<PAGE>
<PAGE>
American Stock Transfer & Trust Company BULK RATE
40 Wall Street U.S. POSTAGE
New York, New York 10005 PAID
STATEN ISLAND, NY
PERMIT No.
169
The Emerging Markets
Floating Rate Fund Inc.
Semi-Annual Report
AUGUST 31, 1997
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<PAGE>
THE EMERGING MARKETS FLOATING RATE FUND INC.
October 22, 1997
To Our Shareholders:
We are pleased to provide this semi-annual report for The Emerging Markets
Floating Rate Fund Inc. (the 'Fund') as of August 31, 1997. Included are market
commentary, a statement of the Fund's investments as of August 31, 1997 and
financial statements for the six months ended August 31, 1997.
The net asset value of the Fund increased from $16.71 per share on February 28,
1997 to $17.39 per share as of August 31, 1997. Dividends of $0.795 per share
were paid during this period. Assuming the reinvestment of these dividends in
additional shares of the Fund, the net asset value return for the six months
ended August 31, 1997 was 9.09%. In comparison, the Salomon Brothers Brady Bond
Index returned 9.67% during the same period.
On August 31, 1997, the Fund, as a percentage of long-term investments, was 100%
invested in securities of emerging market issuers.
EMERGING MARKET DEBT
The emerging debt markets enjoyed a strong performance in the six months ended
August 31, 1997, and maintained solid investor support. The impact on these
markets from the heightened U.S. stock market volatility has been limited.
Indeed, emerging debt markets have benefited from favorable market conditions,
attractive yields and positive economic and political settings in many key
countries. Moreover, the Federal Reserve's decision to hold U.S. interest rates
steady since March has also buoyed the market.
Latin America. We believe prospects for economic growth in Latin America remain
bright. In Mexico, the recent election results signal a decisive step toward
greater democracy and, in our view, are not likely to derail the ongoing reform
process. Second-quarter GDP growth of 8.8% was more than in any comparable
period over the past fifteen years.
Brazil's launch of its $3 billion, 30-year global bond was the largest amount
ever issued by an emerging market borrower, and will likely allow Brazilian
corporates to obtain more attractive longer-term financing.
Argentina aggressively tapped the markets this year, taking advantage of
favorable global conditions. In April, a change in methodology by
S&P -- whereby, under certain circumstances, a sovereign country's rating is no
longer a ceiling for its corporate issuers -- allowed for the upgrading of
twelve Argentine corporate ratings to BBB-. This represents an investment-grade
rating two notches above the sovereign and spurred a strong rally in the bonds
that were upgraded.
Venezuela's privatization efforts and restructurings have continued. The
Government is planning a longer-term debt management strategy that would reduce
the amount budgeted for debt service from 40% of the budget to 25% by the year
2000. S&P upgraded Venezuela's long-term foreign currency debt to B+ from B,
reflecting the country's commitment to reform, higher world oil prices, fiscal
restraint, and increased oil production.
Although political instability earlier this year caused a great deal of
volatility in Ecuador, current interim Government officials appear committed to
correcting the fiscal imbalances. Moody's assigned Ecuador's long-term foreign
currency debt a B1 rating, reflecting its competitive export sector and
basically sound economic policies. However, the recent announcement that
gasoline prices will not be increased significantly reduces the potential for an
International Monetary Fund ('IMF') deal.
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<PAGE>
THE EMERGING MARKETS FLOATING RATE FUND INC.
Eastern Europe. Following a period of declining economic activity and a weak
currency, Bulgaria has embarked on an impressive turnaround. In exchange for IMF
support, Bulgaria agreed to launch a currency board and to implement tight
fiscal and monetary policies. With the victory of the pro-reform UDF party
earlier this year, there is both the incentive and the political majority to
deliver swift economic reform. The momentum of stabilization and reform efforts
continues to be strong, and market expectations remain solid, as Bulgarian debt
instruments continue to outperform.
In Russia, President Yeltsin's return from a prolonged illness provided an
element of stability. The debt restructuring process is under way, with more
than 90% of an estimated US$24.3 billion in eligible debt having been
reconciled. Progress on the inflation front reflects the impact of high real
interest rates and tight monetary policy. The government achieved its
self-imposed deadline of July 1 for repaying outstanding pension arrears.
