UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-7066
Salomon Brothers Emerging Markets Income Fund Inc.
(Exact name of registrant as specified in charter)
125 Broad Street, New York, NY 10004
(Address of principal executive offices) (Zip code)
Robert I. Frenkel, Esq.
Salomon Brothers Asset Management Inc
300 First Stamford Place
Stamford, CT 06902
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 725-6666
Date of fiscal year end: August 31
Date of reporting period: February 29, 2004
ITEM 1. REPORT TO STOCKHOLDERS.
The Semi-Annual Report to Stockholders is filed herewith.
SALOMON BROTHERS EMERGING MARKETS INCOME FUND INC.
Letter from the Chairman
[PICTURE OF R. JAY GERKEN, CFA]
R. Jay Gerken, CFA
Chairman and
Chief Executive Officer
DEAR SHAREHOLDER,
During the six months ended February 29, 2004, the Salomon Brothers Emerging
Markets Income Fund Inc., returned 18.45% based on its New York Stock Exchange
("NYSE") market price, and 10.94% based on its net asset value ("NAV") /i/ per
share. In comparison, the J.P. Morgan Emerging Markets Bond Index Plus ("EMBI+")
/ii/ returned 9.80% and the fund's Lipper emerging markets debt funds category
average returned 10.58% over the same time frame. /iii/ Please note that Lipper
performance returns are based on each fund's NAV.
During this six-month period, the fund distributed dividends to shareholders
totaling $0.82 per share. The performance table shows the fund's 30-day SEC and
annualized distribution yields as well as its six-month total return based on
its NAV and market price as of February 29, 2004. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS. THE FUND'S YIELD WILL VARY.
FUND PERFORMANCE
AS OF FEBRUARY 29, 2004
(unaudited)
Annualized Six-Month
30-Day Distribution Total
Price Per Share SEC Yield Yield Return
$16.40 (NAV) 6.40% 10.06% 10.94%
$18.95 (NYSE) 5.53% 8.71% 18.45%
ALL FIGURES REPRESENT PAST PERFORMANCE AND ARE NOT A GUARANTEE OF FUTURE
RESULTS. THE FUND'S YIELDS WILL VARY.
Total returns are based on changes in NAV or market price, respectively. Total
returns assume the reinvestment of all dividends and/or capital gains
distributions, if any, in additional shares. Annualized distribution yield is
the fund's current quarterly income dividend rate, annualized, and then divided
by the NAV or the market price noted in this report. The 30-day SEC yield is the
average annualized net investment income per share for the 30-day period. The
annualized distribution yield assumes a current quarterly income dividend rate
of $0.4125. These yields are as of February 29, 2004 and are subject to change.
SALOMON BROTHERS EMERGING MARKETS INCOME FUND INC.
MARKET OVERVIEW
Emerging markets debt returned 9.80% over the six-month period ended February
29, 2004 as measured by the EMBI+. The performance for the period was similar to
the return for the previous six-month period and was again driven by a
combination of fundamental and technical factors. The macro environment was
supportive of emerging market investments, as interest rates in the developed
world remained relatively stable at historically low levels and equity markets
worldwide performed well.
Significant strength in commodity markets, including metals, agriculture and
oil, provided further positive support for many emerging market countries, as
commodities exports are an important source of growth for emerging economies.
Oil prices remained high during the past 12 months and rose from $30 to over $36
per barrel over the six months ending February 29, 2004. Revenues from oil
production contributed to positive performance in Ecuador, Russia and Venezuela.
INFORMATION ABOUT YOUR FUND
In recent months several issues in the mutual fund industry have come under the
scrutiny of federal and state regulators. The fund's Adviser and some of its
affiliates have received requests for information from various government
regulators regarding market timing, late trading, fees and other mutual fund
issues in connection with various investigations. The fund has been informed
that the Adviser and its affiliates are responding to those information
requests, but are not in a position to predict the outcome of these requests and
investigations.
LOOKING FOR ADDITIONAL INFORMATION?
The fund is traded under the symbol "EMD" and its closing market price is
available in most newspapers under the NYSE listings. The daily NAV is available
online under symbol XEMDX. Barron's and The Wall Street Journal's Monday
editions carry closed-end fund tables that will provide additional information.
In addition, the fund issues a quarterly allocation press release that can be
found on most major financial web sites as well as www.sbam.com.
In a continuing effort to provide information concerning the fund, shareholders
may call 1-888-777-0102 or 1-800-SALOMON (toll free), Monday through Friday from
8:00 a.m. to 6:00 p.m. Eastern Time, for the fund's current NAV, market price
and other information.
Thank you for your investment in the Salomon Brothers Emerging Markets Income
Fund Inc. We appreciate that you have entrusted us with your money and value our
relationship with you.
Sincerely,
/s/ R. Jay Gerken
R. Jay Gerken, CFA
Chairman and Chief Executive Officer
March 19, 2004
SALOMON BROTHERS EMERGING MARKETS INCOME FUND INC.
The information provided is not intended to be a forecast of future events, a
guarantee of future results or investment advice. Views expressed may differ
from those of the firm as a whole.
Portfolio holdings and breakdowns are as of February 29, 2004, and are subject
to change. Please refer to pages 4 through 7 for a list and percentage breakdown
of the fund's holdings.
RISKS: The fund may invest in high yield and foreign securities, including
emerging markets, which involve risks beyond those inherent in solely
higher-rated and domestic investments. High yield bonds involve greater credit
and liquidity risks than investment grade bonds. Investing in foreign securities
is subject to certain risks not associated with domestic investing, such as
currency fluctuations, and changes in political and economic conditions. These
risks are magnified in emerging or developing markets.
All index performance reflects no deduction for fees, expenses or taxes. Please
note that an investor cannot invest directly in an index.
i NAV is a price that reflects the value of the fund's underlying portfolio
plus other assets, less the fund's liabilities. However, the price at which
an investor may buy or sell shares of the fund is at the fund's market price
as determined by supply of and demand for the fund's common shares, which
may be more or less than the fund's NAV.
ii The J.P. Morgan Emerging Markets Bond Index Plus is a total return index
that tracks the traded market for U.S. dollar-denominated Brady and other
similar sovereign restructured bonds traded in the emerging markets.
iii Lipper, Inc. is a major independent mutual-fund tracking organization.
Returns are based on the 6-month period ended February 29, 2004 calculated
among the 12 funds in the fund's Lipper category including the reinvestment
of dividends and capital gains, if any.
SALOMON BROTHERS EMERGING MARKETS INCOME FUND INC.
