N-30D: Initial annual and semi-annual reports mailed to investment company shareholders pursuant to Rule 30e-1 (other than those required to be submitted as part of Form NCSR.)
Published on February 28, 2003
GLOBAL INCOME
FUND
ANNUAL REPORT
December 31, 2002
Independent Public Accountant American Stock
Tait, Weller & Baker Exchange Symbol:
GIF
11 Hanover Square
New York, NY 10005
1-800-278-4353
www.globalincomefund.net
[LETTERHEAD OF GLOBAL INCOME FUND]
January 23, 2003
Fellow Shareholders:
We are pleased to submit this Annual Report and welcome our shareholders
who have made their investment since our last Report. The primary investment
objective of the Fund is to provide for its shareholders a high level of income
and, secondarily, capital appreciation. The Fund pursues its investment
objectives by investing primarily in a global portfolio of investment grade
fixed income securities. At year-end, the Fund was approximately 82% invested in
fixed income securities with an actual or deemed investment grade rating and
approximately 5% in fixed income securities below investment grade,
approximately 9% in actual or deemed investment grade preferred stocks, 2% in
common stocks and the balance in money market securities. At year-end
approximately 88% of investments were in entities located in the United States
and the balance was spread over four countries and one supranational
organization.
REVIEW AND OUTLOOK
In our 2001 year-end letter, we predicted the beginnings of a slow economic
recovery. The economy posted a strong first quarter, faded in the second,
strengthened in the third and then faded again in the fourth quarter. Even our
conservative predictions were too optimistic. The markets were again roiled by
unpredictable events including accounting scandals, securities fraud and
continuing ailing economies both at home and abroad. Market pessimism mounted
towards the end of 2002, resulting in the Federal Reserve lowering the funds
rate a full 0.50% to close the year at 1.25%.
Against this economic background, 10 year Treasuries dropped in yield from
5.06% at the start of the year to a 44 year low on October 9, and 3.82% at year
end. Although the LB Intermediate Corporate Bond Index had a 2002 return of
9.84%, the ML High Yield Corporate and Agencies Indexes recorded a - 1.89% and
1.29% total return, respectively. Equity markets had negative returns for the
third straight year, with the DJ Industrial Average, the S&P 500 Index and the
Nasdaq Composite Index declining 15.01%, 22.09% and 31.53%, respectively. In the
midst of these market cross currents, we remained focused on seeking a high
level of income, yet maintaining prudent financial quality standards for
potential capital appreciation. Accordingly, as the economy faltered, we
increased the overall financial strength of the portfolio by increasing U.S.
Treasury, mortgage-backed, and high quality preferred stock positions. Despite
the difficulty in this market environment for funds seeking a high level of
income, we are pleased to report that the Fund had a 2002 market total return of
3.15% on the American Stock Exchange on a net asset value return of 2.01%.
Looking ahead, many market factors appear to be in place for an economic
recovery. The Federal Reserve is maintaining its accommodative posture towards
interest rates. With the anticipated building of momentum as the year
progresses, corporate spending and profits could rebound, producing more jobs
and boosting consumer confidence as the economy experiences sustainable growth.
With Middle East tensions rising and Congress debating the administration's tax
cut proposals, however, financial markets may become more volatile.
10% DIVIDEND DISTRIBUTION POLICY CONTINUED
The managed 10% dividend distribution policy adopted by the Fund's Board of
Directors in 1997 continues to be well received. The objective is to provide
shareholders with a relatively stable cash flow and reduce or eliminate any
market price discount to the Fund's net asset value per share. Payments are made
primarily from ordinary income and any capital gains, with the balance
representing return of capital. For the year ending December 31, 2002 actual
distributions were 9.35% of average net assets with approximately 5.34% derived
from net investment income and the balance from return of capital. We continue
to believe shares of the Fund are a sound value and attractive for portfolios
seeking total return from capital appreciation and income.
PURCHASE SHARES AT AN ATTRACTIVE DISCOUNT
The Fund's current net asset value per share is $5.03. With a recent
closing on the American Stock Exchange of $4.89, we believe this represents an
important opportunity to purchase additional shares at an attractive discount
from their underlying value. The Fund's Dividend Reinvestment Plan is an
effective way to also add to your holding because quarterly dividend
distributions are reinvested without charge at the lower of net asset value or
market price, which can contribute importantly to growing your investment over
time. Please call 1-800-278-4353 and an Investor Service Representative will be
happy to assist you. We appreciate your support and look forward to serving your
investment needs in the months and years ahead.
