N-CSRS: Certified semi-annual shareholder report of registered management investment companies filed on Form N-CSR
Published on September 6, 2006
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSRS
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-08025
Global Income Fund, Inc.
(Exact name of registrant as specified in charter)
11 Hanover Square, New York, NY 10005
--------------------------------------------------------------
(Address of principal executive offices) (Zipcode)
Thomas B. Winmill, President
11 Hanover Square
New York, NY 10005
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(Name and address of agent for service)
Registrant's telephone number, including area code: 1-212-344-6310
Date of fiscal year end: 12/31
Date of reporting period: 1/1/06 - 06/30/06
Form N-CSRS is to be used by management investment companies to file reports
with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSRS in its
regulatory, disclosure review, inspection, and policy making roles.
A registrant is required to disclose the information specified by Form N-CSRS
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSRS
unless the Form displays a current valid Office of Management and Budget ("OMB")
control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under clearance requirements of 44 U.S.C. sec. 3507.
Item 1. Report to Stockholders
SEMI-ANNUAL REPORT
June 30, 2006
American Stock
Exchange Symbol:
GIF
11 Hanover Square
New York, NY 10005
www.globalincomefund.net
COUNTRY ALLOCATION*
[CHART APPEARS HERE]
Netherlands 16.36%
Canada 12.91%
United Kingdom 11.46%
Australia 10.27%
France 8.16%
Supranational/Other 8.09%
Germany 5.81%
United States 4.82%
Austria 4.24%
Sweden 4.13%
Japan 4.03%
Mexico 2.92%
Cyprus 2.02%
Hungary 1.99%
Korea 1.54%
-----
98.75%
PORTFOLIO ANALYSIS*
Currency Allocation
Eurodollar 49.06%
U.S. Dollar 20.77%
Australian Dollar 11.87%
British Pound 10.17%
Canadian Dollar 6.88%
98.75%
Ratings
AAA 34.94%
AA 14.66%
A 39.54%
BBB 6.24%
(Less than)BBB 1.36%
NR 2.01%
98.75%
* Country allocation and portfolio analysis use approximate percentages of
total net assets, and may not add up to 100%, due to leverage or other
assets, rounding, and other factors. Ratings are not a guarantee of credit
quality and may change. NR means "not rated."
GLOBAL INCOME FUND American Stock
Exchange Symbol: GIF
11 Hanover Square, New York, NY 10005
www.globalincomefund.net
July 18, 2006
Fellow Shareholders:
It is a pleasure to submit this 2006 Semi-Annual Report for Global Income
Fund, and to welcome our new shareholders who find the Fund's quality approach
to global income investing attractive. The primary investment objective of the
Fund, a closed-end investment company, is to provide for its shareholders a high
level of income. The Fund's secondary investment objective is capital
appreciation. The Fund pursues its investment objectives by investing primarily
in a global portfolio of investment grade fixed income securities.
Market Report
Under the new leadership of Federal Reserve Chairman Bernanke, the Federal
Open Market Committee (FOMC) increased the Federal funds target rate by a
quarter of one percent at each of its four meetings since the beginning of 2006,
when it stood at 4.25%, so that on June 30th it had climbed to 5.25%. When the
FOMC raised interest rates for the 17th straight time in June 2006, it signaled
that future increases would depend on current data regarding inflation and
economic growth. The FOMC, in its comments, has moved from a somewhat obscure
"balanced" approach to a "statistic" sensitive approach.
If the FOMC does in fact rely on statistical data, it may be that the FOMC
is close to ending the target rate increases of the last two years. The economy
is showing signs of having slowed down in the second quarter, and consumers
appear to be struggling under current economic conditions. Rising interest rates
and persistently high gasoline prices may even further pinch consumer spending
and weaken the U.S. economy for the rest of the year. Other indicators point
towards a decline of consumer confidence and to a slowdown in the housing
markets. Yet, unemployment is only 4.6% and the U.S. economy is growing in terms
of U.S. industrial production. In fact, the Federal Reserve recently reported
that industrial capacity utilization reached its highest level since June 2000.
The wild card in the markets, however, which may be difficult for the FOMC
to reduce to statistical trend analysis, is the heightened geopolitical tension
in the world today - from the Middle East to North Korea, Russia to South
America. Further, other important players are seeking a role on the global
financial stage: the Bank of Japan, China's central bank, Russia's Industry and
Energy Ministry, and OPEC. Their influence on global economics is becoming
increasingly significant and may be ignored only at an investor's own risk.
Global Allocation
In view of the cross-currents in global markets, the Fund's strategy in the
first six months of 2006 was to invest its assets in primarily investment grade
fixed income securities denominated in major world currencies and issued by
organizations across many countries. On June 30, 2006, the Fund held securities
of sovereign nations, corporations, and other organizations based in the United
States, Netherlands, United Kingdom, Australia, France, Canada, Germany,
Austria, Sweden, Japan, Cyprus, Hungary, and Korea. Of these securities
approximately 49% were in Eurodollars, 21% in U.S. dollars, 12% in Australian
dollars, 10% in British pounds and 7% in Canadian dollars. All but 3% of the
Fund's portfolio investments are considered investment grade by actual or deemed
rating, or in cash or cash equivalents.
