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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
The Emerging Markets
Floating Rate Fund Inc.
Semi-Annual Report
AUGUST 31, 1996
[GRAPHIC]
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THE EMERGING MARKETS FLOATING RATE FUND INC.
October 18, 1996
Dear Shareholders:
We are pleased to provide this semi-annual report for The Emerging Markets
Floating Rate Fund Inc. (the 'Fund') as of August 31, 1996. Included are market
commentary, a statement of the Fund's investments as of August 31, 1996 and
financial statements for the six months ended August 31, 1996.
The net asset value of the Fund increased from $14.58 per share on May 31, 1996
to $15.01 per share on August 31, 1996. Dividends of $0.3975 per share were
declared during the quarter. Assuming reinvestment of these dividends in
additional shares of the Fund, the net asset value return for the quarter ended
August 31, 1996 was 5.78%. In comparison, the Salomon Brothers Brady Bond Index
returned 6.85% during the same period.
The Fund continued to provide investors with stable current income through its
broad exposure to the world's emerging markets sovereign and corporate floating
rate debt securities. On August 31, 1996, the Fund was invested in floating rate
instruments in 15 countries. The Fund, as a percentage of total investments on
August 31, 1996, was approximately 93% invested in securities of emerging market
issuers, including obligations of sovereign governments and companies. The
remainder of the Fund's assets was invested primarily in U.S. high-yield
securities and short-term investments.
EMERGING MARKETS DEBT
There was a decidedly positive tone to the emerging debt markets by the end of
August 1996, as political and fundamental economic developments continued to
promote growth throughout most of the emerging market nations.
Latin America The Mexican Finance Ministry confirmed late in July that it
would repay $7 billion of its remaining $10.5 billion in emergency
borrowings from the U.S. Treasury as well as $1 billion in debt owed to the
International Monetary Fund (the 'IMF'). The repayments, financed in part
with a $6 billion floating-rate note issue, are nearly double what Mexico
had initially planned. Since these bonds will be repaid from oil-export
revenues of government-owned Petroleos Mexicanos, flowing directly to the
Federal Reserve Bank of New York, the issue was rated Baa-3 by Moody's
Investors Service and BBB- by Standard and Poor's, both higher ratings than
garnered by Mexico itself.
In other positive news, Mexico reported a surge in second-quarter economic
growth, breaking a five-quarter string of declines. A strong export sector
is credited with reviving demand for goods and services in the local
economy.
The Venezuelan government approved the creation of a Debt Rescue Fund that
will set aside certain oil revenues to pay down foreign debt. Also, the IMF
approved a $1.4 billion standby credit, signifying Venezuela's first formal
credit arrangement since 1989. As a further positive sign, Venezuela's
economy is estimated to rebound to a 4% annual growth rate in 1997 from a
negative 1.1% inflation-adjusted growth rate this year, according to the
IMF. The IMF's visit to Caracas in August highlighted the government's
progress towards many of its economic reform targets.
Eastern Europe Russia was the emerging debt market's top performer in
August, despite continued speculation over the health of President Boris
Yeltsin. Yeltsin soundly beat his Communist rival in a runoff presidential
election in July but immediately departed Moscow to
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THE EMERGING MARKETS FLOATING RATE FUND INC.
receive care for his ailing condition. Separately, the Russian Central Bank
moved to draw more foreign investors into its treasury-bill market in a bid
to lower the country's rising interest payments. Foreign investors will now
be allowed greater flexibility in investing in ruble-denominated treasury
bills, including easier repatriation of profits.
Poland enjoyed another successful issue with its July 9 release of a
five-year, 250 million deutschemark Eurobond, priced very competitively
over comparable German government bonds. This pricing, along with recent
acceptance of Poland into the Organization for Economic Cooperation and
Development and its strong trade relations with Germany, are believed to be
among the primary reasons German investors accounted for one-third of the
bond issue's placement.
In Bulgaria, the IMF approved a fourth standby loan for the country in
July. This loan is hoped to pave the way for additional external financial
support from the World Bank and bilateral lenders. Of course, the success
of Bulgaria's IMF and World Bank loan programs is dependent on the nation's
ongoing progress towards recapitalization and reform of its banking system.
