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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-CSR
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CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21343
SALOMON BROTHERS EMERGING MARKETS DEBT FUND INC.
----------------------------------------------------
(Exact name of registrant as specified in charter)
125 Broad Street, New York, NY 10004
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(Address of principal executive offices) (Zip code)
Robert I. Frenkel, Esq.
Salomon Brothers Asset Management Inc
300 First Stamford Place
Stamford, CT 06902
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(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 725-6666
Date of fiscal year end: OCTOBER 31
Date of reporting period: APRIL 30, 2004
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ITEM 1. REPORT TO STOCKHOLDERS.
The Semi-Annual Report to Stockholders is filed herewith.
[GRAPHIC]
SALOMON BROTHERS
EMERGING MARKETS
DEBT FUND INC.
SEMI-ANNUAL REPORT
April 30, 2004
[LOGO] SALOMON BROTHERS
Asset Management
PFPC Inc.
P.O. Box 8030
Boston, MA 02266-8030
ESDSEMI 4/04
04-6775
SALOMON BROTHERS EMERGING MARKETS DEBT FUND INC.
LETTER FROM THE CHAIRMAN
[PHOTO]
R. Jay Gerken
R. Jay Gerken, CFA
Chairman and Chief Executive Officer
Dear Shareholder:
On behalf of everyone at Salomon Brothers Asset Management, I would like to
extend a warm welcome to you as a shareholder of the new Salomon Brothers
Emerging Markets Debt Fund. The stewardship of your fund is a responsibility we
take very seriously and we will work diligently to achieve the fund's
investment goals. Thank you again for your confidence in our investment
management capabilities.
This is the first of two shareholder reports that we will send to you each year
detailing the economic and financial markets environment, the fund's investment
strategy and how it affected performance, and what, if any, changes we are
making in anticipation of the market outlook. We encourage you to read these
reports carefully to monitor the fund's progress. Also, you can obtain updates
about your fund through our www.sbam.com website.
Over the first four months of the semi-annual period ended April 30, 2004,
emerging debt markets, as represented by the J.P. Morgan Emerging Markets Bond
Index Plus ("EMBI+")/i/, performed positively, and markets remained generally
calm amid a relatively benign stretch in the U.S. Treasury bond markets.
Emerging markets were disrupted later in the period after U.S. Treasury bonds
sold off and yields rose following an extremely strong March U.S. jobs report
and comments from the Fed about the economy and inflation concerns in the U.S.
However, we believe that emerging markets debt fundamentals remained strong,
and the markets benefited from increasing signs of a global economic turnaround
and continued strength in commodity prices, particularly the economies of Latin
American countries, whose markets constitute a large part of the EMBI+.
The Salomon Brothers Emerging Markets Debt Fund Inc. began operation on
December 1, 2003 and, thus, only has returns for approximately five months of
the six-month period. Since its inception date on December 1, 2003, the fund
underperformed the EMBI+, which returned 0.22%, based both on the fund's
- -11.26% market price return and on its -5.85% net asset value ("NAV")/ii/ total
return. The fund also underperformed its Lipper closed-end emerging markets
debt funds category, which returned 0.56%/iii/, from November 30, 2003 to April
30, 2004./iv/
The fund's December and January underperformance versus the index of -2.16% and
- -1.48%, respectively, was largely the result of the transaction costs
associated with investing a portfolio in a rising market. The portfolio was
further hampered in April, with returns of -7.33% versus -5.91% for the Index,
by its overweight positions in the highly-leveraged markets of Brazil and
Ecuador, which were the month's two worst performers in the index. Finally, our
use of leverage, which is needed to achieve the fund's stated yield, detracted
from overall performance. Due largely to fears of rising U.S. interest rates,
market psychology turned against closed-end funds in general, putting pressure
on the entire sector (many closed-end funds invest in fixed-income securities
that can be hampered in a rising rate environment). Nevertheless, we continue
to believe that the fund's investment program, including our ability to utilize
leverage, remains sound for investors with a long-term horizon.
SALOMON BROTHERS EMERGING MARKETS DEBT FUND INC.
During the period ended April 30, 2004, the fund distributed dividends to
shareholders totaling approximately $0.45 per share. The table below shows the
annualized distribution yields and total return based on the fund's April 30,
2004 NAV per share and its New York Stock Exchange ("NYSE") closing price. Past
performance is no guarantee of future results. The fund's yield will vary.
FUND PERFORMANCE AS OF APRIL 30, 2004*
Annualized
30-Day Distribution 12/1/03-4/30/04
Price Per Share SEC Yield Yield Total Return
- ---------------
$17.52 (NAV) 10.40% 10.27% -5.85%
$17.32 (NYSE) 10.52% 10.39% -11.26%
All figures represent past performance and are not a guarantee of future
results. The fund's yields will vary.