For the first six months of 2006, the Fund had a market total return on the
American Stock Exchange of 0.99% on a net asset value total return of 3.04%,
according to Morningstar, gratifying results for our global investment grade
allocation process. We believe this approach provides a sound, quality, fixed
income strategy for
investors over the long term. Our current view of markets suggests that the Fund
will benefit during the remainder of 2006 from a high quality portfolio
strategy, investing globally in investments over multiple currencies.
Distribution Policy
The Fund has a managed quarterly distribution policy, which is intended to
provide shareholders with a relatively stable cash flow and reduce or eliminate
the Fund's market price discount to its net asset value per share. Under the
current policy, distributions of approximately 6% of the Fund's net asset value
per share on an annual basis are intended to be paid primarily from ordinary
income and any net capital gains, with the balance representing return of
capital. As of the dividend declaration on June 2, 2006, approximately 39%, 0%
and 61% of distributions made in 2006 were from ordinary income, capital gains,
and return of capital, respectively. This is only an estimate based on the first
two quarters of the fiscal year and is subject to change.
This managed quarterly distribution policy is subject to regular review at
the Board of Directors' quarterly meetings and the amount of the distribution
may vary depending on the Fund's net asset value per share at the time of
declaration. Although the dollar amount of the distributions cannot be
predicted, we continue to believe shares of the Fund are a sound long term value
for investors seeking a high level of income, with capital appreciation as a
secondary objective.
Shares at a Discount
The Fund's current net asset value per share is $4.28. With a recent
closing price on the American Stock Exchange of $3.82, you can purchase
additional shares at a discount from their underlying value. Investment return
and value will vary, so shares of the Fund when redeemed may be worth more or
less than their original cost.
We believe that shares of the Fund are attractive, and look forward to
serving your investment needs over the 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 See notes to financial statements.
Schedule of Portfolio Investments - June 30, 2006 (Unaudited)
See notes to financial statements. 3 GLOBAL INCOME FUND, INC.
Schedule of Portfolio Investments - June 30, 2006 (Unaudited)
(a) The principal amount is stated in U.S. dollars unless otherwise indicated.
(b) 144A securities may be sold to institutional investors only. The total
market value of this security represents approximately 1.0% of total net
assets.
GLOBAL INCOME FUND, INC. 4 See notes to financial statements.
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2006 (Unaudited)
ASSETS:
Investments at market value
(cost: $31,943,007) ............................................ $ 31,542,423
Interest receivable ............................................. 624,201
Other assets .................................................... 6,155
------------
Total assets ................................................... 32,172,779
------------
LIABILITIES:
Note payable .................................................... 137,001
Accrued expenses ................................................ 63,574
Investment management ........................................... 18,175
Administrative services ......................................... 12,902
------------
Total liabilities .............................................. 231,652
------------
NET ASSETS: (applicable to 7,388,733 shares
outstanding: 20,000,000 shares of $.01
par value authorized) ........................................... $ 31,941,127
============
NET ASSET VALUE PER SHARE
($31,941,127 / 7,388,733 shares
outstanding) .................................................... $ 4.32
============
At June 30, 2006, net assets consisted of:
Paid-in capital ................................................. $ 38,391,957
Accumulated undistributed net
investment loss ................................................ (5,582)
Accumulated net realized loss on
investments and foreign currencies ............................. (6,059,751)
Net unrealized depreciation on
investments and foreign currencies ............................. (385,497)
------------
$ 31,941,127
============
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2006 (Unaudited)
INVESTMENT INCOME:
Interest (net of $1,317 of foreign
tax expense) ................................................... $ 676,642
Dividends ....................................................... 53,209
------------
Total investment income ........................................ 729,851
------------
EXPENSES:
Investment management ........................................... 111,569
Legal ........................................................... 90,397
Administrative services ......................................... 36,585
Bookkeeping and pricing ......................................... 22,800
Printing and postage ............................................ 15,708
Auditing ........................................................ 13,575
Exchange listing ................................................ 8,645
Custodian ....................................................... 8,305
Insurance ....................................................... 7,421
Transfer agent .................................................. 6,749
Directors ....................................................... 2,920
Loan interest and fees .......................................... 1,561
Other ........................................................... 1,215
------------
Total expenses ................................................. 327,450
Expense reductions ............................................. (1,669)
------------
Total net expenses ............................................. 325,781
------------
Net investment income ........................................ 404,070
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND
FOREIGN CURRENCIES:
Net realized loss on:
Sale of investments ............................................ (252,442)
Foreign currencies transactions ................................ (6,457)
Net unrealized appreciation on:
Investments .................................................... 799,982
Translation of assets and liabilities
in foreign currencies ........................................ 39,498
------------
Net realized and unrealized loss
on investments and foreign currencies ...................... 580,581
------------
Net change in net assets
resulting from operations .................................... $ 984,651
============
See notes to financial statements. 5 GLOBAL INCOME FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ended June 30, 2006 (Unaudited) and the Year Ended December
31, 2005
GLOBAL INCOME FUND, INC. 6 See notes to financial statements.