Interest payments totaling US$125 million on Brady bonds were paid in July
as scheduled.
DIVIDEND REINVESTMENT PLAN
For those shareholders not currently participating in the Fund's Dividend
Reinvestment Plan (the 'Plan'), we encourage you to do so. The Plan offers a
prompt, simple and inexpensive way to put your dividends and distributions to
work through reinvestment in additional shares of capital stock of the Fund.
Shareholders who are not currently participating in the Plan may enroll in the
Plan by completing an Authorization Card attached to the Terms and Conditions of
the Plan, which can be obtained by contacting American Stock Transfer & Trust
Company at 1-800-937-5449 (1-718-921-8200 if you are calling from within New
York City). Shareholders who initially purchased shares of the Fund on or after
September 6, 1996 are automatically enrolled in the Plan. If your shares are
held in the name of a broker or nominee, you should contact your broker or
nominee for more information about your ability to participate in the Plan.
ANNUAL SHAREHOLDERS MEETING
The Fund held its annual shareholders meeting on June 20, 1996. At the meeting,
shareholders elected each of the nominees proposed for election to the Fund's
Board of Directors and ratified the selection of Price Waterhouse LLP as the
independent accountants of the Fund. The following table provides information
concerning the matters voted on at the meeting:
1. Election of Directors
<TABLE>
<CAPTION>
NOMINEES VOTES FOR VOTES WITHHELD
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<S> <C> <C>
Riordan Roett 3,868,728 31,965
Jeswald W. Salacuse 3,870,228 30,465
</TABLE>
2. Ratification of Price Waterhouse LLP as the Independent Accountants of
the Fund
<TABLE>
<CAPTION>
VOTES FOR VOTES AGAINST VOTES ABSTAINED UNVOTED
- ----------------------------------------------------------------------
<S> <C> <C> <C>
3,854,296 14,955 31,441 1
</TABLE>
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THE EMERGING MARKETS FLOATING RATE FUND INC.
* * *
As we continue to pursue the Fund's investment objective of maintaining a high
level of current income by investing primarily in floating rate securities of
emerging market sovereign and corporate issuers, we appreciate your ongoing
interest in the Fund. In an effort to provide more timely information concerning
the Fund, shareholders may call 1-800-421-4777 for a recorded periodic update of
the developments affecting the markets in which the Fund invests, as well as the
Fund's current net asset value, portfolio manager comments and other information
regarding the Fund's portfolio holdings and allocations. Although the Fund will
continue to issue a semi-annual and annual report to shareholders, a press
release containing financial highlights and other Fund information will be
issued in lieu of a first and third quarter interim report. This will result in
some cost savings for the Fund while still providing shareholders with current
information about the Fund.
Sincerely,
<TABLE>
<S> <C>
/s/ Alan Rappaport /s/ Michael S. Hyland
Alan Rappaport Michael S. Hyland
Chairman of the Board President
</TABLE>
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THE EMERGING MARKETS FLOATING RATE FUND INC.