S&P reaffirmed the BBB- rating for Poland's long-term foreign currency debt but
raised its outlook to positive from stable. The recent underperformance of
Polish Brady bonds reflects growing investor concern about the upcoming
elections and the widening current account deficit. Tighter monetary policy, in
the form of a higher discount rate and greater reserve requirements, should help
to improve macroeconomic stability, but higher levels of public sector saving
still need to be achieved.
* * *
On September 24, 1997, Travelers Group ('Travelers') and Salomon Inc
('Salomon'), the ultimate parent company of Salomon Brothers Asset Management
Inc ('SBAM'), announced their agreement (the 'Transaction') to merge Salomon
with and into Smith Barney Holdings Inc., a subsidiary of Travelers, to form a
new company expected to be called Salomon Smith Barney Holdings Inc. Travelers
is a diversified financial services company engaged in investment services,
asset management, consumer finance and life and property casualty insurance
services.
The Transaction is expected to be completed by the end of November, 1997,
subject to a number of conditions, including the receipt of U.S. and foreign
regulatory approvals and the approval of Salomon stockholders. Upon consummation
of the Transaction, Travelers will become the ultimate parent of SBAM, which
will continue to serve as investment adviser to the Fund.
At a special meeting of stockholders of the Fund held on October 14, 1997, the
Fund's shareholders approved a new investment management agreement for the Fund
with Value Advisors LLC ('Value Advisors') and a new investment advisory and
administration agreement among the Fund, Value Advisors and SBAM. The new
agreements will take effect upon the closing of the sale of Value Advisors by
Oppenheimer Group Inc. to PIMCO Advisors L.P., which is expected to occur in
November, 1997. Prior to the closing, Value Advisors will assume the
responsibilities and obligations that are currently performed by Advantage
Advisers, Inc. under the existing agreements.
As another current matter, in response to recent amendments to Maryland
corporate law, the Board of Directors recently reviewed various corporate
governance provisions in the Fund's By-Laws and approved amendments to the
Fund's By-Laws to (1) increase the percentage of stockholder voting power that
is required to call a special meeting of its stockholders to a majority of the
votes entitled to be cast at the meeting and (2) reduce the minimum permissible
board committee size to one director.
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THE EMERGING MARKETS FLOATING RATE FUND INC.
In a continuing effort to provide timely information concerning The Emerging
Markets Floating Rate Fund, shareholders may call 1-888-777-0102 (a toll-free
number), Monday through Friday from 8:00 am to 6:00 pm EST for the Fund's net
asset value, market price and other information regarding the Fund's portfolio
holdings and allocations. Should you require specific information regarding your
Emerging Markets Floating Rate Fund stock account, or for information regarding
the Fund's Dividend Reinvestment Plan, 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).