Notes to Financial Statements
June 30, 2006 (Unaudited)
(1) Global Income Fund, Inc., a Maryland corporation registered under the
Investment Company Act of 1940, as amended (the "Act"), is a non-diversified,
closed-end management investment company, whose shares are listed on the
American Stock Exchange. The Fund's primary and fundamental objective is to
provide a high level of income. The Fund's secondary, non-fundamental,
investment objective is capital appreciation. The Fund pursues its investment
objectives by investing primarily in a global portfolio of investment grade
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, currency denomination, 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 are valued at the last reported sales price on the day the valuations
are made. Securities traded primarily on the NASDAQ Stock Market ("NASDAQ") are
normally valued by the Fund at the NASDAQ Official Closing Price ("NOCP")
provided by NASDAQ each business day. The NOCP is the most recently reported
price as of 4:00:02 p.m., Eastern time, unless that price is outside the range
of the "inside" bid and asked prices (i.e., the bid and asked prices that
dealers quote to each other when trading for their own accounts); in that case,
NASDAQ will adjust the price to equal the inside bid or asked price, whichever
is closer. Because of delays in reporting trades, the NOCP may not be based on
the price of the last trade to occur before the market closes. Such securities
that are not traded on a particular day and securities traded in the
over-the-counter market that are not on NASADAQ 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. If market quotations are not available or deemed reliable, then such
securities are valued as determined in good faith under the direction of and
pursuant to procedures established by the Fund's Board of Directors. Debt
obligations with remaining maturities of 60 days or less are valued at cost
adjusted for amortization of premiums and accretion of discounts. Securities
denominated in foreign currencies are translated into U.S. dollars at prevailing
exchange rates. Realized gain or loss on sale of investments denominated in
foreign currencies is reported separately from gain or loss attributable to the
change in foreign exchange rates for those investments. 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. The Fund
participates in repurchase agreements with the Funds' custodian. The custodian
takes possession of the underlying collateral securities which are valued daily
to ensure that the fair market value, including accrued interest is at least
equal, at all times, to the repurchase price. In the event of default of the
obligation to repurchase, the Fund has the right to liquidate the collateral and
apply the proceeds in satisfaction of the obligation. Under certain
circumstances, in the event of default or bankruptcy by the other party to the
agreement, realization and/or retention of the collateral may be subject to
legal proceedings. For financial reporting purposes, 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.
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Withholding taxes on foreign dividends have been provided for
in accordance with the Fund's understanding of the applicable country's tax
rules and rates. Certain expenses are applicable to multiple funds. Expenses
directly attributable to the Fund are charged to the Fund. Expenses borne by the
complex of related investment companies, which includes open-end and closed-end
investment companies for which the Investment Manager or its affiliates serves
as investment manager that are not directly attributed to the Fund are allocated
among the Fund and the other investment companies in the complex on the basis of
relative net assets, except where a more appropriate allocation of expenses to
each investment company in the complex can otherwise be made fairly.
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
7 GLOBAL INCOME FUND, INC.
Notes to Financial Statements
June 30, 2006 (Unaudited) (continued)
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) No provision has been made for U.S. income taxes because the Fund's current
intention is to continue to qualify as a regulated investment company under the
Internal Revenue Code and to distribute to its shareholders substantially all of
its taxable income and net realized gains. Foreign securities held by the Fund
may be subject to foreign taxation. Foreign taxes, if any, are recorded based on
the tax regulations and rates that exist in the foreign markets in which the
Fund invests. At December 31, 2005, the Fund has net capital loss carryovers
that may be used to offset future realized capital gains for federal income tax
purposes of $5,800,852, of which $1,341,528, $1,708,533, $1,381,580, and
$1,369,211 expires in 2006, 2007, 2008, and 2010, respectively. Distributions
paid to shareholders during the year ended December 31, 2005, differ from net
investment income and net gains or losses from security, foreign currency, and
futures transactions as a result of gains and losses from foreign currencies,
capital distributions due to the managed distribution policy of the Fund, and
the net capital loss carryovers. 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. As
compensation for its services the Investment Manager receives a management fee,
payable monthly, based on the average weekly net assets of the Fund at an annual
rate of 7/10 of 1% of the first $50 million, 5/8 of 1% over $50 million to $150
million, 1/2 of 1% over $150 million. Certain officers and directors of the Fund
are officers and directors of the Investment Manager. Pursuant to the investment
management agreement, the Fund reimburses the Investment Manager for providing
at cost certain administrative services comprised of compliance and accounting
services. For the six months ended June 30, 2006, the Fund incurred total
administrative costs of $36,585 comprised of $19,420 and $17,165 for compliance
and accounting services, respectively. Through arrangements with the Fund's
custodian and cash management banks, credits realized as a result of uninvested
cash balances were used to reduce custody and transfer agency expenses,
respectively. For financial reporting purposes, the Fund included these credits
as an expense offset in the Statement of Operations.
