N-30D 1 a33415.txt SALOMON BROTHERS GLOBAL PARTNERS INCOME FUND GLOBAL PARTNERS INCOME FUND INC. September 19, 2002 Dear Shareholder: Enclosed herein is the annual report for Global Partners Income Fund Inc. ('Fund') for the year ended August 31, 2002. In this report, we summarize what we believe to be the period's prevailing economic and market conditions and outline our investment strategy. A detailed summary of the Fund's performance can be found in the appropriate sections that follow. We hope you find this report to be useful and informative. SPECIAL NOTICE TO SHAREHOLDERS We are pleased to report that R. Jay Gerken, a managing director of Salomon Smith Barney Inc., has been elected Co-Chairman of the board of the Fund replacing Heath B. McLendon, who has been appointed chairman of Salomon Smith Barney Inc.'s new Equity Research Policy Committee. Previously, Jay managed the Smith Barney Growth and Income Fund for six years; developed and managed the Smith Barney Allocation Series Inc. from inception in 1996 through the end of 2001; and was responsible for the investment design and implementation of Citigroup Asset Management's college savings programs with the states of Illinois and Colorado. PERFORMANCE REVIEW(1) During the year ended August 31, 2002, the Fund distributed income dividends to shareholders totaling $1.43 per share. The table on the following page details the annualized distribution rates and annual total return based on the Fund's August 31, 2002 net asset value ('NAV') per share and its New York Stock Exchange ('NYSE') closing price.(2) --------- (1) PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. (2) NAV is calculated by subtracting total liabilities from the closing value of all securities held by the Fund (plus all other assets) and dividing the result (total net assets) by the total number of the Fund's shares outstanding. The NAV fluctuates with changes in the market prices of securities in which the Fund has invested. However, the price at which an investor may buy or sell shares of the Fund is at the Fund's market (NYSE) price as determined by supply of and demand for the Fund's shares. GLOBAL PARTNERS INCOME FUND INC.
PRICE ANNUALIZED ANNUAL PER SHARE DISTRIBUTION RATE(3) TOTAL RETURN(3) --------- -------------------- --------------- $ 8.88 (NAV) 16.05% (4.85)% $10.43 (NYSE) 13.66% (0.25)%
In comparison, the Fund's Lipper Inc. ('Lipper')(4) peer group of emerging markets debt funds returned 2.67% based on NAV for the same period. INVESTMENT STRATEGY The Fund's investment objective is to maintain a high level of current income by investing primarily in a portfolio of high-yield U.S. and non-U.S. corporate debt securities and high-yield foreign sovereign(5) debt securities. As a secondary objective, the Fund will seek capital appreciation. Currently, the Fund invests approximately 50% of its total assets in high-yield U.S. corporate debt securities and 50% of its total assets in high-yield foreign sovereign debt securities and high-yield non-U.S. corporate debt securities. The Fund has adopted a policy to provide stockholders of the Fund with at least 60 days prior notice of any changes to the investment policy adopted if the Investment Company Act of 1940 requires such notice. U.S. HIGH-YIELD BONDS PORTFOLIO MANAGER MARKET AND FUND OVERVIEW For the year ended August 31, 2002, the U.S. high-yield market returned negative 8.51%, as measured by the Salomon Smith Barney High Yield Market Index ('SSB High Yield Market Index')(6). The September 11th tragedy caused the high-yield market to record its worst month of performance (negative 7.20%) since the SSB High Yield Market Index began in January 1989. These events introduced heightened volatility into the high-yield market and had a particularly adverse impact on --------- (3) Total returns are based on changes in NAV or the market price, respectively. Total returns assume the reinvestment of all dividends and/or capital gains distributions in additional shares. Annualized distribution rate is the Fund's current monthly income dividend rate, annualized, and then divided by the NAV or the market price noted in this report. The annualized distribution rate assumes a current monthly income dividend rate of $0.11875 for twelve months. This rate is as of August 31, 2002 and is subject to change. The important difference between a total return and an annualized distribution rate is that the total return takes into consideration a number of factors including the fluctuation of the NAV or the market value during the period reported. NAV fluctuation includes the effects of unrealized appreciation or depreciation in the Fund. Accordingly, since an annualized distribution rate only reflects the current monthly income dividend rate annualized, it should not be used as the sole indicator to judge the return you receive from your Fund investment. (4) Lipper is a major independent mutual-fund tracking organization. Average annual returns are based on the 12-month period ended August 31, 2002, calculated among 12 funds in the emerging markets debt funds category. (5) Sovereign bonds are bonds issued by non-U.S. governments. (6) The SSB High Yield Market Index is a broad-based unmanaged index of high-yield securities. Please note that an investor cannot invest directly in an index. GLOBAL PARTNERS INCOME FUND INC. valuations of bonds from issuers in industries with more cyclical exposure, or with exposure to the tourism and airline sectors. Despite continued economic weakness and the uncertain economic consequences of the events of September 11th, the high-yield market rebounded over the next several months following the poor September performance. Strong U.S. Treasury security gains, bargain hunters in search of oversold credits, and the reversal of mutual-fund flows to $4.7 billion of inflows compared to almost $2 billion in redemptions in September contributed to the market rally. During early 2002, the market struggled higher as encouraging economic data, strong equity markets and large mutual-fund inflows were offset by increased volatility caused by Enron's collapse and the related accounting concerns and increased downgrade activity by the rating agencies. The rally proved short-lived, however, as additional discoveries of accounting fraud and earnings restatements harmed already-fragile investor confidence, causing the high-grade market to reprice lower and prompting large mutual-fund outflows as investors fled riskier securities. In addition, new economic data sparked concerns that a recovery would be slower than expected. In June, WorldCom Inc. disclosed that it had improperly accounted for $3.8 billion of expenses, causing investors to shun sectors with more complex financials and leading to an 8.81% decline in the high-yield market. The decline culminated in the arrest of senior Adelphia Communications executives, WorldCom's Chapter 11 bankruptcy and the passing of the August 14 financial-certification deadline without additional surprises. More positive economic data, lower volatility in the equity markets and a reversal of fund flows to net inflows then propelled the high-yield market higher in the second half of August. For the period, the high-yield market's top-performing sectors included containers, restaurants, consumer products, energy, capital goods and industrials. Containers benefited from lower raw-material prices and an improving economy. Operational improvements and asset sales enabled restaurants to return from oversold prices in the prior year. Consumer products benefited from a flight to quality. Energy outperformed due to high oil prices. Capital goods and industrials benefited as investors focused on companies with steady cash flows, easy-to-understand businesses and improving business outlooks. The worst performers included telecommunications, airlines, cable, utilities, automotive and technology. Telecommunications suffered from WorldCom's bankruptcy, accounting investigations at Qwest, Corp. and deteriorating industry fundamentals. Airlines were negatively impacted by the terror attacks and subsequent dramatic slowdown in air travel. Adelphia Communications' disclosure of off-balance-sheet debt and other accounting problems caused the entire cable sector to decline as investors reconsidered industry leverage, liquidity and valuations. Utilities suffered as Enron's bankruptcy caused investors to view utilities as riskier investments with high leverage. Automotive suffered due to the falloff in production schedules and continued pricing pressure from GLOBAL PARTNERS INCOME FUND INC. original-equipment manufacturers. Technology declined as capital spending failed to show signs of improvement as corporations focused on cutting costs. In terms of credit quality, BB, B and CCC issues generated returns of negative 7.42%, negative 6.80% and negative 21.60% respectively, as investors sought safety in the higher-quality credit tiers. The Fund's performance was helped by overweighting consumer products, gaming, healthcare and retail, and by underweighting telecommunications, airlines, automotive