MERRILL LYNCH
EMERGING TIGERS
FUND, INC.
FUND LOGO
Quarterly Report
February 28, 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 invest-
ment 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 February 28, 1999
INDIA 14.6%
INDONESIA 2.7%
MALAYSIA 8.2%
THAILAND 10.5%
SINGAPORE 31.0%
CHINA 10.0%
PHILIPPINES 10.1%
[FN]
*Total may not equal 100%.
Merrill Lynch Emerging Tigers Fund, Inc., February 28, 1999
DEAR SHAREHOLDER
For the quarter ended February 28, 1999, Merrill Lynch Emerging
Tigers Fund, Inc.'s Class A, Class B, Class C and Class D Shares had
total returns of -7.25%, -7.47%, -7.37% and -7.21%, respectively.
(Complete performance information can be found on pages 4 and 5 of
this report to shareholders.)
Investment Environment
Emerging tiger economies continued with the slow work of repair and
reconstruction during the quarter ended February 28, 1999. During
the period, there were signs that the region's economic contraction
is moderating. Certain macroeconomic indicators are recovering and
there has been a huge buildup in Asia's current account surpluses.
Some economists forecast a resumption of positive year-over-year
gross domestic product (GDP) growth in the second quarter of 1999
for most Asian countries. However, Hong Kong will probably lag the
recovery, since it still has to deal with the deflationary effects
of its currency peg.
Along with record-low interest rates, government fiscal spending is
also on the rise. After years of running surpluses, all the emerging
tiger economies are currently running fiscal deficits, helping to
give growth a boost during 1999. Industrial production numbers are
up on a year-over-year basis in India, Korea and Singapore. From a
quarter-to-quarter standpoint, they are up in Taiwan and Thailand.
The spending patterns of local consumers are beginning to shift for
the better. Auto sales are rising on a quarter-to-quarter basis as
well as from a more volatile month-to-month standpoint. Airline
travel offers another sign of a renewal in consumer spending. Part
of the recovery of private consumption is attributable to a rise in
Asia's savings ratio in 1998 from 1997.
External accounts continue to be strong for the emerging tiger
countries. Economists estimate that the current account surpluses in
the region this year will be around 5% of GDP. This reversal is
dramatic and provides support for emerging tiger currencies. It was
notable that when the Brazilian currency devalued in January, the
Asian currencies barely moved. Current account surpluses and large
foreign reserves will help cushion emerging tiger countries from the
potential economic dislocations that may arise globally, and will
continue to provide a buffer against upward pressure on interest
rates.
Investment Outlook
We expect The People's Republic of China's economy to experience
further slowing this year. The country is suffering from three main
problems. First there is excess supply of many goods. Second,
domestic demand has been very weak because of corporate
restructuring and bankruptcies. Third, the country is undergoing
deflation. However, despite these problems, China must continue its
reform process by cleaning up its banking sector and restructuring
its state-owned enterprises. Strong government fiscal spending has
been supporting the economy, but the budget deficit cannot grow
indefinitely. In the latest National Peoples Congress, Vice Premier
Zhu Rongji talked about these problems openly, which signals the
public acknowledgment of China's problems. If reform is to take
place at a faster pace, the stability of the renminbi may be in
doubt by the end of the year. A devaluation may not necessarily be
negative for the economy. It would support the export sector, which
is one of the main drivers of the economy at the current time. It
would also be positive for Hong Kong, since an increase in exports
would be good for its ports and services industries.
In Singapore, companies are focusing on enhancing shareholder value
and improving returns on assets. Firms have cut costs aggressively,
and the government has introduced legislation to allow for better
management of corporate balance sheets. Unlike Hong Kong, Singapore
can set its own monetary policy. As a result, nominal rates of
interest have declined sharply.
In Indonesia, most investors are awaiting the results of the
elections scheduled to take place in June. The likely outcome will
be a coalition government, since there is no single party expected
to gain a majority in parliament. The important outcome of the
elections will be the choice of the president. We expect elections
to take place relatively smoothly. However, if a coalition
government is the result, it will be more difficult to arrive at an
economic policy consensus. Meanwhile, bank reconstruction is making
some progress, since the government has moved to close down seven
banks and recapitalize several others.
Interest rates in the Philippines have continued to fall over the
past quarter. Export figures have also been the strongest in the
region. We expect the economy to recover modestly in 1999.
Fortunately, the country does not have the same level of banking
problems as other emerging tiger economies that were impacted by the
currency crisis.
Malaysia has removed its strict capital controls and replaced them
with a system of exit taxes. This move may have made it easier
officially for money to be repatriated from the country, but the
process is still an administrative and bureaucratic nightmare. The
International Finance Corporation has reinstalled Malaysia into its
indexes as a result of the removal of capital controls. In terms of
the economy, there are signs of improvement. Bank recapitalization
is continuing apace and corporate debt restructuring is also taking
place.
