<PAGE>
The Emerging Markets
Income Fund II Inc
Dear Shareholders:
We are pleased to provide this semi-annual report for The Emerging Markets
Income Fund II Inc (the "Fund") as of November 30, 1998. Included are market
commentary, a statement of the Fund's investments, and financial statements for
the six months ended November 30, 1998.
The net asset value of the Fund decreased from $15.03 per share on May 29, 1998
to $10.44 per share on November 30, 1998. Dividends of $0.83 per share from net
investment income were declared during this period. Assuming reinvestment of
these dividends in additional shares of the Fund, the total return based on net
asset value for the six months ended November 30, 1998 was a negative 23.83%. In
comparison, the JP Morgan Emerging Markets Bond Index Plus ("EMBI+") incurred a
loss of 13.76% during the same period.
On November 30, 1998, the Fund was approximately 96% invested in securities of
emerging market issuers, including obligations of sovereign governments and
companies. The balance of the Fund's assets was invested in short-term
investments.
PERFORMANCE OVERVIEW VERSUS THE BENCHMARK
The Fund's underperformance during the period was a result of the negative
effects of the Fund's leverage and our decision to slightly overweight US Dollar
denominated Russian Eurobonds. Our decision to slightly overweight Russian
Eurobonds came after our analysis that while Russia had a severe domestic
problem, Russia's external debt burden was low enough that timely payment of
Eurobond debt was not terribly onerous. In addition we felt that the significant
yield afforded the Fund was adequate to compensate the Fund for the risk.
Unfortunately, while the Fund's Eurobonds have been paid on time without
default, the Fund has suffered significant mark-to-market losses as a result of
Russia's decision to default on ruble denominated domestic debt that the Fund
did not own.
The Fund's leverage, which has remained constant since the Fund's inception,
tends to negatively exaggerate the Fund's performance in down markets and
positively exaggerate the Fund's performance in up markets.
While we were pleased with the other decisions we made during the end of the
period, including trimming Brazil which subsequently underperformed the Index,
and overweighting Colombia and Venezuela which performed very well versus the
Index, it was not enough to make up for the losses the Fund experienced as a
result of our Russia decision and the Fund's leverage.
EMERGING MARKETS DEBT OVERVIEW
During the six-month period ended November 30, 1998, the emerging debt market
experienced an initial period of strength, a period of extreme volatility in the
month of August, and a partial recovery towards the end of the period.
Performance was poor in August, due to continued fall-out from the Asian crisis
combined with Russia's economic and political turmoil which exerted pressure
on Latin American credits as
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T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C
investors reduced their exposure to all emerging markets countries. Russia's
dramatic decline during the period was due to a number of factors including a
forced restructuring of all domestic debt; a ruble devaluation; Yeltsin's
dismissal of his cabinet; and a failure of the Duma to approve Chernomyrdin as
the next Prime Minister. These developments devastated Russian
dollar-denominated bond prices (prices declined 72% in August alone). The
timing of the debt restructuring and devaluation, coming less than a month
after Russia's latest IMF financing, was a tremendous shock to the market and
caused a wide-spread sell-off across all emerging markets.
At the end of the period, however, market concerns of global contagion lessened
in the emerging debt market due to a number of positive world events including
the Clinton administration and the US Congress reaching an agreement on
additional funding for the International Monetary Fund ("IMF") which totaled
US$17.9 billion. This funding was crucial for the IMF to play a major role in
preventing financial meltdown in Latin America. Also, towards the period's end,
the Brazilian government reached an agreement with the IMF on fiscal targets for
the next three years which should help Brazil somewhat over the next few months.
An illustration of the recovery in the emerging markets was shown during
September, when the EMBI+ returned 9.78%, the second largest monthly gain since
the Index's inception.
The following regional overviews highlight significant events during the period.
LATIN AMERICA
Argentina The IMF mission completed its review of Argentina, announcing that
the country has met all of its fiscal targets for the first half of 1998
including all Extended Fund Facility ("EFF") performance targets, and that
implementation of structural reforms included in the program has been
substantial. Additionally, the World Bank made positive announcements with
regard to Argentina and will extend US$4.5 billion for debt financing. While
Argentina's capital raising efforts are impressive, we remain underweight in
Argentina due to concerns over Brazil's economic outlook.
Brazil At the end of the period, Brazil was downgraded to B2 by Moody's. In
response to this, as well as to continued capital outflows, the government
announced a fiscal package aimed at spending cuts in 1998 and 1999.
Additionally, in a long-anticipated move, an agreement was made with the IMF
totaling US$41.5 billion of assistance. The three-year program envisages fiscal
surpluses through a series of reform initiatives of 2.6%, 2.8%, and 3.0% for
1999, 2000, and 2001 respectively. Separately, Brazil elected a new president,
Fernando Henrique Cardoso, who secured approximately 50% of the vote, versus
Luiz Inacio "Lula" da Silva's 35%, and Ciro Gomes' 11%. Brazil is currently
dealing with the consequences of its devaluation of the real. In addition, we
are concerned that their level of short-term local currency debt ($300 billion)
is a potential problem, and thus remain underweight in Brazil.
Colombia During the period, Colombia devalued the peso by 9%. Although the
devaluation was not a surprise, the timing of it was, as it wasn't expected to
happen until after the presidential elections in January. Both Moody's and
Standard & Poor's stated that implementing the fiscal package in a timely
fashion is more important now than ever before and, because of the devaluation,
Congress will likely speed up the process. Separately, Colombia's new President,
Andres Pastrana, traveled to Washington to meet with top officials from the
World Bank and the Inter-American Development Bank ("IADB"), the first state
visit to the US by a Colombian president in 23 years. As
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T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C
a result of the meetings, an expected US$2 billion is to be made available to
Colombia in 1999. This amount will bring total financing to about US$4 billion
for the 1998-1999 period.
Ecuador Events in Ecuador mirrored Colombia's somewhat during the period as
both countries elected new Presidents as well as devalued their currencies.
