MERRILL LYNCH
EMERGING TIGERS
FUND, INC.
FUND LOGO
Quarterly Report
August 31, 1998
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 fluctuations, 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 is not authorized for use as an offer of sale or a
solicitation of an offer to buy shares of the Fund unless
accompanied or preceded by the Fund's current prospectus. Past
performance results shown in this report should not be considered a
representation of future performance. Investment return and
principal value of shares will fluctuate so that shares, when
redeemed, may be worth more or less than their original cost.
Statements and other information herein are as dated and are subject
to change.
Merrill Lynch
Emerging Tigers Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
Printed on post-consumer recycled paper
MERRILL LYNCH EMERGING TIGERS FUND, INC.
Map Depicting the Fund's Asset Allocation As a Percentage* of Net
Assets as of August 31, 1998
INDIA 19.0%
INDONESIA 2.2%
MALAYSIA 13.1%
THAILAND 9.7%
SINGAPORE 24.0%
CHINA 7.7%
PHILIPPINES 8.0%
[FN]
*Total may not equal 100%.
Merrill Lynch Emerging Tigers Fund, Inc., August 31, 1998
DEAR SHAREHOLDER
Investment Review
During the quarter ended August 31, 1998, there were unexpectedly
strong "contagion effects" from the Asian crisis that spread to
stock markets worldwide. First, the Japanese economy, which was
already in a slump, was further weakened by economic collapse in the
rest of Asia. Since Asia is at least one-third of Japan's export
market, an economic decline will have a significant negative impact
on Japanese exports. The reluctance and inability of the Japanese
authorities to deal with their own economic and banking problems
have resulted in a recession, which is harming the chances of a
recovery in the rest of Asia.
Second, deflation and falling demand in Asia have negatively
affected prices of nearly all commodities. This has led to slowing
growth in commodity-producing countries, which include most of Latin
America, Russia, Australia and Canada. The devaluation of the
Russian ruble was largely initiated by falling commodity prices,
which in turn caused a deterioration in the Russian current account.
This event triggered devaluations in the currencies of Colombia and
Ecuador. Investors are waiting to see if other emerging economies
can avoid devaluing their currencies, most notably The People's
Republic of China and Hong Kong. During the August quarter,
investors appeared to anticipate ongoing difficulties for emerging
economies worldwide, and global equities fell accordingly.
The most significant events in Asia during the August quarter were
the intervention by the Hong Kong Monetary Authority in the stock
market and the imposition of capital controls in Malaysia. These
controls will likely limit the Fund's ability to repatriate proceeds
of its Malaysian investments. The precise nature of some of the
restrictions is currently unclear. The Fund's investments in
Malaysia may not be available to meet redemptions. Also, the
Fund's management will not be able to reallocate the Fund's current
investments in Malaysia to other investment opportunities outside
Malaysia so long as the restrictions remain in place (which is
currently anticipated to be at least until September 1999). This
will affect the Fund's performance in the upcoming quarters. As of
September 30, 1998, approximately 13.1% of the Fund's net assets was
invested in Malaysia. It is possible that Malaysia will impose
additional restrictions or that other countries will impose similar (or
other) restrictions. In these circumstances, it is possible that
the percentage of the Fund's portfolio subject to currency controls
may increase.
With the deteriorating global economic environment, deflation and
lack of political leadership worldwide, we chose to sell positions
in The People's Republic of China and Singapore during the August
quarter. We also raised the Fund's cash position from 12.0% at the
beginning of the quarter to 15.7% at August 31, 1998. In addition,
we are underweighted in most of the Asian tiger stock markets,
compared to the unmanaged Goldman Sachs Southeast Asian Emerging
Markets Index.
Investment Outlook
The government in The People's Republic of China has been attempting
to reflate the economy through interest rate cuts, which have lent
some support to the stock market. Further cuts are likely since real
interest rates remain quite high, and the government has finally
realized that the country is now suffering from deflation, as
opposed to inflation. The renminbi is likely to remain stable
through the rest of the year, in our opinion, because of the
positive current account, large foreign exchange reserves, and
capital account controls on the currency. As of August 31, 1998, our
weighting in China stood at 7.7% of net assets, still above the
weighting in the benchmark index.