(4) Purchases and sales of securities other than short term notes aggregated
$3,959,308 and $4,249,725, respectively, for the six months ended June 30, 2006.
At June 30, 2006, for federal income tax purposes the aggregate cost of
securities was $31,943,007, and net unrealized depreciation was $400,584
comprised of gross unrealized appreciation of $357,489 and gross unrealized
depreciation of $758,073. 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 June 30, 2006. Realized gains and losses arising from foreign
exchange differences are included in the Statement of Operations.
(5) The Fund, Foxby Corp., Midas Fund, Inc., and Midas Special Fund, Inc. (the
"Borrowers") have entered into a committed secured line of credit facility with
State Street Bank & Trust Company ("Bank") the Fund's custodian bank. Foxby
Corp. is a closed-end investment company advised by the Investment Manager and
Midas Fund, Inc. and Midas Special Fund, Inc. are open-end investment companies
an affiliate of the Investment Manager. The aggregate amount of the line of
credit is $25,000,000 which was renewed from $9,000,000 effective June 15, 2006.
The borrowing of each Borrower is collateralized by the underlying investments
of such Borrower. The Bank will make revolving loans to a Borrower not to exceed
in the aggregate outstanding at any time with respect to any one Borrower the
least of $25,000,000 or the maximum amount permitted pursuant to each Borrower's
investment policies or as permitted under the Act. The commitment fee on this
facility is 0.10% per annum on the unused portion of the commitment, based on a
360-day year. All loans under this facility will be available at the Borrower's
option of (i) overnight Federal funds or (ii) LIBOR (30, 60, 90 days), each as
in effect from time to time, plus 0.75% per annum, calculated on the basis of
actual days elapsed for a 360-day year. For the six months ended June 30, 2006,
the weighted average interest rate was 5.73% based on the balances outstanding
during the period and the weighted average amount outstanding was $32,763. There
was no loan outstanding at June 30, 2006.
GLOBAL INCOME FUND, INC. 8
Notes to Financial Statements
(Unaudited) (concluded)
(6) The tax character of distributions paid to shareholders for the six months
ended June 30, 2006 and for the year ended December 31, 2005 was as follows:
June 30, December 31,
2006 2005
---------- -----------
Distributions paid
from:
Ordinary income $ 404,070 $ 1,458,409
Return of capital 629,925 608,022
---------- -----------
$1,033,995 $ 2,066,431
========== ===========
A reclassification between ordinary income and return of capital is likely to
occur for the Fund's fiscal year ended December 31, 2006, although the exact
amount is not estimable at June 30, 2006.
As of December 31, 2005, the components of distributable earnings on a tax basis
were as follows:
Unrealized depreciation on investments and foreign
currencies $ (1,224,977)
Capital loss carryovers (5,800,852)
Post-October foreign currency losses (5,582)
------------
$ (7,031,411)
============
Accounting principles generally accepted in the United States of America require
certain components of net assets be reclassified between financial and tax
reporting. These reclassifications have no effect on net assets or net asset
value per share. For the year ended December 31, 2005, permanent differences
between book and tax accounting have been reclassified as follows:
Increase in Decrease in Accumulated
Accumulated Undistributed Net Realized Loss on Decrease in
Net Investment Loss Investments and Foreign Currencies Paid-in Capital
- -------------------------- ---------------------------------- ---------------
$1,225,796 $(298,542) $(927,254)
(7) Regarding concentration of credit risk, investing in securities of foreign
issuers involves special risks which include changes in foreign exchange rates
and the possibility of future adverse political and economic developments which
could adversely affect the value of such securities. Moreover, securities of
many foreign issuers and in foreign markets may be less liquid and their prices
more volatile than those of U.S. issuers and markets.
(8) At June 30, 2006 there were 7,388,733 shares of $.01 par value common stock
outstanding (20,000,000 shares authorized). The shares issued and resulting
increase in paid-in capital in connection with reinvestment of distributions
during the six months ended June 30, 2006 and for the year ended December 31,
2005 were as follows:
Shares issued Increase in paid-in capital
-------------- ---------------------------
6 months ended 6/30/06 ....... 3,945 $15,342
2005 ......................... 7,249 $30,567
In October 2005, the Fund filed with the Securities and Exchange Commission a
registration statement relating to a non-transferable offering of rights
exercisable for shares of the Fund (the "Offer"). The Board of Directors of the
Fund authorized the filing of the registration statement, but has not, as of the
date hereof, yet unconditionally approved the Offer or its final terms. Legal
costs incurred to the Offer were $64,077 during the six months ended June 30,
2006 and were expensed in the period.
