EMERGING
TIGERS
FUND, INC.
Semi-Annual Report May 31, 1994
Investing in emerging market securities involves a number
of risk factors and special considerations, including
restrictions on foreign investments and on repatriation of
capital invested in emerging markets, currency fluctua-
tions, and potential price volatility and less liquidity of
securities traded in emerging markets. In addition, there
may be less publicly available information about the
issuers of securities, and such issuers may not be subject
to accounting, auditing and financial reporting standards
and requirements comparable to those to which US companies
are subject. Therefore, the Fund is designed as a long-
term investment for investors capable of assuming
the risks of investing in emerging markets. The Fund
should be considered as a vehicle for diversification and
not as a complete investment program. Please refer to the
prospectus for details.
This report, including the financial information herein, is
transmitted to the shareholders of Emerging Tigers Fund,
Inc. for their information. It is not a prospectus, circular or
representation intended for use in the purchase of shares of the
Fund or any securities mentioned in the report. Past performance
results shown in this report should not be considered a
representation of future performance.
<PAGE>
Emerging Tigers Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
EMERGING TIGERS FUND, INC.
Asset Allocation
As a Percentage* of
Net Assets as of
May 31, 1994
IMAGE MATERIAL APPEARS HERE. SEE APPENDIX: GRAPHIC AND
IMAGE MATERIALS. ITEM 1.
DEAR SHAREHOLDER
We are pleased to provide you with
this first semi-annual report for
Emerging Tigers Fund, Inc. In this
and future reports to shareholders,
we will outline recent performance,
discuss the investment environment
that shaped our investment strategy
during the period under review, and
describe our investment activities.
Emerging Tigers Fund, Inc. seeks
long-term capital appreciation by
investing in equity securities of
companies in certain emerging market
countries in Asia and the Pacific
Basin. For purposes of its investment
objective, the Fund may invest in
securities of companies whose primary
operations are in all countries in
Asia and the Pacific Basin other than
Japan, Taiwan, Australia, New Zealand
and Hong Kong. The Fund may also seek
capital appreciation through investment of
up to 35% of its total assets in debt
securities of companies or govern-
ments in emerging market Asia-Pacific
countries.
<PAGE>
The Fund commenced operations on
March 4, 1994 with net assets of almost
$312 million. The "emerging tiger"
stock markets had risen sharply at the
end of 1993 as foreign investment capital
flooded in. However, this liquidity
evaporated in February as the tight-
ening of monetary policy in the
United States triggered price declines
in financial markets worldwide. The
rapid change in investor sentiment
was most pronounced in emerging
markets. For example, after rising
20% on average in December 1993,
the emerging tiger markets lost these
gains in the first quarter of 1994.
These price declines have enabled
the Fund to establish long-term
investments at attractive valuations.
Nevertheless, we are proceeding
slowly in the investment process. In
addition, we are generally focusing
on large, blue-chip companies with
stable earnings, selling at low price/
earnings ratios. As of May month-end
the Fund was 46.7% invested in
equities, with the remainder of net
assets in cash and cash equivalents.
We have established investment
positions in 48 companies based in
seven countries. Given current stock
market valuations, we expect that
the investment process will continue
uninterrupted in the weeks ahead.
Investment Results
Since inception (March 4, 1994)
through May 31, 1994, the total invest-
ment return of Emerging Tigers Fund,
Inc. was +2.68%, based on a change in
per share net asset value from $14.18
to $14.56.
<PAGE>
Investment Activities
Our largest single country exposure
is Malaysia at 13.8% of net assets.
This is the stock market with the
largest capitalization among the
emerging tigers. Economic growth
appears secure in Malaysia at a
forecast 8% in 1994. At the same time,
the outlook for corporate earnings is
positive, with a forecast average
growth rate of 20% this year. With
the recent decline in share prices,
Malaysian stocks are now available at
more attractive valuations. We have
invested primarily in infrastructure-
related issues, such as Leader
Universal Cable, a manufacturer of
both electric and telecommunications
cables. We expect this company to
benefit as Malaysia's economic growth
increases demand for electric and
telecommunications services.