- -------------------------------------------------
Statement of Investments
August 31, 1996 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) Sovereign Bonds -- 78.0% (NOTE 2)
<C> <S> <C>
- ----------------------------------------------------------------------------------------------------------
Argentina -- 8.6%
$ 6,881 Republic of Argentina, FRB, 6.3125%, 3/31/05*................................... $ 5,358,189
-----------
Brazil -- 17.1%
5,484 Federal Republic of Brazil, C Bond, 8.00%, 4/15/14**............................ 3,543,852
10,000 Federal Republic of Brazil, DCB, 6.5625%, 4/15/12*.............................. 7,084,375
-----------
10,628,227
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Bulgaria -- 4.0%
8,000 Republic of Bulgaria, FLIRB, Series A, 2.25%, 7/28/12*.......................... 2,470,000
-----------
Costa Rica -- 3.1%
2,084 Costa Rica, Interest Bond, Series B, 6.34375%, 5/21/05*......................... 1,916,935
-----------
Ecuador -- 4.7%
6,347 Republic of Ecuador, PDI Bond, 6.50%, 2/27/15*,**............................... 2,951,321
-----------
Mexico -- 7.8%
United Mexican States, Discount Bond, Series B, 6.39062%, 12/31/19
2,000 (including 3,076,000 rights)*................................................. 1,650,000
United Mexican States, Discount Bond, Series C, 6.35156%, 12/31/19
1,900 (including 2,923,000 rights)*................................................. 1,567,500
1,700 United Mexican States, Global Bond, 11.50%, 5/15/26............................. 1,635,190
-----------
4,852,690
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Panama -- 3.5%
1,846 Republic of Panama, FRN, 6.62891%, 5/10/02*..................................... 1,770,006
750 Republic of Panama, IRB, 3.50%, 7/17/14*........................................ 450,000
-----------
2,220,006
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Peru -- 4.5%
6,000 Republic of Peru, FLIRB, 3.25%, 12/29/49*....................................... 2,812,500
-----------
Philippines -- 4.6%
3,000 Republic of the Philippines, DCB, Series B, 6.50%, 12/01/09*.................... 2,859,375
-----------
</TABLE>
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See accompanying notes to financial statements.
PAGE 1
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THE EMERGING MARKETS FLOATING RATE FUND INC.
- -------------------------------------------------
Statement of Investments (continued)
August 31, 1996 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) Sovereign Bonds (concluded) (NOTE 2)
- ----------------------------------------------------------------------------------------------------------
<C> <S> <C>
Poland -- 4.6%
$ 1,550 Republic of Poland, Discount Bond, 6.4375%, 10/27/24*........................... $ 1,492,359
1,750 Republic of Poland, PDI Bond, 3.75%, 10/27/14*.................................. 1,381,406
-----------
2,873,765
-----------
Russia -- 2.4%
2,500 Russia, IAN, 12/31/15*.......................................................... 1,467,186
-----------
Uruguay -- 3.0%
2,000 Uruguay Debt Conversion Bond, 6.4375%, 2/18/07*................................. 1,865,000
-----------
Venezuela -- 10.1%
2,750 Republic of Venezuela, FLIRB, Series A, 6.375%, 3/31/07*........................ 2,119,219
5,500 Republic of Venezuela, DCB, 6.5625%, 12/18/07*.................................. 4,166,250
-----------
6,285,469
-----------
Total Sovereign Bonds (cost $43,550,158)........................................ 48,560,663
-----------
Corporate Bonds -- 6.2%
- ----------------------------------------------------------------------------------------------------------
Consumer Non-Cyclicals -- 3.3%
2,000 Empresa Distribuidora Sur S.A., 9.50%, 8/16/97*................................. 2,025,000
-----------
Industrial/Manufacturing -- 1.4%
1,000 Venture Holdings Trust, 9.75%, 4/01/04.......................................... 875,000
-----------
Transportation -- 1.5%
1,000 Petro PSC Properties, 12.50%, 6/01/02........................................... 955,000
-----------
Total Corporate Bonds (cost $3,909,168)......................................... 3,855,000
-----------
</TABLE>
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See accompanying notes to financial statements.
PAGE 2
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THE EMERGING MARKETS FLOATING RATE FUND INC.