and utilities. The Fund's performance was adversely affected, however, by underweighting containers and by overweighting cable and technology. During this period the Fund added several higher-quality media and telecommunications names that traded down to attractive levels due to investment-grade selling. On August 31, 2002, the high-yield market yielded 12.85%, up from 11.75% on August 31, 2001. The excess yield over U.S. Treasury securities was 9.33%, an increase from 7.28% on August 31, 2001. We believe that these levels represent attractive long-term value. PORTFOLIO MANAGER MARKET AND FUND OUTLOOK Going forward, valuations in the market continue to appear attractive at yields in excess of 12.5%, yet we remain somewhat cautious as we believe that several factors, including (i) high global default rates and credit-rating downgrades, (ii) disappointing corporate profitability, (iii) the magnitude and timing of a global economic rally, (iv) reduced secondary-market liquidity, (v) further accounting scares and (vi) continued equity-market volatility could dampen positive momentum. In light of these conditions, we are focusing on selected opportunities in the single-B sector that present compelling risk/reward profiles. In addition, we are pursuing selected opportunities in lower-quality investment-grade and crossover (investment grade/high yield) bonds. EMERGING-MARKETS DEBT(7) PORTFOLIO MANAGER MARKET AND FUND OVERVIEW The annual period ending August 31, 2002, was characterized by a number of developments that affected investors' assessments of risk. The September 11th terrorist attacks; war in Afghanistan; volatile and declining equity markets; and corporate scandals including Enron Corp., WorldCom Inc., Tyco International Ltd. and Adelphia Communications all contributed to heightened risk-aversion. In this volatile environment, many emerging-market countries (aside from Argentina and Brazil) performed well. In addition, higher quality high-yield credits performed relatively well. --------- (7) Investing in foreign securities is subject to certain risks not associated with domestic investing, such as currency fluctuations and changes in political and economic conditions. These risks are magnified in emerging or developing markets. GLOBAL PARTNERS INCOME FUND INC. Emerging-markets debt returned negative 1.07% for the Fund's annual period ending August 31, 2002, as measured by the J.P. Morgan Emerging Markets Bond Index Plus ('EMBI+')(8). Political developments drove performance in Brazil (down 8.94% for the period). Brazil's large weighting, which now accounts for 19.18% of the EMBI+ market capitalization, caused its performance to dominate overall returns for the period. Lack of improving developments in Argentina (down 62.05% for the period) also weighed on the asset class. However, Argentina does not have the impact it once did, as it now only reflects 2% of the EMBI+ composition, down from 22% in January 2001. On a positive note, 14 countries out of 17 outperformed the EMBI+ return for the Fund's annual period. Oil prices, an important driver of value in emerging markets, experienced considerable price volatility for the Fund's annual period. Oil prices traded in a range from $17.45 to $30.11 per barrel and closed the period at $28.98. At a September 18 meeting, the Organization of Petroleum Exporting Countries ('OPEC')(9) maintained its production quota at an 11-year low of 21.7 million barrels per day. Return volatility(10) for emerging-markets debt varied over the period. Return volatility for the year ended August 31, 2002 was 11.78%. Volatility for the period was highest during the fourth calendar quarter of 2001 in the aftermath of the September 11th terrorist attacks and the demise of the Argentine economy. Volatility for the month of August increased to 15.16% as investors responded to weakness in Brazil as well as problems in the high-yield market. LATIN AMERICA Latin American debt as a region returned negative 14.28% for the year, as measured by the EMBI+. The region was affected by the turmoil in Argentina and more recently, by political and fiscal uncertainty in Brazil. Ecuador's inability to reach an agreement with the International Monetary Fund ('IMF')(11) has weighed on the markets recently. ECUADORIAN DEBT returned 6.95% for the year, as measured by the EMBI+. While the country continues to post positive Gross Domestic Product ('GDP')(12) growth and better credit fundamentals due to better tax collection and higher oil prices, the country's inability to secure an IMF agreement in June is behind the spread widening and recent poor performance. On a positive note, Ecuador recently appointed a new Finance Minister, Francisco Arosemena, who we believe will help the country reach an agreement with the IMF. --------- (8) The EMBI+ is a total-return index that tracks the traded market for U.S. dollar-denominated Brady and other similar sovereign restructured bonds traded in the emerging markets. Please note that an investor cannot invest directly in an index. (9) OPEC is an international organization of 11 developing countries, each of which is heavily reliant on oil revenues as its main source of income. Membership is open to any country that is a substantial net exporter of oil and shares the ideals of the Organization. (10) Return volatility is the standard deviation of monthly returns over the period being measured. (11) The IMF is an organization of 183 member countries established to promote international monetary cooperation, exchange stability and orderly exchange arrangements. (12) GDP is the market value of goods and services produced by labor and property in a given country. GLOBAL PARTNERS INCOME FUND INC. BRAZILIAN DEBT returned negative 8.94% for the year, one of the worst performers in the EMBI+. Price volatility in Brazil has been primarily driven by political and fiscal uncertainty in the country. Investors are focused on the outcome of the upcoming October 6 Presidential election. ARGENTINE DEBT returned negative 62.05% for the year as measured by the EMBI+. Following the country's default on all external debt obligations in December 2001, policymakers have continued to struggle to free the economy from recession. Argentina must resolve a number of big issues before it can talk with investors about restructuring. Those issues include electing a new president, choosing a currency and resolving the banking crisis. Much uncertainty remains over how the situation in Argentina will play out over the next 12-18 months. We remain underweight Argentine debt and continue to monitor developments very closely. EASTERN EUROPE/MIDDLE EAST/AFRICA Non-Latin American countries, which represent 40% of the EMBI+ market capitalization, outperformed the Latin American region for the year, returning 27.35%. RUSSIAN DEBT, the best performer for the year, returned 40.09%. The Russian economy continues to benefit from high domestic consumption and high oil prices. Russia is now rated BB - (or equivalent) by all the major credit-rating agencies. TURKISH DEBT returned 19.14% for the year. The country's strategic importance combined with its improved relations with the IMF has attracted recent investor interest. The domestic economy has stabilized with a return of confidence, a lowering of interest rates and a stronger currency. Early in the summer, concerns over Prime Minister Ecevit's health unsettled the market, ultimately leading to early elections. However, this past month the tone in Turkey has turned positive with the passage of key European Union accession legislation and the scheduling of elections for November 3. We continue to remain overweight Turkish sovereign debt. BULGARIAN DEBT returned 15.80% for the year. Bulgaria outperformed the EMBI+ for the period, in large part because the government's fiscal performance and active management of its liabilities have been excellent. PORTFOLIO MANAGER MARKET AND FUND OUTLOOK Emerging markets as measured by the EMBI+ returned negative 1.07% for the Fund's annual period. Market returns were influenced by the events described above in the context of an extremely difficult environment for financial markets. Emerging-market sovereign spreads(13) as measured by the EMBI+ ended the annual period at 886 basis points(14) over Treasuries. We believe that spreads are likely to remain volatile, in line with overall cautious market sentiment. --------- (13) Yield spread is the difference between yields on securities of the same quality but different maturities or the difference between yields on securities of the same maturity but different quality. (14) A basis point is 0.01%, or one one-hundredth of a percent. GLOBAL PARTNERS INCOME FUND INC. LOOKING FOR ADDITIONAL INFORMATION? The Global Partners Income Fund Inc. is traded on the New York Stock Exchange under the symbol 'GDF.' Daily closing prices are available online under symbol 'XGDFX' and in most newspapers under the New York Stock Exchange listings. Barron's and The Wall Street Journal's Monday editions carry closed-end fund tables that provide weekly net asset value per share information. In addition, the Fund issues a quarterly allocation press release that can be found on most major financial web sites. In a continuing effort to provide information concerning the Global Partners Income Fund Inc., shareholders may call 1-888-777-0102 or 1-800-SALOMON (toll free), Monday through Friday from 8:00 a.m. to 6:00 p.m. Eastern Standard Time (EST), for the Fund's current net asset value, market price and other information regarding the Fund's portfolio holdings and allocations. Thank you for your investment in the Global Partners Income Fund Inc. We look forward to continuing to help you meet your investment objectives. Sincerely, R. JAY GERKEN STEPHEN TREADWAY R. Jay Gerken Stephen Treadway Co-Chairman of the Board Co-Chairman of the Board PETER J. WILBY, CFA BETH A. SEMMEL, CFA Peter J. Wilby, CFA Beth A. Semmel, CFA President Executive Vice President