In Singapore, we have a 12.6% expo-
sure, our second-largest country
position. With its large percentage of
exports to the United States, Singa-
pore's economic prospects are closely
tied to that of the US economic
recovery, which appears to be on firm
footing. We have found attractive
investment opportunities in banking
stocks, such as Development Bank of
Singapore Ltd.(DBS), our largest
banking investment in Singapore. DBS
is a well-managed bank with good
long-term earnings growth prospects.
It also benefits from exposure to
investment banking activities.
<PAGE>
We have also invested 6.4% of net
assets in the Philippines and 5.1% in
Indonesia. After foundering for some
years following the end of the Marcos
era and consolidation during the
Aquino era, the Philippines economy
is now in a growth phase. We favor
consumer-oriented stocks in the
Philippines. The Indonesian gross
domestic product (GDP) is expected
to grow about 5% this year, boosted
primarily by exports and domestic
demand. Our investments in Indonesia
also focus primarily on consumer
stocks, with some cyclical exposure
as well.
We have established three positions
in India. With restrictions on foreign
share ownership it has been difficult
for us to acquire Indian stocks quickly.
Over the longer term, the Indian
economy is likely to benefit from the
liberalization policies of the Rao
administration. The country's large
population represents a huge poten-
tial consumer market. There are also
some Indian companies which can
compete on a global basis in their
respective industries. However, stock
selection is very important in India,
and we will continue to accumulate
positions there cautiously.
<PAGE>
Our 1.7% exposure to The People's
Republic of China was accompanied
through the purchase of shares of
Hong Kong companies with a majority
of their revenues and assets in China.
These companies are listed on the
Hong Kong Stock Exchange. Recent
austerity measures designed to curb
inflationary pressures may curtail
near-term GDP growth in China, but
over the longer term we believe that
the trend toward market orientation
will benefit economic growth. Our
largest holding with exposure to
China is Guangdong Investments,
Ltd., a conglomerate which is heavily
exposed to the surging consumer
activity in Southern China through
its diverse businesses such as prop-
erty development, home appliance
manufacturing and travel agency
services. The company's operations
are based in Guangdong province,
which is adjacent to Hong Kong and
is the fastest-growing region in China.
In Conclusion
We thank you for your investment in
Emerging Tigers Fund, Inc., and
we look forward to serving your
investment needs in the months and
years ahead.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Kara Tan Bhala)
Kara Tan Bhala
Vice President and Portfolio Manager
June 30, 1994
<PAGE>
Officers and
Directors
Arthur Zeikel, President and Director
Donald Cecil, Director
Edward H. Meyer, Director
Charles C. Reilly, Director
Richard R. West, Director
Terry K. Glenn, Executive Vice President
Donald C. Burke, Vice President
Kara W. Y. Tan Bhala, Vice President and Portfolio Manager
Gerald M. Richard, Treasurer
Michael J. Hennewinkel, Secretary
Custodian
Brown Brothers Harriman & Co.
40 Wall Street
Boston, Massachusetts 02109
Transfer Agent
State Street Bank and Trust Company
Two Heritage Drive
Quincy, Massachusetts 02171
NYSE Symbol
TGF
<TABLE>
PER SHARE INFORMATION
<CAPTION>
Per Share
Selected Quarterly
Financial Data* Net Dividends/Distributions
Investment Realized Unrealized Net Investment Capital
For the Period Income Loss Gains Income Gains
<S> <C> <C> <C> <C> <C>
March 4, 1994++ to May 31, 1994 $.07 $(.01) $.34 -- --
<CAPTION>
Net Asset Value Market Price**
For the Period High Low High Low Volume***
<S> <C> <C> <C> <C> <C>
March 4, 1994++ to May 31, 1994 $14.56 $13.99 $15.125 $12.75 2,761
<FN>
*Calculations are based upon shares of Common Stock outstanding at the end of each period.