Schedule of Investments (unaudited)
February 29, 2004
FACE
AMOUNT+ SECURITY(a) VALUE
--------------------------------------------------------------------------------
Sovereign Bonds -- 90.4%
ARGENTINA -- 0.3%
Republic of Argentina:
50 ARS 10.000% due 9/19/08 (b)......................... $ 5
575,000 DISC, Series L, 2.0625% due 3/31/23 (b)(c)...... 284,625
-----------
284,630
-----------
BRAZIL -- 21.9%
Federal Republic of Brazil:
50,000 11.000% due 1/11/12............................. 54,375
425,000 10.125% due 5/15/27 ............................ 421,812
1,452,000 12.250% due 3/6/30 ............................. 1,706,100
1,450,000 11.000% due 8/17/40 ............................ 1,523,225
14,775,000 DCB, Series L, 2.0625% due 4/15/12 (c) ......... 12,724,969
1,523,077 FLIRB, Series 15U, 2.000% due 4/15/09 (c) ...... 1,405,038
1,455,930 NMB, Series L, 2.0625% due 4/15/09 (c) ......... 1,335,816
-----------
19,171,335
-----------
BULGARIA -- 0.9%
655,000 Republic of Bulgaria, 8.250% due 1/15/15 ......... 788,456
-----------
COLOMBIA -- 4.9%
Republic of Colombia:
1,800,000 7.625% due 2/15/07 ............................. 1,953,000
725,000 10.000% due 1/23/12 ............................ 811,637
550,000 10.750% due 1/15/13 ............................ 635,937
670,000 10.750% due 2/25/20 ............................ 825,775
100,000 8.375% due 2/15/27 ............................. 91,500
-----------
4,317,849
-----------
COSTA RICA -- 2.5%
Republic of Costa Rica:
200,000 6.914% due 1/31/08 (d) ......................... 217,000
600,000 9.335% due 5/15/09 ............................. 712,500
750,000 8.050% due 1/31/13 (d) ......................... 838,125
350,000 9.995% due 8/1/20 (d) .......................... 430,500
-----------
2,198,125
-----------
DOMINICAN REPUBLIC -- 0.7%
775,000 Dominican Republic, 9.500% due 9/27/06 ........... 569,625
-----------
--------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
PAGE 4
SALOMON BROTHERS EMERGING MARKETS INCOME FUND INC.
Schedule of Investments (unaudited) (continued)
February 29, 2004
FACE
AMOUNT+ SECURITY(a) VALUE
--------------------------------------------------------------------------------
ECUADOR -- 4.7%
Republic of Ecuador:
3,775,000 12.000% due 11/15/12 ........................... $ 3,761,788
450,000 7.000% due 8/15/30 (c) ......................... 373,612
-----------
4,135,400
-----------
ELSALVADOR -- 1.7%
Republic of El Salvador:
645,000 7.750% due 1/24/23 ............................. 701,438
750,000 8.250% due 4/10/32 ............................. 755,625
-----------
1,457,063
-----------
MALAYSIA -- 1.9%
825,000 Malaysia, 7.500% due 7/15/11 ..................... 982,783
550,000 Petronas Capital LTD, 7.875% due 5/22/22 ......... 651,339
-----------
1,634,122
-----------
MEXICO -- 11.1%
United Mexican States:
3,500,000 8.125% due 12/30/19 ............................ 4,062,625
875,000 11.500% due 5/15/26 ............................ 1,323,437
3,725,000 8.300% due 8/15/31 ............................. 4,337,763
-----------
9,723,825
-----------
PANAMA -- 4.7%
Republic of Panama:
1,300,000 9.625% due 2/8/11 ............................. 1,508,000
1,200,000 9.375% due 1/16/23 ............................ 1,314,000
950,000 8.875% due 9/30/27 ............................ 999,875
275,000 9.375% due 4/1/29 ............................. 310,062
-----------
4,131,937
-----------
PERU -- 4.6%
Republic of Peru:
925,000 9.875% due 2/6/15 ............................. 1,063,750
1,000,000 FLIRB, 4.500% due 3/7/17 (c) .................. 867,500
2,263,520 PDI Bond, 5.000% due 3/7/17 (c) ............... 2,076,780
-----------
4,008,030
-----------
PHILIPPINES -- 4.5%
Republic of the Philippines:
500,000 8.375% due 3/12/09 ............................ 521,875
675,000 9.000% due 2/15/13 ............................ 683,438
--------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
PAGE 5
SALOMON BROTHERS EMERGING MARKETS INCOME FUND INC.
Schedule of Investments (unaudited) (continued)
February 29, 2004
FACE
AMOUNT+ SECURITY(a) VALUE
--------------------------------------------------------------------------------
PHILIPPINES -- 4.5% (CONTINUED)
225,000 9.375% due 1/18/17 ............................ $ 233,156
2,350,000 10.625% due 3/16/25 ........................... 2,510,740
-----------
3,949,209
-----------
RUSSIA -- 16.4%
Russian Federation:
5,920,000 12.750% due 6/24/28 ........................... 9,575,600
4,875,000 5.000% due 3/31/30 (c) ........................ 4,801,875
-----------
14,377,475
-----------
TURKEY -- 4.8%
Republic of Turkey:
2,100,000 11.500% due 1/23/12 ........................... 2,656,500
75,000 11.000% due 1/14/13 ........................... 93,563
725,000 9.500% due 1/15/14 ............................ 842,813
450,000 11.875% due 1/15/30 ........................... 635,063
-----------
4,227,939
-----------
VENEZUELA -- 4.8%
Republic of Venezuela:
200,000 5.375% due 8/7/10 ............................. 156,000
250,000 6.750% due 3/31/20 ............................ 227,812
1,250,000 9.375% due 1/13/34 ............................ 1,040,625
2,761,826 DCB,Series DL, 2.125% due 12/18/07 (c) ........ 2,513,262
249,990 FLIRB, Series A, 2.065% due 3/31/07 (c) ....... 229,991
-----------
4,167,690
-----------
Total Sovereign Bonds (Cost -- $71,095,770)...... 79,142,710
-----------
Loan Participation (c)(e) -- 3.1%
2,787,135 Kingdom of Morocco, Tranche A, 2.03125% due 1/2/09
(CS First Boston Inc., J.P. Morgan Chase & Co.,
UBS Financial Services Inc.) (Cost -- $2,616,101) 2,748,812
-----------
Corporate Bonds -- 4.8%
PEMEX, Project Funding Master Trust:
290,000 6.125% due 8/15/08 ............................ 310,880
1,500,000 9.125% due 10/13/10 ........................... 1,830,000
1,800,000 8.000% due 11/15/11 ........................... 2,074,500
-----------
Total Corporate Bonds (Cost -- $3,731,705)....... 4,215,380
-----------
--------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
PAGE 6
SALOMON BROTHERS EMERGING MARKETS INCOME FUND INC.
Schedule of Investments (unaudited) (continued)
February 29, 2004
WARRANTS SECURITY(a) VALUE
--------------------------------------------------------------------------------
Warrants (d)(f)(g) -- 0.0%
500 Asia Pulp & Paper (Exercise price of $7.8375 per
share expiring on 3/15/05. Each warrant
exercisable for 12.914 shares of
Asia Pulp & Paper.) (Cost -- $0)................. $ 0
-----------
FACE
AMOUNT
----------
Repurchase Agreement -- 1.7%
$1,485,000 Deutsche Bank Securities Inc. dated 2/27/04,
0.990% due 3/1/04; Proceeds at maturity --
$1,485,123; (Fully collateralized by various
U.S. Government Agency obligations, 0.000%
to 3.000% due 11/15/09 to 7/15/12;
Market value -- $1,529,330) (Cost -- $1,485,000) 1,485,000
-----------
Total Investments -- 100.0% (Cost -- $78,928,576*). $87,591,902
===========
-----------
+ Face amount denominated in U.S. dollars unless otherwise indicated.
(a) All securities are segregated as collateral pursuant to loan agreement.
(b) Security is currently in default.