Capital controls in Malaysia are likely to hurt Singapore's economy
because of slowing trade, a decline in the financial services
industry, and fewer tourists. Singapore's stock market fell sharply
since the announcement of Malaysia's capital controls, and financial
firms have been especially hard hit. We chose to sell our position
in the real estate industry because of concerns about continued
deterioration in property prices. However, we believe that
Singapore's financial and economic infrastructures remain strong and
are able to weather the economic dislocations of its neighbors.
Indonesia may be examining the possibility of instituting capital
controls, although controls would likely hurt the already damaged
economy still further. It seems unlikely that President Habibie will
be able to stay in power for long. There is growing civil unrest as
the economy continues to worsen.
The Philippines' stock market finally succumbed to the Asian
financial collapse and declined sharply during the August quarter.
There are two reasons for this sharp correction. First, President
Estrada has not been pushing for financial and economic reforms.
Second, the economy has been negatively impacted by falling demand
from the rest of Asia, and exports have slowed considerably. We
reduced our position in the Philippines during the quarter from 9.1%
of net assets to 8.0% by August 31, 1998.
The Thai economy appears to be bottoming. If the monetary
authorities prove capable of solving the problems of the banking
system, the economy may recover by next year. However, we do not
foresee a sharp recovery, but a slow, shallow one.
India has been one of the more resilient economies during the Asian
financial turmoil. Although the Indian economy is not doing well, it
is performing better than other Asian economies. The Reserve Bank of
India has been loosening monetary policy recently, which has eased
the country's liquidity situation and provided some short-term
support to the stock market. However, the political situation is a
key variable in India, with an unstable coalition government and its
questionable commitment to financial reform. Although India's
relatively closed economy has not served the country well in the
past, at this time it is providing some insulation from the
devastating economic and financial effects in the rest of Asia.
In Conclusion
We currently expect to continue to follow a defensive investment
strategy through the balance of 1998. In our view, the primary
problem in Asia is the immense indebtedness of the private sector.
Banks are in poor shape and are not making loans, so lower interest
rates may not do much to stimulate Asian economies. For this reason,
we believe that it is crucial for Asian governments to solve their
banking problems before their economies can move forward again.
We thank you for your continued investment in Merrill Lynch Emerging
Tigers Fund, Inc., and we look forward to reviewing our outlook and
strategy with you again in our upcoming annual report to
shareholders.
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Kara Tan Bhala)
Kara Tan Bhala
Senior Vice President and
Portfolio Manager
September 30, 1998
Merrill Lynch Emerging Tigers Fund, Inc., August 31, 1998
PERFORMANCE DATA
About Fund Performance
Investors are able to purchase shares of the Fund through the
Merrill Lynch Select Pricing SM System, which offers four pricing
alternatives:
* Class A Shares incur a maximum initial sales charge (front-end
load) of 5.25% and bear no ongoing distribution or account
maintenance fees. Class A Shares are available only to eligible
investors.
* Class B Shares are subject to a maximum contingent deferred sales
charge of 4% if redeemed during the first year, decreasing 1% each
year thereafter to 0% after the fourth year. In addition, Class B
Shares are subject to a distribution fee of 0.75% and an account
maintenance fee of 0.25%. These shares automatically convert to
Class D Shares after approximately 8 years. (There is no initial
sales charge for automatic share conversions.)
* Class C Shares are subject to a distribution fee of 0.75% and an
account maintenance fee of 0.25%. In addition, Class C Shares are
subject to a 1% contingent deferred sales charge if redeemed within
one year of purchase.
* Class D Shares incur a maximum initial sales charge of 5.25% and
an account maintenance fee of 0.25% (but no distribution fee).
None of the past results shown should be considered a representation
of future performance. Figures shown in the "Recent Performance
Results" and "Average Annual Total Return" tables assume
reinvestment of all dividends and capital gains distributions at net
asset value on the ex-dividend date. Investment return and principal
value of shares will fluctuate so that shares, when redeemed, may be
worth more or less than their original cost. Dividends paid to each
class of shares will vary because of the different levels of account
maintenance, distribution and transfer agency fees applicable to
each class, which are deducted from the income available to be paid
to shareholders.