*From the time period of 12/1/03 to 4/30/04
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 monthly 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 monthly income dividend
rate of $0.15 for 12 months. These yields are as of April 30, 2004 and are
subject to change.
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 "ESD" and its closing market price is
available in most newspapers under the NYSE listings. The daily NAV is
available online under symbol XESDX. 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 press release that can be
found on most major financial websites 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.
SALOMON BROTHERS EMERGING MARKETS DEBT FUND INC.
Thank you for your investment in the Salomon Brothers Emerging Markets Debt
Fund Inc. We appreciate that you have entrusted us to manage your money and
value our relationship with you.
Sincerely,
/s/ R. Jay Gerken
R. Jay Gerken, CFA
Chairman and Chief Executive Officer
May 17, 2004
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 April 30, 2004 and are subject to
change. Please refer to pages 4 through 6 for a list and percentage breakdown
of the fund's holdings.
The mention of country sector breakdowns is for informational purposes only and
should not be construed as a recommendation to purchase or sell any securities.
The information provided regarding such sectors is not a sufficient basis upon
which to make an investment decision. Investors seeking financial advice
regarding the appropriateness of investing in any securities or investment
strategies discussed should consult their financial professional. Portfolio
holdings are subject to change at any time and may not be representative of the
portfolio manager's current or future investments. The fund's top five sector
holdings as of April 30, 2004 were: Brazil (33.47%); Russia (24.12%); Mexico
(22.69%); Philippines (7.21%); Panama (7.18%). The fund's portfolio composition
is subject to change at any time.
RISKS:
Like any investment where there is risk loss, you may not be able to sell the
shares for the same amount that you purchased them. 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.
High-yield bonds involve greater credit and liquidity risks than investment
grade bonds. The fund may use derivatives, such as options and futures, which
can be illiquid, may disproportionately increase losses, and have a potentially
large impact on fund performance. Leverage may magnify gains and increase
losses in the fund's portfolio.
All index performance reflects no deduction for fees, expenses or taxes. Please
note that an investor cannot invest directly in an index.
/i/The EMBI+ 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.
/ii/NAV is a price that reflects the value of the fund's underlying portfolio.
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.
/iii/Lipper returns are based on the time period from 11/30/03 to 4/30/04.
/iv/Lipper, Inc. is a major independent mutual-fund tracking organization.
Returns are based on the 5-month period from 11/30/03 to 4/30/04,
calculated among 12 funds in the fund's Lipper peer group of closed-end
emerging markets debt funds, including the reinvestment of dividends and
capital gains, if any.
SALOMON BROTHERS EMERGING MARKETS DEBT FUND INC.
SCHEDULE OF INVESTMENTS (unaudited)
April 30, 2004
Face
Amount Security Value
-----------------------------------------------------------------
SOVEREIGN BONDS -- 96.8%
Argentina -- 1.1%
Republic of Argentina, Series L:
$10,000,000 6.000% due 3/31/23 (a)................ $ 5,237,500
4,860,000 DISC, 2.0625% due 3/31/23 (a)(b)...... 2,545,425
------------
7,782,925
------------
Brazil -- 23.3%
Federal Republic of Brazil:
12,760,000 10.125% due 5/15/27................... 11,244,750
59,465,000 12.250% due 3/6/30 (c)................ 60,654,300
3,880,000 11.000% due 8/17/40................... 3,622,950
81,841,754 C Bond, 8.000% due 4/15/14 (c)........ 75,345,565
11,411,765 DCB, Series L, 2.125% due 4/15/12 (b). 9,557,353
------------
160,424,918
------------
Bulgaria -- 1.9%
11,700,000 Republic of Bulgaria, 8.250% due 1/15/15 13,455,000
------------
Colombia -- 4.8%
Republic of Colombia:
3,000,000 10.750% due 1/15/13................... 3,307,500
3,700,000 11.750% due 2/25/20................... 4,310,500
8,165,000 8.125% due 5/21/24.................... 6,858,600
18,500,000 10.375% due 1/28/33................... 18,685,000
------------
33,161,600
------------
Costa Rica -- 2.4%
Republic of Costa Rica:
6,000,000 6.548% due 3/20/14.................... 5,640,000
9,750,000 9.995% due 8/1/20..................... 11,017,500
------------
16,657,500
------------
Dominican -- 0.6%
4,545,000 Dominican Republic, 9.500% due 9/27/06.. 3,863,250
------------
Ecuador -- 4.2%
Republic of Ecuador:
31,005,000 12.000% due 11/15/12 (c).............. 27,749,475
1,175,000 7.000% due 8/15/30 (b)................ 826,906
------------
28,576,381
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See Notes to Financial Statements.
