<PAGE>
MARTIN CURRIE BUSINESS TRUST
ASIA PACIFIC EX JAPAN FUND
ANNUAL REPORT
APRIL 30, 1999
<PAGE>
MCBT ASIA PACIFIC EX JAPAN FUND
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PROFILE AT APRIL 30, 1999
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 $199.7m
PERFORMANCE Total return from May 1, 1998 through April 30,
1999
- MCBT - Asia Pacific Ex Japan Fund
(excluding all transaction fees) -3.9%
- MCBT - Asia Pacific Ex Japan Fund
(including all transaction fees) -7.2%
Annualized total return from March 24, 1995 through
April 30, 1999
- MCBT - Asia Pacific Ex Japan Fund
(excluding all transaction fees) -27.9%
- MCBT - AsiaPacific Ex Japan Fund
(including all transaction fees) -28.5%
The graph on the following page represents the
annualized total return of the portfolio including
all transaction fees through September 30, 1998,
versus the Morgan Stanley Capital International
Emerging Free Asia Index from April 1, 1995 through
October 31, 1998 and the total return for the period
October 31, 1998 through April 30, 1999 versus the
Morgan Stanley Capital International All Countries
Asia Pacific Free (ex Japan & India) Index,
respectively. Note as of November 1998, the Fund
changed its' investment mandate and performance bench
mark from the Morgan Stanley Capital International
Emerging Free Asia Index to the Morgan Stanley
Capital International All Countries Asia Pacific Free
(ex Japan & India) Index.
Total return from May 1, 1998 through April 30, 1999
- Morgan Stanley Capital International -
Emerging Free Asia Index +4.9%
- Morgan Stanley Capital International -
All Countries Asia Pacific Free (ex Japan &
India) Index +27.8%
Annualized total return from April 1, 1995 through
April 30, 1998
- MCBT - Asia Pacific Ex Japan Fund (excluding
all transaction fees) -28.2%
- MCBT - Asia Pacific Ex Japan Fund (including
all transaction fees) -28.8%
- Morgan Stanley Capital International -
Emerging Free Asia Index -25.4%
Total return from October 31, 1998 through April 30,
1999
- MCBT - Asia Pacific Ex Japan Fund (excluding
all transaction fees) +27.0%
- MCBT - Asia Pacific Ex Japan Fund (including
all transaction fees) +22.6%
- Morgan Stanley Capital International -
All Countries Asia Pacific Free (ex Japan &
India) Index +37.5%
1
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MCBT ASIA PACIFIC EX JAPAN FUND
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PROFILE AT APRIL 30, 1999
[GRAPH]
(a) Performance for the benchmark is not available from March 24, 1995
(commencement of investment operations). For that reason, performance is
shown from April 1, 1995.
(b) Performance for the benchmark is not available from March 24, 1995
(commencement of investment operations). For that reason, performance is
shown from October 31, 1998.
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 prior to
October 1, 1998 which reflects a transaction fee of 175 basis points on
purchase and 175 basis points on redemption. Transaction fees are paid to the
Fund to cover trading costs. Transaction fees were eliminated effective
October 1, 1998. Past performance is not indicative of future performance.
2
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MCBT ASIA PACIFIC EX JAPAN FUND
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PROFILE AT APRIL 30, 1999
PORTFOLIO In the last annual report we highlighted the
COMMENTS collapse in emerging Asian stock markets and
currencies. The difficult year faced by these
markets led to our decision to restructure the
fund. We broadened the fund's mandate to Asian
Pacific markets, excluding Japan and India.
Increasingly investment opportunities will
present themselves on a stock-by-stock basis
across the region and the fund will be
well-positioned for these. We completed the
restructuring in November 1998.