(9) The Fund indemnifies its officers and directors for certain liabilities that
might arise from their performance of their duties to the Fund. Additionally, in
the normal course of business the Fund enters into contracts that contain a
variety of representations and warranties and which provide general
indemnifications. The Fund's maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund
that have not occurred.
9 GLOBAL INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
(a) Total return on market value basis is calculated assuming a purchase of
common stock on the opening of the first day and a sale on the closing of
the last day of each period reported. Dividends and distributions, if any,
are assumed for purposes of this calculation, to be reinvested at prices
obtained under the Fund's dividend reinvestment plan. Generally, total
return on net asset value basis will be higher than total return on market
value basis in periods where there is an increase in the discount or a
decrease in the premium of the market value to the net asset value from the
beginning to the end of such periods. Conversely, total return on net asset
value basis will be lower than total return on market value basis in
periods where there is a decrease in the discount or an increase in the
premium of the market value to the net asset value from the beginning to
the end of such periods. Total return calculated for a period of less than
one year is not annualized. The calculation does not reflect brokerage
commissions, if any.
(b) Annualized.
GLOBAL INCOME FUND, INC. 10
The additional information below and on the following pages is supplemental
and not part of the financial statements of the Fund.
BOARD OF DIRECTORS' ANNUAL APPROVAL OF THE INVESTMENT MANAGEMENT AGREEMENT
The investment management agreement (the "Agreement") between Global Income
Fund, Inc. and the investment manager, CEF Advisers, Inc., generally provides
that the Agreement shall continue automatically for successive periods of twelve
months each, provided that such continuance is specifically approved at least
annually (i) by a vote of a majority of the Directors of the Fund who are not
parties to the Agreement, or interested persons of any such party, and (ii) by
the Board of Directors of the Fund or by the vote of the holders of a majority
of the outstanding voting securities of the Fund.
In considering the annual approval of the Agreement, the Board of Directors
considered information that had been provided throughout the year at regular
Board meetings, as well as information furnished to the Board for the meeting
held in March 2006 to specifically consider the renewal of the Agreement. Such
information included, among other things, the following: information comparing
the management fee of the Fund with those of comparable funds; information
regarding Fund investment performance in comparison to a relevant peer group of
funds; the economic outlook and the general investment outlook in relevant
investment markets; the investment manager's results and financial condition and
the overall organization of the investment manager; the allocation of brokerage
and the benefits received by the investment manager as a result of brokerage
allocation; the investment manager's management of relationships with the
custodian, transfer agents, and fund accountants; the resources devoted to the
investment manager's compliance efforts undertaken on behalf of the funds it
manages and the record of compliance with the investment policies and
restrictions and with policies on personal securities transactions; the quality,
nature, cost and character of the administrative and other non-investment
management services provided by the investment manager and its affiliates; and
the terms of the Agreement and the reasonableness and appropriateness of the
particular fee paid by the Fund for the services described therein.
The Board of Directors also considered the nature, extent and quality of the
management services provided by the investment manager. In so doing, the Board
considered the investment manager's management capabilities with respect to the
types of investments held by the Fund, including information relating to the
education, experience and number of investment professionals and other personnel
who provide services under the Agreement. The Board also took into account the
time and attention to be devoted by management to the Fund. The Board evaluated
the level of skill required to manage the Fund and concluded that the human
resources available at the investment manager were appropriate to fulfill
effectively its duties on behalf of the Fund. The Directors also noted that the
investment manager has managed the Fund since 1997 and the Directors believe
that a long-term relationship with a capable, conscientious investment manager
is in the best interests of the Fund.
The Board received information concerning the investment philosophy and
investment process applied by the investment manager in managing the Fund. In
this regard, the Board considered the investment manager's in-house research
capabilities as well as other resources available to the investment manager
personnel, including research services that may be available to the investment
manager as a result of securities transactions effected for the Fund. The Board
concluded that the investment manager's investment process, research
capabilities and philosophy were well suited to the Fund, given the Fund's
investment objective and policies.
In its review of comparative information with respect to Fund investment
performance, the Board received comparative information, comparing the Fund's
performance to that of similar peer groups. After reviewing this information,
the Board concluded that the Fund has performed within a range that the Board
deemed competitive. With respect to its review of the investment management fee,
the Board considered information comparing the Fund's management fee and expense
ratio to those of comparable funds with similar management
Additional Information 11 GLOBAL INCOME FUND, INC.
fee characteristics. The Board noted that economies of scale may develop for the
Fund as its assets increase and fund-level expenses decline as a percentage of
assets, but that fund-level economies of scale may not necessarily result in
investment manager-level economies of scale. This information assisted the Board
in concluding that the fee paid by the Fund is within the range of those paid by
comparable funds within the closed-end fund industry.
In reviewing the information regarding the expense ratio of the Fund, the Board
concluded that although the Fund's expense ratio is within a higher range, it is
competitive with comparable funds in light of the quality of services received.