Page 4
SALOMON BROTHERS EMERGING MARKETS DEBT FUND INC.
SCHEDULE OF INVESTMENTS (unaudited) (continued)
April 30, 2004
Face
Amount Security Value
---------------------------------------------------------------------
El Salvador -- 0.7%
$ 4,275,000 Republic of El Salvador, 7.750% due 1/24/23 $ 4,670,437
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Malaysia -- 1.2%
6,750,000 Malaysia, 8.750% due 6/1/09................ 8,033,178
------------
Mexico -- 15.8%
29,950,000 Petroleos Mexicanos, 9.500% due 9/15/27 (c) 34,816,875
United Mexican States:
12,360,000 6.375% due 1/16/13....................... 12,545,400
27,717,000 5.875% due 1/15/14....................... 26,954,783
27,375,000 8.300% due 8/15/31....................... 29,496,563
5,000,000 7.500% due 4/8/33 (c).................... 4,968,750
------------
108,782,371
------------
Panama -- 5.0%
Republic of Panama:
23,875,000 9.375% due 1/16/23....................... 25,068,750
10,000,000 8.125% due 4/28/34....................... 9,350,000
------------
34,418,750
------------
Peru -- 4.2%
Republic of Peru:
6,200,000 9.875% due 2/6/15........................ 6,696,000
20,175,000 8.750% due 11/21/33...................... 17,955,750
5,000,000 FLIRB, 4.500% due 3/7/17 (b)............. 4,225,000
------------
28,876,750
------------
Philippines -- 5.0%
Republic of Philippines:
7,300,000 9.875% due 1/15/19....................... 7,519,000
25,125,000 10.625% due 3/16/25...................... 27,040,781
------------
34,559,781
------------
Russia -- 16.8%
Russian Federation:
9,640,000 11.000% due 7/24/18...................... 12,435,600
112,400,000 5.000% due 3/31/30 (b)(c)................ 103,197,250
------------
115,632,850
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Turkey -- 4.9%
Republic of Turkey:
23,240,000 11.500% due 1/23/12...................... 27,597,500
1,725,000 11.000% due 1/14/13...................... 2,013,937
200,000 9.500% due 1/15/14....................... 215,750
3,050,000 11.875% due 1/15/30 (c).................. 3,972,625
------------
33,799,812
------------
See Notes to Financial Statements.
Page 5
SALOMON BROTHERS EMERGING MARKETS DEBT FUND INC.
SCHEDULE OF INVESTMENTS (unaudited) (continued)
April 30, 2004
Face
Amount Security Value
- -------------------------------------------------------------------------------------------------------------------
Venezuela -- 4.9%
Republic of Venezuela:
$ 5,700,000 5.375% due 8/7/10....................................................................... $ 4,460,250
3,875,000 9.250% due 9/15/27...................................................................... 3,187,188
21,250,000 9.375% due 1/13/34...................................................................... 17,371,875
9,333,030 DCB, Series DL, 2.125% due 12/18/07 (b)................................................. 8,784,714
------------
33,804,027
------------
TOTAL SOVEREIGN BONDS (Cost -- $713,022,331).............................................. 666,499,530
------------
LOAN PARTICIPATIONS (B)(D) -- 2.0%
Morocco -- 2.0%
13,800,000 Kingdom of Morocco, Tranche A, 2.03125% due 1/2/09 (J.P. Morgan Chase & Co. and
Merrill Lynch, Pierce, Fenner & Smith Inc.) (Cost -- $13,645,751)........................ 13,593,000
------------
REPURCHASE AGREEMENT -- 1.2%
8,171,000 Morgan Stanley & Co. dated 4/30/04, 1.020% due 5/3/04; Proceeds at maturity -- $8,171,695;
(Fully collateralized by Fannie Mae Notes, 2.590% to 6.375% due 5/5/04 to 6/13/17;
Market value -- $8,334,420) (Cost -- $8,171,000)......................................... 8,171,000
------------
TOTAL INVESTMENTS -- 100.0% (Cost -- $734,839,082*)....................................... $688,263,530
============
- --------
(a)Security is currently in default.
(b)Rate shown reflects current rate on instrument with variable rate or step
coupon rates.
(c)All or a portion of this security is held as collateral for reverse
repurchase agreements.
(d)Participation interests were acquired through the financial institutions
indicated parenthetically.
* Aggregate cost for Federal income tax purposes is substantially the same.
Abbreviations used in this schedule:
C Bond -- Capitalization Bond
DCB -- Debt Conversion Bond
DISC -- Discount Bond
FLIRB -- Front Loaded Interest Reduction Bond
See Notes to Financial Statements.