Asian markets are on the road to recovery. As
import demand collapsed, the creation of current
account surpluses with shrinking domestic
consumption and investment allowed the build-up
of liquidity in the second half of 1998. Russia
led the global debt crisis in August 1998. The
subsequent decision by the US Federal Reserve to
cut interest rates marked the turning point for
Asian markets. By the end of 1998, regional
economies showed signs of bottoming and of
benefiting from lower interest rates, the return
of the domestic consumer and steady global
growth.
So we have been increasing our positions in
SINGAPORE (the bank Overseas Chinese Bank
Corporation and Singapore Airlines), SOUTH KOREA
(Housing & Commercial Bank and Samsung
Securities), INDONESIA (telecommunications
carrier Indosat) and THAILAND (Bangkok Bank).
These holdings are already yielding good returns.
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.
OUTLOOK
For Asian markets and economies, the outlook has
improved dramatically. The severe economic
problems in 1998 forced many companies to
rethink how they run their businesses. To
attract foreign capital and improve local
competitiveness, Asian governments have begun to
de-regulate domestic markets. Singapore, South
Korea and Thailand are at the forefront of these
changes. Indonesia seems to be managing the
transition to democracy.
In contrast to the rest of the region, economic
growth appears to be slowing in CHINA. The
government's emphasis remains on stability over
radical reform. The outlook for growth,
deflation and foreign direct investment remains
difficult.
Our investment strategy over the next 12 months
will be to buy into the earnings recovery. As
they benefit from improving domestic and
regional economies, lower interest rates and the
restructuring they have put in place, companies
will enjoy strong earnings growth. Stock
selection is key.
3
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MCBT ASIA PACIFIC EX JAPAN FUND
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PROFILE AT APRIL 30, 1999
INVESTMENT All funds are managed on a team basis with a
MANAGER named director heading each team.
PROFILE
James Fairweather, Chief Investment Officer,
oversees the management of the MCBT Asia Pacific
Ex Japan Fund.
Adrian Mowat manages the MCBT Asia Pacific 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 became a
director of Martin Currie in 1994 and was
appointed head of the Asia team in September
1998.
4
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MCBT ASIA PACIFIC EX JAPAN FUND
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PROFILE AT APRIL 30, 1999
ASSET ALLOCATION
(% of net assets)
[GRAPH]
<TABLE>
<CAPTION>
LARGEST HOLDINGS
BY COUNTRY % OF NET ASSETS
<S> <C> <C>
AUSTRALIA
Telestra Corporation Limited 4.6
Woolworths Limited 4.3
Brambles Industries Limited 3.9
Westpac Banking Corporation Limited 3.9
Fosters Brewing Group Limited 3.6
SINGAPORE
Natsteel Electronics Limited 3.1
Overseas Union Bank Limited, Foreign 3.1
Singapore Airlines Limited, Foreign 3.1
HONG KONG
Cheung Kong (Holdings) Limited 3.5
China Telecom (Hong Kong) Limited 2.2
Henderson Land Development Company Limited 2.2
SOUTH KOREA
Pohang Iron & Steel Company 2.5
Samsung Electronics America Incorporated 2.5
THAILAND
Bangkok Bank, Foreign 6.4
</TABLE>
5
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MCBT ASIA PACIFIC EX JAPAN FUND
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SCHEDULE OF INVESTMENTS
APRIL 30, 1999
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
COMMON STOCK AND RIGHTS - 90.6%
AUSTRALIA - 23.6%
BRAMBLES INDUSTRIES LIMITED 265,000 $7,787,026
