<PAGE>
MARTIN CURRIE BUSINESS TRUST
EMEA FUND
SEMI-ANNUAL REPORT
OCTOBER 31, 1999
(Unaudited)
<PAGE>
MCBT EMEA FUND
- -------------------------------------------------------------------------------
PROFILE AT OCTOBER 31, 1999 (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 $77.8m
PERFORMANCE Total return from May 1, 1999 through October 31,
1999
<TABLE>
<CAPTION>
<S> <C>
- MCBT - EMEA Fund (excluding all transaction fees) 1.6%
- MCBT - EMEA Fund (including all transaction fees) 0.8%
- Morgan Stanley Capital International - EMEA 10.1%
Annualized total return from June 25, 1997 through October 31, 1999
- MCBT - EMEA Fund (excluding all transaction fees) -3.1%
- MCBT - EMEA Fund (including all transaction fees) -1.7%
- Morgan Stanley Capital International - EMEA -1.1%
(from July 1, 1997 through October 31, 1999)
</TABLE>
PORTFOLIO COMMENTS Greece extended its lead over other EMEA markets
in the six months to 31 October 1999. Our
underweight position there explains the bulk
of the fund's underperformance against the
regional benchmark (1.6% against the benchmark's
10.1%). Initially, the rally in Greece was
an entirely rational response to the prospect
of interest rate convergence with western
Europe. But a spiral has since developed whereby
stockmarket gains encourage widespread
participation by local individual investors
who seem insensitive to share prices.
Despite upgrades to European forecasts of growth,
returns from central Europe were mixed. Whereas
Hungary's current account deficit has narrowed,
Poland's has deteriorated. This may reflect the
underlying competitiveness of the two economies.
We were surprised that South Africa did not return
more than 4%. A mix of depressed domestic demand
and stronger exports (especially to Asia) has
supported the rand. Fiscal discipline remains
exemplary and interest rates have continued to
fall. Institutional liquidity is the missing
ingredient. South African institutions are fully
invested and are still keen to move assets
offshore where possible.
More positively, Egypt gained 16%. Higher oil
revenues and record tourist numbers have taken
pressure off the Egyptian pound and allowed
interbank rates to ease.
1
<PAGE>
MCBT EMEA FUND
- -----------------------------------------------------------------------------
PROFILE AT OCTOBER 31, 1999 (Unaudited)
PORTFOLIO COMMENTS OUTLOOK
(continued) We believe that the Middle East and Turkey offer
the greatest medium term potential. Improved
relations between Israel and its Arab neighbours,
and between Turkey and the European Union, will
increase the confidence of investors. The Turkish
government's commitment to stabilising the economy
should be rewarded with IMF support and a lower
risk premium. The stockmarket is highly sensitive
to movements in T-bill yields which we expect to
fall steadily. Investors in Egypt will want to see
more rapid privatisation by the new
administration. But in the meantime, interest
rates have peaked and valuations are the most
attractive in our universe.
Poland's intractable current account deficit is
cause for concern. But our holdings are
concentrated in telecom networks which, in our
view, are undervalued and strategically important
to international operators. We fear that for
Greece, convergence could be its downfall. The
selling that would accompany removal from the
emerging market indices would not necessarily be
counterbalanced by European investors, for whom
Greece would be a tiny percentage of their
benchmark.
INVESTMENT MANAGER PROFILE Chris Butler manages the MCBT EMEA Fund, assisted
by Dariusz Sliwinski.
