MERRILL LYNCH
EMERGING TIGERS
FUND, INC.
FUND LOGO
Quarterly Report
August 31, 1999
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, 1999
India 12.7%
Indonesia 7.7%
Malaysia 19.4%
Thailand 6.6%
Singapore 33.0%
China 9.8%
Philippines 6.1%
[FN]
*Total may not equal 100%.
Merrill Lynch Emerging Tigers Fund, Inc., August 31, 1999
DEAR SHAREHOLDER
For the three-month period ended August 31, 1999, Class A, Class B,
Class C and Class D Shares of Merrill Lynch Emerging Tigers Fund,
Inc. had total returns of +11.32%, +11.08%, +11.07% and +11.22%,
respectively. (Fund results do not reflect sales charges, and would
be lower if sales charges were included. Complete performance
information can be found on pages 4 and 5 of this report to
shareholders.)
Although there were upbeat second quarter gross domestic product
(GDP) reports in many Asian tiger countries, recent shocks have
increased fears that Asia's recovery was imperiled. For example, in
Thailand, the inability and unwillingness of banks to recapitalize
have left investors doubting the country's recovery prospects. In
Indonesia, evidence of corruption at the banking restructuring
agency and troubles in East Timor have been negative factors that
have affected the rupiah and the equity market. Finally, the recent
increase in US interest rates, with the possibility of more
increases in the future, has caused investors to become more
cautious on global liquidity. Consequently, many Asian equity
markets corrected in the third calendar quarter of 1999. This was
not surprising, considering that the markets had excellent
performances in the first two quarters of the year.
Investment Strategy and
Outlook
Singapore's GDP figures have been very strong in the first and
second quarters of this year, although bank lending, which tends to
lag economic recovery, has not picked up. While restructuring
remains a key long-term positive, we believe that much of the news
is already reflected in stock prices. We are slightly overweight in
Singapore in the Fund.
The economic fundamentals in Malaysia point to a continuing
recovery. Low inflation has been supporting low interest rates.
Money supply has been accelerating and the inclusion of Malaysia in
various benchmark indexes should mean liquidity into the equity
market. However, Malaysia's main risk is political, since the
government has repeatedly compromised foreign investors' interests
in recent years. Malaysia has made some progress on macroeconomic
reform, but much less on microeconomic issues of transparency and
governance. In addition, the government continues to practice
political favoritism towards selected business groups and is still
interventionist. In the short term, the Malaysian equity market is
likely to perform well as high liquidity levels will be maintained
in the period before the elections in November. We have maintained
an overweighted position in Malaysia.
Important data suggests a strong economic recovery is indeed
underway in the Philippines, although the equity market has been
dampened by negative perceptions about President Estrada. We tend to
be less worried about his political image. However, we are not
enthusiastic about stock valuations and the growing concerns on
transparency and governance cannot help investor sentiment. We have
reduced our weighting in the Philippines, which makes it an
approximately neutral position in the portfolio.
With very positive export trends and an improvement in consumption,
Thailand appears to be in a steady economic recovery. However, there
are two areas of concern. First, credit growth and private
investment continue to be weak. Second, economic growth, although
higher, does not appear to be sufficient to bring down non-
performing loan (NPL) levels by itself. Banks remain reluctant to
lend and have been slow at recapitalizing. The recovery process in
Thailand may be more protracted than in other Asian tiger countries.
Accordingly, the Fund is underweight in the country.
Reform and recovery are stalling in Indonesia, and the country's
NPLs are close to 60%. The government's recapitalization of the
banks has been marred by corruption at Bank Bali. As a result, the
International Monetary Fund has threatened to withhold further
funding until an unbiased investigation is carried out. On top of
all this, Indonesia has yet to choose a new president and complete
the political transition that has been underway for more than a year
now, in addition to the violence in East Timor. We have been selling
our Indonesian positions in the Fund and expect to remain
underweight in Indonesia until we see clear signs of progress there.
Valuations are attractive in India, compared to the rest of Asia,
and there has been a strong pick up in economic growth indicators
along with falling inflation. Although there are uncertainties
regarding the outcome of the general election, it does appear as if
the current coalition will gain at the expense of smaller political
parties. A less-fragmented parliament would also support the reform
process. Given these factors, the Fund is overweight in India.
In The People's Republic of China, weakness in business activity
remains pervasive and may be spreading. At the same time, there is
still no sign of an acceleration in consumer spending, real estate
price deflation has persisted, and exports are lagging those of most
other Asian economies. We have been selling our Chinese positions,
particularly those we view as vulnerable if the currency is
devalued. Our remaining Chinese positions are those that are
defensive and have dominant positions in their respective
industries.