In addition to the factors mentioned above, the Board reviewed the level of the
investment manager's profits in providing investment management and related
services for the Fund. The Board considered the fiduciary duty assumed by the
investment manager in connection with the services rendered to the Fund and the
business reputation of the investment manager and its financial resources. The
Board also considered information regarding the character and amount of other
incidental benefits received by the investment manager and its affiliates from
their association with the Fund. The Board concluded that potential "fall-out"
benefits that the investment manager and its affiliates may receive, such as
greater name recognition, affiliated brokerage commissions or increased ability
to obtain research services, appear to be reasonable, and may, in some cases,
benefit the Fund. The Board concluded that in light of the services rendered,
the profits realized by the investment manager are not unreasonable.
The Board did not consider any single factor as controlling in determining
whether or not to renew the Agreement. Nor are the items described herein all
the matters considered by the Board. In assessing the information provided by
the investment manager and its affiliates, the Board also took into
consideration the benefits to shareholders of investing in a fund that is part
of an investment company complex.
Based on its consideration of the foregoing factors and conclusions, and such
other factors and conclusions as it deemed relevant, and assisted by counsel,
the Board concluded that the approval of the Agreement, including the fee
structure, is in the interests of shareholders.
GLOBAL INCOME FUND, INC. 12
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.
PROXY VOTING
The Fund's Proxy Voting Guidelines (the "Guidelines") as well as its voting
record for the most recent 12 months ended June 30, are available without charge
by calling the Fund collect at 1-212-344-6310 and on the SEC's website at
www.sec.gov. The Guidelines are also posted on the Fund's website at
www.globalincomefund.net.
QUARTERLY HOLDINGS
The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q
are available on the SEC's website at http://www.sec.gov. The Fund's Forms N-Q
may be reviewed and copied at the SEC's Public Reference Room in Washington, DC,
and information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330. The Fund makes the information on Form N-Q available to
shareholders on its website at www.globalincomefund.net
Additional Information 13 GLOBAL INCOME FUND, INC.
MANAGED DISTRIBUTIONS
The Board's current policy is to provide investors with a stable quarterly
distribution out of current income, supplemented by realized capital gains, and
to the extent necessary, paid-in capital. The Fund is subject to U.S. corporate,
tax, and securities laws. Under U.S. tax accounting rules, the amount of
distributable net income is determined on an annual basis and is dependent
during the fiscal year on the aggregate gains and losses realized by the Fund
and, to a lesser extent, the actual exchange rate between the U.S. dollar and
the currencies in which Fund assets are denominated. Therefore, the exact amount
of distributable income can only be determined as of the end of the Fund's
fiscal year. Under the U.S. Investment Company Act of 1940, however, the Fund is
required to indicate the source of each distribution to shareholders. The Fund
estimates that distributions for the fiscal period commencing January 1, 2006,
including the distributions paid quarterly, are comprised approximately
one-tenth of net investment income and the balance from paid-in capital. This
estimated distribution composition may vary from quarter to quarter because it
may be materially impacted by future realized gains and losses on securities and
fluctuations in the value of currencies in which Fund assets are denominated. In
January after each fiscal year, a Form 1099 DIV will be sent to shareholders
stating the amount and composition of distributions and provide information
about their appropriate tax treatment.
DIVIDEND REINVESTMENT PLAN
Terms and Conditions of
the 2006 Restated Dividend Reinvestment Plan
1. Each shareholder (the "Shareholder") holding shares of common stock (the
"Shares") of Global Income Fund, Inc. (the "Fund") will automatically be a
participant in the Dividend Reinvestment Plan (the "Plan"), unless the
Shareholder specifically elects to receive all dividends and capital gains in
cash paid by check mailed directly to the Shareholder by American Stock Transfer
& Trust Company, 59 Maiden Lane, New York, New York 10038, 1-800-278-4353, as
agent under the Plan (the "Agent"). The Agent will open an account for each
Shareholder under the Plan in the same name in which such Shareholder's shares
of Common Stock are registered.
2. Whenever the Fund declares a capital gain distribution or an income dividend
payable in Shares or cash, participating Shareholders will take the distribution
or dividend entirely in Shares and the Agent will automatically receive the
Shares, including fractions, for the Shareholder's account in accordance with
the following:
Whenever the Market Price (as defined in Section 3 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 greater of the Fund's net asset value per Share or
95% of the Fund's Market Price per Share. Whenever 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. If the Fund should
declare a dividend or capital gain distribution payable only in cash, the
Agent will, as purchasing agent for the participating Shareholders, buy
Shares in the open market, on the American Stock Exchange (the "Exchange")
or elsewhere, for such Shareholders' accounts after the payment date,
except that the Agent will endeavor to terminate purchases in the open
market and cause the Fund to issue the remaining Shares if, following the
commencement of the purchases, the market value of the Shares exceeds the
net asset value. These remaining Shares will be issued by the Fund at a
price equal to the Market Price.
