BANK, GDR 22,422 1,790,052
HELLENIC TECHNODOMIKI SA 20 131
NATIONAL BANK OF GREECE SA, GDR (a) 61,560 1,737,839
STET HELLAS TELECOMMUNICATIONS SA * 28,100 737,625
----------
TOTAL GREECE - (COST $4,287,964) 4,265,647
----------
HUNGARY - 6.1%
MAGYAR OLAJ-ES GAZIPARI RT., GDR 101,500 2,311,155
----------
TOTAL HUNGARY - (COST $2,107,275) 2,311,155
----------
LUXEMBOURG - 2.4%
MINORCO SA 53,000 908,977
----------
TOTAL LUXEMBOURG - (COST $911,983) 908,977
----------
</TABLE>
See notes to financial statements
4
<PAGE>
MCBT EMEA FUND
- -------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
EUROPE - CONTINUED
POLAND - 9.0%
BIG BANK GDANSKI SA 35,000 $ 563,500
ELEKTRIM SA 189,989 2,260,789
IZOLACJA A.S. 13,800 564,737
----------
TOTAL POLAND - (COST $3,920,911) 3,389,026
----------
RUSSIA - 0.3%
BRUNSWICK RUSSIAN GROWTH FUND * 2,465 124,733
----------
TOTAL RUSSIA - (COST $900,000) 124,733
----------
UNITED KINGDOM - 1.0%
ORYX FUND * 30,500 381,250
----------
TOTAL UNITED KINGDOM - (COST $549,000) 381,250
----------
TOTAL EUROPE - (COST $15,565,661) 14,869,768
----------
MIDDLE EAST - 34.4%
EGYPT - 11.8%
EFG HERMES HOLDING SAE (a)* 100,000 1,150,000
EGYPT TRUST 24,000 240,600
INTERNATIONAL FOODS COMPANY * 14,800 237,318
MISR ELGEDIDA FOR HOUSE & RECO 10,550 963,433
MISR FREE SHOPS 66,000 587,843
NASR (EL) CITY FOR HOUSING & CONSTRUCTION 13,805 427,633
SUEZ CEMENT 45,998 710,756
THE EGYPT FUND * 8,912 122,540
----------
TOTAL EGYPT - (COST $5,840,969) 4,440,123
----------
ISRAEL - 15.2%
BANK HAPOALIM LIMITED 388,222 702,155
BANK LEUMI LE-ISRAEL 551,388 702,208
BANQUE INTERNATIONALE DE ARABE * 82,000 764,240
NICE-SYSTEMS LIMITED, ADR * 64,260 1,220,940
ORBOTECH LIMITED * 34,000 1,190,000
TEVA PHARMACEUTICAL INDUSTRIES LIMITED, ADR 29,000 1,143,688
----------
TOTAL ISRAEL - (COST $6,799,388) 5,723,231
----------
JORDAN - 2.0%
JORDAN CEMENT FACTORIES 306,000 773,596
----------
TOTAL JORDAN - (COST $1,502,804) 773,596
----------
TURKEY - 5.4%
AKBANK T.A.S. 22,400,000 330,550
AKSIGORTA A.S. 8,093,170 174,225
CARSI BUYUK MAGAZACILIK 14,509,000 554,153
DOGAN YAYIN HOLDING * 155,000,000 968,733
----------
TOTAL TURKEY - (COST $4,063,162) 2,027,661
----------
TOTAL MIDDLE EAST - (COST $18,206,322) 12,964,611
----------
</TABLE>
See notes to financial statements
5
<PAGE>
MCBT EMEA FUND
- -------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
OTHER AREAS - 2.6%
INVESTMENT COMPANIES - 2.6%
NEAR EAST OPPORTUNITIES FUND (b)* 70,000 $ 965,300
----------
TOTAL INVESTMENT COMPANIES - (COST $1,086,400) 965,300
----------
TOTAL OTHER AREAS - (COST $1,086,400) 965,300
----------
TOTAL COMMON STOCK AND WARRANTS - (COST $36,847,091) + 30,623,763
----------
Principal
Amount
------
SHORT TERM INVESTMENT - 17.3%
STATE STREET BANK AND TRUST REPURCHASE
AGREEMENT, 4.250%, 11/02/1998 (c) $1,540,000 1,540,000
UNITED STATES TREASURY BILLS, 3.500%, 11/12/1998 5,000,000 4,994,167
----------
TOTAL SHORT TERM INVESTMENT - (COST $6,534,167) 6,534,167
----------
TOTAL INVESTMENTS - (COST $43,381,258) - 98.6% 37,157,930
CASH, RECEIVABLES AND OTHER ASSETS, LESS
LIABILITIES - 1.4% 523,119
----------
NET ASSETS - 100.0% $37,681,049
----------
----------
</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 these securities amounted to $2,887,839 or 7.7% 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.