The Thai economy seems to be mending. Industrial production numbers
have been rising on a quarter-to-quarter and month-on-month basis.
Nominal and real interest rates have contracted sharply. Nominal and
inflation-adjusted interest rates have declined to levels that are
lower than those prevailing before the currency crisis. In the
political arena, the passage of the bankruptcy and foreclosure laws
bodes well for easing the economic reform logjam.
In summary, we expect the emerging tiger countries to continue on
their recovery paths this year, with momentum building more toward
the end of the year and then moving apace next year. It is
encouraging to see that as governments are restructuring the
economies on a macroeconomic level, there is also micro-level
corporate restructuring taking place. For this reason, earnings
growth is likely to improve next year, as corporations dispose of
assets, restructure debt and streamline operations. This activity
should prove positive for their bottom lines. Nevertheless, there is
much more work to be done in terms of bank recapitalization.
However, the initial steps have been taken. If this trend continues,
it then becomes a matter of time for Asia to clean up its debt
problem.
Investment Strategy
We made no major shifts in the Fund's asset allocation during the
February quarter. Our most significant change was to reduce our
weighting in Thailand. We have also started to modestly increase
investments in Indonesia. In addition, we decreased the Fund's
Chinese investments, since we believe that this maybe a difficult
year for the economy. Within the country portfolios, we have started
to build some holdings in consumer-related stocks, since we have
seen the beginning of a recovery in this sector. In Malaysia, we
have used our ringgit-denominated cash reserves to invest in a well-
capitalized bank as well as several stocks in the consumer sector.
Merrill Lynch Emerging Tigers Fund, Inc., February 28, 1999
In Conclusion
We expect to remain fully weighted in equities in the near term. We
will shift our portfolio of stocks in each country toward positions
that will benefit from the recovery in various sectors of the
economy. We believe that all the countries in non-Japan Asia are in
a recovery trend; therefore, it is difficult to differentiate medium-
term country performance. Therefore at this stage of the cycle,
stock picking will become more important.
We thank you for your investment in Merrill Lynch Emerging Tigers
Fund, Inc., and 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
April 13, 1999
After more than 20 years of service, Arthur Zeikel recently retired
as Chairman of Merrill Lynch Asset Management, L.P. (MLAM). Mr.
Zeikel served as President of MLAM from 1977 to 1997 and as Chairman
since December 1997. Mr. Zeikel is one of the country's most
respected leaders in asset management and presided over the growth
of Merrill Lynch's asset management business. During his tenure,
client assets under management grew from $300 million to over $500
billion. Mr. Zeikel will remain on Merrill Lynch Emerging Tigers
Fund, Inc.'s Board of Directors. We are pleased to announce that
Terry K. Glenn has been elected President and Director of the Fund.
Mr. Glenn has held the position of Executive Vice President of MLAM
since 1983.
Mr. Zeikel's colleagues at MLAM join the Fund's Board of Directors
in wishing him well in his retirement from Merrill Lynch and are
pleased that he will continue as a member of the Fund's Board of
Directors.
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 -29.11% -7.25% -57.25%++
ML Emerging Tigers Fund, Inc. Class B Shares -29.88 -7.47 -62.52
ML Emerging Tigers Fund, Inc. Class C Shares -29.83 -7.37 -62.54
ML Emerging Tigers Fund, Inc. Class D Shares -29.25 -7.21 -61.75
<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 periods are Class A Shares, from 3/04/94 to
2/28/99 and Class B, Class C and Class D Shares, from 6/10/96 to
2/28/99.
++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 12/31/98 -18.81% -23.07%
Inception (3/04/94) through 12/31/98 -14.78 -15.72
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
% Return % Return
Without CDSC With CDSC**
Class B Shares*
Year Ended 12/31/98 -19.66% -22.82%
Inception (6/10/96) through 12/31/98 -29.72 -30.26
[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 12/31/98 -19.62% -20.41%
Inception (6/10/96) through 12/31/98 -29.74 -29.74
[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 12/31/98 -18.95% -23.20%
Inception (6/10/96) through 12/31/98 -29.18 -30.65
[FN]
*Maximum sales charge is 5.25%.