FOSTERS BREWING GROUP LIMITED 2,470,000 7,204,974
NEWS CORPORATION LIMITED 380,000 3,184,552
TELSTRA CORPORATION LIMITED 1,690,000 9,170,530
WESTFIELD HOLDINGS LIMITED 506,892 3,354,357
WESTPAC BANKING CORPORATION LIMITED 1,012,000 7,725,554
WOOLWORTHS LIMITED 2,720,000 8,639,806
--------------
TOTAL AUSTRALIA - (COST $41,914,262) 47,066,799
--------------
HONG KONG - 18.0%
CATHAY PACIFIC AIRWAYS 1,433,000 2,301,748
CHEUNG KONG (HOLDINGS) LIMITED 775,000 7,049,090
CHINA TELECOM (HONG KONG) LIMITED 1,926,000 4,398,168
DAO HENG BANK GROUP LIMITED 969,000 3,938,008
HENDERSON LAND DEVELOPMENT COMPANY LIMITED 730,000 4,417,108
HONG KONG & CHINA GAS COMPANY LIMITED 2,500,000 3,515,675
HUTCHISON WHAMPOA 460,000 4,124,629
JOHNSON ELECTRIC HOLDINGS 740,000 2,210,166
SWIRE PACIFIC LIMITED 700,000 3,928,525
--------------
TOTAL HONG KONG - (COST $30,065,243) 35,883,117
--------------
INDONESIA - 3.9%
PT INDAH KIAT PULP & PAPER CORPORATION * 9,000,000 3,762,775
PT INDOSAT 2,094,500 4,047,594
--------------
TOTAL INDONESIA - (COST $6,104,476) 7,810,369
--------------
PHILIPPINES - 2.0%
AYALA LAND INCORPORATED 8,000,000 2,945,430
PHILIPPINE NATIONAL BANK * 426,970 1,179,010
--------------
TOTAL PHILIPPINES - (COST $3,447,736) 4,124,440
--------------
SINGAPORE - 15.3%
CITY DEVELOPMENTS LIMITED 590,000 3,930,319
NATSTEEL ELECTRONICS LIMITED 1,850,000 6,216,471
OVERSEAS CHINESE BANK CORPORATION, FOREIGN 434,000 4,068,030
OVERSEAS UNION BANK LIMITED, FOREIGN 1,200,000 6,154,572
SINGAPORE AIRLINES LIMITED, FOREIGN 664,000 6,106,467
SINGAPORE TELECOMMUNICATIONS LIMITED 2,200,000 4,072,393
--------------
TOTAL SINGAPORE - (COST $21,951,831) 30,548,252
--------------
</TABLE>
See notes to financial statements.
6
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MCBT ASIA PACIFIC EX JAPAN FUND
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SCHEDULE OF INVESTMENTS
APRIL 30, 1999
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
COMMON STOCK AND RIGHTS - CONTINUED
SOUTH KOREA - 13.3%
HOUSING & COMMERCIAL BANK, KOREA GDR 154,448 $ 3,638,657
HYUNDAI MOTOR COMPANY LIMITED 82,216 1,373,149
HYUNDAI MOTOR COMPANY LIMITED, RIGHTS 5/18/1999 * 55,392 309,934
KOOKMIN BANK 114,000 1,553,891
KOREA ELECTRIC POWER CORPORATION 128,344 3,693,197
MEDISON COMPANY 129,185 1,445,655
POHANG IRON & STEEL COMPANY 69,130 5,031,338
SAMSUNG ELECTRONICS AMERICA INCORPORATED 65,730 5,054,878
SAMSUNG SECURITIES COMPANY LIMITED * 116,438 4,506,645
--------------
TOTAL SOUTH KOREA - (COST $18,298,446) 26,607,344
--------------
TAIWAN - 6.2%
ASUSTEK COMPUTER INCORPORATED 286,000 2,991,193
FAR EASTERN TEXTILE LIMITED 237 318
TAIWAN SEMICONDUCTOR MANUFACTURING 773,086 2,612,416
UNITED WORLD CHINESE COMMERCIAL BANK * 2,393,000 2,993,079
YUANTA SECURITIES CORPORATION * 2,280,000 3,800,000
--------------
TOTAL TAIWAN - (COST $9,716,688) 12,397,006
--------------
THAILAND - 8.3%
BANGKOK BANK, FOREIGN * 4,240,000 12,695,981
ELECTRICITY GENERATING PUBLIC COMPANY 707,276 1,574,056
SIAM CEMENT PUBLIC COMPANY LIMITED, FOREIGN 75,900 2,244,036
--------------
TOTAL THAILAND - (COST $13,341,994) 16,514,073
--------------
TOTAL COMMON STOCK AND RIGHTS - (COST$144,840,676) o 180,951,400
--------------
PRINCIPAL
AMOUNT
SHORT TERM INVESTMENT - 1.5%
STATE STREET BANK AND TRUST COMPANY REPURCHASE
AGREEMENT, 4.250%, 05/03/1999 (A) $ 3,076,000 3,076,000
--------------
TOTAL SHORT TERM INVESTMENT - (COST $3,076,000) 3,076,000
--------------
TOTAL INVESTMENTS - (COST $147,916,676) - 92.1% 184,027,400
CASH, RECEIVABLES AND OTHER ASSETS, LESS LIABILITIES - 7.9% 15,696,578
--------------
NET ASSETS - 100.0% $ 199,723,978
--------------
--------------
</TABLE>
* Non-income producing security.
