UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM N-Q

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY

 

Investment Company Act file number

811-7686

 

 

Western Asset Emerging Markets Income Fund Inc.

(Exact name of registrant as specified in charter)

 

55 Water Street, New York, NY

 

10041

(Address of principal executive offices)

 

(Zip code)

 

Robert I. Frenkel, Esq.
Legg Mason & Co., LLC
100 First Stamford Place
Stamford, CT 06902

(Name and address of agent for service)

 

Registrant’s telephone number, including area code:
Funds Investors Services

1-800-822-5544

 

or

 

 

Institutional Shareholder Services

1-888-425-6432

 

 

 

 

Date of fiscal year end:

May 31

 

 

 

 

Date of reporting period:

February 28, 2009

 

 



 

ITEM 1.                                                     SCHEDULE OF INVESTMENTS

 



 

WESTERN ASSET

EMERGING MARKETS INCOME
FUND INC.

 

FORM N-Q

FEBRUARY 28, 2009

 



 

Western Asset Emerging Markets Income Fund Inc.

 

 

 

 

February 28, 2009

Schedule of Investments (unaudited)

 

 

 

Face
Amount†

 

 

 

Security

 

Value

 

SOVEREIGN BONDS — 46.9%

 

 

 

Argentina — 1.7%

 

 

 

 

 

 

 

Republic of Argentina:

 

 

 

2,000,000

 

DEM

 

10.250% due 2/6/03 (a)(b)

 

$

142,883

 

1,000,000

 

DEM

 

9.000% due 9/19/03 (a)(b)

 

71,442

 

3,500,000

 

DEM

 

7.000% due 3/18/04 (a)(b)

 

250,045

 

3,875,000

 

DEM

 

8.500% due 2/23/05 (a)(b)

 

276,836

 

5,400,000

 

DEM

 

11.250% due 4/10/06 (a)(b)

 

385,784

 

1,000,000

 

EUR

 

9.000% due 4/26/06 (a)(b)

 

139,727

 

550,000

 

EUR

 

9.000% due 7/6/10 (a)(b)

 

76,850

 

1,000,000

 

DEM

 

11.750% due 5/20/11 (a)(b)

 

71,442

 

8,800,000

 

DEM

 

12.000% due 9/19/16 (a)(b)

 

628,685

 

950,000

 

DEM

 

11.750% due 11/13/26 (a)(b)

 

67,869

 

5,165,000

 

 

 

Bonds, 7.000% due 9/12/13

 

1,710,906

 

 

 

 

 

GDP Linked Securities:

 

 

 

3,800,000

 

EUR

 

1.985% due 12/15/35 (b)(c)

 

108,606

 

3,195,000

 

 

 

2.280% due 12/15/35 (b)(c)

 

86,265

 

20,189,523

 

ARS

 

2.458% due 12/15/35 (b)(c)

 

212,208

 

 

 

 

 

Medium-Term Notes:

 

 

 

6,500,000,000

 

ITL

 

7.000% due 3/18/04 (a)(b)

 

469,061

 

3,000,000,000

 

ITL

 

5.002% due 7/13/05 (a)(b)

 

216,490

 

1,000,000

 

EUR

 

10.000% due 2/22/07 (a)(b)

 

139,727

 

1,000,000,000

 

ITL

 

7.625% due 8/11/07 (a)(b)

 

72,163

 

625,000

 

DEM

 

8.000% due 10/30/09 (a)(b)

 

44,651

 

 

 

 

 

Total Argentina

 

5,171,640

 

Brazil — 9.2%

 

 

 

 

 

 

 

 

 

 

 

Brazil Nota do Tesouro Nacional:

 

 

 

8,595,000

 

BRL

 

10.000% due 1/1/10

 

3,600,825

 

38,357,000

 

BRL

 

10.000% due 7/1/10

 

16,023,315

 

19,737,000

 

BRL

 

10.000% due 1/1/12

 

8,001,945

 

1,000

 

 

 