<TABLE>
Recent
Performance
Results*
<CAPTION>
12 Month 3 Month Since Inception
Total Return Total Return Total Return
<S> <C> <C> <C>
ML Emerging Tigers Fund, Inc. Class A Shares -55.28% -31.71% -65.83%++
ML Emerging Tigers Fund, Inc. Class B Shares -55.72 -31.88 -69.86
ML Emerging Tigers Fund, Inc. Class C Shares -55.64 -31.78 -69.86
ML Emerging Tigers Fund, Inc. Class D Shares -55.32 -31.75 -69.35
<FN>
*Investment results shown do not reflect sales charges; results
shown would be lower if a sales charge was included. Total
investment returns are based on changes in net asset values for the
periods shown, and assume reinvestment of all dividends and capital
gains distributions at net asset value on the ex-dividend date. The
Fund's inception dates are: Class A Shares, 3/4/94; and Class B,
Class C and Class D Shares, 6/10/96.
++Performance results for Class A Shares prior to June 10, 1996 are
for the period when the Fund was closed-end.
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/98 -61.60% -63.62%
Inception (3/4/94) through 6/30/98 -18.02 -19.04
<FN>
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/98 -61.90% -63.43%
Inception (6/10/96) through 6/30/98 -38.03 -38.63
<FN>
*Maximum contingent deferred sales charge is 4% and is reduced to 0%
after 4 years.
**Assuming payment of applicable contingent deferred sales charge.
% Return % Return
Without CDSC With CDSC**
Class C Shares*
Year Ended 6/30/98 -61.94% -62.32%
Inception (6/10/96) through 6/30/98 -38.08 -38.08
<FN>
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after one year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 6/30/98 -61.60% -63.62%
Inception (6/10/96) through 6/30/98 -37.55 -39.17
<FN>
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
Merrill Lynch Emerging Tigers Fund, Inc., August 31, 1998
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
<CAPTION>
Shares Held/ Percent of
COUNTRY Industries Face Amount Long-Term Investments Cost Value Net Assets
<S> <S> <S> <C> <S> <C> <C> <C>
China Appliances 690,000 Guangdong Kelon Electrical Holdings
Co., Ltd. (Class H) $ 759,191 $ 347,284 1.0%
Conglomerates 267,000 Shanghai Industrial Holdings Ltd. 676,860 358,357 1.0
Infrastructure 63,000 New World Infrastructure Ltd. 187,796 35,977 0.1
US$ 611,000 New World Infrastructure Ltd., 5%
due 7/15/2001 770,740 387,985 1.1
1,825,000 Zhejiang Expressway Co. Ltd.
(Class H) 323,104 186,064 0.5
------------ ------------ ------
1,281,640 610,026 1.7
Mining 22,880 Yanzhou Coal Mining Co. Ltd. (ADR)* 360,360 111,540 0.3
Telecommunications 588,500 China Telecom (Hong Kong) Limited 941,234 774,672 2.2
Utilities-- 1,876,000 Beijing Datang Power Generation
Electric & Gas Company Limited (Class H) 1,032,004 295,368 0.8
38,500 Huaneng Power International,
Inc. (ADR)* 589,092 250,250 0.7
1,621,096 545,618 1.5
Total Long-Term Investments in China 5,640,381 2,747,497 7.7
India Banking & Financial 45,181 Housing Development Finance
Corporation Ltd. 2,812,530 2,728,709 7.7
77,600 State Bank of India (GDR)** 1,187,470 663,480 1.9
------------ ------------ ------
4,000,000 3,392,189 9.6
Oil Services 60,900 Hindustan Petroleum Corporation Ltd. 659,510 402,026 1.1
Pharmaceuticals 38,400 Ranbaxy Laboratories Limited 704,147 460,302 1.3
