Notes to Financial Statements (unaudited)
1. Organization and Significant Accounting
Policies
Western
Asset Emerging Markets Floating Rate Fund Inc. (the Fund) was incorporated in
Maryland on January 21, 1994 and is registered as a non-diversified, closed-end
management investment company under the Investment Company Act of 1940, as
amended (the 1940 Act). The Fund seeks to maintain a high level of current
income by investing at least 80% of its net assets plus any borrowings for
investment purposes in floating rate debt securities of emerging market
sovereign and corporate issuers, including fixed rate securities with respect
to which the Fund has entered into interest rate swaps to effectively convert the
fixed rate interest payments received into floating rate interest payments. As
a secondary objective, the Fund seeks capital appreciation.
The following are significant accounting policies
consistently followed by the Fund and are in conformity with U.S. generally
accepted accounting principles (GAAP). Estimates and assumptions are required
to be made regarding assets, liabilities and changes in net assets resulting
from operations when financial statements are prepared. Changes in the economic
environment, financial markets and any other parameters used in determining
these estimates could cause actual results to differ.
(a) Investment Valuation.
Debt securities are valued at the mean
between the last quoted bid and asked prices provided by an independent pricing
service that are based on transactions in debt obligations, quotations from
bond dealers, market transactions in comparable securities and various other
relationships between securities. Publicly traded foreign government debt
securities are typically traded internationally in the over-the-counter market,
and are valued at the mean between the bid and asked prices as of the close of
business of that market. When prices are not readily available, or are
determined not to reflect fair value, such as when the value of a security has
been significantly affected by events after the close of the exchange or market
on which the security is principally traded, but before the Fund calculates its
net asset value, the Fund may value these investments at fair value as
determined in accordance with the procedures approved by the Funds Board of
Directors. Short-term obligations with maturities of 60 days or less are valued
at amortized cost, which approximates fair value.
(b) Repurchase Agreements.
When entering into repurchase agreements, it
is the Funds policy that its custodian or a third party custodian take
possession of the underlying collateral securities, the market value of which,
at all times, 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 market
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.
(c) Reverse Repurchase Agreements.
The Fund may enter into a reverse repurchase
agreement in which the Fund sells a portfolio security at a specified price
with an agreement to purchase the same or substantially the same security from
the same counterparty at a fixed or determinable price at a future date. When
entering into reverse repurchase agreements, the Funds custodian delivers to
the counterparty liquid assets, the market value of which, at the inception of
the transaction, at least equals the repurchase price
Western Asset Emerging
Markets Floating Rate Fund Inc. 2007 Semi-Annual Report 11
Notes to Financial Statements (unaudited) (continued)
(including
accrued interest). The Fund pays interest on amounts obtained pursuant to
reverse repurchase agreements. Reverse repurchase agreements are considered to
be borrowings, which may create leverage risk to the Fund.
(d) Financial Futures Contracts.
The Fund may enter into financial futures
contracts typically to hedge a portion of the portfolio. Upon entering into a
financial futures contract, the Fund is required to deposit cash or securities
as initial margin, equal to a certain percentage of the contract amount
(initial margin deposit). Additional securities are also segregated up to the
current market value of the financial futures contracts. Subsequent payments,
known as variation margin, are made or received by the Fund each day,
depending on the daily fluctuations in the value of the underlying financial
instruments. The Fund recognizes an unrealized gain or loss equal to the daily
variation margin. When the financial futures contracts are closed, a realized
gain or loss is recognized equal to the difference between the proceeds from
(or cost of) the closing transactions and the Funds basis in the contracts.
The risks associated with entering into financial
futures contracts include the possibility that a change in the value of the
contract may not correlate with the changes in the value of the underlying
financial instruments. In addition, investing in financial futures contracts
involves the risk that the Fund could lose more than the initial margin deposit
and subsequent payments required for a futures transaction. Risks may also
arise upon entering into these contracts from the potential inability of the
counterparties to meet the terms of their contracts.