Federative Republic of Brazil, Collective Action Securities, Notes,
8.000% due 1/15/18

 

1,083

 

 

 

 

 

Total Brazil

 

27,627,168

 

Colombia — 3.2%

 

 

 

 

 

 

 

Republic of Colombia:

 

 

 

1,632,000

 

 

 

7.375% due 1/27/17

 

1,649,136

 

8,701,000

 

 

 

7.375% due 9/18/37

 

8,004,920

 

 

 

 

 

Total Colombia

 

9,654,056

 

Egypt — 0.7%

 

 

 

12,530,000

 

EGP

 

Arab Republic of Egypt, 8.750% due 7/18/12 (b)(d)

 

1,946,625

 

Gabon — 0.5%

 

 

 

2,160,000

 

 

 

Gabonese Republic, 8.200% due 12/12/17 (d)

 

1,414,800

 

Indonesia — 1.6%

 

 

 

 

 

 

 

Republic of Indonesia:

 

 

 

10,904,000,000

 

IDR

 

10.250% due 7/15/22

 

682,190

 

21,720,000,000

 

IDR

 

11.000% due 9/15/25

 

1,388,265

 

21,034,000,000

 

IDR

 

10.250% due 7/15/27

 

1,243,584

 

25,039,000,000

 

IDR

 

9.750% due 5/15/37

 

1,359,051

 

 

 

 

 

Total Indonesia

 

4,673,090

 

Mexico — 5.1%

 

 

 

 

 

 

 

United Mexican States, Medium-Term Notes:

 

 

 

1,400,000

 

 

 

5.625% due 1/15/17

 

1,357,300

 

 

See Notes to Schedule of Investments.

 

1



 

Western Asset Emerging Markets Income Fund Inc.

 

 

 

 

February 28, 2009

Schedule of Investments (unaudited) (continued)

 

 

 

Face
Amount†

 

 

 

Security

 

Value

 

Mexico — 5.1% (continued)

 

 

 

8,525,000

 

 

 

8.000% due 9/24/22

 

$

9,377,500

 

5,334,000

 

 

 

6.050% due 1/11/40

 

4,410,685

 

 

 

 

 

Total Mexico

 

15,145,485

 

Panama — 3.8%

 

 

 

 

 

 

 

Republic of Panama:

 

 

 

1,664,000

 

 

 

7.250% due 3/15/15

 

1,726,400

 

2,283,000

 

 

 

9.375% due 4/1/29

 

2,522,715

 

8,260,000

 

 

 

6.700% due 1/26/36

 

7,268,800

 

 

 

 

 

Total Panama

 

11,517,915

 

Peru — 2.2%

 

 

 

 

 

 

 

Republic of Peru:

 

 

 

169,000

 

 

 

8.750% due 11/21/33

 

192,660

 

2,725,000

 

 

 

Bonds, 6.550% due 3/14/37

 

2,500,187

 

3,550,000

 

 

 

Senior Bonds, 8.375% due 5/3/16

 

3,976,000

 

 

 

 

 

Total Peru

 

6,668,847

 

Russia — 5.5%

 

 

 

 

 

 

 

Russian Federation:

 

 

 

110,000

 

 

 

11.000% due 7/24/18 (d)

 

132,088

 

617,000

 

 

 

12.750% due 6/24/28 (d)

 

786,675

 

17,377,360

 

 

 

7.500% due 3/31/30 (d)

 

15,498,694

 

 

 

 

 

Total Russia

 

16,417,457

 

Turkey — 7.9%

 

 

 

 

 

 

 

Republic of Turkey:

 

 

 

3,348,000

 

 

 

11.875% due 1/15/30

 

4,243,925

 

25,804,000

 

 

 

Notes, 6.875% due 3/17/36

 

19,417,510

 

 

 

 

 

Total Turkey

 

23,661,435

 

Venezuela — 5.5%

 

 

 

 

 

 

 

Bolivarian Republic of Venezuela:

 

 

 

8,804,000

 