Sincerely,
/s/ Thomas B. Winmill /s/ Marion E. Morris
Thomas B. Winmill Marion E. Morris
President Senior Vice President
Portfolio Manager
GLOBAL INCOME FUND, INC.
2
SCHEDULE OF PORTFOLIO INVESTMENTS - DECEMBER 31, 2002
See accompanying notes to financial statements.
GLOBAL INCOME FUND, INC.
3
SCHEDULE OF PORTFOLIO INVESTMENTS - DECEMBER 31, 2002
(1) Par value stated in currency indicated; market value stated in
U.S.dollars.
See accompanying notes to financial statements.
GLOBAL INCOME FUND, INC.
4
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2002
ASSETS:
Investments at market value
(cost: $27,231,658) (note 1) ............. $ 27,317,691
Interest and dividend receivable ........... 340,990
Receivable for securities sold ............. 25,623
Other assets ............................... 2,842
------------
Total assets ............................. 27,687,146
------------
LIABILITIES:
Accrued expenses ........................... 55,763
Cash overdraft ............................. 26,242
Accrued management fees .................... 16,631
------------
Total liabilities ........................ 98,636
------------
NET ASSETS: (applicable to 5,474,422
shares outstanding: 20,000,000 shares
of $.01 par value authorized) .............. $ 27,588,510
============
NET ASSET VALUE PER SHARE
($27,588,510 / 5,474,422 shares
outstanding) $ 5.04
============
At December 31, 2002, net assets consisted of:
Paid-in capital ............................ $ 35,864,035
Accumulated net realized loss on investments,
foreign currencies and futures ............ (8,361,606)
Net unrealized appreciation on
investments and foreign currencies ........ 86,081
------------
$ 27,588,510
============
STATEMENT OF OPERATIONS
Year Ended December 31, 2002
INVESTMENT INCOME:
Interest ................................... $ 1,760,921
Dividends .................................. 193,202
------------
Total investment income .................... 1,954,123
------------
EXPENSES:
Investment management (note 3) ............. 197,320
Professional (note 3) ...................... 55,486
Custodian .................................. 50,983
Registration (note 3) ...................... 35,573
Directors .................................. 31,196
Printing ................................... 18,750
Transfer agent ............................. 13,720
Other ...................................... 10,612
------------
Total operating expenses ................. 413,640
Loan interest and fees (note 5) .......... 1,686
------------
Total expenses ........................... 415,326
------------
Net investment income .................. 1,538,797
------------
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS, FOREIGN
CURRENCIES AND FUTURES:
Net realized loss on investments ........... (967,432)
Unrealized depreciation on investments
and foreign currencies during the year ... (9,373)
------------
Net realized and unrealized loss
on investments and foreign
currencies .............................. (976,805)
------------
Net increase in net assets
resulting from operations ............... $ 561,992
============
See accompanying notes to financial statements.
GLOBAL INCOME FUND, INC.
5
STATEMENTS OF CHANGES IN NET ASSETS For the Years Ended December 31, 2002 and
2001
See accompanying notes to financial statements.
GLOBAL INCOME FUND, INC.
6
NOTES TO FINANCIAL STATEMENTS
(1) Global Income Fund, Inc., a Maryland corporation registered under the
Investment Company Act of 1940, as amended, is a non-diversified, closed-end
management investment company, whose shares are listed on the American Stock
Exchange. The primary objective of the Fund is a high level of income and
secondarily, capital appreciation. The Fund seeks to achieve its investment
objectives by investing primarily in foreign and domestic fixed income
securities. The Fund is subject to the risk of price fluctuations of the
securities held in its portfolio which is generally a function of the underlying
credit ratings of an issuer, the duration and yield of its securities, and
general economic and interest rate conditions. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements. With respect to security valuation,
securities traded on a national securities exchange or the Nasdaq National
Market System ("NMS") are valued at the last reported sales price on the day the
valuations are made. Such securities that are not traded on a particular day and
securities traded in the over-the-counter market that are not on NMS are valued
at the mean between the current bid and asked prices. Certain of the securities
in which the Fund invests are priced through pricing services which may utilize
a matrix pricing system which takes into consideration factors such as yields,
prices, maturities, call features and ratings on comparable securities. Bonds
may be valued according to prices quoted by a dealer in bonds which offers
pricing services. Debt obligations with remaining maturities of 60 days or less
are valued at cost adjusted for amortization of premiums and accretion of
discounts. Securities of foreign issuers denominated in foreign currencies are
translated into U.S. dollars at prevailing exchange rates. Forward contracts are
marked to market and the change in market value is recorded by the Fund as an