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 was promoted to director in
1999. 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, 1999 (Unaudited)
ASSET ALLOCATION
(% of net assets)
RAW DATA FOR PIE CHARTS
Europe 36%
Africa 26%
Middle East 25%
Other Areas 5%
ST Investment 4%
Other Net Assets 4%
-------
TOTAL: 100%
<TABLE>
<CAPTION>
LARGEST HOLDINGS
BY REGION/COUNTRY % OF NET ASSETS
<S> <C> <C> <C>
AFRICA
Anglo American Corporation (South Africa) 1.1
Sasol Limited (South Africa) 0.9
Nedcor Limited (South Africa) 0.9
EUROPE
Hellenic Telecommunications
Organization SA (OTE) (Greece) 1.3
Old Mutual PLC (United Kingdom) 0.7
STET Hellas
Telecommunications SA, ADR (Greece) 0.6
Lukoil Holding, ADR (Russia) 0.6
Ceske Radiokomunikace (Czech Republic) 0.6
MIDDLE EAST
ECI Telecommunications (Israel) 0.6
Orbotech Limited (Israel) 0.5
OTHER AREAS
Near East Opportunities Fund (Investment Company) 1.1
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
MCBT EMEA FUND
- --------------------------------------------------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1999 (Unaudited)
SHARES VALUE
------ ------
<S> <C> <C>
COMMON STOCKS, RIGHTS AND WARRANTS - 92.4%
AFRICA - 25.6%
KENYA - 0.2%
KENYA AIRWAYS 4,000 $ 352
KENYA COMMERCIAL BANK 300,738 136,153
-----------------
TOTAL KENYA - (COST $350,909) 136,505
-----------------
SOUTH AFRICA - 25.4%
ANGLO AMERICAN CORPORATION 77,557 4,127,991
BARLOW LIMITED 380,000 1,852,467
LIBERTY LIFE ASSOCIATION OF SOUTH AFRICA 114,000 1,057,669
NEDCOR INVESTMENT BANK HOLDINGS * 171,500 100,493
NEDCOR LIMITED 161,000 3,165,649
SANLAM LIMITED 1,900,000 2,180,282
SAPPI LIMITED 240,000 1,988,378
SASOL LIMITED 482,000 3,295,083
SOUTH AFRICAN BREWERIES LIMITED 176,000 1,541,221
STANDARD BANK INVESTMENT CORPORATION 133,697 456,995
-----------------
TOTAL SOUTH AFRICA - (COST $19,071,006) 19,766,228
-----------------
TOTAL AFRICA - (COST $19,421,915) 19,902,733
-----------------
EUROPE - 36.2%
CROATIA - 2.1%
PLIVA D.D., GDR 152,500 1,658,438
-----------------
TOTAL CROATIA - (COST $2,486,163) 1,658,438
-----------------
CZECH REPUBLIC - 2.9%
CESKE RADIOKOMUNIKACE * 70,860 2,276,377
-----------------
TOTAL CZECH REPUBLIC - (COST $2,223,490) 2,276,377
-----------------
GERMANY - 0.9%
BERENBERG HELLAS OLYMPIA FUND 4,177 671,383
-----------------
TOTAL GERMANY - (COST $228,965) 671,383
-----------------
GREECE - 11.8%
ALPHA CREDIT BANK, GDR 29,474 2,253,938
HELLENIC TELECOMMUNICATION ORGANIZATION SA (OTE) 217,100 4,600,163
STET HELLAS TELECOMMUNICATIONS SA, ADR * 107,000 2,300,500
-----------------
TOTAL GREECE - (COST $8,736,056) 9,154,601
-----------------
HUNGARY - 6.0%
BORSODCHEM RT., GDR 40,000 1,210,000
MAGYAR OLAJ-ES GAZIPARI RT., GDR * 30,500 610,000
MATAV RT., ADR 49,600 1,429,100
OTP BANK RT., GDR 32,300 1,454,307
-----------------
TOTAL HUNGARY - (COST $4,541,392) 4,703,407
-----------------
</TABLE>
See notes to financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
MCBT EMEA FUND
- ------------------------------------------------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1999 (Unaudited)
SHARES VALUE
------ ------
<S> <C> <C>
EUROPE - CONTINUED
POLAND - 6.2%
BANK HANDLOWY W WARSZAWIE, GDR 89,000 $ 1,259,350
ELEKTRIM SPOLKA AKCYJNA SA 120,000 1,038,038
NETIA HOLDINGS SA, ADR * 30,000 468,750