(a) The repurchase agreement, dated 4/30/1999, $3,076,000 par due 5/3/1999,
is collateralized by United States Treasury Notes, 6.750%, due 8/15/2026,
with a market value of $3,142,950.
+ Percentages of long term investments are presented in the portfolio by
country. Percentages of long term investments by industry are as follows:
Air Travel 4.2%, Automobiles 0.8%, Banks 22.0%, Brewery 3.6%, Building &
Construction 1.1%, Commercial Services 3.9%, Computers 1.5%,
Conglomerates 2.1%, Diversified 2.0%, Drugs & Health Care 0.7%, Electric
Utilities 3.7%, Electronics 5.6%, Financial Services 4.2%, Gas & Pipeline
Utilities 1.8%, Paper 1.9%, Publishing 1.6%, Real Estate 10.9%, Retail
4.3%, Semi-Conductor 1.3%, Steel 2.5%, Telecommunications 10.9%.
GDR Global Depositary Receipts.
See notes to financial statements.
7
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MCBT ASIA PACIFIC EX JAPAN FUND
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STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999
<TABLE>
<S> <C>
ASSETS
Investments in securities, at value (cost $144,840,676) (Note B) $ 180,951,400
Investments in repurchase agreements, at value (Note B) 3,076,000
-----------------
Total Investments 184,027,400
Cash 133
Foreign currency, at value (cost $10,295,440) (Note B) 10,291,209
Receivable for investments sold 14,594,835
Dividend and interest receivable 69,731
Deferred organization expense (Note B) 2,101
-----------------
TOTAL ASSETS 208,985,409
-----------------
LIABILITIES
Payable for investments purchased 7,918,517
Payable for currency purchased 37,167
Management fee payable (Note C) 627,285
Administration fee payable (Note C) 9,996
Trustees fees payable (Note C) 1,459
Accrued expenses and other liabilities 667,007
-----------------
TOTAL LIABILITIES 9,261,431
-----------------
TOTAL NET ASSETS $ 199,723,978
-----------------
-----------------
COMPOSITION OF NET ASSETS
Paid-in-capital $ 220,026,009
Undistributed net investment loss (198,766)
Accumulated net realized loss on investment and foreign currency transactions (55,598,026)
Net unrealized appreciation on investment and foreign currency transactions 35,494,761
-----------------
TOTAL NET ASSETS $ 199,723,978
-----------------
-----------------
NET ASSET VALUE PER SHARE $ 2.49
($199,723,978 / 80,188,617 shares of beneficial interest outstanding) -----------------
-----------------
</TABLE>
See notes to financial statements.