Jamil Mahuad was the official first-round winner of the Ecuadorian presidential
race, with 34.9% of the vote, followed by Alvaro Noboa with 26.6%. Mahuad is an
experienced politician with a respected economic team, and is believed to be the
one with the ability to stabilize the economy. In addition, Ecuador also entered
into a peace agreement with Peru which should help stabilize the regional
tensions and increase foreign investment. While we are relatively pleased with
Ecuador's progress, we remain roughly neutral on the credit as we fear continued
lower oil prices and a tenuous fiscal situation will cap upward price momentum.
Further reforms will need to take place for us to increase our exposure.
Mexico The Zedillo administration presented its proposed MXP (Mexican Peso)
1.02 trillion 1999 budget to Congress, which was in line with market
expectations and is one of the most stringent budgets ever submitted to
Congress. The budget assumes 3% GDP growth, a reduction in inflation to 13%,
limits the size of the fiscal deficit to 1.25% of GDP, and incorporates a
difficult external environment in 1999. Mexico's limited need for new capital in
1999 leads us to believe that the country is a relative safe haven versus other
more volatile assets. We are, however, slightly underweight due to tight spread
levels.
Peru The Peruvian government continues to show overall fiscal prudence as all
IMF macroeconomic targets have been met. In addition, the government has
initiated efforts to broaden the tax base and reduce tax evasion and has
proposed US$110 million in spending cuts in the 1999 budget. During the period,
the government sold a 30% stake in four electricity distribution firms to a
local bidder for US$145 million, a 61% premium over the minimum asking price.
This is important as it bodes well for future privatizations. We maintained our
overweight position during the period.
Venezuela Venezuela's presidential race resulted in a landslide victory for
Hugo Chavez, a reformist who led an unsuccessful government overthrow in 1991.
Chavez won with 56% of the votes, compared to Salas Romer's 40% and Irene Saez's
3.1%. This overwhelming victory in a democratic election was due to Chavez's
campaign promises to change Venezuela's governmental elitism and improve living
conditions for the poor. The election was won by the largest margin in 15
years-and is a clear mandate for change.
Chavez's primary challenges include restoring economic growth in a low oil price
environment, as well as working with a widely polarized Congress. The market
will watch developments closely as Chavez makes his initial Cabinet
appointments, especially in the area of economic policy. We remain overweight in
Venezuela due to three primary factors: 1) Venezuela's capital needs in 1999 are
relatively limited; 2) Venezuela retired a good deal of its external debt with
the proceeds of the 1997 oil boom; and 3) Venezuelan yield spreads are at
historically wide levels versus other similarly rated countries.
EASTERN EUROPE
Bulgaria The IMF recently approved a three-year EFF program for Bulgaria,
totaling over US$850 million. We remain slightly overweight in Bulgaria due to
the country's limited amount of debt service, and its ability to meet fiscal
targets.
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T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C
Russia Russia experienced tremendous volatility during the period due to the
ruble being devalued and continuous shifts in government. These developments
devastated Russian dollar denominated bond prices during the month of August,
with prices declining over 70%. As a result, the tremendous shock to the market
caused a wide-spread sell-off across all emerging markets. The timing of these
events was unfortunate, coming when the investment community was already in need
of a convincing commitment to promote political continuity and fiscal reform.
While evidence is slowly emerging that the government is at least trying to sort
out some of the challenges it faces, the IMF has yet to approve a budget
proposed by the government.
While we are extremely concerned with Russia's ability to reform both
financially and politically, we continue to have a slightly overweight US
dollar-denominated position in the Fund. It is important to note as mentioned in
our Performance Overview, that while the Fund suffered significant
mark-to-market losses in these positions, the Fund did not own ruble-denominated
debt which defaulted in August. We believe the bonds, trading at cents on the
dollar, have much more upside than downside in an unchanged environment. In
addition, there is significant return potential if the country implements any
meaningful reforms.
In conclusion, despite improved performance at the end of the period, the
emerging debt market will continue to be impacted as investors assess their
appetite for risk and evaluate the appropriate risk premium for investing in
credit sensitive fixed income assets. Although market sentiment has certainly
improved and we are confident that the outlook is much more positive, we do
expect this volatile period in the emerging markets to continue in the short
term.
ANNUAL SHAREHOLDERS MEETING
THE Fund held its annual shareholders meeting on September 16, 1998. At the
meeting, shareholders elected each of the nominees proposed for election to the
Fund's Board of Directors and ratified the selection of PricewaterhouseCoopers
LLP as the independent acountants of the Fund. The following table provides
information concerning the matters voted on at the meeting.
1. ELECTION OF DIRECTORS
NOMINEES VOTES FOR VOTES AGAINST
--------- --------- ------------
Heath B. McLendon 18,437,121 393,061
Riordan Roett 18,436,166 394,016
Leslie H. Gelb 18,429,657 400,525
2. RATIFICATION OF PRICEWATERHOUSECOOPERS LLP AS THE INDEPENDENT ACCOUNTANTS
OF THE FUND
VOTES FOR VOTES AGAINST VOTES ABSTAINED
--------- ------------ ---------------
18,610,068 96,497 123,617
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<PAGE>
T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C
In a continuing effort to provide timely information concerning The Emerging
Markets Income Fund II Inc, shareholders may call 1-888-777-0102 (toll free),
Monday through Friday from 8:00 am to 6:00 pm EST for the Fund's current net
asset value, market price and other information regarding the Fund's portfolio
holdings and allocations. For information concerning your Emerging Markets
Income Fund II stock account, please call American Stock Transfer & Trust
Company at 1-800-937-5449 (1-718-921-8200 if you are calling from within New
York City).
We appreciate the confidence you have demonstrated in the past and hope to
continue to serve you in the future years.