Page 6
SALOMON BROTHERS EMERGING MARKETS DEBT FUND INC.
STATEMENT OF ASSETS AND LIABILITIES (unaudited)
April 30, 2004
ASSETS:
Investments, at value (Cost -- $734,839,082)................................................... $688,263,530
Cash........................................................................................... 5,208,907
Receivable for securities sold................................................................. 20,576,079
Interest receivable............................................................................ 12,532,426
------------
Total Assets................................................................................... 726,580,942
------------
LIABILITIES:
Payable for open reverse repurchase agreements (Note 6)........................................ 235,081,261
Payable for securities purchased............................................................... 8,973,418
Payable to broker -- variation margin.......................................................... 1,312,500
Organization costs............................................................................. 858,567
Management fee payable......................................................................... 524,244
Interest payable............................................................................... 459,293
Accrued expenses............................................................................... 34,171
------------
Total Liabilities.............................................................................. 247,243,454
------------
Total Net Assets.................................................................................. $479,337,488
============
NET ASSETS:
Common stock ($0.001 par value, 100,000,000 shares authorized; 27,363,442 shares outstanding).. $ 27,363
Additional paid-in capital..................................................................... 521,472,005
Undistributed net investment income............................................................ 3,918,837
Accumulated net realized loss from investment transactions, options and futures contracts...... (18,618,729)
Net unrealized depreciation of investments and futures contracts............................... (27,461,988)
------------
Total Net Assets.................................................................................. $479,337,488
============
Net Asset Value, per share ($479,337,488 / 27,363,442 shares outstanding)......................... $17.52
======
See Notes to Financial Statements.
Page 7
SALOMON BROTHERS EMERGING MARKETS DEBT FUND INC.
STATEMENT OF OPERATIONS (unaudited)
For the Period Ended April 30, 2004+
INCOME:
Interest........................................ $ 19,470,148
------------
EXPENSES:
Management fee (Note 2)......................... 2,313,096
Interest expense (Note 6)....................... 737,920
Custody......................................... 59,242
Shareholder communications...................... 44,548
Audit and legal................................. 41,676
Directors' fees................................. 19,980
Transfer agency services........................ 15,058
Registration fees............................... 14,046
Insurance....................................... 4,440
Other........................................... 26,808
------------
Total Expenses.................................. 3,276,814
------------
Net Investment Income.............................. 16,193,334
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
OPTIONS AND FUTURES CONTRACTS (NOTES 3, 5 AND 8):
Realized Gain (Loss) From:
Investment transactions........................ (2,120,952)
Options written................................ 196,000
Futures contracts.............................. (16,693,777)
------------
Net Realized Loss............................... (18,618,729)
------------
Change in Net Unrealized Depreciation From:
Beginning of period............................ --
End of period.................................. (27,461,988)
------------
Increase in Net Unrealized Depreciation......... (27,461,988)
------------
Net Loss on Investments and Futures Contracts...... (46,080,717)
------------
Decrease in Net Assets from Operations............. $(29,887,383)
============
- --------
+ For the period December 1, 2003 (commencement of operations) to April 30,
2004.
See Notes to Financial Statements.
Page 8
SALOMON BROTHERS EMERGING MARKETS DEBT FUND INC.
STATEMENT OF CHANGES IN NET ASSETS
For the Period Ended April 30, 2004+ (unaudited)
OPERATIONS:
Net investment income.......................................................................... $ 16,193,334
Net realized loss.............................................................................. (18,618,729)
Increase in net unrealized depreciation........................................................ (27,461,988)
------------
Decrease in Net Assets From Operations......................................................... (29,887,383)
------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.......................................................................... (12,274,497)
------------
Decrease in Net Assets From Distributions to Shareholders...................................... (12,274,497)
------------
FUND SHARE TRANSACTIONS:
Net proceeds from sale of shares (27,219,646 shares issued, net of $1,088,576 offering costs).. 518,806,464
Net asset value of shares issued for reinvestment of dividends (143,796 shares issued)......... 2,692,904
------------
Increase in Net Assets From Fund Share Transactions............................................ 521,499,368
------------
Increase in Net Assets............................................................................ 479,337,488
NET ASSETS:
Beginning of period............................................................................ --
------------
End of period*................................................................................. $479,337,488
============
* Includes undistributed net investment income of:................................................ $3,918,837
==========
- --------
+ For the period December 1, 2003 (commencement of operations) to April 30,
2004.
See Notes to Financial Statements.
Page 9
SALOMON BROTHERS EMERGING MARKETS DEBT FUND INC.