- -------------------------------------------------
Statement of Investments (concluded)
August 31, 1996 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) Loan Participations -- 11.8% (NOTE 2)
- ----------------------------------------------------------------------------------------------------------
<C> <S> <C>
Republic of Jamaica, Tranche A, 6.50%, 10/15/00*
$ 1,222 (Chase Manhattan, New York)T.................................................. $ 1,191,667
Kingdom of Morocco, Tranche B, 6.4375%, 1/01/04*
7,059 (Morgan Stanley Emerging Markets Inc, Merrill Lynch)T......................... 6,141,177
-----------
Total Loan Participations (cost $6,770,372)..................................... 7,332,844
-----------
Warrants(a)
- ----------------------------------------------------------------------------------------------------------
Petro PSC Properties (Exercise price of $0 expiring on 7/01/97. Warrants are
1,000 exchangeable for $55,380 principal amount of Notes or an equivalent number of
Warrants shares.) (cost $35,535)....................................................... 38,000
-----------
Repurchase Agreement -- 3.7%
- ----------------------------------------------------------------------------------------------------------
J.P. Morgan, 5.22%, cost $2,283,000, dated 8/30/96, $2,284,324 due 9/03/96,
(collateralized by $2,504,000 Zero Coupon U.S. Treasury Strips due 11/15/97,
$ 2,283 valued at $2,328,720)......................................................... 2,283,000
-----------
Total Investments -- 99.7% (cost $56,548,233).................................. 62,069,507
-----------
Cash and Other Assets in Excess of Liabilities -- .3%.......................... 161,853
-----------
Net Assets -- 100.0%
(equivalent to $15.01 per share on 4,147,134 common shares outstanding)....... $62,231,360
-----------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
* Rate shown reflects current rate on instrument with variable rate or step
coupon rates.
** Payment-in-kind security for which part of the interest earned is
capitalized as additional principal.
T Participation interests were acquired through the financial institutions
indicated parenthetically.
(a) Non-income producing security.
DCB -- Debt Conversion Bond.
FLIRB -- Front Loaded Interest Reduction Bond.
FRB -- Floating Rate Bond.
FRN -- Floating Rate Note.
IAN -- Interest in Arrears Note.
IRB -- Interest Reduction Bond.
PDI -- Past Due Interest.
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
PAGE 3
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THE EMERGING MARKETS FLOATING RATE FUND INC.
- ---------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1996 (unaudited)
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost -- $56,548,233)................................................... $62,069,507
Cash........................................................................................... 1,838,284
Receivable for investments sold................................................................ 1,168,125
Interest receivable............................................................................ 1,317,846
Unamortized organization expenses.............................................................. 56,792
Prepaid expenses............................................................................... 5,246
-----------
Total assets........................................................................... 66,455,800
-----------
LIABILITIES
Payable for investments purchased.............................................................. 4,062,500
Accrued management fee (Note 3)................................................................ 57,454
Accrued audit and tax return preparation fees.................................................. 32,751
Accrued legal fee.............................................................................. 22,423
Accrued printing and mailing fees.............................................................. 17,294
Other accrued expenses......................................................................... 32,018
-----------
Total liabilities...................................................................... 4,224,440
-----------
NET ASSETS
Common Stock ($.001 par value, authorized 100,000,000 shares; 4,147,134 shares outstanding).... 4,147
Additional paid-in capital..................................................................... 57,445,100
Undistributed net investment income............................................................ 278,557
Accumulated net realized loss on investments................................................... (1,017,718)
Net unrealized appreciation on investments..................................................... 5,521,274
-----------
Net assets............................................................................. $62,231,360
-----------
NET ASSET VALUE PER SHARE ($62,231,360 [div] 4,147,134 shares)................................. $ 15.01
-----------
</TABLE>
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See accompanying notes to financial statements.
PAGE 4
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THE EMERGING MARKETS FLOATING RATE FUND INC.