Sincerely,
/s/ William D. Cvengros /s/ Heath B. McLendon
William D. Cvengros Heath B. McLendon
Co-Chairman of the Board Co-Chairman of the Board
/s/ Peter J. Wilby
Peter J. Wilby
Executive Vice President
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T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C
Statement of Investments (unaudited)
November 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (a) Bonds -- 81.5% VALUE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ARGENTINA -- 11.3%
Republic of Argentina:
1,285,188 Bocon, Pre 4, 5.19833% due 9/1/02*.............................. $ 1,125,182
Peso 10,766,134+ Bocon, Pro 1, 2.9091% due 4/1/07*............................... 6,950,331
6,000,000+ Discount Bond, Series L-GL, 6.0625% due 3/31/23*................ 4,530,000
12,600,000 Global Bond, 11.000% due 12/4/05................................ 13,198,500
5,000,000 Global Bond, 11.000% due 10/9/06................................ 5,118,750
500,000 Structured Note, 12.11% due 4/10/05*(b)......................... 470,000
Peso 1,750,000+ 8.750% due 7/10/02.............................................. 1,468,018
Peso 2,000,000+ 11.750% due 2/12/07............................................. 1,757,746
2,250,000+ 11.750% due 2/12/07#............................................ 1,977,464
------------
36,595,991
------------
BRAZIL -- 4.5%
4,000,000+ Companhia Energetica De Sao Paulo, 9.125% due 6/26/07*............ 3,540,000
Federal Republic of Brazil:
4,500,000+ Discount Bond, Series ZL, 6.125% due 4/15/24*................... 2,941,875
8,250,000+ Global Bond, 9.375% due 4/7/08.................................. 6,595,875
2,000,000+ NMB, Series L, 6.1875% due 4/15/09*............................. 1,320,000
------------
14,397,750
------------
BULGARIA -- 3.6%
Republic of Bulgaria:
14,000,000+ FLIRB, Series A, 2.500% due 7/28/12*............................ 8,750,000
3,875,000 IAB, 6.6875% due 7/28/11*....................................... 2,857,840
------------
11,607,840
------------
COLOMBIA -- 3.3%
Republic of Colombia:
750,000 7.500% due 2/15/03.............................................. 652,500
5,000,000+ 7.625% due 2/15/07.............................................. 4,125,000
6,275,000+ 12.243% due 8/13/05*............................................ 5,835,750
------------
10,613,250
------------
COSTA RICA -- 6.2%
Costa Rica:
169,578+ Interest Bond, Series B, 6.20703% due 5/21/05*.................. 163,643
7,200,000+ Principal Bond, 6.250% due 5/21/10.............................. 6,372,000
16,000,000+ Principal Bond, 6.250% due 5/21/15.............................. 13,440,000
------------
19,975,643
------------
See accompanying notes to financial statements.
</TABLE>
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T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C
Statement of Investments (unaudited) (continued)
November 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (a) Bonds -- 81.5% (continued) VALUE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CROATIA -- 3.3%
Republic of Croatia, FRN:
10,500,000+ Series A, 6.5625% due 7/31/10*.................................. $ 8,505,000
2,714,337 Series B, 6.5625% due 7/31/06*.................................. 2,252,900
------------
10,757,900
------------
ECUADOR -- 4.0%
Republic of Ecuador:
1,500,000 Discount Bond, 6.625% due 2/28/25*.............................. 887,812
495,000 IE Bond, 6.5625% due 12/21/04*.................................. 351,450
23,235,808+ PDIBond, 6.625% due 2/27/15*(c)................................. 11,574,337
------------
12,813,599
------------
INDONESIA -- 1.6%
5,001,900 Pt Polytama Propindo, 11.25% due 6/15/07.......................... 1,062,904
Tjiwi Kimia International Finance Company B.V:
1,000,000+ 13.250% due 8/1/01.............................................. 750,000
5,000,000+ 10.000% due 8/1/04.............................................. 3,225,000
------------
5,037,904
------------
IVORY COAST -- 0.1%
725,000 Republic of Ivory Coast, FLIRB, 2.000% due 3/29/18*............... 228,375
------------
MEXICO -- 10.3%
3,000,000+ Grupo Industrial Durango, 12.000% due 7/15/01..................... 2,850,000
2,000,000+ Hylsa S.A. de C.V., 9.250% due 9/15/07............................ 1,630,000
United Mexican States, Global Bond:
10,000,000 9.875% due 1/15/07.............................................. 10,062,500
17,525,000 11.375% due 9/15/16............................................. 18,773,656
------------
33,316,156
------------
PANAMA -- 2.3%
9,875,000+ Republic of Panama, IRB, 4.000% due 7/17/14*...................... 7,572,891
------------
PERU -- 5.3%
27,200,000+ Republic of Peru, PDI Bond, 4.000% due 3/7/17*.................... 17,119,000
------------
See accompanying notes to financial statements.
Page 7
</TABLE>
<PAGE>
T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C
Statement of Investments (unaudited) (continued)
November 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (a) Bonds -- 81.5% (concluded) VALUE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PHILIPPINES -- 4.7%
Republic of the Philippines:
2,300,000+ 8.750% due 10/7/16#............................................. $ 2,231,000
13,000,000+ Treasury Bond, 8.875% due 4/15/08............................... 12,837,500
------------
15,068,500
------------
POLAND -- 1.4%
Republic of Poland:
2,760,000+ PDI Bond, 4.000% due 10/27/14*.................................. 2,594,400
3,000,000+ RSTA Bond, 4.000% due 10/27/24*................................. 2,115,000
------------
4,709,400
------------
RUSSIA -- 6.5%
Russian Government, Global Bond:
5,325,000+ 11.750% due 6/10/03#............................................ 1,863,750
8,425,000 11.000% due 7/24/18............................................. 2,148,375
57,525,000+ 12.750% due 6/24/28............................................. 16,826,063
1,505,187 IAN, 6.625% due 12/15/15*,#..................................... 199,437
------------
21,037,625
------------
SOUTH KOREA -- 2.3%
Export-Import Bank of Korea, Global Bond:
1,100,000+ 7.250% due 6/25/01.............................................. 1,023,440
1,560,0000+ 6.500% due 2/10/02.............................................. 1,413,516
5,800,0000+ Korea Development Bank, Global Bond, 6.625% due 11/21/03.......... 5,098,200
------------
7,535,156
------------
URUGUAY -- 1.1%
Uruguay:
1,565,788+ DCB, Series B, 6.6875% due 2/18/07*............................. 1,299,604
2,647,058+ NMB, 6.8125% due 2/19/06*....................................... 2,263,235
------------
3,562,839
------------
VENEZUELA -- 9.7%
Republic of Venezuela:
452,496+ DCB, Series DL, 6.625% due 12/18/07*............................ 260,185
50,392,658+ FLIRB, Series A, 6.125% due 3/31/07*............................ 27,715,962
607,143+ FLIRB, Series B, 6.125% due 3/31/07*............................ 333,929
4,000,000 Global Bond, 13.625% due 8/15/18................................ 2,870,000
------------
31,180,076
------------
TOTAL BONDS (cost -- $287,181,513)................................ 263,129,895
------------
</TABLE>
See accompanying notes to financial statements.