unrealized gain or loss. When a contract is closed, the Fund records a realized
gain or loss equal to the difference between the value of the contract at the
time it was opened and the value at the time it was closed. The Fund could be
exposed to risk if the counterparties are unable to meet the terms of the
contracts or if the value of the currency changes unfavorably. Investment
transactions are accounted for on the trade date (the date the order to buy or
sell is executed). Interest income is recorded on the accrual basis. Discounts
and premiums on securities purchased are amortized over the life of the
respective securities. Dividends and distributions to shareholders are recorded
on the ex-dividend date. In preparing financial statements in conformity with
accounting principles generally accepted in the United States of America,
management makes estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements, as well as the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
(2) The Fund intends to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute
substantially all of its taxable investment income and net capital gains, if
any, after utilization of any capital loss carryforward, to its shareholders and
therefore no Federal income tax provision is required. At December 31, 2002, the
Fund had an unused capital loss carryforward of approximately $8,361,200 of
which $1,420,000 expires in 2004, $214,000 in 2006, $3,977,000 in 2007,
$1,381,000 in 2008 and $1,369,200 in 2010. Based on Federal income tax cost of
$27,231,658, gross unrealized appreciation and gross unrealized depreciation
were $680,286 and $594,253, respectively, at December 31, 2002. Distributions
paid to shareholders during the year ended December 31, 2002 differ from net
investment income and net gains (losses) from security, foreign currency, and
futures transactions as determined for financial reporting purposes. These
distributions are shown under "Distributions to Shareholders" in the Statements
of Changes in Net Assets.
(3) The Fund retains CEF Advisers, Inc. as its Investment Manager. Under the
terms of the Investment Management Agreement, the Investment Manager receives a
management fee, payable monthly, based on the average weekly net assets of the
Fund at the annual rate of 7/10 of 1% of the first $250 million, 5/8 of 1% from
$250 million to $500 million, and 1/2 of 1% over $500 million. This fee is
calculated by determining the average of net assets on each Friday of a month
and applying the applicable rate to such average for the number of days in the
month. Certain officers and directors of the Fund are officers and directors of
the Investment Manager. The Fund reimbursed the Investment Manager $39,677 for
providing certain administrative and accounting services at cost for the year
ended December 31, 2002.
GLOBAL INCOME FUND, INC.
7
(4) The Fund has an arrangement with its custodian and transfer agent whereby
interest earned on uninvested cash balances was used to offset a portion of the
Fund's expenses. Purchases and sales of securities other than short term notes
aggregated $45,093,332 and $42,963,049, respectively, for the year ended
December 31, 2002. A forward currency contract is an obligation to purchase or
sell a specific currency for an agreed-upon price at a future date. The Fund
could be exposed to risk if counterparties to the contracts are unable to meet
the terms of their contracts. The Fund had no forward currency contracts
outstanding at December 31, 2002.
(5) The Fund may borrow through a committed bank line of credit. At December 31,
2002, there was no balance outstanding and the interest rate was equal to the
Federal Reserve Rate plus 1.00 percentage point. For the year ended December 31,
2002, the weighted average interest rate was 2.56% based on the balances
outstanding during the period and the weighted average amount outstanding was
$46,057.
(6) The tax character of distributions paid to shareholders for the years ended
December 31, 2002 and 2001 was follows:
2002 2001
Distributions paid from:
Ordinary income $ 1,538,797 $ 1,939,108
Return of capital 1,158,289 1,050,851
----------- -----------
$2,697,086 $2,989,959
----------- -----------
GLOBAL INCOME FUND, INC.
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FINANCIAL HIGHLIGHTS
* Per share income and operating expenses and net realized and unrealized gain
(loss) on investments have been computed using the average number of shares
outstanding. These computations had no effect on net asset value per share.
** Annualized.
(a) Effective February 7, 1997, the Fund converted from an open-end management
investment company to a closed-end management investment company. The Fund
has calculated total return on market value basis based on purchases and
sales of shares of the Fund at current market values and reinvestment of
dividends and distributions at prices obtained under the dividend
reinvestment plan. The calculation does not reflect brokerage commissions,
if any.
(b) Ratio after custodian credits was 2.66%, 2.24%**, 2.43% and 3.42% for the
years ended December 31, 2001, and 2000, the six months ended December 31,
1999 and the years ended June 30, 1999 and 1998, respectively. There were no
custodian credits for the year ended December 31, 2002.
GLOBAL INCOME FUND, INC.