Telecommunications 168,000 Mahanagar Telephone Nigam Ltd. (GDR)** 2,008,944 1,709,400 4.8
81,000 Videsh Sanchar Nigam Ltd. (GDR)** 1,311,500 789,750 2.2
------------ ------------ ------
3,320,444 2,499,150 7.0
Total Long-Term Investments in India 8,684,101 6,753,667 19.0
Indonesia Oil--Related 109,200 Gulf Indonesia Resources Ltd. 2,303,596 771,225 2.2
Total Long-Term Investments
in Indonesia 2,303,596 771,225 2.2
Malaysia Building & 43,000 I.J.M. Corp. BHD 83,169 6,994 0.0
Construction
Consumer Products 655,500 Amway (Malaysia) Holdings BHD 2,577,576 724,413 2.1
Industrial 798,075 O.Y.L. Industries BHD 3,561,363 935,431 2.6
Insurance 1,278,000 MNI Holdings BHD 3,982,108 565,554 1.6
Leisure 297,000 Berjaya Sports Toto BHD 630,655 193,240 0.6
173,000 Genting BHD 613,496 318,646 0.9
85,000 Resorts World BHD 205,223 65,471 0.2
554,000 Sime Darby BHD 706,167 225,284 0.6
------------ ------------ ------
2,155,541 802,641 2.3
Publishing & 1,333,000 Star Publications (Malaysia) BHD 3,528,662 1,147,901 3.2
Broadcasting
Telecommunications 169,000 Telekom Malaysia BHD 422,936 218,299 0.6
Utilities-- 331,000 YTL Power International BHD 302,732 133,809 0.4
Electric & Gas
Wire & Cable US$ 230,000 Leader Universal Holdings BHD, 2.75%
due 5/05/2004 167,750 115,000 0.3
Total Long-Term Investments
in Malaysia 16,781,837 4,650,042 13.1
Philippines Conglomerates 6,157,200 Benpres Holdings Corp. 2,468,856 508,393 1.4
Infrastructure 1,156,500 International Container Terminal
Services, Inc. 106,875 41,910 0.1
Real Estate 4,405,250 Ayala Land Corporation 2,264,614 697,161 2.0
Restaurants 1,365,000 Jollibee Foods Corporation (Warrants)(a) 700,869 383,515 1.1
Retail 7,486,346 SM Prime Holdings, Inc. 1,229,712 910,038 2.6
Utilities-- 174,956 Manila Electric Co. (MERALCO) 'B' 983,374 288,918 0.8
Electric & Gas
Total Long-Term Investments in
the Philippines 7,754,300 2,829,935 8.0
Singapore Airlines 258,000 Singapore Airlines Ltd. 'Foreign' 2,457,414 1,104,676 3.1
Banking & Financial 97,500 Development Bank of Singapore Ltd. 848,944 337,817 1.0
62,400 United Overseas Bank Ltd. 'Foreign' 344,062 147,651 0.4
------------ ------------ ------
1,193,006 485,468 1.4
Electronics 280,500 Elec & Eltek International
Company Ltd. 1,306,174 1,189,320 3.4
981,000 Natsteel Electronics Ltd. 1,876,465 1,956,473 5.5
------------ ------------ ------
3,182,639 3,145,793 8.9
Industrial 863,000 Clipsal Industries Ltd. 2,200,509 362,460 1.0
Publishing 216,664 Singapore Press Holdings Ltd. 'Foreign' 2,539,866 1,525,803 4.3
& Broadcasting
Real Estate 119,000 City Developments Ltd. 708,622 209,172 0.6
Telecommunications 1,142,000 Singapore Telecommunications, Ltd. 1,758,644 1,666,355 4.7
Total Long-Term Investments
in Singapore 14,040,700 8,499,727 24.0
Thailand Banking & Financial 211,800 Bangkok Bank Public Company Ltd.
'Foreign' 512,742 149,476 0.4
343,000 Thai Farmers Bank Public Company
Limited 'Foreign' 527,016 147,703 0.4
------------ ------------ ------
1,039,758 297,179 0.8
Oil--Related 175,600 PTT Exploration and Production
Public Company Ltd. 'Foreign' 1,551,345 1,159,464 3.3
Publishing & 225,400 BEC World Public Company Ltd. 'Foreign' 1,016,396 717,182 2.0
Broadcasting
Telecommunications 137,600 Advanced Info Service Public Co.