Cordially,
<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, 1997 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) Sovereign Bonds -- 61.6% (NOTE 2)
- ----------------------------------------------------------------------------------------------------------
<C> <S> <C>
Argentina -- 15.9%
$ 9,021 Republic of Argentina, FRB, Series L, 6.75%, 3/31/05*........................... $ 8,581,226
2,550 Republic of Argentina, Global Bond, 11.375%, 1/30/17............................ 2,982,225
-----------
11,563,451
-----------
Brazil -- 4.2%
3,700 Federal Republic of Brazil, DCB, Series L, 6.9375%, 4/15/12*.................... 3,064,062
-----------
Bulgaria -- 4.4%
1,400 Republic of Bulgaria, FLIRB, Series A, 2.25%, 7/28/12*.......................... 867,125
3,000 Republic of Bulgaria, IAB, 6.6875%, 7/28/11*.................................... 2,310,000
-----------
3,177,125
-----------
Ecuador -- 3.8%
3,829 Republic of Ecuador, PDI Bond, 6.6875%, 2/27/15*,**............................. 2,728,180
-----------
Mexico -- 9.2%
United Mexican States, Discount Bond, Series B, 6.83594%, 12/31/19*
3,200 (including 4,923,000 rights).................................................. 3,016,000
United Mexican States, Discount Bond, Series C, 6.82031%, 12/31/19*
3,875 (including 5,960,000 rights).................................................. 3,652,188
-----------
6,668,188
-----------
Panama -- 4.9%
1,750 Republic of Panama, IRB, 3.75%, 7/17/14*........................................ 1,358,437
2,525 Republic of Panama, PDI Bond, 6.6875%, 7/17/16*,**.............................. 2,215,773
-----------
3,574,210
-----------
Peru -- 4.9%
4,500 Republic of Peru, FLIRB, 3.25%, 3/07/17*........................................ 2,711,250
1,000 Republic of Peru, Discount Bond, 6.5625%, 3/08/27*.............................. 850,000
-----------
3,561,250
-----------
</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 (concluded)
August 31, 1997 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000) Sovereign Bonds (concluded) (NOTE 2)
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<C> <S> <C>
Venezuela -- 14.3%
$ 8,500 Republic of Venezuela, DCB, Series DL, 6.75%, 12/18/07*......................... $ 7,952,812
2,619 Republic of Venezuela, FLIRB, Series A, 6.75%, 3/31/07*......................... 2,455,357
-----------
10,408,169
-----------
Total Sovereign Bonds (cost $39,829,020)........................................ 44,744,635
-----------
<CAPTION>
Loan Participations -- 12.7%
- ----------------------------------------------------------------------------------------------------------
<C> <S> <C>
The People's Democratic Republic of Algeria, Tranche A, 6.91%, 9/04/06*
3,500 (Chase Manhattan, New York)(T)................................................ 3,097,500
Kingdom of Morocco, Tranche B, 6.8125%, 1/01/04*
6,118 (Morgan Stanley Emerging Markets Inc, Merrill Lynch)(T)....................... 6,117,648
-----------
Total Loan Participations (cost $7,816,441)..................................... 9,215,148
-----------
<CAPTION>
Repurchase Agreement -- 0.2%
- ----------------------------------------------------------------------------------------------------------
<C> <S> <C>
Merrill Lynch, 5.53%, cost $168,000, dated 8/29/97, $168,103 due 9/02/97,
(collateralized by $175,000 U.S. Treasury Notes, 5.875%, due 7/31/99, valued
168 at $175,656).................................................................. 168,000
-----------
Total Investments -- 74.5% (cost $47,813,461).................................. 54,127,783
-----------
Cash and Other Assets in Excess of Liabilities -- 25.5%........................ 18,484,974
-----------
Net Assets -- 100.0%
(equivalent to $17.39 per share on 4,174,699 common shares outstanding)....... $72,612,757
-----------
-----------
- ----------------------------------------------------------------------------------------------------------
</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.
DCB -- Debt Conversion Bond.
FLIRB -- Front Loaded Interest Reduction Bond.
FRB -- Floating Rate Bond.
IAB -- Interest in Arrears Bond.
IRB -- Interest Reduction Bond.
PDI -- Past Due Interest.
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
PAGE 2
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THE EMERGING MARKETS FLOATING RATE FUND INC.
- ---------------------------------------------------------------
Statement of Assets and Liabilities
August 31, 1997 (unaudited)
<TABLE>
<S> <C>
ASSETS
Investments, at value (cost -- $47,813,461)................................................... $54,127,783
Cash........................................................................................... 62,496
Receivable for investments sold................................................................ 18,280,625
Interest receivable............................................................................ 1,620,006
Unamortized organization expenses.............................................................. 34,600
Prepaid expenses............................................................................... 5,760
-----------
Total assets........................................................................... 74,131,270
-----------
LIABILITIES
Payable for investments purchased.............................................................. 1,382,500
Accrued management fee (Note 3)................................................................ 68,159
Accrued audit and tax return preparation fees.................................................. 33,108
Accrued legal fee.............................................................................. 19,424
Accrued printing and mailing fees.............................................................. 10,536
Other accrued expenses......................................................................... 4,786
-----------
Total liabilities...................................................................... 1,518,513
-----------
NET ASSETS
Common Stock ($.001 par value, authorized 100,000,000 shares; 4,174,699 shares outstanding).... 4,175
Additional paid-in capital..................................................................... 57,896,008
Distributions in excess of net investment income............................................... (6,540)
Accumulated net realized gain on investments................................................... 8,086,042
Net unrealized appreciation on investments (Note 6)............................................ 6,633,072
-----------
Net assets............................................................................. $72,612,757
-----------
NET ASSET VALUE PER SHARE ($72,612,757 [div] 4,174,699 shares)................................. $ 17.39
-----------
</TABLE>
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See accompanying notes to financial statements.