(e) Interest Rate Swaps.
In order to manage interest rate sensitivity
(duration), the Fund has entered into interest rate swap agreements with
JPMorgan Chase Bank (counterparty) pursuant to which, the Fund has guaranteed
to make semi-annual payments to the counterparty at predetermined fixed rates,
in exchange for floating payments from the counterparty at the 3-month and
6-month LIBOR, based on notional principal amount for each swap agreement.
During the term of the outstanding swap agreement, changes in the underlying
value of the swap are recorded as unrealized gain or loss. Net periodic
interest payments to be received or paid are accrued daily and recorded in the
Statement of Operations as an adjustment to realized gain or loss.
(f) Loan Participations.
The Fund may invest in loans arranged
through private negotiation between one or more financial institutions. The
Funds investment in any such loan may be in the form of a participation in or
an assignment of the loan. In connection with purchasing participations, the
Fund generally will have no right to enforce compliance by the borrower with
the terms of the loan agreement, 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.
The Fund assumes the credit risk of the borrower,
the lender that is selling the participation and any other persons
interpositioned between the Fund and the borrower. 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.
12 Western
Asset Emerging Markets Floating Rate Fund Inc. 2007 Semi-Annual Report
Notes to
Financial Statements (unaudited) (continued)
(g) Security Transactions and
Investment Income.
Security transactions are accounted for on a trade date basis. Interest income,
adjusted for amortization of premium and accretion of discount, is recorded on
the accrual basis. Dividend income is recorded on the ex-dividend date. The
cost of investments sold is determined by use of the specific identification
method. To the extent any issuer defaults on an expected interest payment, the
Funds policy is to generally halt any additional interest income accruals and
consider the realizability of interest accrued up to the date of default.
(h) Foreign Currency Translation.
Investment securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts based upon prevailing exchange rates on the date of valuation.
Purchases and sales of investment securities and income and expense items
denominated in foreign currencies are translated into U.S. dollar amounts based
upon prevailing exchange rates on the respective dates of such transactions.
The Fund does not isolate that portion of the
results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss on investments.
Net realized foreign exchange gains or losses arise
from sales of foreign currencies, including gains and losses on forward foreign
currency contracts, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on the
Funds books and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in
the fair values of assets and liabilities, other than investments in
securities, at the date of valuation, resulting from changes in exchange rates.
Foreign security and currency transactions may
involve certain considerations and risks not typically associated with those of
U.S. dollar denominated transactions as a result of, among other factors, the
possibility of lower levels of governmental supervision and regulation of
foreign securities markets and the possibility of political or economic
instability.
(i) Credit and Market Risk.
The Fund invests in high-yield and emerging
market instruments that are subject to certain credit and market risks. The
yields of high-yield and emerging market debt obligations reflect, among other
things, perceived credit and market risks. The Funds investment in securities
rated below investment grade typically involves risks not associated with
higher rated securities including, among others, greater risk related to 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 Funds investment in
non-dollar denominated securities may also result in foreign currency losses
caused by devaluations and exchange rate fluctuations.
(j) Cash Flow Information.
The Fund invests in securities and
distributes dividends from net investment income and net realized gains, which
are paid in cash and may be reinvested at the discretion of shareholders. These
activities are reported in the Statement
Western Asset Emerging
Markets Floating Rate Fund Inc. 2007 Semi-Annual Report 13
Notes to Financial Statements (unaudited) (continued)
of
Changes in Net Assets and additional information on cash receipts and cash
payments are presented in the Statement of Cash Flows.
(k) Distributions to Shareholders.
Distributions from net investment income for
the Fund, if any, are declared and paid on a monthly basis. Distributions of
net realized gains, if any, are declared at least annually. Distributions are
recorded on the ex-dividend date and are determined in accordance with income
tax regulations, which may differ from GAAP.
(l) Federal and Other Taxes.