- ------------------------------------------------
Statement of Operations
For the Six Months Ended August 31, 1996 (unaudited)
<TABLE>
<S> <C> <C>
INCOME
Interest (includes discount accretion of $1,124,041).............................. $3,856,418
EXPENSES
Management fee.................................................................... $329,994
Audit and tax services............................................................ 29,263
Transfer agent.................................................................... 17,881
Directors' fees and expenses...................................................... 15,311
Legal............................................................................. 12,951
Amortization of deferred organization expenses.................................... 11,187
Printing.......................................................................... 11,061
Custodian......................................................................... 8,510
Listing fee....................................................................... 7,912
Other............................................................................. 6,750 450,820
-------- ----------
Net investment income............................................................. 3,405,598
----------
NET REALIZED AND UNREALIZED GAIN
Net Realized Gain on Investments.................................................. 461,419
Change in Net Unrealized Appreciation on Investments.............................. 5,030,185
----------
Net realized gain and change in net unrealized appreciation....................... 5,491,604
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS........................................ $8,897,202
----------
</TABLE>
- ----------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, YEAR ENDED
1996 FEBRUARY 29,
(UNAUDITED) 1996
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income.................................................. $ 3,405,598 $ 6,871,147
Net realized gain/(loss) on investments................................ 461,419 (1,163,346)
Change in net unrealized appreciation.................................. 5,030,185 8,401,614
--------------- ------------
Net increase in net assets from operations............................. 8,897,202 14,109,415
--------------- ------------
DIVIDENDS
From net investment income............................................. (3,296,973) (6,925,715)
--------------- ------------
Total increase in net assets........................................... 5,600,229 7,183,700
NET ASSETS
Beginning of period.................................................... 56,631,131 49,447,431
--------------- ------------
End of period (includes undistributed net investment income of $278,557
and $169,932, respectively).......................................... $62,231,360 $56,631,131
--------------- ------------
</TABLE>
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See accompanying notes to financial statements.
PAGE 5
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THE EMERGING MARKETS FLOATING RATE FUND INC.
- --------------------------------------------------------
Notes to Financial Statements
(unaudited)
Note 1. Organization
The Emerging Markets Floating Rate Fund Inc. (the 'Fund') was incorporated in
Maryland on January 21, 1994 and is registered as a non-diversified, closed-end,
management investment company under the Investment Company Act of 1940, as
amended. The Fund commenced operations on March 25, 1994. The Fund seeks to
maintain a high level of current income by investing primarily in a portfolio of
floating rate debt securities of emerging market sovereign and corporate
issuers. As a secondary objective, the Fund seeks capital appreciation.
Note 2. Significant Accounting Policies
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 for
which market quotations are readily available are valued (i) at the last sale
price prior to the time of determination if there were a sale on the date of
determination, (ii) at the mean between the last current bid and asked prices if
there were no sales price on such date and bid and asked quotations are
available, and (iii) at the bid price if there were 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 at
the close of business of that market. However, when 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 which approximates market 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) INVESTMENT TRANSACTIONS AND INVESTMENT INCOME. Investment transactions are
recorded on the trade date. Interest income is accrued on a daily basis. Market
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 sale of investments.
PAGE 6
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THE EMERGING MARKETS FLOATING RATE FUND INC.
- --------------------------------------------------------
Notes to Financial Statements (continued)
(unaudited)
(c) FEDERAL INCOME TAXES. The Fund has complied and intends to continue to
comply with the requirements of the Internal Revenue Code of 1986, as amended,
applicable to regulated investment companies, and to distribute all of its
income and capital gains, if any, to its shareholders. Therefore, no federal
income tax or excise tax provision is required.
(d) DIVIDENDS AND DISTRIBUTIONS. The Fund declares and pays dividends to
shareholders monthly 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 GAAP. 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
tax basis treatment; temporary differences do not require reclassifications.
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 dividends in excess of net investment income or distributions in
excess of net realized capital gains.
(e) UNAMORTIZED ORGANIZATION EXPENSES. Organization expenses amounting to
$115,541 were incurred in connection with the organization of the Fund. These
expenses have been deferred and are being amortized ratably over a five-year
period from commencement of operations.
(f) 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 on a daily basis 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.
Note 3. Management and Advisory Fees and Other Transactions
The Fund entered into a management agreement with Advantage Advisers, Inc. (the
'Investment Manager'), a subsidiary of Oppenheimer & Co., Inc. ('Oppenheimer'),
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.
PAGE 7
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THE EMERGING MARKETS FLOATING RATE FUND INC.
- --------------------------------------------------------
Notes to Financial Statements (continued)
(unaudited)
The Investment Manager and the Fund entered into an investment advisory and
administration agreement with Salomon Brothers Asset Management Inc (the
'Investment Adviser') pursuant to which the Investment Adviser provides
investment advisory and administrative services to the Fund. The Investment
Adviser is responsible 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 1.10% 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 .65% of the Fund's average weekly net assets for its services.
At August 31, 1996, Oppenheimer and the Investment Adviser owned 3,567 and 4,230
shares of the Fund, respectively.