(c) The repurchase agreement, dated 10/30/98, $1,540,000 par due 11/2/98, is
collateralized by United States Treasury Notes, 6.875%, due 5/15/06 with a
market value of $1,571,063.
+ Percentages of long term investments are presented in the portfolio by
country. Percentages of long term investments by industry are as
follows: Air Travel 1.3%, Banks 20.7%, Broadcasting 4.4%, Building &
Construction 1.5%, Cement 3.9%, Diversified 2.6%, Drugs & Health Care
5.5%, Electrical Equipment 6.0%, Electronics 3.2%, Financial Services
6.1%, Food & Beverages 0.6%, Insurance 0.5%, Investment Companies 4.2%,
Mining 2.7%, Miscellaneous 4.1%, Mobile Homes 1.1%, Oil & Gas 6.1%,
Retail 1.5%, Telecommunications Equipment 3.3%, Telecommunications
Services 2.0%.
ADR American Depositary Receipts.
GDR Global Depositary Receipts.
See notes to financial statements
6
<PAGE>
MCBT EMEA FUND
- -------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Investments in securities, at value (cost $41,841,258) (Note B) $35,617,930
Investments in repurchase agreements, at value (Note B) 1,540,000
-----------
Total Investments 37,157,930
Cash 764
Foreign currency, at value (cost $580,448) (Note B) 577,908
Receivable for investments sold 1,308,871
Receivable for currency sold 983,233
Dividend and interest receivable 159,652
Foreign tax reclaims receivable 8,313
Prepaid insurance expense 4,830
-----------
TOTAL ASSETS 40,201,501
-----------
LIABILITIES
Payable for investments purchased 1,338,284
Payable for foreign currency purchased 976,690
Management fee payable (Note C) 147,117
Administration fee payable (Note C) 5,304
Trustees fees payable (Note C) 856
Accrued expenses and other liabilities 52,201
-----------
TOTAL LIABILITIES 2,520,452
-----------
TOTAL NET ASSETS $37,681,049
-----------
-----------
COMPOSITION OF NET ASSETS:
Paid-in-capital $50,815,955
Undistributed net investment income 509,039
Accumulated net realized loss on investment and foreign currency transactions (7,408,250)
Net unrealized depreciation on investment and foreign currency transactions (6,235,695)
-----------
TOTAL NET ASSETS $37,681,049
-----------
-----------
NET ASSET VALUE PER SHARE $ 7.32
($37,681,049 / 5,149,492 shares of beneficial interest outstanding) -----------
-----------
</TABLE>
See notes to financial statements.
7
<PAGE>
MCBT EMEA FUND
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
SIX MONTHS ENDED OCTOBER 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
INVESTMENT INCOME
<S> <C>
Interest income $ 34,040
Dividend income 932,211
Foreign taxes withheld (62,292)
-----------
TOTAL INVESTMENT INCOME 903,959
-----------
EXPENSES
Management fee (Note C) 370,342
Custodian fee 127,169
Administration fee (Note C) 24,264
Audit fee 12,602
Legal fees 2,823
Transfer agent fee 3,327
Trustees fees (Note C) 1,411
Miscellaneous expenses 9,306
-----------
TOTAL EXPENSES 551,244
-----------
NET INVESTMENT INCOME 352,715
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
Net realized loss on investments (9,086,284)
Net realized loss on foreign currency transactions (263,026)
Net unrealized appreciation (depreciation) on:
Investments (10,564,070)
Foreign currency transactions 11,791
-----------
NET LOSS ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS (19,901,589)
-----------
NET DECREASE IN NET ASSETS FROM OPERATIONS $(19,548,874)
-----------
-----------
</TABLE>
See notes to financial statements.