NOTES TO FINANCIAL STATEMENTS (unaudited)
NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Salomon Brothers Emerging Markets Debt Fund Inc. ("Fund") was incorporated in
Maryland on December 1, 2003 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 total return. As a secondary objective, the Fund seeks high current
income. 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 emerging markets issuers located in emerging
market countries. The Fund's investments in debt securities of emerging market
issuers will include dollar and non-dollar denominated (a) debt obligations
issued or guaranteed by foreign national, provincial, state, municipal or other
governments with taxing authority or by their agencies or instrumentalities,
including Brady Bonds; (b) debt obligations of supranational entities; (c) debt
obligations and other fixed-income securities of foreign corporate issuers; (d)
debt obligations of U.S. corporate issuers; (e) corporate debt securities
issued by corporations that generate significant profits from emerging market
countries; and (f) structured securities, including but not limited to,
warrants, options and other derivatives, whose price is directly linked to
emerging market securities or indices.
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
Page 10
SALOMON BROTHERS EMERGING MARKETS DEBT FUND INC.
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
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 or premium on securities purchased is accreted or amortized,
respectively, on an effective yield basis over the life of the security. The
Fund uses the specific identification method for determining realized gain or
loss on investments sold.
(c) FOREIGN CURRENCY TRANSLATION. The books and records of the Fund are
maintained in U.S. dollars. Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at the date of valuation. 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 meet the
provisions of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all of its taxable income and capital
gains, if any, to its shareholders. Therefore, no Federal income tax or excise
tax provision is required.
(e) REPURCHASE AGREEMENTS. When entering into repurchase agreements, it is the
Fund's policy 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
market-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 distributions
to shareholders quarterly. Net realized gains, if any, in excess of loss
carryovers are expected to be distributed, at least, annually. Dividends and
distributions to shareholders are recorded on the ex-dividend date. The amount
of dividends and distributions from net investment income and
Page 11
SALOMON BROTHERS EMERGING MARKETS DEBT FUND INC.
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
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 incurred
by the Fund. These "book/tax" differences are either considered temporary or
permanent in nature. To the extent these differences are permanent in nature,
such amounts are reclassified within the capital accounts based on their
Federal income tax basis treatment; temporary differences do not require
reclassification. Dividends and distributions which exceed net investment
income and net realized capital gains for financial reporting purposes but not
for tax purposes are reported as distributions in excess of net investment
income or distributions in excess of net realized capital gains. To the extent
they exceed net investment income and net realized capital gains for tax
purposes, they are reported as tax return of capital.
(g) FORWARD FOREIGN CURRENCY CONTRACTS. A forward foreign currency contract is
a commitment to purchase or sell a foreign currency at a future date at a
negotiated forward rate. The contract is marked to market to reflect the change
in the currency exchange rate. The change in market value is recorded by the
Fund as an unrealized gain or loss. The Fund records a realized gain or loss on
delivery of the currency or at the time the forward 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.
(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 entered into an investment advisory and administration agreement with
Salomon Brothers Asset Management Inc ("SBAM"), an indirect wholly-owned
subsidiary of Citigroup Inc. ("Citigroup"). SBAM provides all management,
advisory and administration services for the Fund.
The Fund currently pays SBAM a monthly fee at an annual rate of 0.85% of the
Fund's average daily net assets plus any borrowings for its services.
At April 30, 2004, Citigroup Financial Products Inc., another indirectly,
wholly-owned subsidiary of Citigroup, held 5,246.59 shares of the Fund.
Certain officers and/or directors of the Fund are officers and/or directors of
SBAM.
Page 12
SALOMON BROTHERS EMERGING MARKETS DEBT FUND INC.
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
NOTE 3. PORTFOLIO ACTIVITY
For the period ended April 30, 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 $1,107,997,933
==============
Sales.... $ 376,062,769
==============
At April 30, 2004, the aggregate gross unrealized appreciation and depreciation
of investments for Federal income tax purposes were substantially as follows:
Gross unrealized appreciation $ 929,735
Gross unrealized depreciation (47,505,287)
------------
Net unrealized depreciation.. $(46,575,552)
============
NOTE 4. 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 April 30, 2004, the
total cost of the Fund's loan participations was $13,645,751.
In connection with purchasing loan participations, the Fund generally will have
no right to enforce compliance by the borrower with the terms of the loan
agreement relating to the loan, nor any rights of set-off against the borrower,
and the Fund may not benefit directly from any collateral supporting the loan
in which it has purchased the participation. As a result, the Fund will assume
the credit risk of both the borrower and the lender that is selling the
participation. In the event of the insolvency of the lender selling the
participation, the Fund may be treated
as a general creditor of the lender and may not benefit from any set-off
between the lender and the borrower.
When the Fund purchases assignments from lenders, the Fund will acquire direct
rights against the borrower on the loan, except that under certain
circumstances such rights may be more limited than those held by the assigning
lender.