PAGE 3
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THE EMERGING MARKETS FLOATING RATE FUND INC.
- ------------------------------------------------
Statement of Operations
For the Six Months Ended August 31, 1997 (unaudited)
<TABLE>
<S> <C> <C>
INCOME
Interest (includes discount accretion of $1,133,517).............................. $3,736,787
EXPENSES
Management fee.................................................................... $390,442
Audit and tax services............................................................ 31,758
Legal............................................................................. 24,198
Directors' fees and expenses...................................................... 16,435
Transfer agent.................................................................... 15,728
Custodian......................................................................... 12,098
Amortization of deferred organization expenses.................................... 11,187
Printing.......................................................................... 9,577
Listing fee....................................................................... 7,912
Other............................................................................. 9,556 528,891
-------- ----------
Net investment income............................................................. 3,207,896
----------
NET REALIZED AND UNREALIZED GAIN
Net Realized Gain on Investments.................................................. 4,966,847
Change in Net Unrealized Appreciation on Investments.............................. (2,019,522)
----------
Net realized gain and change in net unrealized appreciation....................... 2,947,325
----------
NET INCREASE IN NET ASSETS FROM OPERATIONS........................................ $6,155,221
----------
</TABLE>
- ----------------------------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, YEAR ENDED
1997 FEBRUARY 28,
(UNAUDITED) 1997
- -------------------------------------------------------------------------------------------------------------
OPERATIONS
<S> <C> <C>
Net investment income.................................................. $ 3,207,896 $ 6,511,208
Net realized gain on investments....................................... 4,966,847 5,021,401
Change in net unrealized appreciation.................................. (2,019,522) 7,842,755
--------------- ------------
Net increase in net assets from operations............................. 6,155,221 19,375,364
--------------- ------------
DIVIDENDS
From net investment income............................................. (3,211,283) (6,684,293 )
From short-term capital gains.......................................... (104,319) --
--------------- ------------
Total dividends........................................................ (3,315,602) (6,684,293 )
--------------- ------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares issued in reinvestment of dividends
(7,225 and 20,340 shares issued)..................................... 122,075 328,861
--------------- ------------
Total increase in net assets........................................... 2,961,694 13,019,932
NET ASSETS
Beginning of period.................................................... 69,651,063 56,631,131
--------------- ------------
End of period (includes distributions in excess of net investment
income of $6,540 and $3,153, respectively)........................... $72,612,757 $69,651,063
--------------- ------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to financial statements.
PAGE 4
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<PAGE>
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 5
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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 6
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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, 1997, 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, 1997, aggregated $62,378,790 and
$76,189,460, respectively. The federal income tax cost basis of the Fund's
investments at August 31, 1997 was substantially the same as the cost basis for
financial reporting. Gross unrealized appreciation and depreciation amounted to
$6,677,538 and $44,466, respectively, resulting in a net unrealized appreciation
for federal income tax purposes of $6,633,072.
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
PAGE 7
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THE EMERGING MARKETS FLOATING RATE FUND INC.
- --------------------------------------------------------
Notes to Financial Statements (continued)
(unaudited)
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. '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.
For the year ended February 28, 1997, the Fund sold approximately $2.5 million
of 'when and if' issued Russian IAN bonds and recorded an unrealized gain of
$318,750. Settlement of the transaction and recognition of the realized gain is
contingent upon the successful closing of Russia's Brady plan before December
31, 1997.
Note 7. 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, 1997, the Fund has a concentration of credit risk in
sovereign debt of emerging market countries.