 

 

8.500% due 10/8/14

 

5,106,320

 

6,802,000

 

 

 

5.750% due 2/26/16 (d)

 

3,264,960

 

1,920,000

 

 

 

7.000% due 12/1/18 (d)

 

849,600

 

933,000

 

 

 

7.650% due 4/21/25

 

408,187

 

 

 

 

 

Collective Action Securities:

 

 

 

7,239,000

 

 

 

9.375% due 1/13/34

 

3,619,500

 

4,600,000

 

 

 

Notes, 10.750% due 9/19/13

 

3,197,000

 

 

 

 

 

Total Venezuela

 

16,445,567

 

 

 

 

 

TOTAL SOVEREIGN BONDS
(Cost — $180,813,438)

 

140,344,085

 

COLLATERALIZED SENIOR LOANS — 0.4%

 

 

 

United States — 0.4%

 

 

 

 

 

 

 

Ashmore Energy International:

 

 

 

248,796

 

 

 

Synthetic Revolving Credit Facility, 3.409% due 3/30/12 (c)

 

153,010

 

1,991,946

 

 

 

Term Loan, 4.459% due 3/30/14 (c)

 

1,225,047

 

 

 

 

 

TOTAL COLLATERALIZED SENIOR LOANS
(Cost — $2,121,879)

 

1,378,057

 

CORPORATE BONDS & NOTES — 40.8%

 

 

 

Brazil — 6.3%

 

 

 

 

 

 

 

Globo Communicacoes e Participacoes SA:

 

 

 

2,556,000

 

 

 

Bonds, 7.250% due 4/26/22 (d)

 

2,377,080

 

110,000

 

 

 

Senior Bonds, 7.250% due 4/26/22 (d)

 

102,300

 

 

See Notes to Schedule of Investments.

 

2



 

Western Asset Emerging Markets Income Fund Inc.

 

 

 

 

February 28, 2009

Schedule of Investments (unaudited) (continued)

 

 

 

Face
Amount†

 

 

 

Security

 

Value

 

Brazil — 6.3% (continued)

 

 

 

 

 

 

 

GTL Trade Finance Inc.:

 

 

 

1,090,000

 

 

 

7.250% due 10/20/17 (d)

 

$

1,007,161

 

2,093,000

 

 

 

7.250% due 10/20/17 (d)

 

1,930,437

 

1,900,000

 

 

 

Odebrecht Finance Ltd., 7.500% due 10/18/17 (d)

 

1,781,250

 

 

 

 

 

Vale Overseas Ltd., Notes:

 

 

 

2,436,000

 

 

 

8.250% due 1/17/34

 

2,416,151

 

10,660,000

 

 

 

6.875% due 11/21/36

 

9,237,956

 

 

 

 

 

Total Brazil

 

18,852,335

 

Chile — 1.0%

 

 

 

2,894,000

 

 

 

Enersis SA, Notes, 7.375% due 1/15/14

 

3,005,627

 

China — 0.3%

 

 

 

1,040,000

 

 

 

Galaxy Entertainment Finance Co. Ltd., 7.323% due 12/15/10 (c)(d)

 

785,200

 

Colombia — 0.5%

 

 

 

 

 

 

 

EEB International Ltd.:

 

 

 

720,000

 

 

 

8.750% due 10/31/14 (d)

 

655,200

 

1,120,000

 

 

 

Senior Bonds, 8.750% due 10/31/14 (d)

 

1,019,200

 

 

 

 

 

Total Colombia

 

1,674,400

 

India — 0.2%

 

 

 

 

 

 

 

ICICI Bank Ltd., Subordinated Bonds:

 

 

 

570,000

 

 

 

6.375% due 4/30/22 (c)(d)

 

306,116

 

454,000

 

 

 

6.375% due 4/30/22 (c)(d)

 

246,516

 

 

 

 

 

Total India

 

552,632

 

Kazakhstan — 2.8%

 

 

 

 

 

 

 

ATF Capital BV:

 

 

 

860,000

 

 

 

9.250% due 2/21/14 (d)

 

391,051

 

2,610,000

 

 

 

Senior Notes, 9.250% due 2/21/14 (d)

 

1,187,550

 

 

 

 

 

HSBK Europe BV:

 

 

 

200,000

 

 

 

9.250% due 10/16/13 (d)

 

83,000

 

2,040,000

 

 

 

7.250% due 5/3/17 (d)

 

724,200

 

369,000

 

 

 

Senior Notes, 9.250% due 10/16/13 (d)

 

164,157

 

7,070,000

 

 

 

KazMunaiGaz Finance Sub B.V., Senior Notes, 8.375% due 7/2/13 (d)

 

4,994,542

 

 

 

 

 

TuranAlem Finance BV, Bonds:

 

 

 

2,333,000

 

 

 

8.250% due 1/22/37 (d)

 

454,935

 

1,930,000

 

 

 

8.250% due 1/22/37 (d)

 

299,150

 

 

 

 

 

Total Kazakhstan

 

8,298,585

 

Mexico — 7.6%

 

 

 

3,160,000

 

 

 

America Movil SAB de CV, Senior Notes, 5.625% due 11/15/17

 

2,953,668

 

 

 

 

 

Axtel SAB de CV, Senior Notes:

 

 

 

230,000

 

 

 

11.000% due 12/15/13

 

198,950

 

8,540,000

 

 

 

7.625% due 2/1/17 (d)

 

6,020,700

 

2,156,000

 

 

 

7.625% due 2/1/17 (d)

 

1,514,590

 

320,000

 

 

 

Kansas City Southern de Mexico, Senior Notes, 9.375% due 5/1/12

 

315,200

 

16,371,000

 

 

 

Pemex Project Funding Master Trust, Senior Bonds, 6.625% due 6/15/35

 

11,638,258

 

130,000

 

 

 

Petroleos Mexicanos, 8.000% due 5/3/19 (d)

 

128,375

 

 

 

 

 

Total Mexico

 

22,769,741

 

Russia — 17.7%

 

 

 

 

 

 

 

Evraz Group SA, Notes:

 

 

 

4,810,000

 

 

 

8.875% due 4/24/13 (d)

 

2,910,050

 

2,265,000

 

 

 

8.875% due 4/24/13 (d)

 

1,371,186

 

2,020,000

 

 

 

9.500% due 4/24/18 (d)

 

1,040,300

 

 

See Notes to Schedule of Investments.

 

3



 

Western Asset Emerging Markets Income Fund Inc.

 

 

 

 

February 28, 2009

Schedule of Investments (unaudited) (continued)

 

 

 

Face
Amount†

 

 

 

Security

 

Value

 

Russia — 17.7% (continued)

 

 

 

 

 

 

 

Gaz Capital SA:

 

 

 

7,110,000

 

 

 

Notes, 8.625% due 4/28/34 (d)

 

$

5,722,462

 

3,100,000

 

 

 

Senior Secured Notes, 7.288% due 8/16/37 (d)

 

1,736,000

 

1,140,000

 

 

 

Gazprom, Loan Participation Notes, 6.212% due 11/22/16 (d)

 

769,500

 

 

 

 

 

LUKOIL International Finance BV:

 

 

 

1,459,000

 

 

 

6.356% due 6/7/17 (d)

 

1,072,365

 

5,216,000

 

 

 

6.656% due 6/7/22 (d)

 

3,625,120

 

8,020,000

 

 

 

Morgan Stanley Bank AG for OAO Gazprom, Loan Participation Notes, 9.625% due 3/1/13 (d)

 

7,318,250

 

 

 

 

 

RSHB Capital, Loan Participation Notes:

 

 

 

 

 

 

 

Secured Notes:

 

 

 

3,414,000

 

 

 

7.175% due 5/16/13 (d)

 

2,574,156

 

6,060,000

 

 

 

7.125% due 1/14/14 (d)