In a case where the Agent has terminated open market purchases and caused
the issuance of remaining Shares by the Fund, the number of Shares received
by the participant in respect of the cash dividend or distribution will be
based on the weighted average of prices paid for Shares purchased in the
open market and the price at which the Fund issues remaining Shares. To the
extent that the Agent is unable to terminate purchases in the open market
before the Agent has completed its purchases, or remaining Shares cannot be
issued by the Fund because the Fund declared a dividend or distribution
GLOBAL INCOME FUND, INC. 14 Additional Information
payable only in cash, and the market price exceeds the net asset value of
the Shares, the average Share purchase price paid by the Agent may exceed
the net asset value of the Shares, resulting in the acquisition of fewer
Shares than if the dividend or capital gain distribution had been paid in
Shares issued by the Fund.
The Agent will apply all cash received as a dividend or capital gain
distribution to purchase shares of common stock on the open market as soon
as practicable after the payment date of the dividend or capital gain
distribution, but in no event later than 45 days after that date, except
when necessary to comply with applicable provisions of the federal
securities laws.
3. For all purposes of the Plan: (a) the Market Price of the Shares on a
particular date shall be the average of the volume weighted average sale prices
or, if no sale occurred then the mean between the closing bid and asked
quotations, for the Shares on the Exchange on each of the five trading days the
Shares traded ex-dividend on the Exchange immediately prior to such date, and
(b) net asset value per share on a particular date shall be as determined by or
on behalf of the Fund.
4. The open-market purchases provided for herein may be made on any securities
exchange on which the Shares are traded, in the over-the-counter market or in
negotiated transactions, and may be on such terms as to price, delivery and
otherwise as the Agent shall determine. Funds held by the Agent uninvested will
not bear interest, and it is understood that, in any event, the Agent shall have
no liability in connection with any inability to purchase Shares within 45 days
after the initial date of such purchase as 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 Shareholder's account.
5. The Agent will hold Shares acquired pursuant to the Plan in noncertificated
form in the Agent's name or that of its nominee. At no additional cost, a
Shareholder participating in the Plan may send to the Agent for deposit into its
Plan account those certificate shares of the Fund in its possession. These
Shares will be combined with those unissued full and fractional Shares acquired
under the Plan and held by the Agent. Shortly thereafter, such Shareholder will
receive a statement showing its combined holdings. The Agent will forward to the
Shareholder any proxy solicitation material and will vote any Shares so held for
the Shareholder only in accordance with the proxy returned by him or her to the
Fund. Upon the Shareholder's written request, the Agent will deliver to him or
her, without charge, a certificate or certificates for the full Shares.
6. The Agent will confirm to the Shareholder each acquisition for his or her
account as soon as practicable but not later than 60 days after the date
thereof. Although the Shareholder may from time to time have an individual
fractional interest (computed to three decimal places) in a Share, no
certificates for fractional Shares will be issued. However, dividends and
distributions on fractional Shares will be credited to Shareholders' accounts.
In the event of a termination of a Shareholder's account under the Plan, the
Agent will adjust for any such undivided fractional interest in cash at the
opening market value of the Shares at the time of termination.
7. Any stock dividends or split Shares distributed by the Fund on Shares held by
the Agent for the Shareholder will be credited to the Shareholder's account. In
the event that the Fund makes available to the Shareholder the right to purchase
additional Shares or other securities, the Shares held for a Shareholder under
the Plan will be added to other Shares held by the Shareholder in calculating
the number of rights to be issued by such Shareholder. Transaction processing
may either be curtailed or suspended until the completion of any stock dividend,
stock split, or corporate action.
8. The Agent's service fee for handling capital gain distributions or income
dividends will be paid by the Fund. The Shareholder will be charged a pro rata
share of brokerage commissions on all open market purchases.
9. The Shareholder may terminate his or her account under the Plan by notifying
the Agent. A termination will be effective immediately if notice is received by
the Agent two days prior to any dividend or distribution payment date. If the
request is received less than two days prior to the payment date, then that
dividend will be invested, and all subsequent dividends will be paid in cash.
Upon any termination the Agent will cause a certificate or certificates for the
full Shares held for the Shareholder under the Plan and cash adjustment for any
fraction to be delivered to him or her.
Additional Information 15 GLOBAL INCOME FUND, INC.
10. These terms and conditions may be amended or supplemented by the Fund at any
time or times but, except when necessary or appropriate to comply with
applicable law or the rules or policies of the Securities and Exchange
Commission or any other regulatory authority, only by mailing to the Shareholder
appropriate written notice at least 30 days prior to the effective date thereof.
The amendment or supplement shall be deemed to be accepted by the Shareholder
unless, prior to the effective date thereof, the Agent receives written notice
of the termination of such Shareholder's account under the Plan. Any such
amendment may include an appointment by the Fund of a successor agent in its
place and stead under these terms and conditions, with full power and authority
to perform all or any of the acts to be performed by the Agent. Upon any such
appointment of an Agent for the purpose of receiving dividends and
distributions, the Fund will be authorized to pay to such successor Agent all
dividends and distributions payable on Shares held in the Shareholder's name or
under the Plan for retention or application by such successor Agent as provided
in these terms and conditions.