Certain officers and/or directors of the Fund are also officers and/or directors
of the Investment Manager or the Investment Adviser.
The Fund pays each Director not affiliated with the Investment Manager or the
Investment Adviser a fee of $5,000 per year, a fee of $700 for attendance at
each in-person meeting and $100 for participation in each telephonic meeting and
reimbursement for travel and out-of-pocket expenses for each board and committee
meeting attended.
Note 4. Portfolio Activity
Purchases and sales of investment securities, other than short-term investments,
for the six months ended August 31, 1996, aggregated $38,334,268 and
$38,912,317, respectively. The federal income tax cost basis of the Fund's
investments at August 31, 1996 was substantially the same as the cost basis for
financial reporting. Gross unrealized appreciation and depreciation amounted to
$5,996,144 and $474,870, respectively, resulting in a net unrealized
appreciation for federal income tax purposes of $5,521,274.
For federal income tax purposes, the Fund has a capital loss carryforward as of
February 29, 1996 of approximately $1,479,000 of which approximately $316,000
and $1,163,000 expires in 2003 and 2004, respectively. To the extent future
capital gains are offset by such capital losses, the Fund does not anticipate
distributing such gains to shareholders.
PAGE 8
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THE EMERGING MARKETS FLOATING RATE FUND INC.
- --------------------------------------------------------
Notes to Financial Statements (concluded)
(unaudited)
Note 5. Loan Participations
The Fund invests in fixed and floating rate loans arranged through private
negotiations between a foreign sovereign entity and one or more financial
institutions. The Fund's investment in any such loan may be in the form of a
participation in or an assignment of the loan.
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. The Fund
may have difficulty disposing of participations and assignments because the
market for such instruments is not highly liquid.
Note 6. Credit and Market Risk
The yields of emerging market debt obligations and high yield corporate debt
obligations reflect, among other things, perceived credit risk. The Fund's
investment in securities rated below investment grade typically involve 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. At
August 31, 1996, the Fund has a concentration of credit risk in sovereign debt
of emerging market countries.
Note 7. Events Subsequent to August 31, 1996
On September 3, 1996, the Board of Directors of the Fund declared a common stock
dividend from net investment income of $0.1325 per share payable on September
30, 1996 to shareholders of record on September 17, 1996.
On October 1, 1996, the Board of Directors of the Fund declared a common stock
dividend from net investment income of $0.1325 per share payable on October 31,
1996 to shareholders of record on October 16, 1996.
PAGE 9
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THE EMERGING MARKETS FLOATING RATE FUND INC.
- ------------------------------------------
Financial Highlights
DATA FOR A SHARE OF COMMON STOCK OUTSTANDING THROUGHOUT THE PERIOD:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED PERIOD ENDED
AUGUST 31, 1996 FEBRUARY 29, FEBRUARY 28,
(UNAUDITED) 1996 1995(A)
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period.................... $ 13.66 $ 11.92 $ 14.02
------- ------- --------
Net investment income................................... .82 1.66 1.24
Net realized and unrealized gain (loss) on securities... 1.32 1.75 (1.98)
------- ------- --------
Total from investment operations........................ 2.14 3.41 (.74)
Dividends from net investment income.................... (.79) (1.67) (1.19)
Offering costs on issuance of common stock.............. -- -- (.17)
------- ------- --------
Net increase (decrease) in net asset value.............. 1.35 1.74 (2.10)
------- ------- --------
Net asset value, end of period.......................... $ 15.01 $ 13.66 $ 11.92
------- ------- --------
------- ------- --------
Per share market value, end of period................... $ 15.50 $ 13.75 $ 11.75
Total investment return(c).............................. 19.04% 33.31% (8.17%)(b)
Ratios/supplemental data:
Net assets, end of period (000)..................... $62,231 $56,631 $ 49,447
Ratio of total expenses to average net assets....... 1.50%(d) 1.65% 1.73%(d)
Ratio of net investment income to average net
assets............................................ 11.30%(d) 12.99% 10.00%(d)
Portfolio turnover rate............................. 68.07% 70.36% 60.84%
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(a) For the period March 25, 1994 (commencement of investment operations)
through February 28, 1995.