 

4,266,482

 

3,750,000

 

 

 

7.125% due 1/14/14 (d)

 

2,602,875

 

 

 

 

 

Senior Secured Notes:

 

 

 

2,630,000

 

 

 

7.175% due 5/16/13 (d)

 

2,017,342

 

3,563,000

 

 

 

6.299% due 5/15/17 (d)

 

2,066,540

 

 

 

 

 

TNK-BP Finance SA:

 

 

 

2,387,000

 

 

 

6.625% due 3/20/17 (d)

 

1,318,818

 

218,000

 

 

 

7.875% due 3/13/18 (d)

 

125,350

 

 

 

 

 

Senior Notes:

 

 

 

2,105,000

 

 

 

7.500% due 3/13/13 (d)

 

1,662,950

 

4,650,000

 

 

 

7.500% due 7/18/16 (d)

 

2,813,250

 

2,110,000

 

 

 

7.500% due 7/18/16 (d)

 

1,276,550

 

830,000

 

 

 

7.875% due 3/13/18 (d)

 

477,250

 

2,567,000

 

 

 

UBS Luxembourg SA for OJSC Vimpel Communications, Loan Participation Notes, 8.250% due 5/23/16 (d)

 

1,514,530

 

 

 

 

 

Vimpel Communications, Loan Participation Notes:

 

 

 

2,080,000

 

 

 

8.375% due 4/30/13 (d)

 

1,404,000

 

5,017,000

 

 

 

Secured Notes, 8.375% due 4/30/13 (d)

 

3,444,361

 

 

 

 

 

Total Russia

 

53,129,687

 

Thailand — 1.1%

 

 

 

 

 

 

 

True Move Co., Ltd.:

 

 

 

200,000

 

 

 

10.750% due 12/16/13 (d)

 

79,327

 

3,070,000

 

 

 

10.375% due 8/1/14 (d)

 

1,181,950

 

4,950,000

 

 

 

Notes, 10.750% due 12/16/13 (d)

 

1,955,250

 

 

 

 

 

Total Thailand

 

3,216,527

 

United Kingdom — 3.2%

 

 

 

56,805,000

 

RUB

 

HSBC Bank PLC, Credit-Linked Notes (Russian Agricultural Bank), 8.900% due 12/20/10 (c)(d)

 

845,698

 

209,880,000

 

RUB

 

JPMorgan Chase Bank, Credit-Linked Notes (Russian Agricultural Bank), 9.500% due 2/11/11 (b)(c)(d)

 

4,467,609

 

6,200,000

 

 

 

Vedanta Resources PLC, Senior Notes, 8.750% due 1/15/14 (d)

 

4,371,000

 

 

 

 

 

Total United Kingdom

 

9,684,307

 

United States — 0.1%

 

 

 

310,000

 

 

 

Freeport-McMoRan Copper & Gold Inc., Senior Notes, 8.375% due 4/1/17

 

267,746

 

 

 

 

 

TOTAL CORPORATE BONDS & NOTES
(Cost — $170,790,090)

 

122,236,787

 

 

See Notes to Schedule of Investments.

 

4



 

Western Asset Emerging Markets Income Fund Inc.

 

 

 

 

February 28, 2009

Schedule of Investments (unaudited) (continued)

 

 

 

Warrants

 

 

 

Security

 

Value

 

WARRANTS — 0.1%

 

 

 

11,500

 

 

 

Bolivarian Republic of Venezuela, Oil-linked payment obligations, Expires 4/15/20 (b) (Cost - $356,500)

 

$

201,250

 

 

 

 

 

TOTAL INVESTMENTS BEFORE SHORT-TERM INVESTMENTS
(Cost — $354,081,907)

 

264,160,179

 

 

Face
Amount†

 

 

 

 

 

 

 

SHORT-TERM INVESTMENTS — 7.8%

 

 

 

U.S. Government Agency — 3.8%

 

 

 

11,300,000

 

 

 