The information provided in this letter by the portfolio managers represents the opinion of the portfolio managers and is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed are those of the portfolio managers and may differ from those of other portfolio managers or of the firm as a whole. Furthermore, there is no assurance that certain securities will remain in or out of the Fund or that the percentage of the Fund's assets in various sectors will remain the same. Please refer to pages 8 through 16 for a list and percentage breakdown of the Fund's holdings. Also, please note any discussion of the Fund's holdings, the Fund's performance, and the portfolio managers' views are as of August 31, 2002 and are subject to change. GLOBAL PARTNERS INCOME FUND INC. Schedule of Investments August 31, 2002
FACE AMOUNT SECURITY(a) VALUE ---------------------------------------------------------------------------------------------- Corporate Bonds -- 47.5% Basic Industries -- 6.0% $ 525,000 aaipharma Inc., 11.000% due 4/1/10.......................... $ 467,250 450,000 Abitibi-Consolidated Inc., 8.850% due 8/1/30................ 449,610 450,000 Acetex Corp., 10.875% due 8/1/09............................ 470,250 375,000 Airgas Inc., 9.125% due 10/1/11............................. 399,375 400,000 Applied Extrusion Technologies, Inc., 10.750% due 7/1/11.... 332,000 Georgia-Pacific Corp.: 475,000 7.500% due 5/15/06........................................ 444,543 250,000 9.625% due 3/15/22........................................ 216,771 225,000 8.875% due 5/15/31........................................ 182,734 800,000 ISP Chemco Inc., 10.250% due 7/1/11......................... 804,000 500,000 Luscar Coal Ltd., 9.750% due 10/15/11....................... 537,500 500,000 Methanex Corp., 8.750% due 8/15/12.......................... 515,000 315,000 Millennium America Inc., 9.250% due 6/15/08................. 329,175 300,000 NMHG Holdings Co., 10.000% due 5/15/09 (b).................. 304,500 500,000 Noveon Inc., 11.000% due 2/28/11............................ 537,500 1,000,000 OM Group Inc., 9.250% due 12/15/11.......................... 1,005,000 675,000 P&L Coal Holdings Corp., 9.625% due 5/15/08................. 712,125 500,000 Plastipak Holdings Inc., 10.750% due 9/1/11................. 535,000 675,000 Radnor Holdings Corp., 10.000% due 12/1/03.................. 604,125 1,000,000 Riverwood International Corp., 10.625% due 8/1/07........... 1,040,000 850,000 Trimas Corp., 9.875% due 6/15/12 (b)........................ 845,750 450,000 UCAR Finance Inc., 10.250% due 2/15/12...................... 454,500 ------------ 11,186,708 ------------ Consumer Cyclicals -- 4.1% Advance Stores Co. Inc.: 350,000 10.250% due 4/15/08....................................... 366,188 750,000 Series B, 10.250% due 4/15/08............................. 784,687 Cole National Group, Inc.: 750,000 8.625% due 8/15/07........................................ 746,250 250,000 8.875% due 5/15/12........................................ 248,750 875,000 Finlay Fine Jewelry Corp., 8.375% due 5/1/08................ 831,250 The Gap Inc.: 150,000 6.900% due 9/15/07........................................ 133,664 565,000 10.550% due 12/15/08...................................... 560,106 750,000 HMH Properties, Inc., 8.450% due 12/1/08.................... 730,313 125,000 Host Marriott L.P., 9.500% due 1/15/07...................... 127,656 250,000 Icon Health & Fitness Inc., 11.250% due 4/1/12 (b).......... 242,500 500,000 John Q. Hamons Hotels, Inc., 8.875% due 5/15/12............. 487,500 425,000 Levi Strauss & Co., 11.625% due 1/15/08..................... 359,125
-------------------------------------------------------------------------------- SEE NOTES TO FINANCIAL STATEMENTS. PAGE 8 GLOBAL PARTNERS INCOME FUND INC. Schedule of Investments (continued) August 31, 2002
FACE AMOUNT SECURITY(a) VALUE ---------------------------------------------------------------------------------------------- Consumer Cyclicals -- 4.1% (continued) $ 680,000 Mattress Discounters Co., 12.625% due 7/15/07 (c)(d)........ $ 125,800 500,000 Saks Inc., 9.875% due 10/1/11............................... 482,500 700,000 Starwood Hotels & Resorts Worldwide, Inc., 7.875% due 5/1/12 (b)........................................................ 687,750 600,000 Tommy Hilfiger U.S.A., Inc., 6.850% due 6/1/08.............. 561,799 ------------ 7,475,838 ------------ Consumer Non-Cyclicals -- 8.8% 500,000 Applica Inc., 10.000% due 7/31/08........................... 512,500 1,000,000 Argosy Gaming Co., 10.750% due 6/1/09....................... 1,092,500 650,000 Aztar Corp., 8.875% due 5/15/07............................. 656,500 750,000 Coast Hotels & Casinos, 9.500% due 4/1/09................... 781,875 1,175,000 CONMED Corp., 9.000% due 3/15/08............................ 1,186,750 450,000 Extendicare Health Services Inc., 9.500% due 7/1/10 (b)..... 450,000 175,000 Harrah's Operating Co. Inc., 7.875% due 12/15/05............ 182,875 1,461,000 Hines Horticulture, Inc., 12.750% due 10/15/05.............. 1,526,745 650,000 Home Interiors & Gifts Inc., 10.125% due 6/1/08............. 610,188 750,000 Horseshoe Gaming LLC, 8.625% due 5/15/09.................... 781,875 1,125,000 IASIS Healthcare Corp., 13.000% due 10/15/09................ 1,153,125 550,000 InSight Health Services Corp., 9.875% due 11/1/11........... 540,375 750,000 MGM MIRAGE, 9.750% due 6/1/07............................... 813,750 725,000 North Atlantic Trading Co., 11.000% due 6/15/04............. 725,000 Park Place Entertainment Corp.: 625,000 7.875% due 12/15/05....................................... 634,375 425,000 8.875% due 9/15/08........................................ 440,938 375,000 PETCO Animal Supplies, Inc., 10.750% due 11/1/11............ 401,250 825,000 Playtex Products, Inc., 9.375% due 6/1/11................... 886,875 Rite Aid Corp.: 975,000 7.625% due 4/15/05........................................ 716,625 100,000 11.250% due 7/1/08........................................ 70,500 250,000 Smithfield Foods Inc., 8.000% due 10/15/09.................. 240,000 1,000,000 Station Casinos Inc., 8.375% due 2/15/08.................... 1,045,000 500,000 Sun International Hotels Ltd., 8.875% due 8/15/11 (b)....... 504,375 475,000 Venetian Casino Resort LLC, 11.000% due 6/15/10 (b)......... 479,156 375,000 Vlasic Foods International Inc., 10.250% due 7/1/09 (c)(d)..................................................... 69,375 ------------ 16,502,527 ------------ Energy -- 4.3% 1,000,000 Devon Energy Corp., 10.250% due 11/1/05..................... 1,178,149 375,000 Forest Oil Corp., 8.000% due 6/15/08........................ 384,375 750,000 Grey Wolf, Inc., 8.875% due 7/1/07.......................... 765,000 83,000 Key Energy Services Inc., 14.000% due 1/15/09............... 96,695 625,000 Magnum Hunter Resources, Inc., 9.600% due 3/15/12........... 640,625
-------------------------------------------------------------------------------- SEE NOTES TO FINANCIAL STATEMENTS. PAGE 9 GLOBAL PARTNERS INCOME FUND INC. Schedule of Investments (continued) August 31, 2002