(b) Return calculated based on beginning of period price of $14.02 (initial
offering price of $15.00 less sales load of $0.98) and end of period market
value of $11.75 per share. This calculation is not annualized.
(c) Total investment return is calculated assuming a purchase of common stock
at the current market price on the first day and a sale at the current
market price on the last day of each period reported. For purposes of this
calculation, dividends are assumed to be reinvested at prices obtained
under the Fund's dividend reinvestment plan and the broker commission paid
to purchase or sell a share is excluded.
(d) Annualized.
See accompanying notes to financial statements.
PAGE 10
<PAGE>
<PAGE>
THE EMERGING MARKETS FLOATING RATE FUND INC.
- -----------------------------------------------------------------------
Selected Quarterly Financial Information (unaudited)
SUMMARY OF QUARTERLY RESULTS OF OPERATIONS:
<TABLE>
<CAPTION>
NET REALIZED GAIN
(LOSS) & CHANGE IN
NET UNREALIZED
NET INVESTMENT APPRECIATION
INCOME (DEPRECIATION)
---------------------- --------------------
QUARTERS ENDED(A) TOTAL PER SHARE TOTAL PER SHARE
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
May 31, 1994(b)................................................ $ 834 $.20 $(2,171) $ (.52)
August 31, 1994................................................ 1,188 .29 2,380 .57
November 30, 1994.............................................. 1,433 .34 (1,396) (.33)
February 28, 1995.............................................. 1,684 .41 (7,039) (1.70)
May 31, 1995................................................... 1,753 .42 2,874 .70
August 31, 1995................................................ 1,721 .42 67 .01
November 30, 1995.............................................. 1,704 .41 1,163 .28
February 29, 1996.............................................. 1,693 .41 3,134 .76
May 31, 1996................................................... 1,760 .42 3,725 .90
August 31, 1996................................................ 1,646 .40 1,767 .42
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Totals expressed in thousands of dollars except per share amounts.
(b) For the period March 25, 1994 (commencement of investment operations)
through May 31, 1994.
See accompanying notes to financial statements.
PAGE 11
<PAGE>
<PAGE>
THE EMERGING MARKETS FLOATING RATE FUND INC.
Directors
CHARLES F. BARBER
Consultant; formerly Chairman,
ASARCO Incorporated
LESLIE H. GELB
President, The Council on
Foreign Relations
MICHAEL S. HYLAND
President;
Managing Director, Salomon Brothers Inc
President, Salomon Brothers
Asset Management Inc
ALAN RAPPAPORT
Chairman of the Board;
Executive Vice President,
Oppenheimer & Co., 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
ALAN RAPPAPORT
Chairman of the Board
MICHAEL S. HYLAND
President
PETER WILBY
Executive Vice President
THOMAS K. FLANAGAN
Executive Vice President
LAWRENCE H. KAPLAN
Executive Vice President
and General Counsel
ALAN M. MANDEL
Treasurer
LAURIE A. PITTI
Assistant Treasurer
TANA E. TSELEPIS
Secretary
JENNIFER MUZZEY
Assistant Secretary
The Emerging Markets
Floating Rate Fund Inc.
7 World Trade Center
New York, New York 10048
TELEPHONE
1-800-SALOMON
INVESTMENT MANAGER
Advantage Advisers, Inc.
Oppenheimer Tower
World Financial Center
New York, New York 10281
INVESTMENT ADVISER
Salomon Brothers Asset Management Inc
7 World Trade Center
New York, New York 10048
CUSTODIAN
The Chase Manhattan Bank
Four Metrotech Center
Brooklyn, New York 11245
DIVIDEND DISBURSING AND TRANSFER AGENT
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
LEGAL COUNSEL
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
NEW YORK STOCK EXCHANGE SYMBOL
EFL
- --------------------------------------------------------------------------------
STATEMENT OF DIFFERENCES
------------------------
The division sign shall be expressed as [div]