Note 8. Events Subsequent to August 31, 1997
On September 2, 1997, 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, 1997 to shareholders of record on September 16, 1997.
PAGE 8
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THE EMERGING MARKETS FLOATING RATE FUND INC.
- --------------------------------------------------------
Notes to Financial Statements (concluded)
(unaudited)
On October 1, 1997, 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,
1997 to shareholders of record on October 15, 1997.
On September 24, 1997, Travelers Group ('Travelers') and Salomon Inc
('Salomon'), the ultimate parent company of the Investment Adviser, announced
their agreement (the 'Transaction') to merge Salomon with and into Smith Barney
Holdings Inc., a subsidiary of Travelers, to form a new company expected to be
called Salomon Smith Barney Holdings Inc. Travelers is a diversified financial
services company engaged in investment services, asset management, consumer
finance and life and property casualty insurance services.
The Transaction is expected to be completed by the end of November, 1997,
subject to a number of conditions, including the receipt of U.S. and foreign
regulatory approvals and the approval of Salomon stockholders. Upon consummation
of the Transaction, as proposed, Travelers will become the ultimate parent of
the Investment Adviser, which will continue to serve as investment adviser to
the Fund.
At a special meeting of stockholders of the Fund held on October 14, 1997, the
Fund's shareholders approved a new investment management agreement for the Fund
with Value Advisors LLC ('Value Advisors') and a new investment advisory and
administration agreement among the Fund, Value Advisors and the Investment
Adviser. The new agreements will take effect upon the closing of the sale of
Value Advisors by Oppenheimer Group Inc. to PIMCO Advisors L.P., which is
expected to occur in November, 1997. Prior to the closing, Value Advisors will
assume the responsibilities and obligations that are currently performed by the
Investment Manager under the existing agreements.
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 YEAR ENDED PERIOD ENDED
AUGUST 31, 1997 FEBRUARY 28, FEBRUARY 29, FEBRUARY 28,
(UNAUDITED) 1997 1996 1995(a)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period........................... $ 16.71 $ 13.66 $ 11.92 $ 14.02
------- --------- ------- --------
Net investment income.............. .77 1.56 1.66 1.24
Net realized and unrealized gain
(loss) on securities............. .71 3.10 1.75 (1.98)
------- --------- ------- --------
Total from investment operations... 1.48 4.66 3.41 (.74)
Dividends from net investment
income........................... (.77) (1.61) (1.67) (1.19)
Dividends from net realized
gains............................ (.03) -- -- --
Offering costs on issuance of
common stock..................... -- -- -- (.17)
------- --------- ------- --------
Net increase (decrease) in net
asset value...................... .68 3.05 1.74 (2.10)
------- --------- ------- --------
Net asset value, end of period..... $ 17.39 $ 16.71 $ 13.66 $ 11.92
------- --------- ------- --------
------- --------- ------- --------
Per share market value, end of
period........................... $17.438 $ 17.125 $ 13.75 $ 11.75
Total investment return(c)......... 6.71% 38.28% 33.31% (8.17%)(b)
Ratios/supplemental data:
Net assets, end of period
(000)........................ $72,613 $ 69,651 $56,631 $ 49,447
Ratio of total expenses to
average net assets........... 1.49%(d) 1.52% 1.65% 1.73%(d)
Ratio of net investment income
to average net assets........ 9.01%(d) 10.28% 12.99% 10.00%(d)
Portfolio turnover rate........ 96.57% 119.50% 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
November 30, 1996.............................................. 1,597 .38 4,663 1.12
February 28, 1997.............................................. 1,508 .36 2,708 .65
May 31, 1997................................................... 1,581 .38 1,503 .36
August 31, 1997................................................ 1,627 .39 1,444 .35
- ----------------------------------------------------------------------------------------------------------------
</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
ALAN M. MANDEL
Treasurer
LAURIE A. PITTI
Assistant Treasurer
NOEL B. DAUGHERTY
Secretary
JENNIFER MUZZEY
Assistant Secretary
The Emerging Markets
Floating Rate Fund Inc.
7 World Trade Center
New York, New York 10048
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 symbol shall be expressed as...............[div]