(c) Rate shown reflects current rate on instrument with variable rate or step
coupon rates.
(d) Security is exempt from registration under Rule 144A of the Securities Act
of 1933. This security may be resold in transactions that are exempt from
registration, normally to qualified institu tional buyers. This security
has been deemed liquid pursuant to guidelines approved by the Board of
Directors.
(e) Participation interests were acquired through the financial institutions
indicated parenthetically.
(f) Non-income producing security.
(g) Security is valued in accordance with fair valuation procedures.
* Aggregate cost for Federal income tax purposes is substantially the same.
Abbreviations used in this schedule:
------------------------------------
ARS -- Argentina Peso
DCB -- Debt Conversion Bond
DISC -- Discount Bond
FLIRB -- Front Loaded Interest Reduction Bond
NMB -- New Money Bond
PDI -- Past Due Interest
--------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
PAGE 7
SALOMON BROTHERS EMERGING MARKETS INCOME FUND INC.
Statement of Assets and Liabilities (unaudited)
February 29, 2004
ASSETS:
Investments, at value (Cost -- $78,928,576).................... $ 87,591,902
Cash........................................................... 288,268
Interest receivable............................................ 1,312,392
-----------
Total Assets................................................... 89,192,562
-----------
LIABILITIES:
Loan payable (Note 5)........................................... 20,000,000
Payable for securities purchased................................ 1,210,974
Payable to broker -- variation margin........................... 109,375
Loan interest payable (Note 5).................................. 72,800
Management fee payable ......................................... 56,390
Accrued expenses................................................ 206,286
-----------
Total Liabilities............................................... 21,655,825
-----------
Total Net Assets.................................................. $67,536,737
===========
NET ASSETS:
Par value of capital shares ($0.001 par value,
100,000,000 shares authorized;
4,117,598 shares outstanding)................................. $ 4,118
Capital paid in excess of par value ............................ 57,028,840
Undistributed net investment income............................. 1,007,598
Accumulated net realized gain on investment transactions
and options contracts ....................................... 1,451,455
Net unrealized appreciation of investments and futures contracts 8,044,726
-----------
Total Net Assets.................................................. $67,536,737
===========
Net Asset Value, per share ($67,536,737 / 4,117,598 shares
outstanding) ................................................... $16.40
======
--------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
PAGE 8
SALOMON BROTHERS EMERGING MARKETS INCOME FUND INC.
Statement of Operations (unaudited)
For the Six Months Ended February 29, 2004
INVESTMENT INCOME:
Interest ....................................................... $3,511,006
----------
EXPENSES:
Management fee (Note 2)......................................... 348,871
Interest expense (Note 5)....................................... 220,225
Audit and legal................................................. 59,568
Directors' fees................................................. 29,499
Shareholder communications...................................... 28,664
Custody......................................................... 13,202
Listing fees.................................................... 12,525
Transfer agency services........................................ 7,925
Loan fees....................................................... 3,000
Insurance....................................................... 1,048
Other........................................................... 5,346
----------
Total Expenses.................................................. 729,873
----------
Net Investment Income............................................. 2,781,133
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, OPTIONS AND
FUTURES CONTRACTS (NOTES 3, 4 AND 8):
Realized Gain From:
Investment transactions ...................................... 1,739,644
Options purchased............................................. 14,000
----------
Net Realized Gain............................................... 1,753,644
----------
Change in Net Unrealized Appreciation (Depreciation) From:
Investments .................................................. 2,922,909
Futures contracts............................................. (618,600)
----------
Increase in Net Unrealized Appreciation......................... 2,304,309
----------
Net Gain on Investments, Options and Futures Contracts ........... 4,057,953
----------
Increase in Net Assets From Operations............................ $6,839,086
==========
--------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
PAGE 9
SALOMON BROTHERS EMERGING MARKETS INCOME FUND INC.
Statements of Changes in Net Assets
For the Six Months Ended February 29, 2004 (unaudited)
and the Year Ended August 31, 2003
2004 2003
--------------------------------------------------------------------------------
OPERATIONS:
Net investment income............................ $ 2,781,133 $ 6,280,758
Net realized gain................................ 1,753,644 4,287,378
Increase in net unrealized appreciation.......... 2,304,309 11,519,613
----------- -----------
Increase in Net Assets From Operations........... 6,839,086 22,087,749
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................ (1,692,053) (6,737,049)
Net realized gains............................... (1,695,380) --
----------- -----------
Decrease in Net Assets From Distributions to
Shareholders .................................. (3,387,433) (6,737,049)
----------- -----------
FUND SHARE TRANSACTIONS:
Proceeds from shares issued on reinvestment of
dividends (15,652 and 30,843 shares issued,
respectively).................................. 261,109 424,701
----------- -----------
Increase in Net Assets From Fund Share
Transactions................................... 261,109 424,701
----------- -----------
Increase in Net Assets............................. 3,712,762 15,775,401
NET ASSETS:
Beginning of period.............................. 63,823,975 48,048,574
----------- -----------
End of period*................................... $67,536,737 $63,823,975
=========== ===========
* Included undistributed (overdistributed) net
investment income of: ........................ $1,007,598 $(81,482)
=========== ===========
--------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
PAGE 10
SALOMON BROTHERS EMERGING MARKETS INCOME FUND INC.
Statement of Cash Flows (unaudited)
For the Six Months Ended February 29, 2004
CASH FLOWS PROVIDED (USED) BY OPERATING
AND INVESTING ACTIVITIES:
Interest received............................................. $ 2,864,832
Operating expenses paid....................................... (514,647)
Net sales of short-term investments........................... 448,000
Realized gain on option transactions.......................... 14,000
Net change in unrealized depreciation on futures contracts.... (618,600)
Net purchases of long-term investments........................ (40,593,815)
Proceeds from disposition of long-term investments............ 41,929,052
Open payable to variation margin.............................. 109,375
Interest paid on bank loans................................... (223,726)
-----------
Net Cash Flows Provided by Operating and Investing Activities. 3,414,471
-----------
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES:
Cash distributions paid on Common Stock....................... (3,387,433)
Proceeds from reinvestment of dividends....................... 261,109
-----------
Net Cash Flows Used by Financing Activities................... (3,126,324)
-----------
Net Increase in Cash............................................ 288,147
Cash, Beginning of period....................................... 121
-----------
Cash, End of period............................................. $ 288,268
===========
RECONCILIATION OF INCREASE IN NET ASSETS FROM
OPERATIONS TO NET CASH FLOWS PROVIDED (USED)
BY OPERATING AND INVESTING ACTIVITIES:
Increase in Net Assets From Operations........................ $ 6,839,086
-----------
Accretion of discount on investments.......................... (788,776)
Amortization of premium on investments........................ 110,162
Increase in investments, at value............................. (2,249,699)
Decrease in interest receivable............................... 32,440
Decrease in prepaid expenses.................................. 8,553
Increase in payable of investments purchased.................. (4,793,182)
Increase in variation margin payable.......................... 109,375
Decrease in receivable for investments sold................... 4,163,565
Decrease in interest payable on loan.......................... (3,501)
Decrease in accrued expenses.................................. (13,552)
-----------
Total Adjustments............................................. (3,424,615)
-----------
Net Cash Flows Provided by Operating and Investing Activities... $ 3,414,471
===========
--------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
PAGE 11
SALOMON BROTHERS EMERGING MARKETS INCOME FUND INC.