8
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MCBT ASIA PACIFIC EX JAPAN FUND
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STATEMENT OF OPERATIONS
FOR THE YEAR ENDED APRIL 30, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME
Interest income $ 258,213
Dividend income 1,229,714
Foreign taxes withheld (82,008)
-----------------
TOTAL INVESTMENT INCOME 1,405,919
-----------------
EXPENSES
Management fee (Note C) 1,340,186
Custodian fee 168,269
Administration fee (Note C) 86,298
Audit fee 24,999
Legal fees 1,402
Transfer agent fee 6,674
Trustee fees (Note C) 701
Amortization of deferred organization expenses (Note B) 2,548
Miscellaneous expenses 6,163
-----------------
TOTAL EXPENSES 1,637,240
-----------------
NET INVESTMENT LOSS (231,321)
-----------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
Net realized loss on investments (net of foreign taxes paid of ($22,573)) (352,596)
Net realized loss on foreign currency transactions (248,326)
Net unrealized appreciation on:
Investments (net of foreign taxes of ($618,758)) 39,205,615
Foreign currency transactions 27,188
-----------------
NET GAIN ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS 38,631,881
-----------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 38,400,560
-----------------
-----------------
</TABLE>
See notes to financial statements.
9
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MCBT ASIA PACIFIC EX JAPAN FUND
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STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Year
Ended Ended
April 30, 1999 April 30, 1998
-------------- --------------
<S> <C> <C>
NET ASSETS at beginning of year $ 21,072,974 $ 84,384,554
--------------- ---------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment loss (231,321) (40,188)
Net realized loss on investment transactions (352,596) (44,893,511)
Net realized loss on foreign currency transactions (248,326) (2,054,320)
Net unrealized appreciation (depreciation) on:
Investments 39,205,615 (4,450,434)
Foreign currency transactions 27,188 (15,262)
--------------- ---------------
Net increase (decrease) in net assets from operations 38,400,560 (51,453,715)
--------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 173,143,913 8,136,783
Cost of shares repurchased (32,922,754) (20,466,078)
Paid in capital from subscription and redemption fees 29,285 471,430
--------------- ---------------
Total increase (decrease) in net assets from capital share transactions 140,250,444 (11,857,865)
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS 178,651,004 (63,311,580)
--------------- ---------------
NET ASSETS at end of year (includes undistributed net investment $ 199,723,978 $ 21,072,974
losses of ($198,766) and ($1,920,658), respectively) --------------- ---------------
--------------- ---------------
OTHER INFORMATION:
CAPITAL SHARE TRANSACTIONS:
Shares sold 88,316,616 2,782,687
Less shares repurchased (16,253,026) (3,417,299)
--------------- ---------------
Net share transactions 72,063,590 (634,612)
--------------- ---------------
--------------- ---------------
</TABLE>
See notes to financial statements.
10
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MCBT ASIA PACIFIC EX JAPAN FUND
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FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING FOR THE PERIOD
<TABLE>
<CAPTION>
Year (4) Year Year (4) Year (4) March 24, 1995*
Ended Ended Ended Ended through
April 30, 1999 April 30, 1998 April 30, 1997 April 30, 1996 April 30, 1995
-------------- -------------- -------------- -------------- ---------------
<S> <C> <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) (0.005) (0.227) (0.101) (0.029) 0.009
Net realized and unrealized gain (loss) on investment
and foreign currency transactions (0.095) (6.871) (2.503) 2.446 (0.029)
----------- ----------- ----------- ----------- -----------
Total from investment operations (0.100) (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) 0.000 0.058 0.188 0.172 0.000
----------- ----------- ----------- ----------- -----------
Net asset value, end of period $ 2.490 $ 2.590 $ 9.630 $ 12.360 $ 9.980
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
TOTAL INVESTMENT RETURN (1) (2) (3.86)% (73.10)% (19.82)% 26.30% (0.20)%
- ----------------------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
RATIOS AND SUPPLEMENTAL DATA
- ----------------------------
Net assets, end of period $199,723,978 $21,072,974 $84,384,554 $129,326,397 $42,027,699
Operating expenses, net, to average net
assets (Note C) 1.83% 2.00% 1.89% 1.93% 1.85%(3)
Operating expenses, gross, to average
net assets (Note C) 1.83% 2.23% 1.98% 2.18% 2.57%(3)
Net investment income (loss) to average net assets (0.26)% (0.09)% (0.89)% (0.27)% 0.96%(3)
Portfolio turnover rate 158% 162% 118% 65% 0%
Per share amount of fees waived (Note C) $ 0.000 $ 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.