In Conclusion
Looking ahead, we believe that there is less likelihood that all
Asian equity markets will move synchronously as they did for most of
1999 when they were driven higher by liquidity. Those countries with
higher debt levels, slower recapitalization, and fewer reforms are
likely to underperform relative to their counterparts who are
successfully meeting their challenges. However, as 1999 draws to a
close, we would expect market activity to slow considerably as
investors assess the potential impact that the Year 2000 will have
on the Asian tiger economies.
We thank you for your investment in Merrill Lynch Emerging Tigers
Fund, Inc., and we look forward to reviewing our outlook and
strategy with you again in our next report to shareholders.
Sincerely,
(Terry K. Glenn)
Terry K. Glenn
President and Director
(Kara Tan Bhala)
Kara Tan Bhala
Senior Vice President and
Portfolio Manager
October 6, 1999
Merrill Lynch Emerging Tigers Fund, Inc., August 31, 1999
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>
3 Month 12 Month Since Inception
As of August 31, 1999 Total Return Total Return Total Return
<S> <C> <C> <C>
ML Emerging Tigers Fund, Inc. Class A Shares +11.32% +76.31% -39.75%++
ML Emerging Tigers Fund, Inc. Class B Shares +11.08 +74.36 -47.45
ML Emerging Tigers Fund, Inc. Class C Shares +11.07 +74.19 -47.51
ML Emerging Tigers Fund, Inc. Class D Shares +11.22 +75.57 -46.19
<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 since inception dates are from 3/04/94 for Class A Shares and
from 6/10/96 for Class B, Class C & Class D Shares.
++Performance results for Class A Shares prior to June 10, 1996 are
for the period when the Fund was closed-end.
</TABLE>
Average Annual
Total Return
% Return Without % Return With
Sales Charge Sales Charge**
Class A Shares*
Year Ended 6/30/99 +46.77% +39.07%
Five Years Ended 6/30/99 - 8.99 - 9.97
Inception (3/04/94) through 6/30/99 - 8.54 - 9.46
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 6/30/99 +45.18% +41.18%
Inception (6/10/96) through 6/30/99 -18.11 -18.38
[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 6/30/99 +45.28% +44.28%
Inception (6/10/96) through 6/30/99 -18.14 -18.14
[FN]
*Maximum contingent deferred sales charge is 1% and is reduced to 0%
after 1 year.
**Assuming payment of applicable contingent deferred sales charge.
% Return Without % Return With
Sales Charge Sales Charge**
Class D Shares*
Year Ended 6/30/99 +46.29% +38.61%
Inception (6/10/96) through 6/30/99 -17.49 -18.93
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
Merrill Lynch Emerging Tigers Fund, Inc., August 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (in US dollars)
Shares Percent of
COUNTRY Industries Held Long-Term Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
China Appliances 567,000 Guangdong Kelon Electrical Holdings
Company Limited 'H' $ 579,226 $ 580,524 1.2%
Electronics 800,000 Legend Holdings Limited 396,363 772,718 1.6
Infrastructure 779,013 Cosco Pacific Limited 510,488 682,218 1.4
Mining 1,994,000 Yanzhou Coal Mining Co. Ltd. 'H' 551,276 873,120 1.8
Telecommunications 576,227 China Telecom (Hong Kong) Limited 984,318 1,788,465 3.8
Total Long-Term Investments in China 3,021,671 4,697,045 9.8
India Banking 207,000 Corporation Bank 482,450 504,145 1.1
253,510 Housing Development Finance
Corporation Ltd. (HDFC) 1,578,107 1,509,378 3.1
44,940 State Bank of India (GDR)** 694,152 606,690 1.3
------------ ------------ ------
2,754,709 2,620,213 5.5
Computer Software 3,590 NIIT Limited 143,973 175,364 0.3
16,410 NIIT Limited (New Shares) 738,186 801,594 1.7
------------ ------------ ------
882,159 976,958 2.0
Oil Services 60,900 Hindustan Petroleum Corporation Ltd. 659,510 360,278 0.7
Pharmaceuticals 63,800 Ranbaxy Laboratories Limited 584,702 1,668,355 3.5
Telecommunications 47,240 Mahanagar Telephone Nigam Ltd. (GDR)** 564,896 496,020 1.0