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T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C
Statement of Investments (unaudited) (continued)
November 30, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (a) Loan Participations++ -- 14.5% VALUE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
The People's Democratic Republic of Algeria:
2,863,633 Tranche A, 7.1875% due 3/4/00* (Chase Manhattan Bank).......... $ 2,527,156
5,727,267 Tranche 1, 6.375% due 9/4/06* (Chase Manhattan Bank)........... 2,806,361
16,000,000 Tranche 3, 6.53125% due 3/4/10* (Chase Manhattan Bank)......... 7,440,000
Government of Jamaica:
222,190 Tranche A, 6.1875% due 10/15/00 (Chase Manhattan Bank)......... 208,859
4,812,500 Tranche B, 6.250% due 11/15/04 (Chase Manhattan Bank,
Morgan Guaranty Trust Company of New York)................... 3,946,250
Kingdom of Morocco:
Yen 708,010,686 Tranche A, 3.0175% due 1/1/09* (Goldman Sachs)................. 4,399,011
28,470,590+ Tranche B, 6.0625% due 1/1/04* (Chase Manhattan Bank,
Morgan Stanley Emerging Markets, Inc.)........................ 24,627,060
4,950,000 Russian Government:
11,250,000+ Principal Loan, 6.625%, due 12/15/20
(Chase Manhattan Bank, Goldman Sachs, ING Bank)............... 815,625
3,000,000 Foreign Trade Obligation due 6/26/07 ## (Bank of America)....... 180,000
------------
TOTAL LOAN PARTICIPATIONS (cost -- $63,159,877)................... 46,950,322
------------
TOTAL BONDS AND LOAN PARTICIPATIONS (cost -- $350,341,390)........ 310,080,217
------------
Repurchase Agreement -- 4.0%
- ----------------------------------------------------------------------------------------------------
12,783,000 Merrill Lynch, 5.25%, dated 11/30/98, $12,784,864 due 12/1/98,
(collateralized by $10,370,000 U.S. Treasury Note, 13.375%
due 8/15/01, valued at $13,040,275) (Cost-- $12,783,000)........ 12,783,000
------------
TOTAL INVESTMENTS -- 100% (Cost -- $363,124,390**)................ $322,863,217
============
See accompanying notes to financial statements.
Page 9
</TABLE>
<PAGE>
T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C
Statement of Investments (unaudited)(concluded)
November 30, 1998
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT NOVEMBER 30, 1998:
<TABLE>
<CAPTION>
CONTRACTS IN EXCHANGE CONTRACTS AT DELIVERY UNREALIZED
TO DELIVER FOR VALUE DATE APPRECIATION
--------------- ------------- -------------- -------- ------------
<S> <C> <C> <C> <C> <C>
Sale.......Yen 589,000,000 US $4,881,081 US $4,804,596 12/28/98 $76,484
</TABLE>
- --------------
(a) Principal denominated in U.S. dollars unless otherwise indicated.
(b) Coupon rate linked to yield to maturity of the Republic of Argentina 11%
Bonds due October 9, 2006, the Republic of Argentina 9.75% Global Bonds
due September 19, 2027 and 30-year US Treasury Bond.
(c) Payment-in-kind security for which all or part of the interest earned
is capitalized as additional principal.
* Rate shown reflects current rate on instrument with variable rates or
step coupon rates.
** Aggregate cost for federal income tax purposes is substantially the same.
+ All or a portion of the security is segregated as collateral pursuant
to a loan agreement. See Note 4.
++ Participation interests were acquired through the financial
institutions indicated parenthetically. See Note 5.
# Pursuant to Rule 144A of the Securities Act of 1933, this security can
only be sold to qualified institutional investors.
## Non-income producing. Security is currently in default.
Abbreviations used in this statement:
BOCON - Bonos De Consolidacion.
DCB - Debt Conversion Bond.
FLIRB - Front Loaded Interest Reduction Bond.
FRN - Floating Rate Note.
IAN - Interest Arrears Note.
IE - Interest Equalization Bond.
IRB - Interest Reduction Bond.
NMB - New Money Bond.
PDI - Past Due Interest.
Peso - Argentina Peso.
RSTA - Revolving Short Term Agreement.
Yen - Japanese Yen.
See accompanying notes to financial statements.
Page 10
<PAGE>
T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C
Statement of Assets and Liabilities
November 30, 1998 (unaudited)
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost -- $350,341,390)....................................... $310,080,217
Repurchase agreement............................................................... 12,783,000
Cash............................................................................... 684
Receivable for securities sold..................................................... 16,735,547
Interest receivable................................................................ 9,001,846
Net unrealized appreciation on forward foreign currency contracts.................. 76,484
Prepaid expenses................................................................... 4,947
------------
Total Assets....................................................................... 348,682,725
------------
LIABILITIES
Loan payable (Note 4).............................................................. 100,000,000
Payable for securities purchased................................................... 12,615,000
Accrued interest expense on loan................................................... 463,804
Accrued management fee (Note 2).................................................... 220,548
Other accrued expenses............................................................. 356,439
------------
Total Liabilities.................................................................. 113,655,791
------------
Net Assets......................................................................... $235,026,934
============
NET ASSETS
Common Stock ($0.001 par value, authorized
100,000,000; 22,512,948 shares outstanding)...................................... $ 22,513
Additional paid-in capital......................................................... 314,733,727
Undistributed net investment income................................................ 9,762,127
Accumulated net realized loss on investments....................................... (49,314,742)
Net unrealized depreciation on investments and foreign currencies.................. (40,176,691)
------------
Net Assets......................................................................... $235,026,934
============
NET ASSET VALUE PER SHARE ($235,026,934 / 22,512,948 shares)......................... $10.44
======
See accompanying notes to financial statements.