The Fund may have difficulty disposing of participations/assignments because
the market for certain instruments may not be highly liquid.
NOTE 5. FUTURES CONTRACTS
The Fund may enter into futures contracts, which involves paying or receiving
variation margin, which will be recorded as unrealized gain or loss until the
contract is closed. When the
Page 13
SALOMON BROTHERS EMERGING MARKETS DEBT FUND INC.
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
contract is closed, a realized gain or loss is recognized. Outstanding
contracts may involve elements of market risk in excess of amounts reported in
the financial statements.
At April 30, 2004, the Fund had the following open futures contracts:
Contracts Number of Market Unrealized
to Sell Contracts Expiration Basis Value Value Gain
- --------- --------- ---------- ------------ ------------ -----------
U.S. Treasury 10 Year
Note............... 4,000 6/04 $461,113,564 $442,000,000 $19,113,564
NOTE 6. REVERSE REPURCHASE AGREEMENTS
The Fund may enter into reverse repurchase agreements in which a Fund sells
portfolio securities and agrees to repurchase them from the buyer at a
particular date and price. Whenever a Fund enters into a reverse repurchase
agreement, the custodian delivers liquid assets in an amount at least equal to
the repurchase price marked-to-market daily (including accrued interest), and
subsequently monitors the account to ensure that sure equivalent value is
maintained. A Fund pays interest on amounts obtained pursuant to reverse
repurchase agreements. Reverse repurchase agreements are considered to be
borrowings by a Fund. Transactions in reverse repurchase agreements for the
Fund during the period ended April 30, 2004 were as follows:
Average Weighted Maximum
Daily Average Amount
Fund Balance Interest Rate Outstanding
---- ------------ ------------- ------------
Emerging Markets Debt Fund $186,255,029 1.16% $242,454,556
Interest rates on reverse repurchase agreements ranged from 0.60% to 1.40%
during the period ended April 30, 2004. Interest expense on reverse repurchase
agreements totaled $278,627.
Page 14
SALOMON BROTHERS EMERGING MARKETS DEBT FUND INC.
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
In addition, at April 30, 2004, the Fund had the following open reverse
repurchase agreements:
Face
Amount Security Value
- ----------- -------------------------------------------------------------- ------------
$54,652,500 Reverse Repurchase Agreement with CS First Boston Corp.,
dated 1/15/04 bearing 1.150% to be repurchased at
$55,291,479 on 1/15/05, collateralized by: $55,087,500
Russian Federation, 5.000% due 3/31/30...................... $ 54,652,500
25,023,056 Reverse Repurchase Agreement with J.P. Morgan Chase & Co.,
dated 2/2/04 bearing 1.250% to be repurchased at
$25,341,057 on 2/2/05, collateralized by: $23,250,000
Petroleos Mexicanos, 9.500% due 9/15/27..................... 25,023,056
4,209,000 Reverse Repurchase Agreement with J.P. Morgan Chase & Co.,
dated 2/3/04 bearing 0.600% to be repurchased at $4,234,675
on 2/3/05, collateralized by: $3,972,625 Republic of Turkey,
11.875% due 1/15/30......................................... 4,209,000
50,375,000 Reverse Repurchase Agreement with J.P. Morgan Chase & Co.,
dated 2/19/04 bearing 1.400% to be repurchased at
$51,090,045 on 2/18/05, collateralized by: $45,906,250
Russian Federation, 5.000% due 3/31/30...................... 50,375,000
20,500,000 Reverse Repurchase Agreement with J.P. Morgan Chase & Co.,
dated 2/20/04 bearing 0.950% to be repurchased at
$20,696,373 on 2/17/05, collateralized by: $17,900,000
Republic of Ecuador, 12.000% due 11/15/12................... 20,500,000
27,650,000 Reverse Repurchase Agreement with J.P. Morgan Chase & Co.,
dated 4/26/04 bearing 1.150% to be repurchased at
$27,972,391 on 4/26/05, collateralized by: $25,500,000
Federal Republic of Brazil, 12.250% due 3/6/30.............. 27,650,000
33,090,000 Reverse Repurchase Agreement with J.P. Morgan Chase & Co.,
dated 4/26/04 bearing 1.000% to be repurchased at
$33,425,496 on 4/26/05, collateralized by: $27,618,750
Federal Republic of Brazil, C Bond, 8.000% due 4/15/14...... 33,090,000
19,581,705 Reverse Repurchase Agreement with CS First Boston Corp.,
dated 4/30/04 bearing 0.950% to be repurchased at
$19,770,315 on 4/30/05, collateralized by: $18,412,500
Federal Republic of Brazil, C Bond, 8.000% due 4/15/14...... 19,581,705
------------
Total Reverse Repurchase Agreements
(Cost -- $235,081,261)...................................... $235,081,261
============
Page 15
SALOMON BROTHERS EMERGING MARKETS DEBT FUND INC.