Notes to Financial Statements (unaudited)
Note 1. Organization and Significant Accounting Policies
Salomon Brothers Emerging Markets Income Fund Inc. ("Fund") was incorporated in
Maryland on July 30, 1992 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 $0.001 par
value common stock. The Fund's primary investment objective is to seek high
current income. As a secondary objective, the Fund seeks capital appreciation.
In pursuit of these objectives, the Fund under normal conditions invests at
least 80% of its net assets plus any borrowings for investment purposes in debt
securities of governments and government-related issuers located in emerging
market countries (including participations in loans between governments and
financial institutions), and of entities organized to restructure outstanding
debt of such issuers, and in debt securities of corporate issuers located in
emerging market countries.
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 accounting principles generally accepted in the
United States of America ("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
price 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) INVESTMENT TRANSACTIONS AND INVESTMENT INCOME. Securities transactions are
recorded on the trade date. Interest income is accrued on a daily basis.
Discount and premium on securities purchased is accreted and amortized 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.
PAGE 12
SALOMON BROTHERS EMERGING MARKETS INCOME FUND INC.
Notes to Financial Statements (unaudited) (continued)
(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. 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 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 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 comply with
the provisions of the Internal Revenue Code of 1986, as amended, 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. The character of income
and gains to be distributed are determined in accordance with income tax
regulations which may differ from GAAP.
(e) REPURCHASE AGREEMENTS. When entering into repurchase agreements, it is the
Fund's policy that a custodian takes possession of the underlying collateral
securities, the value of which at least equals the principal amount of the
repurchase transaction, including accrued interest. To the extent that any
repurchase transaction exceeds one business day, the value of the collateral is
marked-to-market to ensure the adequacy of the collateral. If the seller
defaults and the value of the collateral declines or if bankruptcy proceedings
are commenced with respect to the seller of the security, realization of the
collateral by the Fund may be delayed or limited.
(f) DISTRIBUTION OF INCOME AND GAINS. The Fund declares and pays dividends 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 GAAP 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
PAGE 13
SALOMON BROTHERS EMERGING MARKETS INCOME FUND INC.
Notes to Financial Statements (unaudited) (continued)
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 tax purposes are reported as tax return of
capital.
(g) 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.
(h) YEAR END TAX RECLASSIFICATIONS. The character of income and gains to be
distributed is determined in accordance with income tax regulations which may
differ from GAAP.
Note 2. Management and Advisory Fees and Other Transactions
The Fund retains Salomon Brothers Asset Management Inc ("SBAM"), an indirect
wholly-owned subsidiary of Citigroup Inc. ("Citigroup"), to act as investment
manager of the Fund. SBAM has delegated certain administrative responsibilities
to Smith Barney Fund Management LLC ("SBFM"), another indirect wholly-owned
subsidiary of Citigroup and an affiliate of SBAM, pursuant to a
Sub-Administration Agreement between SBAM and SBFM.
The Fund currently pays SBAM a monthly fee at an annual rate of 1.05% of the
Fund's average weekly net assets for its services.
At February 29, 2004, Citigroup Global Markets Inc., another indirect
wholly-owned subsdiary of Citigroup, held 10 shares of the Fund.
Certain officers and/or Directors of the Fund are officers and/or Directors of
SBAM.
Note 3. Portfolio Activity
For the six months ended February 29, 2004, the aggregate cost of purchases and
proceeds from sales of investments (including maturities of long-term
investments, but excluding short-term investments) were as follows:
Purchases ..................................................... $35,800,633
===========
Sales ......................................................... $36,869,759
===========
At February 29, 2004, the aggregate gross unrealized appreciation and
depreciation of investments for Federal income tax purposes were substantially
as follows:
Gross unrealized appreciation ................................. $8,858,210
Gross unrealized depreciation ................................. (194,884)
----------
Net unrealized appreciation ................................... $8,663,326
==========
PAGE 14
SALOMON BROTHERS EMERGING MARKETS INCOME FUND INC.
Notes to Financial Statements (unaudited) (continued)
Note 4. Futures Contracts
Securities or cash equal to the initial margin amount are either deposited with
the broker or segregated by the custodian upon entering into the futures
contract. Additional securities are also segregated up to the curent market
value of the futures contracts. During the period the futures contract is open,
changes in the value of the contract are recognized as unrealized gains or
losses by "marking-to-market" on a daily basis to reflect the market value of
the contract at the end of each day's trading. Variation margin payments are
recieved or made and recognized as assets due from or liabilities due to broker,
depending upon whether unrealized gains or losses are incurred. When the
contract is closed, the Fund records a realized gain or loss equal to the
difference between the proceeds from (or cost of) the closing transactions and
the Fund's basis in the contract. The Fund enters into such contracts typically
to hedge a portion of its portfolio. The Fund bears the market risk that arises
from changes in the value of the financial instruments and securities indices.
At February 29, 2004, the Fund had the following open futures contracts:
Number
of Market Unrealized
Contracts to Sell Contracts Expiration Basis Value Value Loss
--------------- --------- ---------- ----------- ------- ---------
U.S. Treasury
10 Year Note... 250 3/04 $28,225,150 $28,843,750 $(618,600)
Note 5. Loan
At February 29, 2004, the Fund had $20,000,000 outstanding of an available
$23,000,000 loan pursuant to a revolving credit and security agreement with CXC
LLC ("CXC"), an affiliate of Citigroup, a commercial paper conduit issuer for
Citicorp North America, Inc. ("CNA"). CNA, an affiliate of SBAM, acts as the
administrative agent. The loans generally bear interest at a variable rate based
on the weighted average interest rates of the underlying commercial paper or
LIBOR, plus any applicable margin. Securities held by the Fund are subject to a
lien, granted to the lenders, to the extent of the borrowing outstanding and any
additional expenses.
Note 6. 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. At February 29, 2004,
the Fund held loan participations with a total cost of $2,616,101 and with a
total market value of $2,748,812.
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
PAGE 15
SALOMON BROTHERS EMERGING MARKETS INCOME FUND INC.
Notes to Financial Statements (unaudited) (continued)
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.
Note 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 February 29, 2004, the Fund had a concentration
of risk in sovereign debt of emerging market countries.
The net asset value and/or market value per share of the Fund could be
negatively affected if the Fund were required to liquidate assets in other than
an orderly manner and/or in adverse market conditions to repay any bank loans
outstanding.
Note 8. Option Contracts
The Fund may from time to time enter into option contracts. Premiums paid when
put or call options are purchased by the Fund, represent investments, which are
marked-to-market daily. When a purchased option expires, the Fund will realize a
loss in the amount of the premium paid. When the Fund enters into a closing
sales transaction, the Fund will realize a gain or loss depending on whether the
proceeds from the closing sales transaction are greater or less than the premium
paid for the option. When the Fund exercises a put option, it will realize a
gain or loss from the sale of the underlying security and the proceeds from such
sale will be decreased by the premium originally paid. When the Fund exercises a
call option, the cost of the security which the Fund purchases upon exercise
will be increased by the premium originally paid.
At February 29, 2004, the Fund did not hold any purchased call or put option
contracts.