Page 11
</TABLE>
<PAGE>
T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C
Statement of Operations
For the Six Months Ended November 30, 1998 (unaudited)
<TABLE>
<S> <C> <C>
INCOME
Interest (includes discount accretion of $6,602,903)............................... $ 25,642,054
EXPENSES
Interest on loan..................................................... $3,163,455
Management fee....................................................... 1,507,586
Custodian............................................................ 85,100
Audit and tax services............................................... 36,445
Legal................................................................ 33,485
Printing............................................................. 26,825
Transfer agent expenses.............................................. 18,685
Directors' fees and expenses......................................... 16,835
Listing fees......................................................... 16,391
Other............................................................... 22,656 4,927,463
---------- ------------
Net Investment Income................................................................ 20,714,591
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS
Net Realized Gain (Loss) on:
Investments...................................................................... (66,831,794)
Foreign currency transactions.................................................... (128,697)
------------
(66,960,491)
------------
Net Change in Unrealized Appreciation (Depreciation) on:
Investments...................................................................... (37,422,768)
Foreign currency contracts and other assets and liabilities
denominated in foreign currencies.............................................. (287,713)
------------
(37,710,481)
------------
Net Loss on Investments and Foreign Currency Transactions............................ (104,670,972)
------------
NET DECREASE IN NET ASSETS FROM OPERATIONS........................................... $(83,956,381)
============
</TABLE>
See accompanying notes to financial statements.
Page 12
<PAGE>
T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C
Statement of Changes in Net Assets
For the Six Months Ended November 30, 1998 (unaudited)
and the Year Ended May 29, 1998
<TABLE>
<CAPTION>
NOVEMBER 30 MAY 29
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment income............................................. $ 20,714,591 $ 36,700,452
Net realized gain (loss) on investments and foreign currency
transactions.................................................... (66,960,491) 28,265,318
Net change in unrealized appreciation (depreciation).............. (37,710,481) (47,077,819)
------------- -------------
Net Increase (Decrease) in Net Assets From Operations............. (83,956,381) 17,887,951
------------- -------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
From net investment income........................................ (18,432,729) (35,068,422)
From net realized capital gains................................... -- (30,462,193)
------------- -------------
Net Decrease in Net Assets From
Dividends and Distributions to Shareholders..................... (18,432,729) (65,530,615)
------------- -------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares issued in reinvestment of dividends
(213,079 and 353,044 shares issued)............................. 2,336,352 5,469,943
------------- -------------
Total Increase (Decrease) in Net Assets............................. (100,052,758) (42,172,721)
------------- -------------
NET ASSETS
Beginning of year................................................. 335,079,692 377,252,413
------------- -------------
End of year (includes undistributed net investment income of
$9,762,127 and $7,480,264, respectively)........................ $235,026,934 $335,079,692
------------- -------------
------------- -------------
</TABLE>
Statement of Cash Flows
For the Six Months Ended November 30, 1998 (unaudited)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Purchases of securities............................................................ $(242,430,527)
Net purchases of short-term investments............................................ (10,565,000)
Proceeds from sales of securities and principal paydowns........................... 256,679,818
-------------
3,684,291
Net investment income.............................................................. 20,714,591
Accretion of discount on investments............................................... (6,602,903)
Interest on payment-in-kind bonds.................................................. (48,875)
Net change in receivables/payables related to operations........................... (1,650,700)
-------------
Net Cash Provided by Operating Activities.......................................... 16,096,404
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from shares issued in reinvestment of dividends........................... 2,336,352
Dividends and distributions paid................................................... (18,432,729)
-------------
Net Cash Used by Financing Activities.............................................. (16,096,377)
-------------
Net Increase in Cash................................................................. 27
Cash at Beginning of Year............................................................ 657
-------------
Cash at End of Year.................................................................. $ 684
-------------
-------------
See accompanying notes to financial statements.
Page 13
</TABLE>
<PAGE>
T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C
Notes to Financial Statements (unaudited)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Emerging Markets Income Fund II Inc (the "Fund") was incorporated in
Maryland on April 27, 1993 and is registered as a non-diversified, closed-end,
management investment company under the Investment Company Act of 1940, as
amended. The Board of Directors authorized 100 million shares of $.001 par value
common stock. The Fund's primary investment objective is to seek high current
income through investments in selected debt securities of emerging markets
countries. As a secondary objective, the Fund seeks capital appreciation.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles
("GAAP"). The preparation of financial statements in accordance with GAAP
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results may differ
from those estimates.
(a) Securities valuation. In valuing the Fund's assets, all securities and
options for which market quotations are readily available are valued (i) at
the last sale price prior to the time of determination if there was a sale
on the date of determination, (ii) at the mean between the last current bid
and asked prices if there was no sales price on such date and bid and asked
quotations are available, and (iii) at the bid price if there was no sales
price on such date and only bid quotations are available. Publicly traded
foreign government debt securities are typically traded internationally in
the over-the-counter market, and are valued at the mean between the last
current bid and asked price as of the close of business of that market.
However, where the spread between bid and asked price exceeds five percent
of the par value of the security, the security is valued at the bid price.
Securities may also be valued by independent pricing services which use
prices provided by market-makers or estimates of market values obtained
from yield data relating to instruments or securities with similar
characteristics. Short-term investments having a maturity of 60 days or
less are valued at amortized cost, unless the Board of Directors determines
that such valuation does not constitute fair value. Securities for which
reliable quotations are not readily available and all other securities and
assets are valued at fair value as determined in good faith by, or under
procedures established by, the Board of Directors.
(b) Securities transactions and investment income. Securities transactions
are recorded on the trade date. Interest income is accrued on a daily
basis. Discount on securities purchased is accreted on an effective yield
basis over the life of the security. The Fund uses the specific
identification method for determining realized gain or loss on investments
sold.