FACE AMOUNT SECURITY(a) VALUE ---------------------------------------------------------------------------------------------- Energy -- 4.3% (continued) $ 250,000 Nuevo Energy Co., 9.375% due 10/1/10........................ $ 253,750 1,000,000 Pride International, Inc., 9.375% due 5/1/07................ 1,050,000 2,000,000 United Refining Co., 10.750% due 6/15/07.................... 1,550,000 675,000 Vintage Petroleum, Inc., 9.750% due 6/30/09................. 678,375 810,000 Western Gas Resources, 10.000% due 6/15/09.................. 854,550 500,000 Westport Resources Corp., 8.250% due 11/1/11................ 517,500 ------------ 7,969,019 ------------ Finance Services -- 1.4% 987,700 Airplanes Pass-Through Trust, 10.875% due 3/15/12........... 49,385 825,000 FelCor Lodging Trust Inc., 9.500% due 9/15/08............... 841,500 1,000,000 MeriStar Hospitality Corp., 9.125% due 1/15/11.............. 945,000 750,000 Sovereign Bancorp, Inc., 10.500% due 11/15/06............... 836,250 ------------ 2,672,135 ------------ Housing Related -- 0.5% 875,000 Nortek, Inc., 8.875% due 8/1/08............................. 879,375 ------------ Manufacturing -- 2.2% 500,000 Alliant Techsystems Inc., 8.500% due 5/15/11................ 526,250 550,000 ArvinMeritor, Inc., 6.800% due 2/15/09...................... 530,458 425,000 Fedders North America Inc., 9.375% due 8/15/07.............. 334,156 500,000 Ford Motor Co., 7.450% due 7/16/31.......................... 436,343 475,000 Ford Motor Credit Co., 7.250% due 10/25/11.................. 457,337 500,000 Moll Industries, Inc., 10.500% due 7/1/08 (c)(d)............ 62,500 450,000 Sequa Corp., 9.000% due 8/1/09.............................. 427,500 350,000 Sybron Dental Specialties, Inc., 8.125% due 6/15/12 (b)..... 348,250 1,000,000 Terex Corp., 10.375% due 4/1/11............................. 1,040,000 ------------ 4,162,794 ------------ Media and Cable -- 8.4% 700,000 AOL Time Warner Inc., 7.625% due 4/15/31.................... 585,753 Charter Communications Holdings, LLC: 275,000 8.625% due 4/1/09......................................... 191,125 600,000 10.750% due 10/1/09....................................... 423,000 250,000 10.250% due 1/15/10....................................... 175,000 150,000 10.000% due 5/15/11....................................... 105,000 600,000 Zero coupon until 1/15/05,11.750% thereafter), due 1/15/10 255,000 1,050,000 Zero coupon until 1/15/06,13.500% thereafter), due 1/15/11 404,250 1,755,000 Zero coupon until 4/1/04, (9.920% thereafter), d 4/1/11... 851,175 475,000 Zero coupon until 5/15/06,11.750% thereafter), due 5/15/11 180,500
-------------------------------------------------------------------------------- SEE NOTES TO FINANCIAL STATEMENTS. PAGE 10 GLOBAL PARTNERS INCOME FUND INC. Schedule of Investments (continued) August 31, 2002
FACE AMOUNT SECURITY(a) VALUE ---------------------------------------------------------------------------------------------- Media and Cable -- 8.4% (continued) CSC Holdings Inc.: $ 1,425,000 9.875% due 2/15/13........................................ $ 1,075,875 1,100,000 10.500% due 5/15/16....................................... 830,500 475,000 EchoStar Broadband Corp., 10.375% due 10/1/07............... 486,875 EchoStar DBS Corp.: 775,000 9.125% due 1/15/09 (b).................................... 759,500 875,000 9.375% due 2/1/09......................................... 875,000 600,000 Insight Midwest Corp., 10.500% due 11/1/10.................. 543,000 1,050,000 LIN Television Corp., 8.000% due 1/15/08.................... 1,071,000 50,000 Mediacom Broadband LLC, 11.000% due 7/15/13................. 46,000 700,000 Mediacom LLC, 9.500% due 1/15/13............................ 574,000 550,000 Nextmedia Operating Inc., 10.750% due 7/1/11................ 533,500 NTL Communications Corp.: 180,000 11.500% due 10/1/08 (c)(d)................................ 29,700 900,000 Zero coupon until 10/1/03,12.375% thereafter), due 10/1/08.................................................... 130,500 NTL Inc.: 100,000 12.750% due 4/15/05 (c)(d)................................ 15,500 375,000 11.500% due 2/1/06 (c)(d)................................. 61,875 800,000 10.000% due 2/15/07 (c)(d)................................ 132,000 750,000 Zero coupon until 4/1/03, (9.750% thereafter), due 4/1/08. 112,500 750,000 R.H. Donnelly Inc., 9.125% due 6/1/08....................... 769,688 1,000,000 Radio One, Inc., 8.875% due 7/1/11.......................... 1,037,500 1,000,000 Rogers Communications Inc., 8.875% due 7/15/07.............. 855,000 Telewest Communication PLC: 1,065,000 11.250% due 11/1/08....................................... 165,075 390,000 Zero coupon until 2/1/05, (11.375% thereafter), due 2/1/10..................................................... 48,750 150,000 Time Warner Entertainment Co., 8.375% due 7/15/33........... 142,523 250,000 Time Warner Inc., 6.625% due 5/15/29........................ 191,144 United Pan-European Communications N.V.: 100,000 10.875% due 8/1/09 (c)(d)................................. 4,000 1,075,000 11.250% due 2/1/10 (c)(d)................................. 43,000 675,000 11.500% due 2/1/10 (c)(d)................................. 27,000 850,000 Zero coupon until 11/1/04, (13.375% thereafter), due 11/1/09.................................................... 23,375 325,000 Zero coupon until 2/1/05, (13.750% thereafter), due 2/1/10..................................................... 8,938 900,000 Yell Finance BV, 10.750% due 8/1/11......................... 918,000 World Color Press, Inc.: 875,000 8.375% due 11/15/08....................................... 932,635 125,000 7.750% due 2/15/09........................................ 125,594 ------------ 15,740,350 ------------
-------------------------------------------------------------------------------- SEE NOTES TO FINANCIAL STATEMENTS. PAGE 11 GLOBAL PARTNERS INCOME FUND INC. Schedule of Investments (continued) August 31, 2002
FACE AMOUNT SECURITY(a) VALUE ---------------------------------------------------------------------------------------------- Services and Other -- 3.4% Allied Waste North America Inc.: $ 1,125,000 7.875% due 1/1/09......................................... $ 1,102,500 325,000 10.000% due 8/1/09........................................ 321,750 1,525,000 American Tower Corp., 9.375% due 2/1/09..................... 953,125 550,000 COMFORCE Operating Inc., 12.000% due 12/1/07................ 321,750 Crown Castle International Corp.: 150,000 9.000% due 5/15/11........................................ 93,750 1,025,000 10.750% due 8/1/11........................................ 686,750 125,000 Zero coupon until 5/15/04, (10.375% thereafter), due 5/15/11................................................... 54,375 1,000,000 DynCorp Inc., 9.500% due 3/1/07............................. 1,045,000 1,250,000 Holt Group, 9.750% due 1/15/06 (c)(d)....................... 28,125 430,000 Mail-Well I Corp., 8.750% due 12/15/08...................... 174,150 1,000,000 Pierce Leahy Command Corp., 8.125% due 5/15/08.............. 975,000 2,000,000 Safety-Kleen Corp., 9.250% due 6/1/08 (c)(d)................ 60,000 775,000 SBA Communications Corp., 10.250% due 2/1/09................ 449,500 Spectrasite Holdings Inc.: 600,000 10.750% due 3/15/10....................................... 105,000 400,000 Zero coupon until 7/15/03, (12.000% thereafter), due 7/15/08................................................... 74,000 ------------ 6,444,775 ------------ Technology -- 2.2% 750,000 L-3 Communications Corp., 7.625% due 6/15/12 (b)............ 780,000 275,000 Motorola Inc., 8.000% due 11/1/11........................... 267,001 425,000 Seagate Technology HDD Holding, 8.000% due 5/15/09 (b)...... 422,875 1,100,000 Unisys Corp., 8.125% due 6/1/06............................. 1,094,500 1,125,000 Xerox Capital Europe PLC, 5.875% due 5/15/04................ 928,125 600,000 Xerox Corp., 5.500% due 11/15/03............................ 537,000 ------------ 4,029,501 ------------ Telecommunications -- 5.2% 425,000 American Cellular Corp., 9.500% due 10/15/09................ 59,500 AT&T Corp.: 925,000 7.300% due 11/15/11....................................... 875,836 1,250,000 6.500% due 3/15/29........................................ 990,755 AT&T Wireless Services Inc.: 475,000 7.875% due 3/1/11......................................... 404,457 775,000 8.125% due 5/1/12......................................... 663,877 250,000 Dobson Communications Corp., 10.875% due 7/1/10............. 183,750 Global Crossing Holding Ltd.: 1,700,000 9.125% due 11/15/06 (c)(d)................................ 27,625 250,000 9.500% due 11/15/09 (c)(d)................................ 4,063
-------------------------------------------------------------------------------- SEE NOTES TO FINANCIAL STATEMENTS. PAGE 12 GLOBAL PARTNERS INCOME FUND INC. Schedule of Investments (continued) August 31, 2002