It is the Funds policy to comply with the
federal income and excise tax requirements of the Internal Revenue Code of
1986, as amended, applicable to regulated investment companies. Accordingly,
the Fund intends to distribute substantially all of its taxable income and net
realized gains, if any, to shareholders each year. Therefore, no federal income
tax provision is required in the Funds financial statements. Under the
applicable foreign tax laws, a withholding tax may be imposed on interest,
dividends and capital gains at various rates.
(m) Reclassification.
GAAP requires that certain components of net
assets be adjusted to reflect permanent differences between financial and tax
reporting. These reclassifications have no effect on net assets or net asset
values per share.
2. Investment Management Agreement and
Other Transactions with Affiliates
Legg
Mason Partners Fund Advisor, LLC (LMPFA) is the Funds investment manager and
Western Asset Management Company (Western Asset) is the Funds subadviser.
LMPFA and Western Asset are wholly-owned subsidiaries of Legg Mason, Inc.
(Legg Mason).
LMPFA provides administrative and certain oversight
services to the Fund. The Fund pays LMPFA an investment management fee,
calculated daily and paid monthly, at an annual rate of 1.05% of the Funds
average weekly net assets. LMPFA delegates to the subadviser the day-to-day
portfolio management of the Fund. For its services, LMPFA pays Western Asset
70% of the net management fee it receives from the Fund.
During the six months ended August 31, 2007, the
Fund was reimbursed for expenses amounting to $2,388.
Certain officers and one Director of the Fund are
employees of Legg Mason or its affiliates and do not receive compensation from
the Fund.
3. Investments
During
the six months ended August 31, 2007, the aggregate cost of purchases and
proceeds from sales of investments (excluding short-term investments) were as
follows:
Purchases
|
|
$
|
18,712,280
|
|
Sales
|
|
22,991,958
|
|
At
August 31, 2007, the aggregate gross unrealized appreciation and depreciation
of investments for federal income tax purposes were substantially as follows:
14 Western
Asset Emerging Markets Floating Rate Fund Inc. 2007 Semi-Annual Report
Notes to
Financial Statements (unaudited) (continued)
Gross unrealized appreciation
|
|
$
|
1,181,584
|
|
Gross unrealized depreciation
|
|
(1,189,682
|
)
|
Net unrealized depreciation
|
|
$
|
(8,098
|
)
|
At
August 31, 2007, the Fund had the following open futures contracts:
Contracts to Sell:
|
|
Number of
Contracts
|
|
Expiration
Date
|
|
Basis
Value
|
|
Market
Value
|
|
Unrealized
Loss
|
|
U.S. Treasury, 10-Year Notes
|
|
22
|
|
9/07
|
|
$
|
2,332,593
|
|
$
|
2,408,656
|
|
$
|
(76,063
|
)
|
U.S. Treasury, 10-Year Notes
|
|
100
|
|
12/07
|
|
10,860,117
|
|
10,904,687
|
|
(44,570
|
)
|
Net Unrealized Loss on Open Futures
Contracts
|
|
|
|
|
|
|
|
|
|
$
|
(120,633
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
August 31, 2007, the Fund held the following interest rate swap contracts:
Swap
Counterparty:
|
|
JPMorgan
Chase Bank NA
|
Effective
Date:
|
|
12/29/04
|
Notional
Amount:
|
|
$16,000,000
|
Payments
Made by Fund:
|
|
Fixed
Rate 6.130%
|
Payments
Received by Fund:
|
|
Floating
Rate (6 month LIBOR)
|
Termination
Date:
|
|
12/28/10
|
Unrealized
Depreciation
|
|
$(602,288
)
|
|
|
|
|
Swap
Counterparty:
|
|
JPMorgan
Chase Bank NA
|
Effective
Date:
|
|
3/3/05
|
Notional
Amount:
|
|
$4,120,000
|
Payments
Made by Fund:
|
|
Fixed
Rate 4.805%
|
Payments
Received by Fund:
|
|
Floating
Rate (6 month LIBOR)
|
Termination
Date:
|
|
3/3/15
|
Unrealized
Appreciation
|
|
$79,630
|
|
|
|
|
Swap
Counterparty:
|
|
JPMorgan
Chase Bank NA
|
Effective
Date:
|
|
8/22/07
|
Notional
Amount:
|
|
$5,000,000
|
Payments
Made by Fund:
|
|
Fixed
Rate 5.063%
|
Payments
Received by Fund:
|
|
Floating
Rate (3 month LIBOR)
|
Termination
Date:
|
|
8/22/12
|
Unrealized
Depreciation
|
|
$(21,855
)
|
|
|
|
|
|
|
|
4. Loan
At
August 31, 2007, the Fund had a $7,000,000 credit line available pursuant to an
amended and restated revolving credit and security agreement, dated November
20, 2006, among the Fund, Panterra Funding LLC (the Lender), and Citibank
N.A. (Citibank) as secondary lender, for which Citibank also acts as
administrative agent.