When the Fund writes a call or put option, an amount equal to the premium
received by the Fund is recorded as a liability, the value of which is
marked-to-market daily. When a written option expires, the Fund realizes a gain
equal to the amount of the premium received.
PAGE 16
SALOMON BROTHERS EMERGING MARKETS INCOME FUND INC.
Notes to Financial Statements (unaudited) (continued)
When the Fund enters into a closing purchase transaction, the Fund realizes a
gain or loss depending upon whether the cost of the closing transaction is
greater or less than the premium originally received, without regard to any
unrealized gain or loss on the underlying security, and the liability related to
such option is eliminated. When a written call option is exercised the proceeds
of the security sold will be increased by the premium originally received. When
a written put option is exercised, the amount of the premium originally received
will reduce the cost of the security which the Fund purchased upon exercise.
When written index options are exercised, settlement is made in cash.
The Fund enters into options for hedging purposes. The risk associated with
purchasing options is limited to the premium originally paid. The risk in
writing a covered call option is that the Fund gives up the opportunity to
participate in any increase in the price of the underlying security beyond the
exercise price. The risk in writing a put option is that the Fund is exposed to
the risk of loss if the market price of the underlying security declines. The
risk in writing a call option is that the Fund is exposed to the risk of loss if
the market price of the underlying security increases.
For the six months ended February 29, 2004, the Fund did not enter into any
written covered call or put option contracts.
Note 9. 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 foreign currency 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.
The Fund enters into forward foreign currency contracts to facilitate settlement
of foreign currency denominated portfolio transactions or to manage foreign
currency exposure associated with foreign currency denominated securities.
Forward foreign currency 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 foreign currency contract. Risks may also arise upon entering into these
contracts from the potential inability of the counterparties to meet the terms
of their contracts. The Fund bears the market risk that arises from changes in
foreign currency exchange rates.
At February 29, 2004, the Fund did not have any open forward foreign currency
contracts.
Note 10. Dividend Subsequent to February 29, 2004
On February 9, 2004, the Board of Directors of the Fund declared a common stock
dividend of $0.4125 per share from net realized gains. The dividend is payable
on March 26, 2004 to shareholders of record on March 16, 2004.
PAGE 17
SALOMON BROTHERS EMERGING MARKETS INCOME FUND INC.
Notes to Financial Statements (unaudited) (continued)
Note 11. Additional Information
The Fund has received the following information from Citigroup Asset Management
("CAM"), the Citigroup business unit which includes the Fund's Investment
Manager and other investment advisory companies, all of which are indirect,
wholly-owned subsidiaries of Citigroup. CAM is reviewing its entry, through an
affiliate, into the transfer agent business in the period 1997-1999. As CAM
currently understands the facts, at the time CAM decided to enter the transfer
agent business, CAM sub-contracted for a period of five years certain of the
transfer agency services to a third party and also concluded a revenue guarantee
agreement with this sub-contractor providing that the sub-contractor would
guarantee certain benefits to CAM or its affiliates (the "Revenue Guarantee
Agreement"). In connection with the subsequent purchase of the sub-contractor's
business by an affiliate of the current sub-transfer agent (PFPC Inc.) used by
CAM on many of the funds it manages, this Revenue Guarantee Agreement was
amended eliminating those benefits in exchange for arrangements that included a
one-time payment from the sub-contractor.
The Boards of CAM-managed funds (the "Boards") were not informed of the Revenue
Guarantee Agreement with the sub-contractor at the time the Boards considered
and approved the transfer agent arrangements. Nor were the Boards informed of
the subsequent amendment to the Revenue Guarantee Agreement when that occurred.
CAM has begun to take corrective actions. CAM will pay to the applicable funds
approximately $17 million (plus interest) that CAM and its affiliates received
from the Revenue Guarantee Agreement and its amendment. The Fund did not
implement the contractual arrangement described above and therefore will not
receive any portion of the payment. CAM also plans an independent review to
verify that the transfer agency fees charged by CAM were fairly priced as
compared to competitive alternatives. CAM is instituting new procedures and
making changes designed to ensure no similar arrangements are entered into in
the future.
CAM has briefed the SEC, the New York State Attorney General and other
regulators with respect to this matter, as well as the U.S. Attorney who is
investigating the matter. CAM is cooperating with governmental authorities on
this matter, the ultimate outcome of which is not yet determinable.
The Fund's transfer agent is American Stock Transfer & Trust Company, which is
not affiliated with CAM or PFPC Inc.
PAGE 18
SALOMON BROTHERS EMERGING MARKETS INCOME FUND INC.
Financial Highlights
Data for a share of common stock outstanding throughout the year ended August
31, unless otherwise noted:
2004(1)(2) 2003(2) 2002(2) 2001 2000 1999
---------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $15.56 $11.80 $12.91 $14.01 $11.16 $ 7.83
------ ------ ------ ------ ------ ------
INCOME (LOSS) FROM OPERATIONS:
Net investment income(3)........ 0.68 1.54 1.67 1.68 1.72 1.88
Net realized and unrealized
gain (loss)(3)................ 0.98 3.87 (1.13) (1.13) 2.78 3.83
------ ------ ------ ------ ------ ------
Total Income From Operations...... 1.66 5.41 0.54 0.55 4.50 5.71
------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS FROM:
Net investment income........... (0.41) (1.65) (1.65) (1.65) (1.65) (2.41)
Net realized gains.............. (0.41) -- -- -- -- --
Capital......................... -- -- -- -- -- (0.02)
------ ------ ------ ------ ------ ------
Total Distributions............... (0.82) (1.65) (1.65) (1.65) (1.65) (2.43)
------ ------ ------ ------ ------ ------
INCREASE IN NET ASSET VALUE
DUE TO SHARES ISSUED ON
REINVESTMENT OF DIVIDENDS....... -- -- -- -- -- 0.05
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD.... $16.40 $15.56 $11.80 $12.91 $14.01 $11.16
====== ====== ====== ====== ======== ======
MARKET PRICE, END OF PERIOD....... $18.95 $16.80 $12.30 $13.15 $13.9375 $12.50
====== ====== ====== ====== ======== ======
TOTAL RETURN, BASED ON MARKET
PRICE PER SHARE(4).............. 18.45%++ 53.82% 6.10% 7.14% 27.51% 62.97%
RATIOS TO AVERAGE NET ASSETS:
Total expenses, including interest
expense....................... 2.21%+ 2.72% 2.96% 4.76% 5.00% 5.03%
Total expenses, excluding interest
expense (operating expenses).. 1.54%+ 1.83% 1.51% 1.71% 1.73% 1.85%
Net investment income(3)........ 8.42%+ 11.16% 13.24% 12.87% 13.33% 18.13%
SUPPLEMENTAL DATA:
Net assets, end of period (000s) $67,537 $63,824 $48,049 $52,209 $56,313 $44,377
Portfolio turnover rate ........ 42% 179% 168% 195% 136% 87%
Loan outstanding, end of
period (000s) ................ $20,000 $20,000 $20,000 $20,000 $20,000 $20,000
Weighted average loan (000s).... $20,000 $20,000 $20,000 $20,000 $20,000 $20,000
Weighted average interest rate
on loans ..................... 2.20%+ 2.51% 3.70% 7.94% 8.26% 6.48%
Before applicable reimbursement from
SBAM, net investment income per
share and expense ratios would
have been:
Net investment income........... -- -- $1.63 -- -- --
Expense ratio, including interest
expense....................... -- -- 3.26% -- -- --
Expense ratio, excluding interest
expense (operating expenses).. -- -- 1.81% -- -- --
--------------------------------------------------------------------------------
(1) For the six months ended February 29, 2004 (unaudited).