11
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MCBT ASIA PACIFIC EX JAPAN FUND
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NOTES TO FINANCIAL STATEMENTS
NOTE A - ORGANIZATION
Martin Currie Business Trust ("MCBT") (the "Trust") is registered under the
Investment Company Act of 1940, as amended (the 1940 Act), as an open-end
management investment company organized as a Massachusetts business trust on
May 20, 1994. The Trust offers 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 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.
12
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MCBT ASIA PACIFIC EX JAPAN FUND
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NOTES TO FINANCIAL STATEMENTS (Continued)
FOREIGN CURRENCY TRANSLATIONS (CONTINUED) - Reported net realized gains and
losses on foreign currency transactions represent net gains and losses from
sales and maturities of forward currency contracts, disposition of foreign
currencies, currency gains and losses realized between the trade and
settlement dates on security transactions, and the difference between the
amount of net investment income accrued and the U.S. dollar amount actually
received. The effects of changes in foreign currency exchange rates on
investments in securities are not segregated in the Statement of Operations
from the effects of changes in market prices of those securities, and are
included with the net realized and unrealized gain or loss on investment
securities.
FORWARD FOREIGN CURRENCY CONTRACTS - A forward foreign currency contract
("Forward") is an agreement between two parties to buy and sell a currency at
a set price on a future date. The market value of the Forward fluctuates with
changes in currency exchange rates. The Forward is marked-to-market daily and
the change in the market value is recorded by the Fund as an unrealized gain
or loss. When the Forward is closed, the Fund records a realized gain or loss
equal to the difference between the value at the time it was opened and the
value at the time it was closed. The Fund may enter into Forwards in
connection with planned purchases and sales of securities, to hedge specific
receivables or payables against changes in future exchange rates or to hedge
the U.S. dollar value of portfolio securities denominated in a foreign
currency. There were no open forward foreign currency contracts at April 30,
1999.
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 - Effective through September 30,
1998, there was 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 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 are
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, $322 was collected in purchase premiums and $28,963 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 ASIA PACIFIC EX JAPAN 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 $55,493,771
($3,928,107 expires April 30, 2005, $19,088,678 expires April 30, 2006, and
$32,476,986 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 $104,255 current year post October 31
capital loss and a $198,766 current year post October 31 currency loss as
though the losses were 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.
Prior to September 20, 1996 the Investment Manager had voluntarily agreed to
limit its fee to 1.25% of the Fund's average net assets.
The Investment Manager has also voluntarily undertaken to reduce its fee
until further notice to the extent necessary to limit the Fund's annual
expenses (including the management fee but excluding brokerage commissions,
transfer taxes, and extraordinary expenses) to 2.00% of the Fund's average
net assets on an annualized basis. For the year ended April 30, 1999, it was
not necessary for the Investment Manager to waive any 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 year ended April 30, 1999 were $253,767,186 and
$130,902,573, 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>
$ 147,916,676 $ 37,642,078 $ (1,531,354) $ 36,110,724
</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 50% of the Fund.
14
<PAGE>
MCBT ASIA PACIFIC EX JAPAN FUND
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- -------------------------------------------------------------------------------
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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15
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Trustees and Shareholders of the
Martin Currie Business Trust - Asia Pacific Ex Japan 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 Asia Pacific
Ex Japan Fund (previously the Emerging Asia 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
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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