Total Long-Term Investments in India 5,445,976 6,121,824 12.7
Indonesia Banking 8,386,500 PT Bank Internasional Indonesia
'Foreign' 281,311 165,089 0.3
1,480,000 PT Bank Pan Indonesia Tbk 'Foreign' 295,904 271,916 0.6
145,500 PT Bank Pan Indonesia Tbk (Warrants)(a) 0 8,115 0.0
------------ ------------ ------
577,215 445,120 0.9
Foods 630,000 PT Indofood Sukses Makmur Tbk 397,130 677,953 1.4
Retail--Stores 4,750,000 PT Matahari Putra Prima Tbk 564,318 483,104 1.0
Telecommunications 69,125 PT Telekomunikasi Indonesia (ADR)* 568,630 531,398 1.1
Tobacco 339,500 PT Gudang Garam Tbk 497,576 824,245 1.7
353,500 PT Hanjaya Mandala Sampoerna Tbk 390,966 739,938 1.6
------------ ------------ ------
888,542 1,564,183 3.3
Total Long-Term Investments in
Indonesia 2,995,835 3,701,758 7.7
Malaysia++ Banking & 1,540,000 Public Bank Berhad 'Foreign' 865,756 1,450,842 3.0
Financial
Building & 43,000 IJM Corporation Bhd 83,169 34,626 0.1
Construction
Consumer 348,500 Amway (Malaysia) Holdings Berhad 707,344 816,224 1.7
Products
Leisure 385,000 Genting Berhad 862,706 1,418,421 2.9
377,000 Resorts World Berhad 683,286 957,382 2.0
------------ ------------ ------
1,545,992 2,375,803 4.9
Publishing & 438,000 Star Publications (Malaysia) 460,607 1,083,474 2.3
Broadcasting
Restaurants 558,000 KFC Holdings (Malaysia) Berhad 688,792 800,289 1.7
Telecommuni- 331,000 Telekom Malaysia Berhad 942,429 984,289 2.0
cations
Tobacco 141,400 Rothmans of Pall Mall (Malaysia) Berhad 757,998 986,079 2.0
Transportation 529,000 Malaysia International Shipping
Corporation Berhad 'Foreign' 969,076 807,421 1.7
Total Long-Term Investments in
Malaysia 7,021,163 9,339,047 19.4
Philippines Banking 35,000 Metropolitan Bank & Trust Company 232,006 289,457 0.6
Beverages 165,000 San Miguel Corporation 'B' 266,543 268,750 0.6
Conglomerates 2,816,200 Benpres Holdings Corp. 804,269 554,706 1.1
Restaurants 1,165,000 Jollibee Foods Corporation
(Warrants)(a) 598,177 514,836 1.1
Retail 2,543,346 SM Prime Holdings, Inc. 445,650 468,849 1.0
Telecommuni- 17,000 Philippine Long Distance Telephone
cations Company (ADR)* 451,967 402,688 0.8
Utilities-- 144,956 Manila Electric Company 'B' 823,179 431,940 0.9
Electric & Gas
Total Long-Term Investments in
the Philippines 3,621,791 2,931,226 6.1
Singapore Airlines 217,000 Singapore Airlines Ltd. 'Foreign' 2,053,479 2,037,317 4.2
Automotive 118,000 Cycle & Carriage Ltd. 562,742 666,112 1.4
Banking 171,543 DBS Bank Limited 1,310,595 1,967,301 4.1
135,000 Oversea-Chinese Banking Corporation
Ltd. 'Foreign' 941,376 946,580 1.9
291,500 Overseas Union Bank Ltd. 'Foreign' 1,127,301 1,524,274 3.2
------------ ------------ ------
3,379,272 4,438,155 9.2
Conglomerates 739,000 Singapore Technologies
Engineering Ltd. 637,806 891,419 1.9
Electronics 245,000 Natsteel Electronics Ltd. 448,336 1,222,889 2.6
Foods 1,579,000 Del Monte Pacific Ltd. 994,776 805,290 1.7
Industrial 700,000 Clipsal Industries (Holdings)
Limited 1,756,254 903,000 1.9
Publishing & 117,997 Singapore Press Holdings Ltd. 1,518,615 1,963,228 4.1
Broadcasting
Real Estate 180,000 Allgreen Properties Limited 109,232 174,342 0.4
194,000 City Developments Limited 917,822 1,175,827 2.4
219,000 DBS Land Limited 349,590 499,709 1.0
54,750 DBS Land Limited (New Shares) 74,213 124,927 0.3
------------ ------------ ------
1,450,857 1,974,805 4.1
Telecommuni- 524,000 Singapore Telecommunications, Ltd. 811,640 930,988 1.9
cations
Total Long-Term Investments
in Singapore 13,613,777 15,833,203 33.0
</TABLE>
Merrill Lynch Emerging Tigers Fund, Inc., August 31, 1999
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in US dollars)
<CAPTION>
Shares Percent of
COUNTRY Industries Held Long-Term Investments Cost Value Net Assets
<S> <S> <C> <S> <C> <C> <C>
Thailand Banking & Financial 330,000 Siam Commercial Bank Public Company
Limited 'Foreign' (Preferred) $ 232,016 $ 374,804 0.8%