Western Asset Emerging
Markets Floating Rate Fund Inc. 2007 Semi-Annual Report 15
Notes to Financial Statements (unaudited) (continued)
The
loan generally bears interest at a variable rate based on the weighted average
interest rates of the commercial paper or LIBOR, plus any applicable margin. In
addition, the Fund pays a commitment fee on the total amount of the loan
available, whether used or unused. 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. For the six months ended August 31, 2007, the Fund
incurred a commitment fee in the amount of $3,577. The Fund did not have any
borrowings outstanding during the six months ended August 31, 2007.
5. Other Matters
As
previously disclosed, on September 16, 2005, the staff of the Securities and
Exchange Commission (SEC) informed Smith Barney Fund Management LLC (SBFM)
and Salomon Brothers Asset Management Inc., (SBAM), that the staff was
considering recommending administrative proceedings against SBFM and SBAM for
alleged violations of Section 19(a) and 34(b) of the Investment Company Act
(and related Rule 19a-1). On September 27, 2007, SBFM and SBAM, without
admitting or denying any findings therein, consented to the entry of an order
by the SEC relating to the disclosure by certain other funds that are
closed-end funds of the sources of distributions paid by the funds between 2001
and 2004. Each of SBFM and SBAM agreed to pay a fine of $450,000, for which
they were indemnified by Citigroup, Inc., their former parent. It is not
expected that this matter will adversely impact the Fund or its current
investment adviser.
6. Recent Accounting Pronouncements
During
June 2006, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation 48 (FIN 48 or the Interpretation),
Accounting for Uncertainty in Income Taxes an
interpretation of FASB Statement 109
. FIN 48 supplements FASB
Statement 109,
Accounting for Income Taxes
,
by defining the confidence level that a tax position must meet in order to be
recognized in the financial statements. FIN 48 prescribes a comprehensive model
for how a fund should recognize, measure, present, and disclose in its
financial statements uncertain tax positions that the fund has taken or expects
to take on a tax return. FIN 48 requires that the tax effects of a position be
recognized only if it is more likely than not to be sustained based solely on
its technical merits. Management must be able to conclude that the tax law,
regulations, case law, and other objective information regarding the technical
merits sufficiently support the positions sustainability with a likelihood of
more than 50 percent. FIN 48 is effective for fiscal periods beginning after
December 15, 2006, which for this Fund was March 1, 2007. At adoption, the
financial statements must be adjusted to reflect only those tax positions that
are more likely than not to be sustained as of the adoption date. Management of
the Fund has determined that adopting FIN 48 will not have a material impact on
the Funds financial statements.