11. In the case of Shareholders, such as banks, brokers or nominees, which hold
Shares for others who are the beneficial owners, the Agent will administer the
Plan on the basis of the number of Shares certified from time to time by the
Shareholders as representing the total amount registered in the Shareholder's
name and held for the account of beneficial owners who are to participate in the
Plan.
12. The Agent shall at all times act in good faith and agree to 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
the errors are caused by its negligence, bad faith or willful misconduct or that
of its employees.
13. Neither the Fund or the Agent will be liable for any act performed in good
faith or for any good faith omission to act, including without limitation, any
claim of liability arising out of (i) failure to terminate a Shareholder's
account, sell shares or purchase shares, (ii) the prices which shares are
purchased or sold for the Shareholder's account, and (iii) the time such
purchases or sales are made, including price fluctuation in market value after
such purchases or sales.
HISTORICAL DISTRIBUTION SUMMARY
Investment Return of
Period Income Capital Total
------- ---------- -------- -------
6 Months Ended 6/30/06* ..... $ 0.055 $ 0.085 $ 0.140
2005 ........................ $ 0.200 $ 0.080 $ 0.280
2004 ........................ $ 0.245 $ 0.090 $ 0.335
2003 ........................ $ 0.220 $ 0.140 $ 0.360
2002 ........................ $ 0.280 $ 0.220 $ 0.500
2001 ........................ $ 0.360 $ 0.200 $ 0.560
2000 ........................ $ 0.420 $ 0.160 $ 0.580
6 Months Ended 12/31/99 ..... $ 0.230 $ 0.070 $ 0.300
12 Months Ended 6/30/99 ..... $ 0.550 $ 0.130 $ 0.680
12 Months Ended 6/30/98 ..... $ 0.520 $ 0.320 $ 0.840
* A reclassification of ordinary income and return of capital is likely to
occur for the year ended December 31, 2006, although the exact amount is
not estimable at June 30, 2006.
GLOBAL INCOME FUND, INC. 16 Additional Information
WWW.GLOBALINCOMEFUND.NET
Visit us on the Internet at www.globalincomefund.net. The site provides
information about the Fund including market performance, net asset value (NAV),
dividends, press releases, and shareholder reports. For further information, you
can email us at info@globalincomefund.net. The Fund is a member of the
Closed-End Fund Association (CEFA). Its website address is www.cefa.com. CEFA is
solely responsible for the content of its website.
STOCK DATA
Price (6/30/06) ....................... $ 3.85
Net Asset Value (6/30/06) ............. $ 4.32
Discount .............................. 10.9%
American Stock Exchange Symbol: GIF Newspaper exchange listings appear under an
abbreviation, such as: Glinc
2006 DISTRIBUTION PAYMENT DATES
Declaration Record Payment
----------- ------ -------
March 2 March 15 March 31
June 2 June 15 June 30
September 6 September 18 September 29
December 1 December 18 December 29
FUND INFORMATION
Investment Manager Stock Transfer Agent and Registrar
CEF Advisers, Inc. American Stock Transfer & Trust Co.
11 Hanover Square 59 Maiden Lane
New York, NY 10005 New York, NY 10038
www.closedendfunds.net www.amstock.com
1-212-344-6310 1-800-278-4353
Internet Custodian
www.globalincomefund.net State Street Bank & Trust Co.
email: info@globalincomefund.net 801 Pennsylvania Avenue
Kansas City, MO 64105
This report, including the financial statements herein, is transmitted to the
shareholders of the Fund for their information. The financial information
included herein is taken from the records of the Fund. 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. Pursuant to Section 23 of the
Investment Company Act of 1940, notice is hereby given that the Fund may in the
future purchase shares of its own common stock in the open market. These
purchases may be made from time to time, at such times and in such amounts as
may be deemed advantageous to the Fund, although nothing herein shall be
considered a commitment to purchase such shares.
Additional Information 17 GLOBAL INCOME FUND, INC.
GLOBAL INCOME FUND
11 Hanover Square
New York, NY 10005
Printed on recycled paper
GIF-SAR-6/06
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. Schedule of Investments.
Included as part of the report to shareholders filed under Item 1 of
this Form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment
Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11. 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 12. Exhibits.
(a) The certifications required by Rule 30a-2 of the Investment Company Act
of 1940, as amended, and Sections 302 and 906 of the Sarbanes-Oxley Act of
2002 are attached as exhibits 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.
Global Income Fund, Inc.
By: /s/ Thomas B. Winmill
---------------------------------------------
Thomas B. Winmill, President
Date: September 6, 2006
By: /s/ Thomas O'Malley
---------------------------------------------
Thomas O'Malley, Chief Financial Officer
Date: September 6, 2006
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 below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
By: /s/ Thomas B. Winmill
---------------------------------------------
Thomas B. Winmill, President
Date: September 6, 2006
By: /s/ Thomas O'Malley
---------------------------------------------
Thomas O'Malley, Chief Financial Officer
Date: September 6, 2006