Ltd. 'Foreign' 703,037 559,617 1.6
Utilities-- 520,800 Electricity Generating Public Co.
Electric & Gas Ltd. 'Foreign' 833,720 722,641 2.0
Total Long-Term Investments in
Thailand 5,144,256 3,456,083 9.7
Total Long-Term Investments 60,349,171 29,708,176 83.7
</TABLE>
Merrill Lynch Emerging Tigers Fund, Inc., August 31, 1998
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
Face Percent of
COUNTRY Amount Short-Term Securities Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
United Commercial $ 1,000,000 Concord Minutemen Capital Co. LLC,
States Paper*** 5.55% due 9/02/1998 $ 999,846 $ 999,846 2.8%
905,000 General Motors Acceptance Corp.,
5.81% due 9/01/1998 905,000 905,000 2.6
1,787,000 Park Avenue Receivables Corp., 5.56%
due 9/10/1998 1,784,516 1,784,516 5.0
1,900,000 Variable Funding Capital Corp.,
5.54% due 9/10/1998 1,897,368 1,897,368 5.3
Total Investments in Short-Term
Securities 5,586,730 5,586,730 15.7
Total Investments $ 65,935,901 35,294,906 99.4
============
Other Assets Less Liabilities 200,495 0.6
------------ ------
Net Assets $ 35,495,401 100.0%
============ ======
Net Asset Value: Class A--Based on net assets of $27,977,119 and
5,873,277 shares outstanding $ 4.76
============
Class B--Based on net assets of $4,349,001 and
929,325 shares outstanding $ 4.68
============
Class C--Based on net assets of $1,902,041 and
406,804 shares outstanding $ 4.68
============
Class D--Based on net assets of $1,267,240 and
266,880 shares outstanding $ 4.75
============
<FN>
*American Depositary Receipts (ADR).
**Global Depositary Receipts (GDR).
***Commercial Paper is traded on a discount basis; the interest
rates shown reflect the discount rates paid at the time of purchase
by the Fund.
(a)Warrants entitle the Fund to purchase a predetermined number of
shares of common stock and are non-income producing. The purchase
price and number of shares are subject to adjustment under certain
conditions until the expiration date.
</TABLE>
EQUITY PORTFOLIO CHANGES
For the Quarter Ended August 31, 1998
Additions
Huaneng Power International, Inc. (ADR)
Singapore Telecommunications, Ltd.
Zhejiang Expressway Co. Ltd. (Class H)
Deletions
Creative Technology Ltd.
Public Bank BHD 'Foreign'
Vietnam Frontier Fund
PORTFOLIO INFORMATION
As of August 31, 1998
Percent of
Ten Largest Equity Holdings Net Assets
Housing Development Finance Corporation Ltd. 7.7%
Natsteel Electronics Ltd. 5.5
Mahanagar Telephone Nigam Ltd. (GDR) 4.8
Singapore Telecommunications, Ltd. 4.7
Singapore Press Holdings Ltd. 'Foreign' 4.3
Elec & Eltek International Company Ltd. 3.4
PTT Exploration and Production Public
Company Ltd. 'Foreign' 3.3
Star Publications (Malaysia) BHD 3.2
Singapore Airlines Ltd. 'Foreign' 3.1
O.Y.L. Industries BHD 2.6
Merrill Lynch Emerging Tigers Fund, Inc., August 31, 1998
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Donald Cecil, Director
Edward H. Meyer, Director
Charles C. Reilly, Director
Richard R. West, Director
Edward D. Zinbarg, Director
Terry K. Glenn, Executive Vice President
Norman R. Harvey, Senior Vice President
Kara W.Y. Tan Bhala, Senior Vice President and
Portfolio Manager
Donald C. Burke, Vice President
Gerald M. Richard, Treasurer
James W. Harshaw, Secretary
Custodian
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
Transfer Agent
Financial Data Services, Inc.
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
(800) 637-3863