(2) Per share amounts have been calculated using the monthly average shares
method.
(3) Effective September 1, 2001, the Fund adopted a change in the
accounting method that requires the Fund to amortize premiums and accrete
all discounts. Without the adoption of this change, for the year ended
August 31, 2002, the net investment income, net realized and unrealized loss
and the ratio of net investment income to average net assets would have been
$1.68, $(1.14) and 13.29%, respectively. Per share information, ratios and
supplemental data for the periods prior to September 1, 2001 have not been
restated to reflect this change in presentation.
(4) For the purpose 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.
++ Total return is not annualized, as it may not be representative of the total
return for the year.
+ Annualized.
PAGE 19
SALOMON BROTHERS EMERGING MARKETS INCOME FUND INC.
Additional Shareholder Information (unaudited)
Results of Annual Meeting of Shareholders
The Annual Meeting of Shareholders of Salomon Brothers Emerging Markets Income
Fund Inc. was held on December 11, 2003, for the purposes of considering and
voting upon the election of Daniel Cronin, as a Class II Director to serve until
the 2004 Annual Meeting; Carol Colman to serve as a Class II Director until the
2004 Annual Meeting; and William R. Hutchinson, Riordan Roett and Jeswald
W.Salacuse as Class I Directors of the Fund, to serve until the 2006 Annual
Meeting of Shareholders. The following table provides information concerning the
matter voted upon at the meeting:
Election of Directors
Nominees Votes For Votes Withheld
-------- -------- ------------
Carol L. Colman...................... 3,856,289 40,030
Daniel P. Cronin..................... 3,856,289 40,030
William R. Hutchinson................ 3,856,289 40,030
Jeswald W.Salacuse................... 3,856,289 40,030
Riordan Roett........................ 3,856,289 40,030
At February 29, 2004, in addition to Carol L. Colman, Daniel P. Cronin, William
R. Hutchinson, Riordan Roett and Jeswald W. Salacuse, the other Directors of the
Fund were as follows:
Leslie H. Gelb
R. Jay Gerken
PAGE 20
SALOMON BROTHERS EMERGING MARKETS INCOME FUND INC.
Form of Terms and Conditions of Amended and Restated Dividend Reinvestment and
Cash Purchase Plan (unaudited)
Pursuant to certain rules of the Securities and Exchange Commission, the
following additional disclosure is provided. Each shareholder holding shares of
common stock ("Shares") of Salomon Brothers Emerging Markets Income Fund Inc.
("Fund"), will be deemed to have elected to be a participant in the Amended and
Restated Dividend Reinvestment and Cash Purchase Plan ("Plan"), unless the
shareholder specifically elects in writing (addressed to the Agent at the
address below or to any nominee who holds Shares for the shareholder in its
name) to receive all income dividends and distributions of capital gains in
cash, paid by check, mailed directly to the record holder by or under the
direction of American Stock Transfer & Trust Company as the Fund's
dividend-paying agent ("Agent"). A shareholder whose Shares are held in the name
of a broker or nominee who does not provide an automatic reinvestment service
may be required to take such Shares out of "street name" and register such
Shares in the shareholder's name in order to participate, otherwise dividends
and distributions will be paid in cash to such shareholder by the broker or
nominee. Each participant in the Plan is referred to herein as a "Participant."
The Agent will act as Agent for each Participant, and will open accounts for
each Participant under the Plan in the same name as their Shares are registered.
Unless the Fund declares a dividend or distribution payable only in the form of
cash, the Agent will apply all dividends and distributions in the manner set
forth below.
If, on the determination date, the market price per Share equals or exceeds the
net asset value per Share on that date (such condition, a "market premium"), the
Agent will receive the dividend or distribution in newly issued Shares of the
Fund on behalf of Participants. If, on the determination date, the net asset
value per Share exceeds the market price per Share (such condition, a "market
discount"), the Agent will purchase Shares in the open-market. The determination
date will be the fourth New York Stock Exchange trading day (a New York Stock
Exchange trading day being referred to herein as a "Trading Day") preceding the
payment date for the dividend or distribution. For purposes herein, "market
price" will mean the average of the highest and lowest prices at which the
Shares sell on the New York Stock Exchange on the particular date, or if there
is no sale on that date, the average of the closing bid and asked quotations.
Purchases made by the Agent will be made as soon as practicable commencing on
the Trading Day following the determination date and terminating no later than
30 days after the dividend or distribution payment date except where temporary
curtailment or suspension of purchase is necessary to comply with applicable
provisions of federal securities law; provided, however, that such purchases
will, in any event, terminate on the earlier of (i) 60 days after the dividend
or distribution payment date and (ii) the Trading Day prior to the "ex-dividend"
date next succeeding the dividend or distribution payment date.
If (i) the Agent has not invested the full dividend amount in open-market
purchases by the date specified in paragraph 4 above as the date on which such
purchases must terminate or
PAGE 21
SALOMON BROTHERS EMERGING MARKETS INCOME FUND INC.
Form of Terms and Conditions of Amended and Restated Dividend Reinvestment and
Cash Purchase Plan (unaudited) (continued)
(ii) a market discount shifts to a market premium during the purchase period,
then the Agent will cease making open-market purchases and will receive the
uninvested portion of the dividend amount in newly issued Shares (x) in the case
of (i) above, at the close of business on the date the Agent is required to
terminate making open-market purchases as specified in paragraph 4 above or (y)
in the case of (ii) above, at the close of business on the date such shift
occurs; but in no event prior to the payment date for the dividend or
distribution.
In the event that all or part of a dividend or distribution amount is to be paid
in newly issued Shares, such Shares will be issued to Participants in accordance
with the following formula: (i) if, on the valuation date, the net asset value
per Share is less than or equal to the market price per Share, then the newly
issued Shares will be valued at net asset value per Share on the valuation date;
provided, however, that if the net asset value is less than 95% of the market
price on the valuation date, then such Shares will be issued at 95% of the
market price and (ii) if, on the valuation date, the net asset value per Share
is greater than the market price per Share, then the newly issued Shares will be
issued at the market price on the valuation date. The valuation date will be the
dividend or distribution payment date, except that with respect to Shares issued
pursuant to paragraph 5 above, the valuation date will be the date such Shares
are issued. If a date that would otherwise be a valuation date is not a Trading
Day, the valuation date will be the next preceding Trading Day.
Participants have the option of making additional cash payments to the Agent,
monthly, in a minimum amount of $250, for investment in Shares. The Agent will
use all such funds received from Participants to purchase Shares in the open
market on or about the first business day of each month. To avoid unnecessary
cash accumulations, and also to allow ample time for receipt and processing by
the Agent, Participants should send in voluntary cash payments to be received by
the Agent approximately 10 days before an applicable purchase date specified
above. A Participant may withdraw a voluntary cash payment by written notice, if
the notice is received by the Agent not less than 48 hours before such payment
is to be invested.