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
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 April 30, 2004, the
Fund has a concentration of risk in sovereign debt of emerging market countries.
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 April 30, 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.
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
Page 16
SALOMON BROTHERS EMERGING MARKETS DEBT FUND INC.
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
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.
The following written covered call option transactions occurred during the
period ended April 30, 2004:
Number of
Contracts Premiums
--------- ---------
Options written, outstanding at December 1, 2003 -- $ 0
Options written................................. 14,000 203,000
Options closed.................................. (14,000) (203,000)
------- ---------
Options written, outstanding at April 30, 2004.. -- $ 0
======= =========
NOTE 9. DIVIDENDS SUBSEQUENT TO APRIL 30, 2004
On February 5, 2004, the Board of Directors ("Board") of the Fund declared a
dividend from net investment income in the amount of $0.1500 per share payable
on May 28, 2004 to shareholders of record on May 18, 2004.
In addition, on May 14, 2004, the Fund's Board declared three dividends, each
in the amount of $0.1500 per share, payable on June 25, 2004, July 30, 2004 and
August 27, 2004 to shareholders of record on June 15, 2004, July 13, 2004 and
August 17, 2004, respectively.
NOTE 10. 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
Page 17
SALOMON BROTHERS EMERGING MARKETS DEBT FUND INC.
NOTES TO FINANCIAL STATEMENTS (unaudited) (continued)
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 PFPC Inc., which is not affiliated with CAM.
Page 18
SALOMON BROTHERS EMERGING MARKETS DEBT FUND INC.
FINANCIAL HIGHLIGHTS
Data for a share of common stock outstanding throughout the period ended
October 31, unless otherwise noted:
2004/(1)/
- ---------------------------------------------------------------------------------
Net Asset Value, Beginning of Period................................ $19.06*
------
Income (Loss) From Operations:
Net investment income............................................ 0.60
Net realized and unrealized loss................................. (1.69)
-----
Total Loss From Operations.......................................... (1.09)
-----
Less Distributions From:
Net investment income............................................ (0.45)
-----
Total Distributions................................................. (0.45)
-----
Net Asset Value, End of Period...................................... $17.52
======
Market Value, End of Period......................................... $17.32
======
Total Return, Based on Market Price/(2)/............................ (11.26)%++
======
Ratios to Average Net Assets:
Total expenses, including interest expense....................... 1.59%+
Total expenses, excluding interest expense (operating expenses).. 1.23%+
Net investment income............................................ 7.85%+
Supplemental Data:
Net Assets, End of Period (000s)................................. $479,337
Portfolio Turnover Rate.......................................... 58%
- --------------------------------------------------------------------------------
(1)For the period December 1, 2003 (commencement of operations) to April 30,
2004 (unaudited).
(2)For the 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.
* Initial public offering price of $20.00 per share less offering cost of $0.94
per share.
++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 DEBT FUND INC.
DIVIDEND REINVESTMENT PLAN (unaudited)
Unless you elect to receive distributions in cash, all dividends, including any
capital gain dividends, on your Common Shares will be automatically reinvested
by PFPC, as agent for the Common Shareholders (the "Plan Agent"), in additional
Common Shares under the Dividend Reinvestment Plan (the "Plan"). You may elect
not to participate in the Plan by contacting the Plan Agent. If you do not
participate, you will receive all cash distributions paid by check mailed
directly to you by PFPC as dividend paying agent.
If you participate in the Plan, the number of Common Shares you will receive
will be determined as follows:
(1) If the market price of the Common Shares on the record date (or, if the
record date is not a New York Stock Exchange trading day, the immediately
preceding trading day) for determining shareholders eligible to receive the
relevant dividend or distribution (the "determination date") is equal to or
exceeds 98% of the net asset value per share of the Common Shares, the Fund
will issue new Common Shares at a price equal to the greater of (a) 98% of the
net asset value per share at the close of trading on the Exchange on the
determination date or (b) 95% of the market price per share of the Common
Shares on the determination date.
(2) If 98% of the net asset value per share of the Common Shares exceeds the
market price of the Common Shares on the determination date, the Plan Agent
will receive the dividend or distribution in cash and will buy Common Shares in
the open market, on the Exchange or elsewhere, for your account as soon as
practicable commencing on the trading day following the determination date and
terminating no later than the earlier of (a) 30 days after the dividend or
distribution payment date, or (b) the record date for the next succeeding
dividend or distribution to be made to the Common Shareholders; except when
necessary to comply with applicable provisions of the federal securities laws.