**As reported in the consolidated transaction reporting system.
***In thousands.
++Commencement of Operations.
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Shares Held/ Value Percent of
COUNTRY Industries Face Amount Long-Term Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Hong Kong Diversified 6,310,000 Guangdong Investments, Ltd. $ 3,535,636 $ 3,736,748 1.2%
Leisure 1,154,000 Shangri-La Asia, Ltd. 1,564,941 1,702,880 0.5
Total Long-Term Investments in Hong Kong 5,100,577 5,439,628 1.7
India Finance $ 3,050,000 SCICI Ltd., 3.50% due 4/01/2004 (b) 3,760,950 3,660,000 1.1
Industrial $ 3,180,000 Sterlite Industries, 3.50% due
6/30/1999 (b) 3,792,725 3,148,200 1.0
Tobacco 22,000 ++India Tobacco Company (GDS)** 495,000 517,000 0.2
Total Long-Term Investments in India 8,048,675 7,325,200 2.3
Indonesia Banking 750,000 ++P.T. Bank International Indonesia 2,266,736 2,668,669 0.8
Food 650,000 ++P.T. Mayorah Indah 3,351,639 3,664,510 1.1
Forest Products 1,067,000 P.T. Indah Kiat Pulp & Paper Corp. 1,391,943 1,725,739 0.5
Miscellaneous-- 602,500 P.T. Modern Photo Film 2,484,026 2,700,670 0.8
Consumer
Pharmaceuticals 9,500 P.T. Kalbe Farma 64,412 70,350 0.0
Real Estate 1,454,000 P.T. Duta Anggada Realty 3,979,910 4,316,982 1.3
Tobacco 237,500 P.T. Hanjaya Mandala Sampoerna 1,706,543 1,923,377 0.6
Total Long-Term Investments in Indonesia 15,245,209 17,070,297 5.1
<PAGE>
Malaysia Banking 2,015,000 Affin Holdings Bhd 3,250,822 3,124,879 1.0
549,000 Arab-Malaysian Merchant Bank Bhd 4,471,708 4,959,369 1.6
1,840,000 Public Bank Bhd 'Foreign' 3,769,993 3,709,534 1.2
------------ ------------ ------
11,492,523 11,793,782 3.8
Building & 1,230,000 I.J.M. Corp. Bhd 4,211,560 4,196,487 1.3
Construction
Conglomerates 2,225,000 Renong Bhd 3,158,970 2,743,186 0.9
Consumer Products 1,570,000 Berjaya Singer Bhd 2,639,056 2,252,161 0.7
Forest Products 224,000 Aokam Perdana (Ordinary) 1,504,335 1,667,429 0.5
Industrial 120,000 O.Y.L. Industries Bhd 685,507 688,559 0.2
Leisure 1,950,000 Berjaya Sports TOTO Bhd 3,386,972 3,129,919 1.0
87,000 Genting Bhd 1,060,877 1,045,633 0.3
704,000 Resorts World Bhd 3,734,565 3,821,192 1.2
------------ ------------ ------
8,182,414 7,996,744 2.5
Property & 1,220,000 Land & General Bhd 4,112,841 4,446,168 1.4
Forest Products
Telecommunications 860,000 Leader Universal Cable Bhd 3,913,704 4,634,591 1.4
462,000 Telekom Malaysia Bhd 3,216,330 3,403,249 1.1
------------ ------------ ------
7,130,034 8,037,840 2.5
Total Long-Term Investments in Malaysia 43,117,240 43,822,356 13.8
Philip- Beverages 970,000 San Miguel Corp. 'B' 3,797,463 5,122,472 1.6
pines
Conglomerates 8,700,000 ++JG Summit Holdings 3,218,661 3,258,427 1.0
Food & Beverage 1,878,000 ++Universal Robina Corp. 1,421,558 1,688,090 0.5
International Trade 2,500,000 International Container Terminal 2,914,930 2,574,906 0.8
Telecommunications 46,300 Philippine Long Distance Telephone Co.