POWSZECHNY BANK KREDYTOWY SA, GDR 27,000 491,400
TELEKOMUNIKACJA POLSKA SA, GDR 307,000 1,565,700
-----------------
TOTAL POLAND - (COST $5,602,302) 4,823,238
-----------------
RUSSIA - 3.2%
BRUNSWICK RUSSIAN GROWTH FUND * 2,465 188,948
LUKOIL HOLDING, ADR 73,000 2,299,500
-----------------
TOTAL RUSSIA - (COST $3,173,250) 2,488,448
-----------------
UNITED KINGDOM - 3.1%
OLD MUTUAL PLC * 1,147,000 2,427,039
-----------------
TOTAL UNITED KINGDOM - (COST $2,350,055) 2,427,039
-----------------
TOTAL EUROPE - (COST $29,341,673) 28,202,931
-----------------
MIDDLE EAST - 25.4%
EGYPT - 10.0%
AL-AHRAM BEVERAGES COMPANY SAE, GDR * 38,500 1,129,012
COMMERCIAL INTERNATIONAL BANK 125,000 1,497,813
EASTERN COMPANY FOR TOBACCO & CIGARETTES 28,500 673,697
EFG HERMES HOLDING SAE, GDR 70,220 863,706
EGYPT TRUST 16,500 169,125
EGYPTIAN COMPANY FOR MOBILE SERVICES * 42,715 1,101,873
INTERNATIONAL FOODS COMPANY * 14,800 174,536
ORASCOM CONSTRUCTION INDUSTRIES * 86,509 1,210,622
THE EGYPT FUND * 8,912 102,488
TORAH PORTLAND CEMENT 43,872 882,556
-----------------
TOTAL EGYPT - (COST $6,981,034) 7,805,428
-----------------
ISRAEL - 8.4%
BANK HAPOALIM LIMITED 644,000 1,531,528
BANK LEUMI LE-ISRAEL, WARRANTS 12/31/1999 * 1,127,622 224,887
ECI TELECOMMUNICATIONS 72,500 2,111,563
I.T. INTERNATIONAL THEATRES LIMITED * 28,000 245,000
INTERNET GOLD * 60,000 450,000
ORBOTECH LIMITED * 25,000 1,953,125
-----------------
TOTAL ISRAEL - (COST $6,816,968) 6,516,103
-----------------
TURKEY - 7.0%
AKSIGORTA AS 47,000,000 1,441,958
DOGAN SIRKETLER GRUBU HOLDING AS 21,016,000 236,051
EREGLI DEMIR VE CELIK FABRIKALARI TAS 62,000,000 1,547,517
TURKIYE GARANTI BANKASI AS 91,500,000 780,311
VESTEL ELEKTRONIK SANAYI VE TICARET AS * 11,000,000 1,349,918
</TABLE>
See notes to financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
MCBT EMEA FUND
- -------------------------------------------------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1999 (Unaudited)
SHARES VALUE
------ -----
<S> <C> <C>
MIDDLE EAST - CONTINUED
TURKEY - COMTINUED
YAPI VE KREDI BANKASI AS 5,050,000 $ 73,528
-----------------
TOTAL TURKEY - (COST $5,004,757) 5,429,283
-----------------
TOTAL MIDDLE EAST - (COST $18,802,759) 19,750,814
-----------------
OTHER AREAS - 5.2%
INVESTMENT COMPANIES - 5.2%
NEAR EAST OPPORTUNITIES FUND (a) * 260,000 4,043,000
-----------------
TOTAL INVESTMENT COMPANIES - (COST $4,139,700) 4,043,000
-----------------
TOTAL OTHER AREAS - (COST $4,139,700) 4,043,000
-----------------
TOTAL COMMON STOCKS, RIGHTS AND
WARRANTS - (COST $71,706,047) + 71,899,478
-----------------
PRINCIPAL
AMOUNT
---------
SHORT TERM INVESTMENT - 3.7%
STATE STREET BANK AND TRUST COMPANY REPURCHASE AGREEMENT,
4.600%, 11/01/1999 (b) $ 2,843,000 2,843,000
-----------------
TOTAL SHORT TERM INVESTMENT - (COST $2,843,000) 2,843,000
-----------------
TOTAL INVESTMENTS - (COST $74,549,047) - 96.1% 74,742,478
CASH, RECEIVABLES AND OTHER ASSETS, LESS LIABILITIES - 3.9% 3,026,006
-----------------
NET ASSETS - 100.0% $ 77,768,484
-----------------
-----------------
</TABLE>
* Non-income producing security.
(a) 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.
(b) The repurchase agreement, dated 10/29/99, $2,843,000 par due 11/1/99, is
collateralized by United States Treasury Notes, 7.500%, due 11/15/16 with
a market value of $2,901,530.