If during this period: (i) the market price rises so that it equals or exceeds
98% of the net asset value per share of the Common Shares at the close of
trading on the Exchange on the determination date before the Plan Agent has
completed the open market purchases or (ii) if the Plan Agent is unable to
invest the full amount eligible to be reinvested in open market purchases, the
Plan Agent will cease purchasing Common Shares in the open market and the Fund
shall issue the remaining Common Shares at a price per share equal to the
greater of (a) 98% of the net asset value per share at the close of trading on
the Exchange on the determination date or (b) 95% of the then current market
price per share.
The Plan Agent maintains all participants' accounts in the Plan and gives
written confirmation of all transactions in the accounts, including information
you may need for tax records. Common Shares in your account will be held by the
Plan Agent in non-certificated form. Any proxy you receive will include all
Common Shares you have received under the Plan.
Page 20
SALOMON BROTHERS EMERGING MARKETS DEBT FUND INC.
DIVIDEND REINVESTMENT PLAN (unaudited) (continued)
You may withdraw from the Plan by notifying the Plan Agent in writing at P.O.
Box 8030, Boston, Massachusetts 02266-8030 or by calling the Plan Agent at
1-800-331-1710. Such withdrawal will be effective immediately if notice is
received by the Plan Agent not less than ten business days prior to any
dividend or distribution record date; otherwise such withdrawal will be
effective as soon as practicable after the Plan Agent's investment of the most
recently declared dividend or distribution on the Common Shares. The Plan may
be terminated by the Fund upon notice in writing mailed to Common Shareholders
at least 30 days prior to the record date for the payment of any dividend or
distribution by the Fund for which the termination is to be effective. Upon any
termination, you will be sent a certificate or certificates for the full Common
Shares held for you under the Plan and cash for any fractional Common Shares.
You may elect to notify the Plan Agent in advance of such termination to have
the Plan Agent sell part or all of your shares on your behalf. You will be
charged $5.00 plus a $0.05 per Common Share service charge and the Plan Agent
is authorized to deduct brokerage charges actually incurred for this
transaction from the proceeds.
There is no service charge for reinvestment of your dividends or distributions
in Common Shares. However, all participants will pay a pro rata share of
brokerage commissions incurred by the Plan Agent when it makes open market
purchases. Because all dividends and distributions will be automatically
reinvested in additional Common Shares, this allows you to add to your
investment through dollar cost averaging, which may lower the average cost of
your Common Shares over time.
Automatically reinvesting dividends and distributions does not mean that you do
not have to pay income taxes due upon receiving dividends and distributions.
The Fund reserves the right to amend or terminate the Plan if, in the judgment
of the Board of Directors, the change is warranted. There is no direct service
charge to participants in the Plan; however, the Fund reserves the right to
amend the Plan to include a service charge payable by the participants.
Additional information about the Plan and your account may be obtained from the
Plan Agent at 1-800-331-1710.
-----------------
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 21
SALOMON BROTHERS EMERGING MARKETS DEBT FUND INC.
DIRECTORS
CAROL L. COLMAN
DANIEL P. CRONIN
LESLIE H. GELB
R. JAY GERKEN, CFA
WILLIAM R. HUTCHINSON
RIORDAN ROETT
JESWALD W. SALACUSE
OFFICERS
R. JAY GERKEN, CFA
Chairman and Chief Executive Officer
PETER J. WILBY, CFA
President
ANDREW B. SHOUP
Senior Vice President and Chief Administrative Officer
JAMES E. CRAIGE, CFA
Executive Vice President
THOMAS K. FLANAGAN, CFA
Executive Vice President
FRANCES M. GUGGINO
Controller
ROBERT I. FRENKEL
Secretary and Chief Legal Officer
SALOMON BROTHERS EMERGING MARKETS DEBT FUND INC.
125 Broad Street
10/th/ Floor, MF-2
New York, New York 10004
Telephone 1-888-777-0102
INVESTMENT MANAGER
Salomon Brothers Asset Management Inc
399 Park Avenue
New York, New York 10022
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
TRANSFER AGENT
PFPC Inc.
P.O. Box 8030
Boston, Massachusetts 02266-8030
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
LEGAL COUNSEL
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
NEW YORK STOCK EXCHANGE SYMBOL
ESD
Page 22
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 DEBT FUND INC.
By: /s/ R. Jay Gerken
------------------------------------------------
R. Jay Gerken
Chief Executive Officer of
Salomon Brothers Emerging Markets Debt Fund Inc.
Date: July 6, 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 Debt Fund Inc.
Date: July 6, 2004
By: /s/ Andrew B. Shoup
------------------------------------------------
Andrew B. Shoup
Chief Administrative Officer of
Salomon Brothers Emerging Markets Debt Fund Inc.
Date: July 6, 2004