(ADR)* 2,954,182 3,275,725 1.0
Utilities-Electric 326,100 Manila Electric Co. (MERALCO) 'B' 3,657,602 4,671,657 1.5
Total Long-Term Investments in 17,964,396 20,591,277 6.4
the Philippines
<PAGE>
Singapore Airlines 338,000 Singapore Airlines 'Foreign' Ltd. 2,456,244 2,932,420 0.9
Banking 514,000 Development Bank of Singapore Ltd. 4,937,090 5,431,703 1.7
570,000 United Overseas Bank Ltd. 4,727,601 4,647,749 1.5
57,000 United Overseas Bank Ltd. (Rights) (a) 0 153,190 0.1
------------ ------------ ------
9,664,691 10,232,642 3.3
Electronics 2,823,000 I.P.C. Corp. 2,887,380 2,706,986 0.8
Marine/Offshore Oil 668,000 Sembawang Maritime Ltd. 3,088,704 2,963,079 0.9
Services 524,000 Sembawang Shipyard Ltd. 3,941,961 4,375,212 1.4
------------ ------------ ------
7,030,665 7,338,291 2.3
Publishing & 247,000 Singapore Press Holdings Ltd. 3,806,609 4,350,294 1.4
Broadcasting
Real Estate 1,726,000 DBS Land Ltd. 4,965,394 5,314,233 1.7
1,080,000 First Capital Corporation Ltd. 3,453,219 3,395,695 1.1
------------ ------------ ------
8,418,613 8,709,928 2.8
Steel 1,508,750 Natsteel Ltd. 3,951,303 3,464,318 1.1
Total Long-Term Investments in Singapore 38,215,505 39,734,879 12.6
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
Shares Value Percent of
COUNTRY Industries Held Long-Term Investments Cost (Note 1a) Net Assets
<S> <S> <C> <S> <C> <C> <C>
Thailand Banking 620,000 Bangkok Bank Company Ltd. 'Foreign' 4,661,393 5,217,944 1.6
1,580,000 Siam City Bank 1,406,668 1,442,636 0.5
100,000 The Thai Farmers Bank, Ltd. 'Foreign' 553,914 575,625 0.2
------------ ------------ ------
6,621,975 7,236,205 2.3
Building & 172,000 Land & House Public Co. 'Foreign' 3,599,969 3,973,958 1.2
Construction
Financial Services 229,200 Finance One Co., Ltd. 'Foreign' 3,220,435 3,621,342 1.1
Mutual Funds 900,000 Ruam Pattana Fund II 545,285 526,995 0.2
Total Long-Term Investments in Thailand 13,987,664 15,358,500 4.8
<PAGE>
Total Long-Term Investments 141,679,266 149,342,137 46.7
<CAPTION>
COUNTRY Face Amount Short-Term Investments
<S> <S> <C> <S> <C> <C> <C>
United Commercial Paper*** $ 9,375,000 General Electric Capital Corp., 4.22%
States due 6/01/1994 $ 9,375,000 $ 9,375,000 2.9%
US Government & Federal Home Loan Bank:
Agency Obligations*** 20,000,000 4.20% due 6/17/1994 19,962,667 19,962,667 6.2
35,000,000 4.18% due 6/24/1994 34,906,531 34,906,531 10.9
55,000,000 Federal Home Loan Mortgage Association,
4.17% due 7/06/1994 54,777,021 54,777,021 17.1
55,000,000 Federal National Mortgage Association,
4.15% due 6/29/1994 54,822,472 54,822,472 17.1
------------ ------------ ------
164,468,691 164,468,691 51.3
Total Short-Term Investments 173,843,691 173,843,691 54.2
Total Investments $315,522,957 323,185,828 100.9
============
Liabilities in Excess of Other Assets (2,668,054) (0.9)
------------ ------
Net Assets $320,517,774 100.0%
============ ======
<FN>
*American Depositary Receipt (ADR).