+ Percentages of long term investments are presented in the portfolio by
country. Percentages of long term investments by industry are as follows:
Banks 17.1%, Brewery 3.4%, Broadcasting 2.9%, Building & Construction
3.9%, Cement 1.1%, Chemicals 1.6%, Computer Services 0.6%, Diversified
0.3%, Drugs & Health Care 2.1%, Electrical Equipment 1.3%, Electronics
4.3%, Entertainment 0.3%, Financial Services 4.2%, Food & Beverages 0.2%,
Insurance 6.0%, Investment Companies 6.8%, Mining 5.3%, Oil & Gas 8.0%,
Paper 2.6%, Steel 2.0%, Telecommunications 17.5%, Tobacco 0.9%.
ADR American Depositary Receipts.
GDR Global Depositary Receipts.
See notes to financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
MCBT EMEA FUND
- ----------------------------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999 (Unaudited)
<S> <C>
ASSETS
Investments in securities, at value (cost $71,706,047) (Note B) $ 71,899,478
Investments in repurchase agreements, at value (Note B) 2,843,000
-----------------
Total Investments 74,742,478
Cash 843
Foreign currency, at value (cost $46,987) (Note B) 47,082
Receivable for investments sold 3,721,420
Receivable for currency sold 2,139,584
Dividend and interest receivable 104,765
-----------------
TOTAL ASSETS 80,756,172
-----------------
LIABILITIES
Payable for investments purchased 519,420
Payable for currency purchased 2,143,940
Management fee payable (Note C) 282,150
Administration fee payable (Note C) 5,599
Trustees fees payable (Note C) 941
Accrued expenses and other liabilities 35,638
-----------------
TOTAL LIABILITIES 2,987,688
-----------------
TOTAL NET ASSETS $ 77,768,484
-----------------
-----------------
COMPOSITION OF NET ASSETS:
Paid-in-capital $ 85,742,418
Undistributed net investment loss (64,145)
Accumulated net realized loss on investment and foreign currency transactions (8,093,512)
Net unrealized appreciation on investment and foreign currency transactions 183,723
-----------------
TOTAL NET ASSETS $ 77,768,484
-----------------
-----------------
NET ASSET VALUE PER SHARE $ 8.49
($77,768,484 / 9,161,611 shares of beneficial interest outstanding) -----------------
-----------------
</TABLE>
See notes to financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
MCBT EMEA FUND
- -------------------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
SIX MONTHS ENDED OCTOBER 31, 1999 (Unaudited)
<S> <C>
INVESTMENT INCOME
Interest income $ 134,880
Dividend income 477,479
Foreign taxes withheld (30,000)
-----------------
TOTAL INVESTMENT INCOME 582,359
-----------------
EXPENSES
Management fee (Note C) 456,404
Custodian fee 75,125
Administration fee (Note C) 29,934
Audit fee 12,602
Legal fees 3,025
Transfer agent fee 3,529
Trustees fees (Note C) 605
Miscellaneous expenses 6,338
-----------------
TOTAL EXPENSES 587,562
-----------------
NET INVESTMENT LOSS (5,203)
-----------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
Net realized gain on investments 996,871
Net realized loss on foreign currency transactions (251,244)
Net unrealized appreciation (depreciation) on:
Investments (1,716,462)
Foreign currency transactions 11,293
-----------------
NET LOSS ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS (959,542)
-----------------
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (964,745)
-----------------
-----------------
</TABLE>
See notes to financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
MCBT EMEA FUND
- -------------------------------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended Year
October 31, 1999 Ended
(Unaudited) April 30, 1999
----------------- ----------------
<S> <C> <C>
NET ASSETS at beginning of period $ 29,149,329 $ 78,938,181
----------------- ----------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income (loss) (5,203) 431,300
Net realized gain (loss) on investment transactions 996,871 (8,264,440)
Net realized loss on foreign currency transactions (251,244) (372,629)
Net unrealized appreciation (depreciation) on:
Investments (1,716,462) (2,430,849)
Foreign currency transactions 11,293 3,157
----------------- ----------------
Net decrease in net assets from operations (964,745) (10,633,461)
----------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- (587,624)
In excess of net investment income -- (241,285)
Net realized gains -- (1,950,436)
----------------- ----------------
Total distributions -- (2,779,345)
----------------- ----------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 52,995,060 1,691,242
Reinvestment of dividends and distributions to shareholders -- 2,754,167
Cost of shares repurchased (3,411,160) (41,098,987)