FACE AMOUNT SECURITY(a) VALUE ---------------------------------------------------------------------------------------------- Telecommunications -- 5.2% (continued) Nextel Communications, Inc.: $ 550,000 9.375% due 11/15/09....................................... $ 431,750 1,475,000 Zero coupon until 9/15/02, (10.650% thereafter), due 9/15/07................................................... 1,209,500 1,500,000 Zero coupon until 2/15/03, (9.950% thereafter), due 2/15/08................................................... 1,102,500 425,000 Qwest Capital Funding, Inc., 6.875% due 7/15/28............. 206,125 900,000 Qwest Communications International Inc., 7.500% due 11/1/08.................................................... 481,500 1,025,000 Qwest Corp., 8.875% due 3/15/12 (b)......................... 896,875 625,000 Rogers Cantel Inc., 8.800% due 10/1/07...................... 284,375 Sprint Capital Corp.: 875,000 6.875% due 11/15/28......................................... 627,814 575,000 8.750% due 3/15/32.......................................... 446,168 254,000 TeleCorp PCS, Inc., 10.625% due 7/15/10..................... 245,110 Triton PCS Inc.: 375,000 8.750% due 11/15/11....................................... 288,750 250,000 Zero coupon until 5/1/03, (11.000% thereafter), due 5/1/08.................................................... 187,500 575,000 Ubiquitel Operating Co., (zero coupon until 4/15/05, 14.000% thereafter), due 4/15/10................................... 43,125 ------------ 9,660,955 ------------ Utilities -- 1.0% 850,000 Calpine Canada Energy Finance ULC, 8.500% due 5/1/08........ 471,750 Calpine Corp.: 500,000 8.750% due 7/15/07........................................ 265,000 500,000 8.625% due 8/15/10........................................ 272,500 1,125,000 CMS Energy Corp., 9.875% due 10/15/07....................... 946,069 ------------ 1,955,319 ------------ Total Corporate Bonds (Cost -- $101,567,352)............... 88,679,296 ------------ Convertible Bonds -- 0.6% 175,000 CIENA Corp., 3.750% due 2/1/08.............................. 104,563 750,000 Comverse Technology, Inc., 1.500% due 12/1/05............... 586,875 600,000 i2 Technologies, Inc., 5.250% due 12/15/06.................. 355,500 ------------ Total Convertible Bonds (Cost -- $1,157,074)............... 1,046,938 ------------ Sovereign Bonds -- 49.9% Argentina -- 1.0% Republic of Argentina: 1,350,000 Due 11/30/02 (c)(d)....................................... 283,500 6,107,000 Due 4/10/05 (c)(d)........................................ 1,587,820 ------------ 1,871,320 ------------
-------------------------------------------------------------------------------- SEE NOTES TO FINANCIAL STATEMENTS. PAGE 13 GLOBAL PARTNERS INCOME FUND INC. Schedule of Investments (continued) August 31, 2002
FACE AMOUNT SECURITY(a) VALUE ---------------------------------------------------------------------------------------------- Brazil -- 20.8% Federal Republic of Brazil: $ 670,000 11.250% due 7/26/07....................................... $ 470,675 5,325,000 11.500% due 3/12/08....................................... 3,707,531 11,465,000 14.500% due 10/15/09...................................... 8,742,062 37,350,000 12.000% due 4/15/10....................................... 24,557,625 1,475,000 10.125% due 5/15/27....................................... 792,813 400,000 12.250% due 3/6/30........................................ 234,000 500,000 DCB, Series L, 3.125% due 4/15/12 (e)..................... 248,750 ------------ 38,753,456 ------------ Bulgaria -- 2.8% 5,050,000 Republic of Bulgaria, 8.250% due 1/15/15.................... 5,220,437 ------------ Ecuador -- 4.7% Republic of Ecuador: 7,475,000 12.000% due 11/15/12...................................... 4,335,500 10,307,000 6.000% due 8/15/30 (e).................................... 4,380,475 ------------ 8,715,975 ------------ Mexico -- 2.7% United Mexican States: 500,000 8.375% due 1/14/11........................................ 536,250 4,500,000 8.300% due 8/15/31........................................ 4,464,000 ------------ 5,000,250 ------------ Peru -- 3.0% Republic of Peru: 4,900,000 FLIRB, 4.000% due 3/7/17 (e).............................. 3,123,750 3,564,000 PDI, 4.500% due 3/7/17 (e)................................ 2,512,620 ------------ 5,636,370 ------------ Russia -- 9.1% Russia: 9,600,000 12.750% due 6/24/28....................................... 11,556,000 540 5.000% due 3/31/30 (b)(e)................................. 378 7,850,000 5.000% due 3/31/30 (e).................................... 5,499,906 ------------ 17,056,284 ------------ Turkey -- 4.1% Republic of Turkey: 4,570,000 12.375% due 6/15/09....................................... 4,352,925 3,845,000 11.875% due 1/15/30....................................... 3,369,181 ------------ 7,722,106 ------------
-------------------------------------------------------------------------------- SEE NOTES TO FINANCIAL STATEMENTS. PAGE 14 GLOBAL PARTNERS INCOME FUND INC. Schedule of Investments (continued) August 31, 2002
FACE AMOUNT SECURITY(a) VALUE ---------------------------------------------------------------------------------------------- Uruguay -- 1.7% Republic of Uruguay: $ 1,725,000 7.875% due 3/25/09........................................ $ 892,688 950,000 8.750% due 6/22/10........................................ 508,250 475,000 7.625% due 1/20/12........................................ 252,938 1,650,000 7.875% due 7/15/27........................................ 800,250 1,184,211 DCB, 2.875% due 2/19/07 (e)............................... 686,842 ------------ 3,140,968 ------------ Total Sovereign Bonds (Cost -- $99,848,398)................ 93,117,166 ------------ Loan Participations (e)(f) -- 0.2% 470,585 Kingdom of Morocco, Tranche B, 2.5625% due 1/2/04 (Morgan Stanley Emerging Markets Inc.) (Cost -- $459,090).................................................. 430,585 ------------ Debtor-In-Possession (g)(h) -- 0.8% 1,550,000 NTL Inc., Term Loan Note, 11.000% due 12/1/02 (Cost -- $1,550,000)................................................ 1,550,000 ------------ SHARES ------------ Common Stock (d) -- 0.1% 12,166 Axiohm Transaction Solutions Inc. .......................... 0 35,045 Imperial Sugar Co. ......................................... 76,223 798 Pillowtex Corp. ............................................ 4,816 5,043 Terex Corp. ................................................ 99,095 44,962 UnitedGlobalCom., Inc., Class A Shares...................... 78,234 ------------ Total Common Stock (Cost -- $1,472,241).................... 258,368 ------------ Escrow Shares (d)(g) -- 0.0% 1,000,000 Imperial Sugar Co........................................... 0 625,000 Pillowtex Corp. ............................................ 0 ------------ Total Escrow Shares (Cost -- $0)........................... 0 ------------ Preferred Stock -- 0.4% 12 Anvil Holdings Inc., Series B, 13.000%...................... 226 CSC Holdings Inc: 8,975 Series H, 11.750% due 10/1/07............................. 549,719 2,925 Series M, 11.125% due 4/1/08.............................. 176,231 TCR Holding Corp. (d): 4,091 Class B................................................... 4 2,250 Class C................................................... 2 5,932 Class D................................................... 6 12,271 Class E................................................... 12 ------------ Total Preferred Stock (Cost -- $1,081,614)................. 726,200 ------------
-------------------------------------------------------------------------------- SEE NOTES TO FINANCIAL STATEMENTS. PAGE 15 GLOBAL PARTNERS INCOME FUND INC. Schedule of Investments (continued) August 31, 2002
WARRANTS/RIGHTS SECURITY(a) VALUE ---------------------------------------------------------------------------------------------- Warrants and Rights (d) -- 0.1% 1,837,246 ContiFinancial Corp., Units of Interest, (Represents interests in a trust in the liquidation of ContiFinancial Corp. and its affiliates.) (g)............................. $ 118,236 1,000 Glasstech Inc. (Exercise price of $0.01 per share expiring on 6/30/04. Each warrant exercisable for 0.125 shares of common stock.) (g)......................................... 0 1,000 Mattress Discounters Co. (Exercise price of $0.01 per share expiring on 7/15/07. Each warrant exercisable for 4.85 shares of Class A common stock and 0.539 shares of Class L common stock.)............................................. 1,500 4,202 Pillowtex Corp., Expiring on 11/24/09....................... 420 750 UbiquiTel Operating Co. (Exercise price of $22.74 per share expiring on 4/15/10. Each warrant exercisable for 5.965 shares of common stock.)................................... 5,344 United Mexican States Rights: 192,000 Series B.................................................. 384 192,000 Series C.................................................. 96 192,000 Series D.................................................. 96 39,270 Venezuela Rights............................................ 0 ------------ Total Warrants and Rights (Cost -- $163,200)............... 126,076 ------------ FACE AMOUNT ------------ Repurchase Agreement -- 0.4% $ 805,000 State Street Bank & Trust Co., 1.770% due 9/3/02; Proceeds at maturity -- $805,158; (Fully collateralized by U.S. Treasury Bonds, 8.750% due 11/15/08; Market value -- $825,088) (Cost -- $805,000)............................... 805,000 ------------ Total Investments -- 100% (Cost -- $208,103,969).......... $186,739,629 ------------ ------------
-------------------------------------------------------------------------------- (a) All securities segregated as collateral pursuant to loan agreement. (b) 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. (c) Security is currently in default. (d) Non-income producing security. (e) Rate shown reflects current rate on instrument with variable rate or step coupon rates. (f) Participation interests were acquired through the financial institutions indicated parenthetically. (g) Security is valued in accordance with fair valuation procedures. (h) Interest rate per annum equal to the rate per annum during the immediate three month period plus 1% and not to exceed 18%. Abbreviations used in this schedule: DCB --Debt Conversion Bond. FLIRB --Front Loaded Interest Reduction Bond. PDI --Past Due Interest.