**Global Depositary Share (GDS).
***Commercial Paper and certain US Government & Agency Obligations
are traded on a discount basis; the interest rates shown are the discount
rates paid at the time of purchase by the Fund.
(a) The rights may be exercised until 6/30/1994.
(b) Restricted security pursuant to Rule 144A. The value of the Fund's investment
in restricted securities was approximately $6,808,000, representing 2.1% of net assets.
++Non-income producing securities.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
<CAPTION>
As of May 31, 1994
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$315,522,957) (Note 1a) $323,185,828
Foreign cash 1,266,890
Cash 838
Receivables:
Dividends $ 216,387
Interest 67,209 283,596
------------
Deferred organization expenses (Note 1f) 25,160
Prepaid expenses and other assets (Note 1f) 4,510
------------
Total assets 324,766,822
------------
Liabilities: Payables:
Securities purchased 3,441,277
Investment adviser (Note 2) 258,952 3,700,229
------------
Accrued expenses and other liabilities 548,819
------------
Total liabilities 4,249,048
------------
Net Assets: Net assets $320,517,774
============
Net Assets Common Stock, $0.10 par value, 200,000,000 shares authorized $ 2,200,705
Consist of: Paid-in capital in excess of par 309,264,456
Undistributed investment income--net 1,472,844
Accumulated realized capital losses on investments and
foreign currency transactions--net (77,528)
Unrealized appreciation on investments and foreign currency transactions--net 7,657,297
------------
Net assets--Equivalent to $14.56 per share based on 22,007,055 shares of
capital stock outstanding (market price--$13.625) $320,517,774
============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
For the Period March 4, 1994++ to May 31, 1994
<S> <S> <C> <C>
Investment Interest and discount earned $ 2,079,487
Income Dividends (net of $115,190 foreign withholding tax) 362,599
(Notes 1d & 1e): ------------
Total income 2,442,086
------------
Expenses: Investment advisory fees (Note 2) 760,814
Custodian fees 143,548
Accounting services (Note 2) 15,877
Registration fees (Note 1f) 10,226
Transfer agent fees 10,177
Printing and shareholder reports 9,330
Directors' fees and expenses 6,676
Professional fees 6,188
Pricing services 1,466
Amortization of organization expenses (Note 1f) 1,281
Other 3,659
------------
Total expenses 969,242
------------
Investment income--net 1,472,844
------------
Realized & Realized gain (loss) from:
Unrealized Gain Investments--net 4,788
(Loss) on Foreign currency transactions--net (82,316) (77,528)
Investments & ------------
Foreign Currency Unrealized appreciation/depreciation on:
Transactions--Net Investments--net 7,662,871
(Notes 1b, 1e & 3): Foreign currency transactions--net (5,574) 7,657,297
------------ ------------
Net realized and unrealized gain on investments and foreign
currency transactions 7,579,769
------------
Net Increase in Net Assets Resulting from Operations $ 9,052,613
============
<FN>
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
For the Period
March 4, 1994++
Increase (Decrease) in Net Assets: to May 31, 1994
<S> <S> <C>
Operations: Investment income--net $ 1,472,844
Realized loss on investments and foreign currency transactions--net (77,528)
Unrealized appreciation on investments and foreign currency transactions--net 7,657,297
------------
Net increase in net assets resulting from operations 9,052,613
------------
Capital Share Net proceeds from issuance of Common Stock 311,850,000
Transactions Offering and underwriting costs resulting from the issuance of Common Stock (484,844)
(Note 4): ------------
Net increase in net assets derived from capital stock transactions 311,365,156
------------
Net Assets: Total increase in net assets 320,417,769
Beginning of period 100,005
------------
End of period* $320,517,774
============
<FN>
*Undistributed investment income--net $ 1,472,844
============
++Commencement of Operations.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
<CAPTION>
The following per share data and ratios have been derived
from information provided in the financial statements. For the Period
March 4, 1994++
Increase (Decrease) in Net Asset Value: to May 31, 1994
<S> <S> <C>
Per Share Net asset value, beginning of period $ 14.18
Operating --------
Performance: Investment income--net .07
Realized and unrealized gain on investments--net and foreign currency transactions--net .33
--------
Total from investment operations .40
--------
Capital charge resulting from issuance of Common Stock (.02)
--------
Net asset value, end of period $ 14.56
========
Market price, end of period $ 13.625
========
Total Based on net asset value per share 2.68%+++
Investment ========
Return:** Based on market price per share (9.17)%+++
========
Ratios to Expenses 1.27%*
Average ========
Net Assets: Investment income--net 1.94%*
========
Supplemental Net assets, end of period (in thousands) $320,518
Data: ========
Portfolio turnover 0%
========
<FN>
*Annualized.