**Assuming maximum sales charge.
Merrill Lynch Emerging Tigers Fund, Inc., February 28, 1999
<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> <C> <S> <C> <C> <C>
China Appliances 567,000 Guangdong Kelon Electrical Holdings
Company Limited 'H' $ 579,226 $ 380,561 1.1%
Infrastructure US$ 611,000 New World Infrastructure Limited,
5% due 7/15/2001(b) 770,740 501,020 1.4
1,526,000 Jiangsu Expressway Company Ltd. 'H' 378,841 315,147 0.9
2,157,000 Zhejiang Expressway Co. Ltd. 'H' 392,143 350,800 1.0
------------ ------------ ------
1,541,724 1,166,967 3.3
Mining 39,880 Yanzhou Coal Mining Co., Ltd. (ADR)* 549,182 289,130 0.8
Telecommunications 502,500 China Telecom (Hong Kong) Limited 803,687 891,820 2.5
12,400 China Telecom (Hong Kong) Limited (ADR)* 499,069 437,100 1.3
------------ ------------ ------
1,302,756 1,328,920 3.8
Utilities-- 38,500 Huaneng Power International, Inc. (ADR)* 589,092 336,875 1.0
Electric & Gas
Total Long-Term Investments in China 4,561,980 3,502,453 10.0
India Banking & 31,451 Housing Development Finance
Financial Corporation Ltd. 1,957,834 1,686,064 4.8
77,600 State Bank of India (GDR)** 1,187,470 556,780 1.6
------------ ------------ ------
3,145,304 2,242,844 6.4
Oil Services 60,900 Hindustan Petroleum Corporation Ltd. 659,510 296,410 0.8
Pharmaceuticals 76,800 Ranbaxy Laboratories Limited 704,147 664,980 2.0
Telecommunications 128,400 Mahanagar Telephone Nigam Ltd. (GDR)** 1,535,407 1,248,690 3.6
67,400 Videsh Sanchar Nigam Ltd. (GDR)** 1,100,700 645,355 1.8
------------ ------------ ------
2,636,107 1,894,045 5.4
Total Long-Term Investments in India 7,145,068 5,098,279 14.6
Indonesia Telecommunications 150,000 PT Telekomunikasi Indonesia 'B' (ADR)* 1,296,779 956,250 2.7
Total Long-Term Investments in
Indonesia 1,296,779 956,250 2.7
Malaysia++ Building & 43,000 I.J.M. Corporation BHD 83,169 24,216 0.1
Construction
Consumer Products 655,500 Amway (Malaysia) Holdings BHD 2,577,576 1,155,750 3.3
Publishing & 843,000 Star Publications (Malaysia) BHD 1,737,573 1,120,303 3.2
Broadcasting
Tobacco 53,400 Rothmans of Pall Mall (Malaysia) BHD 225,944 307,753 0.9
Utilities-- 331,000 YTL Power Internationl BHD 302,732 252,605 0.7
Electric & Gas
Total Long-Term Investments in
Malaysia 4,926,994 2,860,627 8.2
Philippines Banking 35,000 Metropolitan Bank & Trust Company 232,006 252,577 0.7
Conglomerates 4,857,200 Benpres Holdings Corp. 1,821,157 650,965 1.9
Real Estate 2,581,050 Ayala Land, Inc. 988,456 765,002 2.2
Restaurants 1,365,000 Jollibee Foods Corporation (Warrants) (a) 700,869 642,043 1.8
Retail 3,459,346 SM Prime Holdings, Inc. 596,835 668,688 1.9
Utilities-- 174,956 Manila Electric Company 'B' 983,374 545,610 1.6
Electric & Gas
Total Long-Term Investments in
the Philippines 5,322,697 3,524,885 10.1
Singapore Airlines 258,000 Singapore Airlines Ltd. 'Foreign' 2,457,414 1,903,340 5.4
Banking 127,500 Development Bank of Singapore
Limited 'Foreign' 1,131,612 925,791 2.6
124,000 Oversea-Chinese Banking Corporation
Ltd. 'Foreign' 842,684 828,347 2.4
220,000 Overseas Union Bank Ltd. 'Foreign' 936,467 805,112 2.3
------------ ------------ ------
2,910,763 2,559,250 7.3
Conglomerates 203,000 Singapore Technologies Engineering Ltd. 172,770 174,522 0.5
Construction & 194,000 City Developments Limited 917,822 811,385 2.3
Housing
Electronics 195,500 Elec & Eltek International
Company Ltd. 918,041 1,065,475 3.1
377,000 Natsteel Electronics Ltd. 689,114 1,051,176 3.0
------------ ------------ ------
1,607,155 2,116,651 6.1
Industrial 863,000 Clipsal Industries (Holdings)
Limited 2,200,509 720,605 2.1
Publishing & 126,997 Singapore Press Holdings Ltd.