* * *
16 Western
Asset Emerging Markets Floating Rate Fund Inc. 2007 Semi-Annual Report
Notes to Financial Statements (unaudited) (continued)
On September 20, 2006, FASB released Statement of
Financial Accounting Standards No. 157,
Fair
Value Measurements
(FAS 157). FAS 157 establishes an authoritative
definition of fair value, sets out a framework for measuring fair value, and
requires additional disclosures about fair value measurements. The application
of FAS 157 is required for fiscal years beginning after November 15, 2007 and
interim periods within those fiscal years. At this time, management is
evaluating the implications of FAS 157 and its impact on the financial
statements has not yet been determined.
Western Asset Emerging
Markets Floating Rate Fund Inc. 2007 Semi-Annual Report 17
Additional Shareholder Information (unaudited)
Results of Annual Meeting of Shareholders
The
Annual Meeting of Shareholders of Western Asset Emerging Markets Floating Rate
Fund Inc. was held on June 13, 2007, for the purpose of considering and voting
upon the election of Carol L. Colman, Daniel P. Cronin and William R.
Hutchinson as Class III Directors to serve until the 2010 Annual Meeting of
Shareholders. The following table provides information concerning the matter
voted upon at the Meeting:
Election of Directors
|
|
Common
|
|
|
|
|
|
Shares Voted
|
|
Common
|
|
Nominees
|
|
For Election
|
|
Shares Withheld.
|
|
Carol L. Colman
|
|
3,908,730
|
|
57,333
|
|
Daniel P. Cronin
|
|
3,910,461
|
|
55,602
|
|
William R. Hutchinson
|
|
3,908,530
|
|
57,533
|
|
At
August 31, 2007, in addition to Carol L. Colman, Daniel P. Cronin and William
R. Hutchinson, the other Directors of the Fund were as follows:
Paolo
M. Cucchi
Leslie
H. Gelb
R.
Jay Gerken
Riordan
Roett
Jeswald
W. Salacuse
18 Western
Asset Emerging Markets Floating Rate Fund Inc.
Dividend Reinvestment Plan (unaudited)
1. Each shareholder initially purchasing shares of
common stock (Shares) of Western Asset Emerging Markets Floating Rate Fund
Inc. (Fund) on or after September 6, 1996 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 distributions in cash, paid by
check, mailed directly to the record holder by or under the direction of
American Stock Transfer & Trust Company as the Funds 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
shareholders name in order to participate, otherwise 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.
2. Unless the Fund declares a distribution payable
only in the form of cash, the Agent will apply all distributions in the manner
set forth below.
3. 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 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 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.
4. 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 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 Trading Day prior to
the ex-dividend date next succeeding the distribution payment date.
5. If (i) the Agent has not invested the full
distribution amount in open-market purchases by the date specified in paragraph
4 above as the date on which such purchases must terminate or (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 distribution 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 distribution.
Western Asset Emerging
Markets Floating Rate Fund Inc. 19
Dividend Reinvestment Plan (unaudited) (continued)
6. In the event that all or part of a 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 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.
7. 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.
8. Purchases by the Agent pursuant to paragraphs 4
and 7 above may be made on any securities exchange on which the Shares of the
Fund 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 Participants
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.
9. 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 Participants name or that of its nominee, and each
Participants 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.
10. 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
20 Western
Asset Emerging Markets Floating Rate Fund Inc.
Dividend Reinvestment Plan (unaudited) (continued)
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. Distributions on fractional shares will be credited to each
Participants account. In the event of termination of a Participants account
under Plan, the Agent will adjust for any such undivided fractional interest in
cash at the market value of the Funds Shares at the time of termination less
the pro rata expense of any sale required to make such an adjustment.
11. Any share distributions 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.
12. The Agents service fee for handling capital
gains distributions or income distributions will be paid by the Fund.
Participants will be charged a pro rata share of brokerage commissions on all
open-market purchases.