**Total investment returns based on market value, which can be significantly
greater or lesser than the net asset value, result in substantially different
returns. Total investment returns exclude the effects of sales loads.
++Commencement of Operations.
+++Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
Emerging Tigers Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 as a non-diversified, closed-end
management investment company. Prior to commencement of
operations on March 4, 1994, the Fund had no operations other than
those relating to organizational matters and the issue of 7,055 capital
shares of the Fund to Fund Asset Management, L.P. ("FAM") for
$100,005. The Fund determines and makes available the net asset
value of its Common Stock on a weekly basis. The Fund's Common
Stock is listed on the New York Stock Exchange under the symbol
TGF. The following is a summary of significant accounting policies
followed by the Fund.
(a) Valuation of investments--Portfolio securities which are traded
on stock exchanges are valued at the last sale price, as of the close
of business on the day the securities are being valued or, lacking any
sales, at the last available bid price. Securities traded in the over-
the-counter market are valued at the last available bid prices obtained
from one or more dealers in the over-the-counter market prior to the
time of valuation. Portfolio securities which are traded both in the
over-the-counter market and on a stock exchange are valued accord-
ing to the broadest and most representative market. Short-term
securities are valued at amortized cost, which approximates market
value. Options written by the Fund are valued at the last asked price
in the case of exchange-traded options or, in the case of options
traded in the over-the-counter market, the average of the last asked
price as obtained from one or more dealers. Options purchased by
the Fund are valued at their last bid price in the case of exchange-
traded options or, in the case of options traded in the over-the-
counter market, the average of the last bid price as obtained from
two or more dealers, unless there is only one dealer, in which case
that dealer's price is used. Other investments, including futures
contracts and related options, are stated at market value. Securities
and assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the
direction of the Board of Directors of the Fund.
(b) Foreign currency transactions--Transactions denominated
in foreign currencies are recorded at the exchange rate prevailing
when recognized. Assets and liabilities denominated in foreign
currencies are valued at the exchange rate at the end of the period.
Foreign currency transactions are the result of settling (realized)
or valuing (unrealized) assets or liabilities expressed in foreign
currencies into US dollars. Realized and unrealized gains or losses
from investments include the effects of foreign exchange rates
on investments.
<PAGE>
The Fund is authorized to enter into forward foreign exchange
contracts as a hedge against either specific transactions or portfolio
positions. Such contracts are not entered on the Fund's records.
However, the effect on operations is recorded from the date the Fund
enters into such contracts. Premium or discount is amortized over
the life of the contracts.
The Fund is also authorized to purchase or sell listed or over-
the-counter foreign currency options, foreign currency futures
and related options on foreign currency futures.
(c) Options--The Fund can write covered call and put options and
purchase call and put options. When the Fund writes an option, an
amount equal to the premium received by the Fund is reflected as
an asset and an equivalent liability. The amount of the liability is
subsequently marked to market to reflect the current value of the
option written.
When a security is sold through an exercise of an option, the related
premium received (or paid) is deducted from (or added to) the basis
of the security sold. When an option expires (or the Fund enters
into a closing transaction), the Fund realizes a gain or loss on the
option to the extent of the premiums received or paid (or gain or
loss to the extent the cost of the closing transaction exceeds the
premium paid or received).