330,000 Siam Commercial Bank Public Company
Limited (Warrants)(a) 0 148,629 0.3
238,000 Thai Farmers Bank Public Company
Limited 'Foreign' 310,807 341,775 0.7
------------ ------------ ------
542,823 865,208 1.8
Oil--Related 75,317 PTT Exploration and Production Public
Company Limited 'Foreign' 747,883 593,883 1.2
Telecommunications 78,800 Advanced Info Service Public Company
Limited 'Foreign' 415,686 1,082,214 2.3
637,000 TelecomAsiaCorporation Public Company
Limited 'Foreign' 458,622 611,221 1.3
------------ ------------ ------
874,308 1,693,435 3.6
Total Long-Term Investments
in Thailand 2,165,014 3,152,526 6.6
Total Long-Term Investments 37,885,227 45,776,629 95.3
Face
Amount Short-Term Investments
United Commercial US$1,196,000 General Motors Acceptance Corp., 5.56%
States Paper*** due 9/01/1999 1,196,000 1,196,000 2.5
Total Investments in Short-Term
Investments 1,196,000 1,196,000 2.5
Total Investments $ 39,081,227 46,972,629 97.8
============
Other Assets Less Liabilities 1,038,526 2.2
------------ ------
Net Assets $ 48,011,155 100.0%
============ ======
Net Asset Value: Class A--Based on net assets of $36,154,177 and
4,433,172 shares outstanding $ 8.16
============
Class B--Based on net assets of $7,521,771 and
938,402 shares outstanding $ 8.02
============
Class C--Based on net assets of $2,213,801 and
275,799 shares outstanding $ 8.03
============
Class D--Based on net assets of $2,121,406 and
260,908 shares outstanding $ 8.13
============
<FN>
++Effective February 16, 1999, the Fund's Board of Directors adopted
a change in valuation for Malaysian securities. The Fund will
utilize a Malaysian exchange rate of 3.80 and record an estimated
exit tax on the value of any investments made before February 15,
1999, based upon its value as of August 31, 1998, equivalent to 30%
through March 31, 1999, 20% from April 1, 1999 through May 31, 1999
and 10% from June 1, 1999 through August 31, 1999. These changes are
due to the capital controls implemented by the Malaysian government,
which froze the Malaysian ringgit at 3.80 until September 1, 1999
and initiated a tax at various rates, as described above, on any
funds repatriated from Malaysia.
*American Depositary Receipts (ADR).
**Global Depositary Receipts (GDR).
***Commercial Paper is traded on a discount basis; the interest rate
shown reflects the discount rate 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>
PORTFOLIO CHANGES
For the Quarter Ended August 31, 1999
Additions
Corporation Bank
DBS Bank Limited
DBS Land Limited (New Shares)
Del Monte Pacific Ltd.
NIIT Limited (New Shares)
PT Bank Pan Indonesia Tbk 'Foreign'
PT Matahari Putra Prima Tbk
*Shandong International Power Development Company Limited 'H'
Deletions
Ayala Land, Inc.
Development Bank of Singapore Limited 'Foreign'
New World Infrastructure Limited
PT Astra International Tbk
*Shandong International Power Development Company Limited 'H'
[FN]
*Added and deleted in the same quarter.
PORTFOLIO INFORMATION
As of August 31, 1999
Percent of
Ten Largest Holdings Net Assets
Singapore Airlines Ltd. 'Foreign' 4.2%
DBS Bank Limited 4.1
Singapore Press Holdings Ltd. 4.1
China Telecom (Hong Kong) Limited 3.8
Ranbaxy Laboratories Limited 3.5
Overseas Union Bank Ltd. 'Foreign' 3.2
Housing Development Finance Corporation
Ltd. (HDFC) 3.1
Public Bank Berhad 'Foreign' 3.0
Genting Berhad 2.9
Natsteel Electronics Ltd. 2.6
Merrill Lynch Emerging Tigers Fund, Inc., August 31, 1999
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
Donald Cecil, Director
Edward H. Meyer, Director
Charles C. Reilly, Director
Richard R. West, Director
Arthur Zeikel, Director
Edward D. Zinbarg, Director
Kara W.Y. Tan Bhala, Senior Vice President and
Portfolio Manager
Donald C. Burke, Vice President and Treasurer
Phillip Gillespie, 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