Federal Home Loan Mortgage Corp. (FHLMC), Discount Notes, 0.471% due 6/15/09 (e)(f) (Cost - $11,284,510)

 

11,290,282

 

Repurchase Agreement — 4.0%

 

 

 

12,000,000

 

 

 

Morgan Stanley tri-party repurchase agreement dated 2/27/09, 0.220% due 3/2/09; Proceeds at maturity - $12,000,220; (Fully collateralized by U.S. government agency obligations, 5.000% due 6/11/09;
Market value - $12,372,490) (Cost - $12,000,000)

 

12,000,000

 

 

 

 

 

TOTAL SHORT-TERM INVESTMENTS
(Cost — $23,284,510)

 

23,290,282

 

 

 

 

 

TOTAL INVESTMENTS — 96.0% (Cost — $377,366,417#)

 

287,450,461

 

 

 

 

 

Other Assets in Excess of Liabilities — 4.0%

 

11,843,945

 

 

 

 

 

TOTAL NET ASSETS — 100.0%

 

$

299,294,406

 

 

Face amount denominated in U.S. dollars, unless otherwise noted.

(a)

Security is currently in default.

(b)

Security is valued in good faith at fair value by or under the direction of the Board of Directors (See Note 1).

(c)

Variable rate security. Interest rate disclosed is that which is in effect at February 28, 2009.

(d)

Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions that are exempt from registration, normally to qualified institutional buyers. This security has been deemed liquid pursuant to guidelines approved by the Board of Directors, unless otherwise noted.

(e)

On September 7, 2008, the Federal Housing Finance Agency placed Fannie Mae and Freddie Mac into Conservatorship.

(f)

Rate shown represents yield-to-maturity.

#

Aggregate cost for federal income tax purposes is substantially the same.

 

 

 

Abbreviations used in this schedule:

 

ARS - Argentine Peso

 

BRL - Brazilian Real

 

DEM - German Mark

 

EGP - Egyptian Pound

 

EUR - Euro

 

GDP - Gross Domestic Product

 

IDR - Indonesian Rupiah

 

ITL - Italian Lira

 

OJSC - Open Joint Stock Company

 

RUB - Russian Ruble

 

See Notes to Schedule of Investments.

 

5



 

Notes to Schedule of Investments (unaudited)

 

1. Organization and Significant Accounting Policies

 

Western Asset Emerging Markets Income Fund Inc. (formerly known as Western Asset Emerging Markets Income Fund II Inc.) (the “Fund”) was incorporated in Maryland 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’s primary investment objective is to seek high current income. As a secondary objective, the Fund seeks capital appreciation. In pursuit of these objectives, the Fund under normal conditions invests at least 80% of its net assets, plus any borrowings for investment purposes, in debt securities of government and government related issuers located in emerging market countries (including participations in loans between governments and financial institutions), and of entities organized to restructure the outstanding debt of such issuers, and in debt securities of corporate issuers located in emerging market countries.

 

The following are significant accounting policies consistently followed by the Fund and are in conformity with U.S. generally accepted accounting principles (“GAAP”).

 

(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 last quoted bid and asked prices as of the close of business of that market.  Equity securities for which market quotations are available are valued at the last reported sales price or official closing price on the primary market or exchange on which they trade.  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 securities at fair value as determined in accordance with the procedures approved by the Fund’s Board of Directors. Short-term obligations with maturities of 60 days or less are valued at amortized cost, which approximates fair value.

 

Effective June 1, 2008, the Fund adopted Statement of Financial Accounting Standards No. 157 (“FAS 157”).  FAS 157 establishes a single definition of fair value, creates a three-tier hierarchy as a framework for measuring fair value based on inputs used to value the Fund’s investments, and requires additional disclosure about fair value.  The hierarchy of inputs is summarized below.