Written and purchased options are non-income producing investments.
(d) Income taxes--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income tax
provision is required. Under the applicable foreign tax law, a with-
holding tax may be imposed on interest, dividends, and capital gains
at various rates.
(e) Security transactions and investment income--Security trans-
actions are recorded on the dates the transactions are entered into
(the trade dates). Dividend income is recorded on the ex-dividend
dates except that if the ex-dividend date has passed, certain dividends
from foreign securities are recorded as soon as the Fund is informed
of the ex-dividend date. Interest income (including amortization of
discount) is recognized on the accrual basis. Realized gains and
losses on security transactions are determined on the identified
cost basis.
<PAGE>
(f) Deferred organization expenses and offering expenses--Deferred
organization expenses are charged to expense on a straight-line
basis over a five-year period beginning with the commencement of
operations. Direct expenses relating to the public offering of the
Common Stock were charged to capital at the time of issuance.
(g) Dividends and distributions--Dividends and distributions paid
by the Fund are recorded on the ex-dividend dates.
2. Investment Advisory Agreement and Transactions
with Affiliates:
The Fund has entered into an Investment Advisory Agreement
with FAM. Effective January 1, 1994, the investment advisory
business of FAM was reorganized from a corporation to a limited
partnership. Both prior to and after the reorganization, ulti-
mate control of FAM was vested with Merrill Lynch & Co., Inc.
("ML & Co."). The general partner of FAM is Princeton Services, Inc.,
an indirect wholly-owned subsidiary of ML & Co. The limited
partners are ML & Co. and Merrill Lynch Investment Management,
Inc. ("MLIM"), which is also an indirect wholly-owned subsidiary
of ML & Co.
FAM is responsible for the management of the Fund's portfolio
and provides the necessary personnel, facilities, equipment and
certain other services necessary to the operations of the Fund.
For such services, the Fund pays a monthly fee of 1.00%, on an annual
basis, of the average weekly value of the Fund's net assets.
For the period ended May 31, 1994, Merrill Lynch, Pierce, Fenner
& Smith Inc. ("MLPF&S") earned $1,978 in commissions on the
execution of portfolio security transactions.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, MLIM, MLPF&S, MLFD, and/or ML & Co.
3. Investments:
Purchases of investments, excluding short-term securities, for the
period March 4, 1994 to May 31, 1994 was $141,831,979.
<PAGE>
Net realized and unrealized gains (losses) as of May 31, 1994 were
as follows:
Realized Unrealized
Gains Gains
(Losses) (Losses)
Long-term investments $ -- $ 7,662,871
Short-term investments 4,788 --
Foreign currency transactions (82,316) (5,574)
------------- ------------
Total $ (77,528) $ 7,657,297
============= ============
As of May 31, 1994, net unrealized appreciation for Federal income
tax purposes aggregated $7,662,871, of which $10,973,492 related
to appreciated securities and $3,310,621 related to depreciated
securities. At May 31, 1994, the aggregate cost of investments for
Federal income tax purposes was $315,522,957.
4. Capital Stock Transactions:
At May 31, 1994, the Fund had one class of Common Stock, par
value $0.10 per share of which 200,000,000 shares were authorized.
During the period March 4, 1994 to May 31, 1994, 22,000,000 shares
were sold. At May 31, 1994, total paid-in capital amounted to
$311,465,161.
5. Commitments:
At May 31, 1994, the Fund had entered into forward foreign exchange
contracts under which it agreed to purchase various foreign
currencies with an approximate value of $1,832,000.
<PAGE>
APPENDIX: GRAPHIC AND IMAGE MATERIALS.
ITEM 1.
Asset Allocation as a Percentage* of Net Assets as of May 31, 1994
A map illusrating the following percentages:
India 2.3%
Indonesia 5.1%
Malaysia 13.8%
Thailand 4.8%
Singapore 12.6%
Hong Kong 1.7%
Philippines 6.4%
[FN]
*Total may not equal 100%.