Purchases by the Agent pursuant to paragraphs 4 and 7 above may be made on any
securities exchange on which the Shares are traded, in the over-the-counter
market or in negotiated transactions, and may be on such terms as to price,
delivery and otherwise as the Agent shall determine. Funds held by the Agent
uninvested will not bear interest, and it is understood that, in any event, the
Agent shall have no liability in connection with any inability to purchase
Shares within the time periods herein provided, or with the timing of any
purchases effected. The Agent shall have no responsibility as to the value of
the Shares acquired for the Participant's account. The Agent may commingle
amounts of all Participants to be used for open-market purchases of Shares and
the price per Share allocable to each Participant in connection with such
purchases shall be the average price (including brokerage commissions) of all
Shares purchased by the Agent.
PAGE 22
SALOMON BROTHERS EMERGING MARKETS INCOME FUND INC.
Form of Terms and Conditions of Amended and Restated Dividend Reinvestment and
Cash Purchase Plan (unaudited) (continued)
The Agent will maintain all Participants' accounts in the Plan and will furnish
written confirmations of all transactions in each account, including information
needed by Participants for personal and tax records. The Agent will hold Shares
acquired pursuant to the Plan in noncertificated form in the Participant's name
or that of its nominee, and each Participant's proxy will include those Shares
purchased pursuant to the Plan. The Agent will forward to Participants any proxy
solicitation material and will vote any Shares so held for Participants only in
accordance with the proxy returned by Participants to the Fund. Upon written
request, the Agent will deliver to Participants, without charge, a certificate
or certificates for the full Shares.
The Agent will confirm to Participants each acquisition made for their
respective accounts as soon as practicable but not later than 60 days after the
date thereof. Although Participants may from time to time have an undivided
fractional interest (computed to three decimal places) in a Share of the Fund,
no certificates for fractional shares will be issued. Dividends and
distributions on fractional shares will be credited to each Participant's
account. In the event of termination of a Participant's account under the Plan,
the Agent will adjust for any such undivided fractional interest in cash at the
market value of the Fund's Shares at the time of termination less the pro rata
expense of any sale required to make such an adjustment.
Any share dividends or split shares distributed by the Fund on Shares held by
the Agent for Participants will be credited to their respective accounts. In the
event that the Fund makes available to Participants rights to purchase
additional Shares or other securities, the Shares held for Participants under
the Plan will be added to other Shares held by the Participants in calculating
the number of rights to be issued to Participants.
The Agent's service fee for handling capital gains distributions or income
dividends will be paid by the Fund. Participants will be charged a pro rata
share of brokerage commissions on all open-market purchases.
Participants may terminate their accounts under the Plan by notifying the Agent
in writing. Such termination will be effective immediately if notice is received
by the Agent not less than 10 days prior to any dividend or distribution record
date; otherwise such termination will be effective on the first Trading Day
after the payment date for such dividend or distribution with respect to any
subsequent dividend or distribution. The Plan may be amended or terminated by
the Fund as applied to any voluntary cash payments made and any income dividend
or capital gains distribution paid subsequent to written notice of the change or
termination sent to Participants at least 30 days prior to the record date for
the income dividend or capital gains distribution. The Plan may be amended or
terminated by the Agent, with the Fund's prior written consent, on at least 30
days' written notice to Participants. Notwithstanding the preceding two
sentences, the Agent or the Fund may amend or supplement the Plan at any time or
times when necessary or appropriate to comply with applicable law or rules or
policies of the Securities and Exchange Commission or any other regulatory
authority. Upon any termination, the Agent will cause a certificate or
certificates
PAGE 23
SALOMON BROTHERS EMERGING MARKETS INCOME FUND INC.
Form of Terms and Conditions of Amended and Restated Dividend Reinvestment and
Cash Purchase Plan (unaudited) (continued)
for the full Shares held by each Participant under the Plan and cash adjustment
for any fraction to be delivered to each Participant without charge. If the
Participant elects by notice to the Agent in writing in advance of such
termination to have the Agent sell part or all of a Participant's Shares and
remit the proceeds to the Participant, the Agent is authorized to deduct a $2.50
fee plus brokerage commission for this transaction from the proceeds.
Any amendment or supplement shall be deemed to be accepted by each Participant
unless, prior to the effective date thereof, the Agent receives written notice
of the termination of the Participant's account under the Plan. Any such
amendment may include an appointment by the Agent in its place and stead of a
successor Agent under these terms and conditions, with full power and authority
to perform all or any of the acts to be performed by the Agent under these terms
and conditions. Upon any such appointment of an Agent for the purpose of
receiving dividends and distributions, the Fund will be authorized to pay to
such successor Agent, for each Participant's account, all dividends and
distributions payable on Shares of the Fund held in each Participant's name or
under the Plan for retention or application by such successor Agent as provided
in these terms and conditions.
In the case of Participants, such as banks, broker-dealers or other nominees,
which hold Shares for others who are beneficial owners ("Nominee Holders"), the
Agent will administer the Plan on the basis of the number of Shares certified
from time to time by each Nominee Holder as representing the total amount
registered in the Nominee Holder's name and held for the account of beneficial
owners who are to participate in the Plan.
The Agent shall at all times act in good faith and use its best efforts within
reasonable limits to insure the accuracy of all services performed under this
Agreement and to comply with applicable law, but assumes no responsibility and
shall not be liable for loss or damage due to errors unless such error is caused
by its negligence, bad faith, or willful misconduct or that of its employees.
All correspondence concerning the Plan should be directed to the Agent at 59
Maiden Lane, New York, New York 10038.
-------------------------------
The report is transmitted to the shareholders of the Fund for their information.
This is not a prospectus, circular or representation intended for use in the
purchase of shares of the Fund or any securities mentioned in this report.
Notice is hereby given in accordance with Section 23(c) of the Investment
Company Act of 1940 that the Fund may purchase at market prices from time to
time shares of its common stock in the open market.
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to portfolio securities is available without charge,
upon request, by telephoning the Fund (toll-free) at 1-800-446-1013 and by
visiting the SEC's web site at www.sec.gov.
PAGE 24
SALOMON BROTHERS EMERGING MARKETS INCOME FUND INC.
Directors Salomon Brothers Emerging
CAROL L. COLMAN Markets Income Fund Inc.
DANIEL P. CRONIN
LESLIE H. GELB 125 Broad Street
R. JAY GERKEN, CFA 10th Floor, MF-2
WILLIAM R. HUTCHINSON New York, New York 10004
RIORDAN ROETT Telephone 1-888-777-0102
JESWALD W. SALACUSE
INVESTMENT MANAGER
Officers Salomon Brothers Asset Management Inc
399 Park Avenue
R. JAY GERKEN, CFA New York, New York 10022
Chairman and
Chief Executive Officer CUSTODIAN
PETER J. WILBY, CFA State Street Bank and Trust Company
President 225 Franklin Street
ANDREW B. SHOUP Boston, Massachusetts 02110
Senior Vice President,
Chief Administrative Officer TRANSFER AGENT
and Treasurer American Stock Transfer & Trust Company
JAMES E. CRAIGE, CFA 59 Maiden Lane
Executive Vice President New York, New York 10038
THOMAS K. FLANAGAN, CFA
Executive Vice President INDEPENDENT AUDITORS
FRANCES M. GUGGINO PricewaterhouseCoopers LLP
Controller 1177 Avenue of the Americas
ROBERT I. FRENKEL New York, New York 10036
Secretary and
Chief Legal Officer LEGAL COUNSEL
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017-3909
NEW YORK STOCK EXCHANGE SYMBOL
EMD
(This page intentionally left blank.)