13. 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 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 distribution. The Plan may be amended or
terminated by the Fund as applied to any voluntary cash payments made and any
distributions paid subsequent to written notice of the change or termination
sent to Participants at least 30 days prior to the record date for the
distributions. The Plan may be amended or terminated by the Agent, with the
Funds 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 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 Participants Shares and remit the proceeds to
Participant, the Agent is authorized to deduct a brokerage commission for this
transaction from the proceeds.
14. 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 Participants
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 distributions, the Fund
will be authorized to pay to such successor Agent, for each Participants
account, all distributions payable on Shares of the Fund held in each
Participants name or under the Plan for retention or application by such
successor Agent as provided in these terms and conditions.
Western Asset Emerging
Markets Floating Rate Fund Inc. 21
Dividend Reinvestment Plan (unaudited) (continued)
15. 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 Holders name
and held for the account of beneficial owners who are to participate in the
Plan.
16. 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.
17. All correspondence concerning the Plan should be
directed to the Agent at 59 Maiden Lane, New York, New York 10038.
22 Western
Asset Emerging Markets Floating Rate Fund Inc.
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Western Asset
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Emerging Markets
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Floating Rate Fund Inc.
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DIRECTORS
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WESTERN ASSET
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Carol
L. Colman
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EMERGING MARKETS
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Daniel
P. Cronin
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FLOATING RATE FUND INC.
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Paolo
M. Cucchi
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125
Broad Street
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Leslie
H. Gelb
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10th
Floor, MF-2
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R.
Jay Gerken, CFA
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New
York, New York 10004
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Chairman
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William
H. Hutchinson
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INVESTMENT MANAGER
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Dr.
Riordan Roett
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Legg
Mason Partners
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Jeswald
W. Salacuse
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Fund
Advisor, LLC
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OFFICERS
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SUBADVISER
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R.
Jay Gerken, CFA
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Western
Asset Management
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President
and Chief
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Company
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Executive
Officer
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CUSTODIAN
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Kaprel
Ozsolak
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State
Street Bank & Trust
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Chief
Financial Officer
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Company
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and
Treasurer
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225
Franklin Street
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Boston,
Massachusetts 02110
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Ted
P. Becker
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Chief
Compliance Officer
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TRANSFER AGENT
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American
Stock Transfer &
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Robert
I. Frenkel
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Trust
Company
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Secretary
and Chief Legal Officer
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59
Maiden Lane
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New
York, New York 10038
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INDEPENDENT
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REGISTERED PUBLIC
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ACCOUNTING FIRM
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KPMG
LLP
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345
Park Avenue
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New
York, New York 10154
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LEGAL COUNSEL
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Simpson
Thacher & Bartlett LLP
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425
Lexington Avenue
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New
York, New York 10017
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NEW YORK STOCK
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EXCHANGE SYMBOL
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EFL
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This
report is transmitted to the shareholders of Western Asset Emerging Markets
Floating Rate Fund Inc. 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.
American Stock Transfer &
Trust Company
59 Maiden Lane
New York, New York 10038
WASX010336
8/07 SR07-434
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Western
Asset
Emerging Markets
Floating Rate Fund Inc.
Notice
is hereby given in accordance with Section 23(c) of the Investment Company
Act of 1940, as amended, that from time to time, the Fund may purchase, at
market prices, shares of its common stock in the open market.
The
Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission (SEC) for the first and third quarters of each
fiscal year on Form N-Q. The Funds Forms N-Q are available on the SECs
website at www.sec.gov. The Funds Forms N-Q may be reviewed and copied at
the SECs Public Reference Room in Washington D.C., and information on the
operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
To obtain information on Form N-Q from the Fund, shareholders can call
1-800-451-2010.
Information on how the Fund
voted proxies relating to portfolio securities during the prior 12-month
period ended June 30th of each year, and a description of the policies and
procedures that the Fund uses to determine how to vote proxies related to
portfolio transactions are available (1) without charge, upon request, by
calling 1-800-451-2010, (2) on the Funds website at
www.leggmason.com/InvestorServices and (3) on the SECs website at
www.sec.gov.
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