(c) Foreign currency translation. The books and records of the Fund are
maintained in U.S. dollars. Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at the date of valuation using the 12:00 noon rate of
exchange reported by Reuters. Purchases and sales of portfolio securities
and income and expense items denominated in foreign currencies are
translated into U.S. dollars at rates of exchange prevailing on the
respective dates of such transactions. Net realized gains and losses on
foreign currency transactions represent net gains and losses from sales and
maturities of forward currency contracts, disposition of foreign
currencies, currency gains and losses realized between the trade and
settlement dates on securities transactions and the difference between the
amount of net investment income accrued and the U.S. dollar equivalent
amount actually received. The Fund does not isolate that portion of gains
and losses on investments which is due to changes in foreign exchange rates
from that which is due to changes in market prices of the
Page 14
<PAGE>
T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C
Notes to Financial Statements (unaudited) (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
securities. Such fluctuations are included with the net realized and
unrealized gain or loss from investments. However, pursuant to U.S. federal
income tax regulations, certain net foreign exchange gains/losses included
in realized gain/loss are included in or are a reduction of ordinary income
for federal income tax purposes.
(d) Federal income taxes. It is the Fund's intention to continue to meet
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its taxable
income and capital gains, if any, to its shareholders. Therefore, no
federal income tax or excise tax provision is required.
(e) Repurchase agreements. When entering into repurchase agreements, it is
the Fund's policy to take possession, through its custodian, of the
underlying collateral and to monitor its value at the time the arrangement
is entered into and during the term of the repurchase agreement to ensure
that it equals or exceeds the repurchase price. In the event of default of
the obligation to repurchase, the Fund has the right to liquidate the
collateral and apply the proceeds in satisfaction of the obligation. Under
certain circumstances, in the event of default or bankruptcy by the other
party to the agreement, realization and/or retention of the collateral may
be subject to legal proceedings.
(f) Distribution of income and gains. The Fund declares and pays
distributions to shareholders quarterly from net investment income. Net
realized gains, if any, in excess of loss carryovers are expected to be
distributed annually. Dividends and distributions to shareholders are
recorded on the ex-dividend date. The amount of dividends and distributions
from net investment income and net realized gains are determined in
accordance with federal income tax regulations, which may differ from
generally accepted accounting principles due primarily to differences in
the treatment of foreign currency gains/losses and deferral of wash sales
and post-October losses incurred by the Fund. These "book/tax" differences
are either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within
the capital accounts based on their federal income tax basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital
gains for financial reporting purposes but not for tax purposes are
reported as distributions in excess of net investment income or
distributions in excess of net realized capital gains. To the extent they
exceed net investment income and net realized capital gains for tax
purposes, they are reported as tax return of capital.
(g) Forward foreign currency contracts. A forward foreign currency contract
is a commitment to purchase or sell a foreign currency at a future date at
a negotiated forward rate. The contract is marked to market to reflect the
change in the currency exchange rate. The change in market value is
recorded by the Fund as an unrealized gain or loss. The Fund records a
realized gain or loss on delivery of the currency or at the time the
forward contract is extinguished (compensated) by entering into a closing
transaction prior to delivery. This gain or loss, if any, is included in
net realized gain (loss) on foreign currency transactions.
Page 15
<PAGE>
T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C
Notes to Financial Statements (unaudited) (continued)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONCLUDED)
(h) Option contracts. When the Fund writes or purchases a call or a put
option, an amount equal to the premium received or paid by the Fund is
recorded as a liability or asset, the value of which is marked-to-market
daily to reflect the current market value of the option. When the option
expires, the Fund realizes a gain or loss equal to the amount of the
premium received or paid. When the Fund exercises an option or enters into
a closing transaction by purchasing or selling an offsetting option, it
realizes a gain or loss without regard to any unrealized gain or loss on
the underlying security. When a written call option is exercised, the Fund
realizes a gain or loss from the sale of the underlying security and the
proceeds from such sale are increased by the premium originally received on
the option.
(i) Cash flow information. The Fund invests in securities and distributes
dividends from net investment income and net realized gains from investment
transactions which are paid in cash. These activities are reported in the
Statement of Changes in Net Assets. Additional information on cash receipts
and cash payments is presented in the Statement of Cash Flows. For the six
months ended November 30, 1998, the Fund paid interest expense of
$3,098,004.
2. MANAGEMENT AND ADVISORY FEES AND OTHER TRANSACTIONS
The Fund has entered into a management agreement with Value Advisors
LLC (the "Investment Manager"), a subsidiary of PIMCO Advisors L.P.,
pursuant to which the Investment Manager, among other things, supervises
the Fund's investment program and monitors the performance of the Fund's
service providers.
The Investment Manager and the Fund have entered into an investment
advisory and administration agreement with Salomon Brothers Asset
Management Inc (the "Investment Adviser"), a wholly-owned subsidiary of
Salomon Smith Barney Holdings Inc.("SSBH"), pursuant to which the
Investment Adviser provides investment advisory and administrative services
to the Fund. The Investment Adviser is responsible on a day-to-day basis
for the management of the Fund's portfolio in accordance with the Fund's
investment objectives and policies and for making decisions to buy, sell,
or hold particular securities and is responsible for day-to-day
administration of the Fund.
The Fund pays the Investment Manager a monthly fee at an annual rate of
1.20% of the Fund's average weekly net assets for its services, out of
which the Investment Manager pays the Investment Adviser a monthly fee at
an annual rate of .70% of the Fund's average weekly net assets for its
services.
At November 30, 1998 the Investment Adviser owned 4,849 shares of the
Fund. Certain officers and/or directors of the Fund are officers and/or
directors of the Investment Manager or the Investment Adviser.
All Officers and two Directors of the Fund are employees of the
Investment Manager and/or the Investment Adviser.
Page 16
<PAGE>
T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C
Notes to Financial Statements (unaudited) (continued)
3. PORTFOLIO ACTIVITY AND TAX INFORMATION
Cost of purchases and proceeds from sales of securities, excluding
short-term investments for the six months ended November 30, 1998 aggregated
$247,728,520 and $255,956,538, respectively. The federal income tax cost basis
of the Fund's investments at November 30, 1998 was substantially the same as the
cost basis for financial reporting. Gross unrealized appreciation and
depreciation amounted to $12,577,059 and $52,838,232, respectively, resulting in
a net unrealized depreciation on investments of $40,261,173.