Broadcasting 'Foreign' 1,629,049 1,445,914 4.1
Telecommunications 784,000 Singapore Telecommunications, Ltd. 1,213,584 1,115,771 3.2
Total Long-Term Investments in
Singapore 13,109,066 10,847,438 31.0
Thailand Banking & US$ 475,000 Bangkok Bank Public Company
Financial Limited, 3.25% due 3/03/2004 (b) 192,750 199,500 0.6
238,000 Thai Farmers Bank Public Company
Limited 'Foreign' 310,807 399,115 1.1
------------ ------------ ------
503,557 598,615 1.7
Electronics 32,500 Hana Microelectronics Public
Company Limited 'Foreign' 80,899 73,249 0.2
Oil--Related 150,600 PTT Exploration and Production
Public Company Limited 'Foreign' 1,359,307 985,951 2.8
Publishing & 162,400 BEC World Public Company Limited
Broadcasting 'Foreign' 731,533 784,331 2.3
Telecommunications 111,600 Advanced Info Service Public Company
Limited 'Foreign' 577,542 778,535 2.2
Utilities-- 200,975 Electricity Generating Public Company
Electric & Gas Limited 'Foreign' 296,417 436,785 1.3
Total Long-Term Investments in
Thailand 3,549,255 3,657,466 10.5
Total Long-Term Investments 39,911,839 30,447,398 87.1
</TABLE>
Merrill Lynch Emerging Tigers Fund, Inc., February 28, 1999
<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 US$ 1,000,000 AT&T Corp., 4.83% due 3/26/1999 $ 996,377 $ 996,377 2.9%
States Paper*** 995,000 General Electric Capital Corp.,
4.875% due 3/01/1999 994,731 994,731 2.8
Total Investments in Short-Term
Investments 1,991,108 1,991,108 5.7
Total Investments $ 41,902,947 32,438,506 92.8
============
Unrealized Appreciation on Forward Foreign Exchange Contracts--Net**** 48,486 0.1
Other Assets Less Liabilities 2,488,208 7.1
------------ ------
Net Assets $ 34,975,200 100.0%
============ ======
Net Asset Value: Class A--Based on net assets of $27,076,076
and 4,673,286 shares outstanding $ 5.79
============
Class B--Based on net assets of $4,801,210 and
838,745 shares outstanding $ 5.72
============
Class C--Based on net assets of $1,797,837 and
313,649 shares outstanding $ 5.73
============
Class D--Based on net assets of $1,300,077 and
224,789 shares outstanding $ 5.78
============
<FN>
(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.
(b)Convertible security.
++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 the value of any
investments made before February 15, 1999 will be discounted, based
upon its value as of August 31, 1998, by 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
rates shown reflect the discount rates paid at the time of purchase
by the Fund.
****Forward foreign exchange contracts as of February 28, 1999 were
as follows:
Foreign Expiration Unrealized
Currency Sold Date Appreciation
THB 37,925,000 May 1999 $ 21,937
THB 22,837,500 June 1999 26,549
Total Unrealized Appreciation on Forward
Foreign Exchange Contracts--Net
(US$ Commitment--$1,655,000) $ 48,486
==========
</TABLE>
EQUITY PORTFOLIO CHANGES
For the Quarter Ended February 28, 1999
Additions
City Developments Limited
Metropolitan Bank & Trust Company
Oversea-Chinese Banking Corporation Ltd. 'Foreign'
Overseas Union Bank Ltd. 'Foreign'
PT Telekomunikasi Indonesia 'B' (ADR)
Singapore Technologies Engineering Ltd.
Deletions
Bangkok Bank Public Company Limited 'Foreign'
Beijing Datang Power Generation Company Limited 'H'
Gulf Indonesia Resources Ltd. (ADR)
International Container Terminal Services, Inc.
O.Y.L. Industries BHD
PORTFOLIO INFORMATION
As of February 28, 1999
Percent of
Ten Largest Equity Holdings Net Assets
Singapore Airlines Ltd. 'Foreign' 5.4%
Housing Development Finance Corporation Ltd. 4.8
Singapore Press Holdings Ltd. 'Foreign' 4.1
Mahanagar Telephone Nigam Ltd. (GDR) 3.6
Amway (Malaysia) Holdings BHD 3.3
Star Publications (Malaysia) BHD 3.2
Singapore Telecommunications, Ltd. 3.2
Elec & Eltek International Company Ltd. 3.1
Natsteel Electronics Ltd. 3.0
PTT Exploration and Production Public
Company Ltd. 'Foreign' 2.8
Merrill Lynch Emerging Tigers Fund, Inc., February 28, 1999
OFFICERS AND DIRECTORS
Terry K. Glenn, President and Director
Donald Cecil, Director
Roland M. Machold, 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
Gerald M. Richard, Treasurer and Norman R. Harvey, Senior Vice
President of Merrill Lynch Emerging Tigers Fund, Inc. have recently
retired. Their colleagues at Merrill Lynch Asset Management, L.P.
join the Fund's Board of Directors in wishing Mr. Richard and Mr.
Harvey well in their retirements.