8
<PAGE>
MCBT EMEA FUND
- -------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months
Ended June 25, 1997*
October 31, 1998 Through
(Unaudited) 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 352,715 407,606
Net realized gain (loss) on investment transactions (9,086,284) 3,158,791
Net realized gain (loss) on foreign currency transactions (263,026) (114,819)
Net unrealized appreciation (depreciation) on:
Investments (10,564,070) 4,340,742
Foreign currency transactions 11,791 (24,158)
------------ ------------
Net increase (decrease) in net assets from operations (19,548,874) 7,768,162
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income 0 (138,147)
Net realized gains 0 (1,216,047)
------------ ------------
Total distributions 0 (1,354,194)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 107,710 84,237,826
Reinvestment of dividends and distributions to shareholders 0 1,345,957
Cost of shares repurchased (22,093,500) (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 (21,708,258) 72,524,213
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS (41,257,132) 78,938,181
------------ ------------
NET ASSETS at end of period (includes undistributed net investment $ 37,681,049 $ 78,938,181
income of $509,039 and $156,324, respectively) ------------ ------------
------------ ------------
OTHER INFORMATION:
CAPITAL SHARE TRANSACTIONS:
Shares sold 11,608 8,454,754
Shares issued in reinvestment of distributions to shareholders 0 140,350
Less shares repurchased (2,134,763) (1,322,457)
------------ ------------
Net share transactions (2,123,155) 7,272,647
------------ ------------
------------ ------------
</TABLE>
*Commencement of investment operations
See notes to financial statements.
9
<PAGE>
MCBT EMEA FUND
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING FOR THE PERIOD
<TABLE>
<CAPTION>
Six Months
Ended June 25, 1997*
October 31, 1998 Through
(Unaudited) April 30, 1998
----------- --------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
- -------------------------------
Net asset value, beginning of period $ 10.850 $ 10.000
----------- -----------
Net investment income 0.077 0.041
Net realized and unrealized gain (loss) on investment
and foreign currency transactions (3.661) 0.887
----------- -----------
Total from investment operations (3.584) 0.928
----------- -----------
Less distributions:
Net investment income 0.000 (0.020)
Net realized gains 0.000 (0.175)
----------- -----------
Total distributions 0.000 (0.195)
----------- -----------
Paid in capital from subscription and redemption fees (Note B) 0.054 0.117
----------- -----------
Net asset value, end of period $ 7.320 $ 10.850
----------- -----------
----------- -----------
TOTAL INVESTMENT RETURN (1) (2) (32.53)% 10.71%
- ----------------------- ----------- -----------
----------- -----------
RATIOS AND SUPPLEMENTAL DATA
- ----------------------------
Net assets, end of period $37,681,049 $78,938,181
Operating expenses, net, to average net assets (Note C) 2.21%(3) 1.93%(3)
Operating expenses, gross, to average net assets (Note C) 2.21%(3) 1.93%(3)
Net investment income to average net assets 1.41%(3) 0.84%(3)
Portfolio turnover rate 51% 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.
10
<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 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 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.
11
<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. There were no open forward foreign currency contracts
at October 31, 1998.
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 - There is a purchase premium for
cash investments into the Fund of 1.00% of the amount invested and a
redemption fee on cash redemptions of 1.00% of the amount redeemed. All
purchase premiums and redemption fees are paid to and retained by the Fund
and are recorded as paid-in-capital by the Fund. These fees are intended to
offset brokerage and transaction costs arising in connection with the
purchase and redemption. The purchase and redemption fees may be waived by
the Manager, however, if these brokerage and transaction costs are minimal or
in other circumstances at the Manager's discretion. For the six months ended
October 31, 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.
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.
12
<PAGE>
MCBT EMEA FUND
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and income and expenses at the date of the financial statements.
Actual results could differ from these estimates.
NOTE C - AGREEMENTS AND FEES
The Fund has entered into a Management Contract with Martin Currie Inc. (the
"Investment Manager"), a wholly owned subsidiary of Martin Currie Ltd. Under
the Management Contract, the Fund pays the Investment Manager a quarterly
management fee at the annual rate of 1.50% of the Fund's average net assets.
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
$22,997,631 and $46,201,256, 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>
$43,381,258 $1,594,728 $(7,818,056) $(6,223,328)
</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 56% 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.
13
<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 form the U. S. economy in such respects as
growth of gross domestic product or gross national product, diversification,
rate of inflation, currency depreciation, capital reinvestment, resource
self-sufficiency, dependence on foreign assistance, vulnerability to change
in trade conditions, structural unemployment and balance of payments position.
- -------------------------------------------------------------------------------
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
Scotland
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. |
----------------------------------------------------------------------