4. BANK LOAN
The Fund has borrowed $100,000,000 pursuant to a secured loan agreement
(the "Loan Agreement") with Morgan Guaranty Trust Company of New York. The
interest rate on the loan is equal to six-month LIBOR plus 0.5% and the maturity
date is April 30, 1999. The collateral for the loan was valued at $213,785,514
on November 30, 1998 and is being held in a segregated account by the Fund's
custodian. In accordance with the terms of the loan agreement, the Fund must
maintain a level of collateral to debt of not less than 190%.
5. LOAN PARTICIPATIONS/ASSIGNMENTS
The Fund invests in fixed and floating rate loans arranged through private
negotiations between a foreign sovereign entity and one or more financial
institutions ("lenders"). The Fund's investment in any such loan may be in the
form of a participation in or an assignment of the loan. The market value of the
Fund's loan participations at November 30, 1998 was $46,950,322.
In connection with purchasing loan participations, the Fund generally will
have no right to enforce compliance by the borrower with the terms of the loan
agreement relating to the loan, nor any rights of set-off against the borrower,
and the Fund may not benefit directly from any collateral supporting the loan in
which it has purchased the participation. As a result, the Fund will assume the
credit risk of both the borrower and the lender that is selling the
participation. In the event of the insolvency of the lender selling the
participation, the Fund may be treated as a general creditor of the lender and
may not benefit from any set-off between the lender and the borrower.
When the Fund purchases assignments from lenders, the Fund will acquire
direct rights against the borrower on the loan, except that under certain
circumstances such rights may be more limited than those held by the assigning
lender.
The Fund may have difficulty disposing of participations/assignments
because the market for certain instruments may not be highly liquid.
6. "WHEN AND IF" ISSUED BONDS
"When and if" issued bonds are recorded as investments in the Fund's
portfolio and marked-to-market to reflect the current value of the bonds. When
the Fund sells a "when and if" issued bond, an unrealized gain or loss is
recorded equal to the difference between the selling price and purchase cost of
the bond. Settlement of trades (i.e., receipt and delivery) of the "when and if"
issued bond is contingent upon the successful issuance of such bond. In the
event its sponsor is unable to successfully issue the security, all trades in
"when and if" issued bonds become null and void, and, accordingly, the Fund will
reverse any gain or loss recorded on such transactions.
Page 17
<PAGE>
T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C
Notes to Financial Statements (unaudited) (concluded)
7. CREDIT AND MARKET RISK
The yields of emerging market debt obligations reflect, among other things,
perceived credit risk. The Fund's investment in securities rated below
investment grade typically involves risks not associated with higher rated
securities including, among others, overall greater risk of timely and ultimate
payment of interest and principal, greater market price volatility and less
liquid secondary market trading. The consequences of political, social, economic
or diplomatic changes may have disruptive effects on the market prices of
investments held by the Fund. The Fund's investment in non-dollar-denominated
securities may also result in foreign currency losses caused by devaluations and
exchange rate fluctuations. At November 30, 1998, the Fund has a concentration
risk in sovereign debt of emerging market countries.
8. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Fund enters into forward foreign currency contracts ("forward
contracts") to facilitate settlement of foreign currency denominated portfolio
transactions or to manage foreign currency exposure associated with foreign
currency denominated securities. Forward contracts involve elements of market
risk in excess of the amount reflected in the Statement of Assets and
Liabilities. The Fund bears the risk of an unfavorable change in the foreign
exchange rate underlying the forward contract. Risks may also arise upon
entering into these contracts from the potential inability of the counterparties
to meet the terms of their contracts. As of November, 30, 1998, the Fund has an
outstanding contract to sell 589,000,000 Japanese Yen for US $4,881,081 for a
scheduled settlement of December 28, 1998.
The Fund enters into option transactions to hedge against possible changes
in the market value of certain securities held. The risk in writing a covered
call option is that the Fund may forego the opportunity of profit if the market
price of the underlying security increases and the option is exercised. In
addition, there is the risk that the Fund may not be able to enter into a
closing transaction because of an illiquid secondary market. As of November 30,
1998, the Fund did not have any outstanding option transactions.
9. DIVIDEND SUBSEQUENT TO NOVEMBER 30, 1998
On December 1, 1998, the Board of Directors of the Fund declared a common
stock dividend of $0.566 per share from net investment income, and distributions
of $0.407 per share from realized net short-term capital gains and $0.469 per
share from realized net long-term capital gains. The dividend and distributions
were payable on December 24, 1998 to shareholders of record December 15, 1998.
Page 18
<PAGE>
T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C
Financial Highlights
Selected data for a share of common stock outstanding throughout the period:
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30, YEAR ENDED
----------------------------------------
1998 MAY 29, MAY 31, MAY 31, MAY 31,
(UNAUDITED) 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period...... $15.03 $17.19 $13.54 $10.77 $12.97
------ ------ ------ ------ ------
Net investment income..................... 0.92 1.68 1.74 1.92 1.69
Net realized gain (loss) and change in
unrealized appreciation (depreciation)
on securities and foreign currency
translations........................... (4.68) (0.86) 3.56 2.50 (2.24)
------ ------ ------ ------ ------
Total from investment operations.......... (3.76) 0.82 5.30 4.42 (0.55)
------ ------ ------ ------ ------
Dividends to shareholders from net
investment income...................... (0.83) (1.59) (1.50) (1.29) (1.36)
Dividends to shareholders from net
realized capital gains................. -- (1.39) (0.15) (0.36) (0.29)
------ ------ ------ ------ ------
Total dividends and
distributions to shareholders.......... (0.83) (2.98) (1.65) (1.65) (1.65)
------ ------ ------ ------ ------
Net increase (decrease) in net asset value (4.59) (2.16) 3.65 2.77 (2.20)
------ ------ ------ ------ ------
Net asset value, end of period............ $10.44 $15.03 $17.19 $13.54 $10.77
====== ====== ====== ====== ======
Per share market value, end of period..... $11.50 $15.4375 $15.75 $13.88 $11.88
====== ======== ====== ====== ======
Total investment return based on market
price per share (a).................... -19.78% 17.51% 26.84% 32.72% -2.18%
Ratios to Average Net Assets:
Total expenses, including interest
expense............................ 3.94%(b) 3.14% 3.34% 4.21% 4.41%
Total expenses, excluding interest
expense (operating expenses)....... 1.41%(b) 1.35% 1.37% 1.43% 1.45%
Net investment income.................. 16.55%(b) 10.16% 11.29% 16.20% 15.42%
Supplemental Data:
Net assets, end of period (000)........ $235,027 $335,080 $377,252 $295,949 $235,372
Portfolio turnover rate................ 74% 136% 172% 94% 58%
Bank loan outstanding, end of period
(000)................................ $100,000 $100,000 $100,000 $100,000 $100,000
Interest rate on bank loan, end of
period............................... 5.57859% 6.28125% 6.50% 6.60156% 7.5625%
Weighted average bank loan (000)....... $100,000 $100,000 $100,000 $100,000 $100,000
Weighted average interest rate......... 6.33%(b) 6.46% 6.67% 7.21% 7.12%
- -----------
(a) Dividends are assumed, for purposes of this calculation, to be reinvested at
prices obtained under the Fund's dividend reinvestment plan.