Paid in capital from subscription and redemption fees -- 277,532
----------------- ----------------
Total increase (decrease) in net assets from capital share transactions 49,583,900 (36,376,046)
----------------- ----------------
NET INCREASE (DECREASE) IN NET ASSETS 48,619,155 (49,788,852)
----------------- ----------------
NET ASSETS at end of period (includes undistributed net investment $ 77,768,484 $ 29,149,329
losses of $(64,145) and $(58,942) respectively) ----------------- ----------------
----------------- ----------------
OTHER INFORMATION:
CAPITAL SHARE TRANSACTIONS:
Shares sold 6,123,576 220,107
Shares issued in reinvestment of distributions to shareholders -- 375,739
Less shares repurchased (400,173) (4,430,285)
----------------- ----------------
Net share transactions 5,723,403 (3,834,439)
----------------- ----------------
----------------- ----------------
</TABLE>
See notes to financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
MCBT EMEA FUND
- -------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING FOR THE PERIOD
Six Months
Ended Year June 25, 1997*
October 31, 1999 Ended through
(Unaudited) April 30, 1999 April 30, 1998
------------------ --------------- ----------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
- --------------------------------
Net asset value, beginning of period $ 8.480 $ 10.850 $ 10.000
----------------- --------------- ---------------
Net investment income 0.010 0.119 0.041
Net realized and unrealized gain (loss) on investment
and foreign currency transactions 0.000 (2.041) 0.887
----------------- --------------- ---------------
Total from investment operations 0.010 (1.922) 0.928
----------------- --------------- ---------------
Less distributions:
Net investment income 0.000 (0.112) (0.020)
In excess of net investment income 0.000 (0.046) -
Net realized gains 0.000 (0.371) (0.175)
----------------- --------------- ---------------
Total distributions 0.000 (0.529) (0.195)
----------------- --------------- ---------------
Paid in capital from subscription and
redemption fees (Note B) 0.000 0.081 0.117
----------------- --------------- ---------------
Net asset value, end of period $ 8.490 $ 8.480 $ 10.850
----------------- --------------- ---------------
----------------- --------------- ---------------
TOTAL INVESTMENT RETURN (1) (2) 0.12% (16.20)% 10.71%
- ----------------------- ----------------- --------------- ---------------
----------------- --------------- ---------------
RATIOS AND SUPPLEMENTAL DATA
- -----------------------------
Net assets, end of period $ 77,768,484 $ 29,149,329 $ 78,938,181
Operating expenses, net, to average net assets (Note C) 1.85%(3) 2.13% 1.93%(3)
Operating expenses, gross, to average net assets (Note C) 1.85%(3) 2.13% 1.93%(3)
Net investment income to average net assets (0.02%)(3) 0.95% 0.84%(3)
Portfolio turnover rate 42% 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.
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 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.
11
<PAGE>
MCBT EMEA FUND
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (Continued)
FOREIGN CURRENCY TRANSLATIONS (CONTINUED) - 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.
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 Fund could be
exposed to additional risks if the counterparties to the contracts are unable to
meet the term of their contracts. There were no open forward foreign currency
contracts at October 31, 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 are 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.
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.
12
<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.
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, 1999 were $67,855,828
and $23,436,750, respectively.
The identified cost of investments in securities and repurchase agreements owned
for federal income tax purposes and their respective gross unrealized
appreciation and depreciation at October 31, 1999 were as follows:
<TABLE>
<CAPTION>
Identified Gross Unrealized Net Unrealized
Cost Appreciation (Depreciation) Appreciation
--------------- ------------ -------------- ---------------
<S> <C> <C> <C>
$ 74,549,047 $ 5,535,715 $ (5,342,284) $ 193,431
</TABLE>
NOTE E - PRINCIPAL SHAREHOLDERS
As of October 31, 1999, there were three shareholders who owned greater
than 10% of the Fund's outstanding shares, representing 74% 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
--------------------
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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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