-------------------------------------------------------------------------------- SEE NOTES TO FINANCIAL STATEMENTS. PAGE 16 GLOBAL PARTNERS INCOME FUND INC. -------------------------------------------------- Statement of Assets and Liabilities August 31, 2002 ASSETS: Investments, at value (Cost -- $208,103,969)............ $186,739,629 Cash..................................................... 351 Interest receivable...................................... 6,147,273 Receivable for securities sold........................... 177,567 Prepaid expenses......................................... 10,902 ------------ TOTAL ASSETS............................................. 193,075,722 ------------ LIABILITIES: Loan payable (Note 4).................................... 59,124,414 Payable for securities purchased......................... 542,700 Loan interest payable (Note 4)........................... 343,922 Management fee payable................................... 62,171 Accrued expenses......................................... 151,804 ------------ TOTAL LIABILITIES........................................ 60,225,011 ------------ TOTAL NET ASSETS............................................ $132,850,711 ------------ ------------ NET ASSETS: Common stock ($0.001 par value, 100,000,000 shares authorized; 14,963,609 shares outstanding).............. $ 14,964 Additional paid-in capital............................... 206,958,786 Overdistributed net investment income.................... (129,019) Accumulated net realized loss from security transactions............................................ (52,629,680) Net unrealized depreciation of investments............... (21,364,340) ------------ TOTAL NET ASSETS............................................ $132,850,711 ------------ ------------ NET ASSET VALUE, PER SHARE ($132,850,711 [div] 14,963,609 shares outstanding)........................................ $8.88 ----- -----
-------------------------------------------------------------------------------- SEE NOTES TO FINANCIAL STATEMENTS. PAGE 17 GLOBAL PARTNERS INCOME FUND INC. -------------------------------------- Statement of Operations For the Year Ended August 31, 2002 INVESTMENT INCOME: Interest................................................. $ 25,203,852 Dividends................................................ 39,215 ------------ Total Investment Income.................................. 25,243,067 ------------ EXPENSES: Interest expense (Note 4)................................ 2,685,890 Management fee (Note 2).................................. 1,634,460 Loan fees................................................ 137,987 Shareholder communications............................... 62,600 Custody.................................................. 55,599 Audit and tax services................................... 49,598 Legal fees............................................... 48,251 Listing fees............................................. 31,540 Transfer agent fees...................................... 31,399 Directors' fees.......................................... 31,200 Other.................................................... 28,676 ------------ TOTAL EXPENSES........................................... 4,797,200 ------------ NET INVESTMENT INCOME....................................... 20,445,867 ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 3): Realized Loss From Security Transactions (excluding short-term securities): Proceeds from sales................................... 286,102,353 Cost of securities sold............................... 298,993,922 ------------ NET REALIZED LOSS........................................ (12,891,569) ------------ CHANGE IN NET UNREALIZED DEPRECIATION (NOTE 1)........... (14,615,189) ------------ NET LOSS ON INVESTMENTS..................................... (27,506,758) ------------ DECREASE IN NET ASSETS FROM OPERATIONS...................... $ (7,060,891) ------------ ------------
-------------------------------------------------------------------------------- SEE NOTES TO FINANCIAL STATEMENTS. PAGE 18 GLOBAL PARTNERS INCOME FUND INC. ---------------------------------------------------- Statements of Changes in Net Assets For the Years Ended August 31,
2002 2001 ----------------------------------------------------------------------------------------- OPERATIONS: Net investment income.................................... $ 20,445,867 $ 20,388,910 Net realized loss........................................ (12,891,569) (17,727,748) (Increase) decrease in net unrealized depreciation....... (14,615,189) 1,088,446 ------------ ------------ INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS........ (7,060,891) 3,749,608 ------------ ------------ DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income.................................... (20,552,754) (20,942,196) Capital.................................................. (676,233) (120,661) ------------ ------------ DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS............................................ (21,228,987) (21,062,857) ------------ ------------ CAPITAL SHARE TRANSACTIONS: Proceeds from shares issued on reinvestment of dividends (121,102 and 93,967 shares issued, respectively)........ 1,343,416 1,040,840 ------------ ------------ INCREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS... 1,343,416 1,040,840 ------------ ------------ DECREASE IN NET ASSETS...................................... (26,946,462) (16,272,409) NET ASSETS: Beginning of year........................................ 159,797,173 176,069,582 ------------ ------------ END OF YEAR*............................................. $132,850,711 $159,797,173 ------------ ------------ ------------ ------------ *Includes undistributed (overdistributed) net investment income of:.................................................. $(129,019) $26,720 ------------ ------------ ------------ ------------
--------------------------------------- Statement of Cash Flows For the Year Ended August 31, 2002 CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES: Proceeds from sales of portfolio securities and principal paydowns................................................ $ 293,394,264 Purchases of portfolio securities........................ (275,313,504) Net sales of short-term securities....................... 1,448,000 ------------- 19,528,760 Net investment income.................................... 20,445,867 Adjustments to reconcile net investment income to net cash provided by operating activities: Amortization of net premium/discount on securities.... (3,885,558) Net change in receivables/payables related to operations.......................................... (16,203,535) ------------- NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES.......... 19,885,534 ------------- CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES: Proceeds from shares issued in reinvestment of distributions........................................... 1,343,416 Distributions paid....................................... (21,228,987) ------------- NET CASH FLOWS USED BY FINANCING ACTIVITIES.............. (19,885,571) ------------- NET DECREASE IN CASH........................................ (37) Cash, Beginning of year..................................... 388 ------------- CASH, END OF YEAR........................................... $ 351 ------------- -------------
-------------------------------------------------------------------------------- SEE NOTES TO FINANCIAL STATEMENTS. PAGE 19 GLOBAL PARTNERS INCOME FUND INC. ---------------------------------------------- Notes to Financial Statements Note 1. Significant Accounting Policies Global Partners Income Fund Inc. ('Fund') was incorporated in Maryland on September 3, 1993 and is registered as a non-diversified, closed-end, management investment company under the Investment Company Act of 1940, as amended. The Fund commenced operations on October 29, 1993. The Fund seeks to maintain a high level of current income by investing primarily in a portfolio of high-yield U.S. and non-U.S. corporate debt securities and high-yield foreign sovereign debt securities. As a secondary objective, the Fund seeks capital appreciation. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The policies are in conformity with accounting principles generally accepted in the United States of America ('GAAP'). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. SECURITIES VALUATION. In valuing the Fund's assets, all securities for which market quotations are readily available are valued (i) at the last sale price prior to the time of determination if there were a sale on the date of determination, (ii) at the mean between the last current bid and asked prices if there were no sales on such date and bid and asked quotations are available, and (iii) at the bid price if there were no sales price on such date and only bid quotations are available. Publicly traded foreign government debt securities are typically traded internationally in the over-the-counter market, and are valued at the mean between the last current bid and asked price as of the close of business of that market. However, when the spread between bid and asked price exceeds five percent of the par value of the security, the security is valued at the bid price. Securities may also be valued by independent pricing services which use prices provided by market-makers or estimates of market values obtained from yield data relating to instruments or securities with similar characteristics. Short-term investments having a maturity of 60 days or less are valued at amortized cost which approximates market value. Securities for which reliable quotations are not readily available are valued at fair value as determined in good faith by, or under procedures established by, the Board of Directors. SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Investment transactions are recorded on the trade date. Interest income is accrued on a daily basis. Market discount and premium on securities purchased is accreted and amortized on an effective yield basis over the life of the security. The Fund uses the specific identification method for determining realized gain or loss on investments sold. FEDERAL INCOME TAXES. The Fund has complied and intends to continue to comply with the requirements of the Internal Revenue Code of 1986, as amended, applicable to regulated PAGE 20 GLOBAL PARTNERS INCOME FUND INC. ---------------------------------------------- Notes to Financial Statements (continued) investment companies, and to distribute all of its income and capital gains, if any, to its shareholders. Therefore, no federal income tax or excise tax provision is required. DIVIDENDS AND DISTRIBUTIONS. The Fund declares and pays dividends to shareholders monthly from net investment income. Net realized gains, if any, in excess of loss carryovers are expected to be distributed annually. Dividends and distributions to shareholders are recorded on the ex-dividend date. The amount of dividends and distributions from net investment income and net realized gains are determined in accordance with federal income tax regulations, which may differ from GAAP. These differences are due primarily