Salomon Brothers
Emerging Markets
Income Fund Inc.
Semi-Annual Report
February 29, 2004
{LOGO]
American Stock Transfer & Trust Company
59 Maiden Lane
New York, New York 10038
EMDSEMI 2/04
04-6465
ITEM 2. CODE OF ETHICS.
Not Applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not Applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
The Board of Directors of the Fund has delegated the authority to
develop policies and procedures relating to proxy voting to the Manager.
The Manager is part of Citigroup Asset Management ("CAM"), a group of
investment adviser affiliates of Citigroup, Inc. ("Citigroup"). Along
with the other investment advisers that comprise CAM, the Manager has
adopted a set of proxy voting policies and procedures (the "Policies")
to ensure that the Manager votes proxies relating to equity securities
in the best interest of clients.
In voting proxies, the Manager is guided by general fiduciary principles
and seeks to act prudently and solely in the best interest of clients.
The Manager attempts to consider all factors that could affect the value
of the investment and will vote proxies in the manner that it believes
will be consistent with efforts to maximize shareholder values. The
Manager may utilize an external service provider to provide it with
information and/or a recommendation with regard to proxy votes. However,
such recommendations do not relieve the Manager of its responsibility
for the proxy vote.
In the case of a proxy issue for which there is a stated position in the
Policies, CAM generally votes in accordance with such stated position.
In the case of a proxy issue for which there is a list of factors set
forth in the Policies that CAM considers in voting on such issue, CAM
votes on a case-by-case basis in accordance with the general principles
set forth above and considering such enumerated factors. In the case of
a proxy issue for which there is no stated position or list of factors
that CAM considers in voting on such issue, CAM votes on a case-by-case
basis in accordance with the general principles set forth above. Issues
for which there is a stated position set forth in the Policies or for
which there is a list of factors set forth in the Policies that CAM
considers in voting on such issues fall into a variety of categories,
including election of directors, ratification of auditors, proxy and
tender offer defenses, capital structure issues, executive and director
compensation, mergers and corporate restructurings, and social and
environmental issues. The stated position on an issue set forth in the
Policies can always be superseded, subject to the duty to act solely in
the best interest of the beneficial owners of accounts, by the
investment management professionals responsible for the account whose
shares are being voted. Issues applicable to a particular industry may
cause CAM to abandon a policy that would have otherwise applied to
issuers generally. As a result of the independent investment advisory
services provided by distinct CAM business units, there may be occasions
when different business units or different portfolio managers within the
same business unit vote differently on the same issue.
In furtherance of the Manager's goal to vote proxies in the best
interest of clients, the Manager follows procedures designed to identify
and address material conflicts that may arise between the Manager's
interests and those of its clients before voting proxies on behalf of
such clients. To seek to identify conflicts of interest, CAM
periodically notifies CAM employees (including employees of the Manager)
in writing that they are under an obligation (i) to be aware of the
potential for conflicts of interest with respect to voting proxies on
behalf of client accounts both as a result of their personal
relationships and due to special circumstances that may arise during the
conduct of CAM's and the Manager's business, and (ii) to bring conflicts
of interest of which they become aware to the attention of compliance
personnel. The Manager also maintains and considers a list of
significant relationships that could present a conflict of interest for
the Manager in voting proxies. The Manager is also sensitive to the fact
that a significant, publicized relationship between an issuer and a
non-CAM affiliate might appear to the public to influence the manner in
which the Manager decides to vote a proxy with respect to such issuer.
Absent special circumstances or a significant, publicized non-CAM
affiliate relationship that CAM or the Manager for prudential reasons
treats as a potential conflict of interest because such relationship
might appear to the public to influence the manner in which the Manager
decides to vote a proxy, the Manager generally takes the position that
non-CAM relationships between Citigroup and an issuer (e.g. investment
banking or banking) do not present a conflict of interest for the
Manager in voting proxies with respect to such issuer. Such position is
based on the fact that the Manager is operated as an independent
business unit from other Citigroup business units as well as on the
existence of information barriers between the Manager and certain other
Citigroup business units.
CAM maintains a Proxy Voting Committee, of which the Manager personnel
are members, to review and address conflicts of interest brought to its
attention by compliance personnel. A proxy issue that will be voted in
accordance with a stated position on an issue or in accordance with the
recommendation of an independent third party is not brought to the
attention of the Proxy Voting Committee for a conflict of interest
review because the Manager's position is that to the extent a conflict
of interest issue exists, it is resolved by voting in accordance with a
pre-determined policy or in accordance with the recommendation of an
independent third party. With respect to a conflict of interest brought
to its attention, the Proxy Voting Committee first determines whether
such conflict of interest is material. A conflict of interest is
considered material to the extent that it is determined that such
conflict is likely to influence, or appear to influence, the Manager's
decision-making in voting proxies. If it is determined by the Proxy
Voting Committee that a conflict of interest is not material, the
Manager may vote proxies notwithstanding the existence of the conflict.
If it is determined by the Proxy Voting Committee that a conflict of
interest is material, the Proxy Voting Committee is responsible for
determining an appropriate method to resolve such conflict of interest
before the proxy affected by the conflict of interest is voted. Such
determination is based on the particular facts and circumstances,
including the importance of the proxy issue and the nature of the
conflict of interest. Methods of resolving a material conflict of
interest may include, but are not limited to, disclosing the conflict to
clients and obtaining their consent before voting, or suggesting to
clients that they engage another party to vote the proxy on their
behalf.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer have concluded that the registrant's disclosure controls and
procedures (as defined in Rule 30a- 3(c) under the Investment Company
Act of 1940, as amended (the "1940 Act")) are effective as of a date
within 90 days of the filing date of this report that includes the
disclosure required by this paragraph, based on their evaluation of the
disclosure controls and procedures required by Rule 30a-3(b) under the
1940 Act and 15d-15(b) under the Securities Exchange Act of 1934.
(b) There were no changes in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act)
that occurred during the registrant's last fiscal half-year (the
registrant's second fiscal half-year in the case of an annual report)
that have materially affected, or are likely to materially affect the
registrant's internal control over financial reporting.
ITEM 10. EXHIBITS.
(a) Not applicable.
(b) Attached hereto.
Exhibit 99.CERT Certifications pursuant to section 302 of the
Sarbanes-Oxley Act of 2002
Exhibit 99.906CERT Certifications pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this Report
to be signed on its behalf by the undersigned, there unto duly authorized.
Salomon Brothers Emerging Markets Income Fund Inc.
By: /s/ R. Jay Gerken
R. Jay Gerken
Chief Executive Officer of
Salomon Brothers Emerging Markets Income Fund Inc.
Date: April 29, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ R. Jay Gerken
R. Jay Gerken
Chief Executive Officer of
Salomon Brothers Emerging Markets Income Fund Inc.
Date: April 29, 2004
By: /s/ Andrew B. Shoup
Andrew B. Shoup
Chief Administrative Officer of
Salomon Brothers Emerging Markets Income Fund Inc.
Date: April 29, 2004