 

·                  Level 1 – quoted prices in active markets for identical investments

·                  Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

·                  Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

 

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

 

The following is a summary of the inputs used in valuing the Fund’s assets carried at fair value:

 

 

 

February 28, 2009

 

Quoted Prices
(Level 1)

 

Other Significant
Observable Inputs
(Level 2)

 

Significant
Unobservable
Inputs
(Level 3)

 

 

 

 

 

 

 

 

 

 

 

Investments in Securities

 

$287,450,461

 

 

$281,841,852

 

$5,608,609

 

 

6



 

Notes to Schedule of Investments (unaudited) (continued)

 

Following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value:

 

 

 

Investments
in Securities

 

Balance as of May 31, 2008

 

 

Accrued Premiums/Discounts

 

 

Realized Gain (Loss)

 

 

Change in unrealized appreciation (depreciation)

 

$

108,105

(1)

Net purchases (sales)

 

 

Transfers in and/or out of Level 3

 

5,500,504

 

Balance as of February 28, 2009

 

$

5,608,609

 

Net unrealized appreciation (depreciation) for Investments in Securities still held at the reporting date

 

$

(5,395,079

)(1)

 


(1) Change in unrealized appreciation (depreciation) includes net unrealized appreciation (depreciation) resulting from changes in investment values during the reporting period and the reversal of previously recorded unrealized appreciation (depreciation) when gains or losses are realized.

 

(b) Repurchase Agreements.  When entering into repurchase agreements, it is the Fund’s 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 Fund’s custodian delivers to the counterparty liquid assets, the market value of which, at the inception of the transaction, at least equals the repurchase price (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) 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 at 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.

 

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.

 

(e) 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 Fund’s 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 Fund’s investment in non-U.S. dollar denominated securities may also result in foreign currency losses caused by devaluations and exchange rate fluctuations.

 

(f) Security Transactions.  Security transactions are accounted for on a trade date basis.

 

7



 

Notes to Schedule of Investments (unaudited) (continued)

 

2.  Investments

 

At February 28, 2009, the aggregate gross unrealized appreciation and depreciation of investments for federal income tax purposes were substantially as follows:

 

Gross unrealized appreciation

 

$

1,757,961

 

Gross unrealized depreciation

 

(91,673,917

)

Net unrealized depreciation

 

$

(89,915,956

)

 

Transactions in reverse repurchase agreements for the Fund during the period ended February 28, 2009 were as follows:

 

Average

 

Weighted

 

Maximum

 

Daily

 

Average

 

Amount

 

Balance *

 

Interest Rate *

 

Outstanding

 

$9,763,293

 

2.225%

 

$15,321,199

 

 

* Average based on the number of days that the Fund had reverse repurchase agreements outstanding.

 

Interest rates on reverse repurchase agreements ranged from 1.250% to 3.000% during the period ended February 28, 2009. Interest expense incurred on reverse repurchase agreements totaled $77,226.

 

At February 28, 2009, the Fund did not have any open reverse repurchase agreements.

 

3. Recent Accounting Pronouncement

 

In March 2008, FASB issued the Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities (“FAS 161”). FAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. FAS 161 requires enhanced disclosures about the Fund’s derivative and hedging activities, including how such activities are accounted for and their effect on the Fund’s financial position, performance and cash flows. Management is currently evaluating the impact the adoption of FAS 161 will have on the Fund’s financial statements and related disclosures.

 

8



 

ITEM 2.                  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 quarter that have materially affected, or are likely to materially affect the registrant’s internal control over financial reporting.

 

ITEM 3.                  EXHIBITS.

 

Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940, as amended, are attached hereto.

 



 

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, thereunto duly authorized.

 

Western Asset Emerging Markets Income Fund Inc.

 

By

/s/ R. Jay Gerken

 

 

R. Jay Gerken

 

 

Chief Executive Officer

 

 

 

 

 

Date:

April 28, 2009

 

 

 

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

 

 

 

 

 

Date:

April 28, 2009

 

 

 

By

/s/ Kaprel Ozsolak

 

 

Kaprel Ozsolak

 

 

Chief Financial Officer

 

 

 

 

 

Date:

April 28, 2009