(b) Annualized.
Page 19
</TABLE>
<PAGE>
T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C
Selected Quarterly Financial Information
Summary of quarterly results of operations (unaudited)*
<TABLE>
<CAPTION>
NET REALIZED GAIN
(LOSS) & CHANGE IN
NET INVESTMENT NET UNREALIZED
INCOME APPRECIATION (DEPRECIATION)
PER PER
QUARTERS ENDED TOTAL SHARE TOTAL SHARE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
August 31, 1994............................. $ 8,536 $ .39 $ (5,787) $ (.27)
November 30, 1994........................... 9,293 .42 (21,503) (.98)
February 28, 1995........................... 9,157 .42 (53,616) (2.45)
May 31, 1995................................ 10,039 .46 31,849 1.46
August 31, 1995............................. 10,387 .48 3,358 .15
November 30, 1995........................... 9,897 .45 10,421 .48
February 29, 1996........................... 10,271 .47 24,630 1.13
May 31, 1996................................ 11,462 .52 16,215 .74
August 31, 1996............................. 10,367 .47 15,085 .69
November 30, 1996........................... 9,927 .46 39,475 1.80
February 28, 1997........................... 8,948 .40 19,218 .88
May 31, 1997................................ 9,003 .41 4,101 .19
August 31, 1997............................. 8,485 .39 17,668 .80
November 30, 1997........................... 8,725 .39 (26,874) (1.21)
February 27, 1998........................... 9,829 .45 5,778 .25
May 29, 1998................................ 9,661 .45 (15,385) (.70)
August 31, 1998............................. 9,371 .42 (170,243) (7.62)
November 30, 1998........................... 11,344 .50 65,572 2.94
</TABLE>
- ------------
*Totals expressed in thousands of dollars except per share amounts.
Page 20
<PAGE>
T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C
Other Information (unaudited)
Year 2000. The investment management services provided to the Fund by the
Investment Adviser depend in large part on the smooth functioning of its
computer systems. Many computer software systems in use today cannot recognize
the year 2000, but revert to 1900 or some other date, due to the manner in which
the dates were encoded or calculated. The capability of these systems to
recognize the year 2000 could have a negative impact on the Investment Adviser's
provision of investment management services, including handling of securities
trades, pricing and account services. The Investment Adviser has advised the
Fund that it has been reviewing all of their computer systems and actively
working on necessary changes to its systems to prepare for the year 2000 and
expects that given the extensive testing which it is undertaking its systems
will be year 2000 compliant before such date. In addition, the Investment
Adviser has been advised by certain of the Fund's service providers that they
are also in the process of modifying their systems with the same goal. There
can, however, be no assurance that the Investment Adviser or any other service
provider will be successful in achieving year 2000 compliance, or that
interaction with other non-complying computer systems will not impair services
to the Fund at that time.
Page 21
<PAGE>
T H E E M E R G I N G M A R K E T S I N C O M E F U N D I I I N C
Directors
CHARLES F. BARBER
Consultant; formerly Chairman,
ASARCO Incorporated
WILLIAM D. CVENGROS
Co-Chairman of the Board;
Chief Executive Officer,
President and Member of the
Board of Value Advisors LLC and
Chief Executive Officer and
President of PIMCO Advisors L.P.
LESLIE H. GELB
President, The Council
on Foreign Relations
HEATH B. MCLENDON
Co-Chairman of the Board
Managing Director, Smith Barney Inc.
President and Director, Mutual
Management Corp. and
Travelers Investment Advisors, Inc.
Chairman, Smith Barney
Strategy Advisors Inc.
RIORDAN ROETT
Professor and Director,
Latin American Studies Program,
Paul H. Nitze School of Advanced
International Studies,
Johns Hopkins University
JESWALD W. SALACUSE
Henry J. Braker Professor of
Commercial Law, and formerly Dean,
The Fletcher School of Law & Diplomacy
Tufts University
Officers
WILLIAM D. CVENGROS
Co-Chairman of the Board
HEATH B. MCLENDON
Co-Chairman of the Board
STEPHEN J. TREADWAY
President
LEWIS E. DAIDONE
Executive Vice President & Treasurer
THOMAS K. FLANAGAN
Executive Vice President
NEWTON B. SCHOTT, JR.
Executive Vice President
PETER J. WILBY
Executive Vice President
ANTHONY PACE
Assistant Controller
The Emerging Markets
Income Fund II Inc
7 World Trade Center
New York, New York 10048
For information call (toll free)
1-888-777-0102
INVESTMENT MANAGER
Value Advisors LLC
800 Newport Center Drive
Newport Beach, California 92660
INVESTMENT ADVISER
Salomon Brothers Asset Management Inc
7 World Trade Center
New York, New York 10048
CUSTODIAN
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
DIVIDEND DISBURSING AND TRANSFER AGENT
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
LEGAL COUNSEL
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
NEW YORK STOCK EXCHANGE SYMBOL
EDF
<PAGE>
The Emerging Markets
Income Fund II Inc
Semi-Annual Report
November 30, 1998
- -------------------------------------------------------------
The Emerging Markets Income Fund II Inc
--------------------------------------------
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
BULK RATE
U.S. POSTAGE
PAID
STATEN ISLAND, NY
PERMIT No. 169