9
REPORT OF INDEPENDENT PUBLIC ACCOUNTANT
To the Board of Directors and Shareholders of Global Income Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of Global
Income Fund, Inc. including the schedule of portfolio investments as of December
31, 2002, and the related statement of operations for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended and the financial highlights for each of the periods indicated hereon.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2002, by correspondence with the custodian.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Global
Income Fund, Inc. as of December 31, 2002, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the periods indicated
thereon, in conformity with accounting principles generally accepted in the
United States of America.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
January 17, 2003
RESULTS OF THE ANNUAL MEETING
The Fund's annual meeting was held on October 2, 2002.
1. To elect the following directors to serve as follows:
Directors whose term of office continued after the meeting are George B. Langa,
Peter K. Werner and Thomas B. Winmill.
GLOBAL INCOME FUND, INC.
10
DIVIDEND REINVESTMENT PLAN
The Fund has adopted a Dividend Reinvestment Plan (the "Plan"). Under the Plan,
each dividend and capital gain distribution, if any, declared by the Fund on
outstanding shares will, unless elected otherwise by each shareholder by
notifying the Fund in writing at any time prior to the record date for a
particular dividend or distribution, be paid on the payment date fixed by the
Board of Directors or a committee thereof in additional shares. If the Market
Price (as defined below) per share is equal to or exceeds the net asset value
per share at the time shares are valued for the purpose of determining the
number of shares equivalent to the cash dividend or capital gain distribution
(the "Valuation Date"), participants will be issued additional shares equal to
the amount of such dividend divided by the Fund's net asset value per share. If
the Market Price per share is less than such net asset value on the Valuation
Date, participants will be issued additional shares equal to the amount of such
dividend divided by the Market Price. The Valuation Date is the day before the
dividend or distribution payment date or, if that day is not an American Stock
Exchange trading day, the next trading day. For all purposes of the Plan: (a)
the Market Price of the shares on a particular date shall be the average closing
market price on the five trading days the shares traded ex-dividend on the
Exchange prior to such date or, if no sale occurred on any of these days, then
the mean between the closing bid and asked quotations for the shares on the
Exchange on such day, and (b) net asset value per share on a particular date
shall be as determined by or on behalf of the Fund.
PRIVACY POLICY
Global Income Fund, Inc. recognizes the importance of protecting the personal
and financial information of its shareholders. We consider each shareholder's
personal information to be private and confidential. This describes the
practices followed by us to protect our shareholders' privacy. We may obtain
information about you from the following sources: (1) information we receive
from you on forms and other information you provide to us whether in writing, by
telephone, electronically or by any other means; (2) information regarding your
transactions with us, our corporate affiliates, or others. We do not sell
shareholder personal information to third parties. We will collect and use
shareholder personal information only to service shareholder accounts. This
information may be used by us in connection with providing services or financial
products requested by shareholders. We will not disclose shareholder personal
information to any nonaffiliated third party except as permitted by law. We take
steps to safeguard shareholder information. We restrict access to nonpublic
personal information about you to those employees and service providers who need
to know that information to provide products or services to you. With our
service providers we maintain physical, electronic, and procedural safeguards to
guard your nonpublic personal information. Even if you are no longer a
shareholder, our Privacy Policy will continue to apply to you. We reserve the
right to modify, remove or add portions of this Privacy Policy at any time.
GLOBAL INCOME FUND, INC.
11
DIRECTORS AND OFFICERS
DIRECTORS OFFICERS
BASSETT S. WINMILL THOMAS B. WINMILL, Esq.
Chairman President
GEORGE B. LANGA* MARION E. MORRIS
Senior Vice President
DAVID R. STACK*
PETER K. WERNER* WILLIAM G. VOHRER
Treasurer
THOMAS B. WINMILL, Esq.
*Member, Audit Committee MONICA PELAEZ, Esq.
Vice President, Secretary
HEIDI KEATING
Vice President
STOCK DATA
Price (12/31/02) ............... $ 4.60
Net Asset Value (12/31/02) ..... $ 5.04
Discount ....................... 8.7%
American Stock Exchange Trading Symbol: GIF
Newspaper exchange listings appear under an abbreviation, such as: Glinc
2003 DISTRIBUTION PAYMENT DATES
Declaration Record Payment
- ------------- -------------- -------------
March 3 March 17 March 31
June 2 June 16 June 30
September 5 September 16 September 30
December 3 December 17 December 31
GLOBAL INCOME FUND, INC.
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GLOBAL INCOME FUND
11 Hanover Square
New York, NY 10005