to deferral of wash sale and post-October losses. Dividends and distributions which exceed net investment income and net realized capital gains for tax purposes are reported as tax return of capital. REPURCHASE AGREEMENTS. When entering into repurchase agreements, it is the Fund's policy to take possession, through its custodian, of the underlying collateral and to monitor its value at the time the arrangement is entered into and during the term of the repurchase agreement to ensure that it equals or exceeds 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. CASH FLOW INFORMATION. The Fund invests in securities and distributes dividends from net investment income and net realized gains from investment transactions. These activities are reported in the Statement of Changes in Net Assets. Additional information on cash receipts and cash payments is presented in the Statement of Cash Flows. Accounting practices that do not affect reporting activities on a cash basis include carrying investments at value and accreting discount and amortizing premium on debt obligations. For the year ended August 31, 2002, the Fund paid interest expenses of $2,640,469. YEAR END TAX RECLASSIFICATIONS. The character of income and gains to be distributed are determined in accordance with income tax regulations which may differ from GAAP. At August 31, 2002, reclassifications were made to the capital accounts of the Fund to reflect permanent book/tax differences and income and gains available for distributions under income tax regulations. Net investment income, net realized gains and net assets were not affected by this change. CHANGE IN ACCOUNTING POLICY. In November 2000, the American Institute of Certified Public Accountants ('AICPA') issued a revised version of the AICPA Audit and Accounting Guide for Investment Companies ('Guide'). This revised version is effective for financial statements issued for fiscal years beginning after December 15, 2000. The revised Guide requires the Fund to amortize premium and accrete all discounts on all fixed-income securities. The Fund adopted this requirement September 1, 2001. This change does not affect the Fund's net asset value, but does change the classification of certain amounts in the statement of operations. For the year ended PAGE 21 GLOBAL PARTNERS INCOME FUND INC. ---------------------------------------------- Notes to Financial Statements (continued) August 31, 2002, interest income decreased by $106,887, net realized loss decreased by $76,019 and the change in net unrealized depreciation of investments decreased by $30,868. In addition, the Fund recorded adjustments to decrease the cost of securities and decrease accumulated undistributed net investment income by $124,871 to reflect the cumulative effect of this change up to the date of the adoption. Note 2. Management and Advisory Fees and Other Transactions The Fund has entered into a management agreement with PIMCO Funds Advisors LLC ('Investment Manager'), an indirect wholly-owned subsidiary of Allianz Dresdner Asset Management of America L.P., formerly known as PIMCO Advisors L.P., a wholly-owned subsidiary of Allianz AG, pursuant to which the Investment Manager, among other things, supervises the Fund's investment program and monitors the performance of the Fund's service providers. The Investment Manager and the Fund have entered into an investment advisory and administration agreement with Salomon Brothers Asset Management Inc ('Investment Adviser'), a wholly-owned subsidiary of Salomon Smith Barney Holdings Inc. ('SSBH'), which, in turn, is a subsidiary of Citigroup Inc., pursuant to which the Investment Adviser provides investment advisory and administrative services to the Fund. The Investment Adviser is responsible on a day-to-day basis for the management of the Fund's portfolio in accordance with the Fund's investment objectives and policies and for making decisions to buy, sell, or hold particular securities and is responsible for day-to-day administration of the Fund. The Investment Adviser has delegated certain administrative services to Smith Barney Fund Management LLC ('SBFM'), an affiliate of the Investment Adviser, pursuant to a Sub-Administration Agreement between the Investment Adviser and SBFM. The Fund pays the Investment Manager a monthly fee at an annual rate of 1.10% of the Fund's average weekly net assets for its services, out of which the Investment Manager pays the Investment Adviser a monthly fee at an annual rate of 0.65% of the Fund's average weekly net assets for its services. At August 31, 2002, Salomon Smith Barney Inc., another subsidiary of SSBH, owned 4,587 shares of the Fund. Certain officers and/or directors of the Fund are also officers and/or directors of the Investment Manager or the Investment Adviser. PAGE 22 GLOBAL PARTNERS INCOME FUND INC. ---------------------------------------------- Notes to Financial Statements (continued) Note 3. Portfolio Activity During the year ended August 31, 2002, the aggregate cost of purchases and proceeds from sales of investments (including maturities, but excluding short-term securities) were as follows: Purchases................................................... $272,387,628 ------------ ------------ Sales....................................................... $286,102,353 ------------ ------------
At August 31, 2002, the aggregate gross unrealized appreciation and depreciation of investments for Federal income tax purposes were substantially as follows: Gross unrealized appreciation............................... $ 5,404,247 Gross unrealized depreciation............................... (26,768,587) ------------ Net unrealized depreciation................................. $(21,364,340) ------------ ------------
Note 4. Bank Loan The Fund had outstanding a $75,000,000 loan pursuant to a secured loan agreement with ING Baring (U.S.) Capital Corporation which matured on November 20, 2001. At August 31, 2002, the Fund had outstanding a $59,124,414 loan pursuant to a revolving credit and security agreement with CXC Inc., a commercial paper conduit issuer for which Citicorp North America Inc., an affiliate of the adviser acts as administrative agent. The agreement between the Fund and CXC Inc. commenced on November 20, 2001. The loans generally bear interest at a variable rate based on the weighted average interest rates of the underlying commercial paper or LIBOR, plus any applicable margin. Securities held by the Fund are subject to a lien, granted to the lenders, to the extent of the borrowing outstanding and any additional expenses. Note 5. Loan Participations The Fund invests in fixed and floating rate loans arranged through private negotiations between a foreign sovereign entity and one or more financial institutions. The Fund's investment in any such loan may be in the form of a participation in or an assignment of the loan. At August 31, 2002, the Fund held loan participations with a total cost of $459,090. In connection with purchasing loan participations, the Fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement relating to the loan, nor any rights of set-off against the borrower, and the Fund may not benefit directly from any collateral supporting the loan in which it has purchased the participation. As a result, the Fund will assume the credit risk of both the borrower and the lender that is selling the participation. In the event of the insolvency of the lender selling the participation, the Fund may be treated as a general creditor of the lender and may not benefit from any set-off between the lender and the borrower. PAGE 23 GLOBAL PARTNERS INCOME FUND INC. ---------------------------------------------- Notes to Financial Statements (continued) Note 6. 'When and If' Issued Bonds 'When and if' issued bonds are recorded as investments in the Fund's portfolio and marked-to-market to reflect the current value of the bonds. When the Fund sells a 'when and if' issued bond, an unrealized gain or loss is recorded equal to the difference between the selling price and purchase cost of the bond. Settlement of trades (i.e., receipt and delivery) of the 'when and if' issued bond is contingent upon the successful issuance of such bond. In the event its sponsor is unable to successfully issue the security, all trades in 'when and if' issued bonds become null and void, and, accordingly, the Fund will reverse any unrealized gain or loss recorded on such transactions. Note 7. Credit Risk The yields of emerging market debt obligations and high-yield corporate debt obligations reflect, among other things, perceived credit risk. The Fund's investment in securities rated below investment grade typically involves risks not associated with higher rated securities including, among others, overall greater risk of timely and ultimate payment of interest and principal, greater market price volatility and less liquid secondary market trading. The consequences of political, social, economic or diplomatic changes may have disruptive effects on the market prices of sovereign bonds and loan participations held by the Fund. The net asset value of the Fund could be negatively affected if the Fund were required to liquidate assets in other than an orderly manner and/or in adverse market conditions to repay any bank loans outstanding. Note 8. Capital Loss Carryforward At August 31, 2002, the Fund had, for Federal income tax purposes, a capital loss carryforward of approximately $44,035,000, available to offset future capital gains. To the extent that these carryforward losses are used to offset capital gains, it is probable that any gains so offset will not be distributed. The amount and expiration of the carryforwards are indicated below. Expiration occurs on August 31 of the year indicated:
2007 2009 2010 ---- ---- ---- Carryforward Amounts.......... $15,469,000 $8,616,000 $19,950,000
Note 9. Dividends Subsequent to August 31, 2002 On July 18, 2002, the Board of Directors of the Fund declared three dividends from net investment income, each in the amount of $0.11875 per share, payable on September 27, October 25 and November 29, 2002, to shareholders of record on September 17, October 16 and November 13, 2002, respectively. PAGE 24 GLOBAL PARTNERS INCOME FUND INC. ---------------------------------------------- Notes to Financial Statements (continued) Note 10. Subsequent Event On October 23, 2002, PIMCO Funds Advisors LLC ('PIMCO Advisors') and Salomon Brothers Asset Management Inc ('SBAM') reached an agreement for SBAM to acquire the investment management and advisory business of PIMCO Advisors with respect to the Fund. Upon the consummation of the transaction contemplated by the agreement between PIMCO Advisors and SBAM, PIMCO Advisors will cease to act as investment manager to the Fund and SBAM will be responsible for all investment management, advisory and administrative services to the Fund. The closing of the transaction under the agreement between PIMCO Advisors and SBAM is subject to stockholder approval of new advisory and administration agreements. The Board of Directors of the Fund has approved the continuation of the existing investment advisory arrangements with PIMCO Advisors and SBAM for the Fund until the earlier of the closing of the transaction under the agreement between PIMCO Advisors and SBAM or October 31, 2003. In addition, the Board of Directors of the Fund has approved a new investment advisory and administration agreement between the Fund and SBAM. Under the new agreement, the aggregate advisory fees payable by the Fund will be reduced. The new agreement will be submitted for stockholder approval at the Annual Meeting to be held on or about December 2002. PAGE 25 GLOBAL PARTNERS INCOME FUND INC. ---------------------------------- Financial Highlights For a share of common stock outstanding throughout each fiscal year ended August 31, unless otherwise noted:
2002 2001 2000 1999 1998 ------------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF YEAR.............................. $10.77 $11.94 $10.98 $ 9.76 $16.18 -------- -------- -------- -------- -------- INCOME (LOSS) FROM OPERATIONS: Net investment income(2)....................... 1.36 1.38 1.44 1.59 1.55 Net realized and unrealized gain (loss)(2)............................... (1.83) (1.12) 0.95 1.30 (5.53) -------- -------- -------- -------- -------- Total Income (Loss) From Operations............. (0.47) 0.26 2.39 2.89 (3.98) -------- -------- -------- -------- -------- LESS DISTRIBUTIONS FROM: Net investment income.......................... (1.38) (1.42) (1.43) (1.67) (1.62) Net realized gains............................. -- -- -- -- (0.49) Capital........................................ (0.05) (0.01) -- -- -- Excess of net realized capital gains........... -- -- -- -- (0.33) -------- -------- -------- -------- -------- Total Distributions............................. (1.43) (1.43) (1.43) (1.67) (2.44) -------- -------- -------- -------- -------- INCREASE IN NET ASSET VALUE DUE TO SHARES ISSUED ON REINVESTMENT OF DIVIDENDS................... 0.01 -- -- -- -- -------- -------- -------- -------- -------- NET ASSET VALUE, END OF YEAR.................... $ 8.88 $10.77 $11.94 $10.98 $ 9.76 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- MARKET VALUE, END OF YEAR....................... $10.43 $11.88 $11.6250 $11.3125 $8.5625 TOTAL RETURN, BASED ON MARKET VALUE(1)....................... (0.25)% 16.26% 17.57% 53.57% (34.35)% RATIOS TO AVERAGE NET ASSETS: Total expenses, including interest expense..... 3.24% 4.90% 4.95% 4.22% 3.54% Total expenses, excluding interest expense (operating expenses)......................... 1.43% 1.28% 1.30% 1.27% 1.31% Net investment income(2)....................... 13.80% 12.53% 12.53% 14.26% 10.56% PORTFOLIO TURNOVER RATE......................... 129% 92% 111% 102% 144% NET ASSETS, END OF YEAR (000S).................. $132,851 $159,797 $176,070 $162,004 $142,129 Bank Loans Outstanding, End of Year (000s)............................. $59,124 $75,000 $75,000 $75,000 $75,000 Weighted Average Bank Loans (000s).............. $72,423 $75,000 $75,000 $75,000 $75,000 Weighted Average Interest Rate on Bank Loans.................................. 3.71% 7.86% 8.28% 6.42% 6.34% --------------------------------------------------------------------------------------------------------
(1) For purposes of this calculation, dividends on common shares are assumed to be reinvested at prices obtained under the Fund's dividend reinvestment plan and the broker commission paid to purchase or sell a share is excluded. (2) Without the adoption of the change in the accounting method discussed in Note 1 of the financial statements, for the year ended August 31, 2002, those amounts would have been $1.37, $1.84 and 13.87% for net investment income, net realized and unrealized loss and ratio of net investment income to average net assets, respectively. Per share, ratios and supplemental data for the periods prior to September 1, 2001 have not been restated to reflect this change in presentation. PAGE 26 GLOBAL PARTNERS INCOME FUND INC. -------------------------------------------------- Report of Independent Accountants To the Board of Directors and Shareholders of Global Partners Income Fund Inc. In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations, of changes in net assets and of cash flows and the financial highlights present fairly, in all material respects, the financial position of Global Partners Income Fund Inc. (the 'Fund') at August 31, 2002, the results of its operations and its cash flows 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 five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as 'financial statements') are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2002 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, NY October 23, 2002 PAGE 27 GLOBAL PARTNERS INCOME FUND INC. PURSUANT TO CERTAIN RULES OF THE SECURITIES AND EXCHANGE COMMISSION, THE FOLLOWING ADDITIONAL DISCLOSURE IS PROVIDED. ------------------------------------------------------------- Form of Terms and Conditions of Amended and Restated Dividend Reinvestment and Cash Purchase Plan (unaudited) 1. Each shareholder initially purchasing shares of common stock ('Shares') of Global Partners Income Fund Inc. ('Fund') on or after September 6, 1996 will be deemed to have elected to be a participant in the Amended and Restated Dividend Reinvestment and Cash Purchase Plan ('Plan'), unless the shareholder specifically elects in writing (addressed to the Agent at the address below or to any nominee who holds Shares for the shareholder in its name) to receive all income dividends and distributions of capital gains in cash, paid by check, mailed directly to the record holder by or under the direction of American Stock Transfer & Trust Company as the Fund's dividend-paying agent ('Agent'). A shareholder whose Shares are held in the name of a broker or nominee who does not provide an automatic reinvestment service may be required to take such Shares out of 'street name' and register such Shares in the shareholder's name in order to participate, otherwise dividends and distributions will be paid in cash to such shareholder by the broker or nominee. Each participant in the Plan is referred to herein as a 'Participant.' The Agent will act as Agent for each Participant, and will open accounts for each Participant under the Plan in the same name as their Shares are registered. 2. Unless the Fund declares a dividend or distribution payable only in the form of cash, the Agent will apply all dividends and distributions in the manner set forth below. 3. If, on the determination date, the market price per Share equals or exceeds the net asset value per Share on that date (such condition, a 'market premium'), the Agent will receive the dividend or distribution in newly issued Shares of the Fund on behalf of Participants. If, on the determination date, the net asset value per Share exceeds the market price per Share (such condition, a 'market discount'), the Agent will purchase Shares in the open-market. The determination date will be the fourth New York Stock Exchange trading day (a New York Stock Exchange trading day being referred to herein as a 'Trading Day') preceding the payment date for the dividend or distribution. For purposes herein, 'market price' will mean the average of the highest and lowest prices at which the Shares sell on the New York Stock Exchange on the particular date, or if there is no sale on that date, the average of the closing bid and asked quotations. 4. Purchases made by the Agent will be made as soon as practicable commencing on the Trading Day following the determination date and terminating no later than 30 days after the dividend or distribution payment date except where temporary curtailment or suspension of purchase is necessary to comply with applicable provisions of federal securities law; provided, however, that such purchases will, in any event, terminate on the Trading Day prior to the 'ex-dividend' date next succeeding the dividend or distribution payment date. PAGE 28 GLOBAL PARTNERS INCOME FUND INC. ------------------------------------------------------------- Form of Terms and Conditions of Amended and Restated Dividend Reinvestment and Cash Purchase Plan (unaudited) (continued) 5. If (i) the Agent has not invested the full dividend amount in open-market purchases by the date specified in paragraph 4 above as the date on which such purchases must terminate or (ii) a market discount shifts to a market premium during the purchase period, then the Agent will cease making open-market purchases and will receive the uninvested portion of the dividend amount in newly issued Shares (x) in the case of (i) above, at the close of business on the date the Agent is required to terminate making open-market purchases as specified in paragraph 4 above or (y) in the case of (ii) above, at the close of business on the date such shift occurs; but in no event prior to the payment date for the dividend or distribution. 6. In the event that all or part of a dividend or distribution amount is to be paid in newly issued Shares, such Shares will be issued to Participants in accordance with the following formula: (i) if, on the valuation date, the net asset value per Share is less than or equal to the market price per Share, then the newly issued Shares will be valued at net asset value per Share on the valuation date; provided, however, that if the net asset value is less than 95% of the market price on the valuation date, then such Shares will be issued at 95% of the market price and (ii) if, on the valuation date, the net asset value per Share is greater than the market price per Share, then the newly issued Shares will be issued at the market price on the valuation date. The valuation date will be the dividend or distribution payment date, except that with respect to Shares issued pursuant to paragraph 5 above, the valuation date will be the date such Shares are issued. If a date that would otherwise be a valuation date is not a Trading Day, the valuation date will be the next preceding Trading Day. 7. Participants have the option of making additional cash payments to the Agent, monthly, in a minimum amount of $250, for investment in Shares. The Agent will use all such funds received from Participants to purchase Shares in the open market on or about the first business day of each month. To avoid unnecessary cash accumulations, and also to allow ample time for receipt and processing by the Agent, Participants should send in voluntary cash payments to be received by the Agent approximately 10 days before an applicable purchase date specified above. A Participant may withdraw a voluntary cash payment by written notice, if the notice is received by the Agent not less than 48 hours before such payment is to be invested. 8. Purchases by the Agent pursuant to paragraphs 4 and 7 above may be made on any securities exchange on which the Shares of the Fund are traded, in the over-the-counter market or in negotiated transactions, and may be on such terms as to price, delivery and otherwise as the Agent shall determine. Funds held by the Agent uninvested will not bear interest, and it is understood that, in any event, the Agent shall have no liability in connection with any inability to purchase Shares within the time periods herein provided, or with the timing of any purchases effected. The Agent shall have no responsibility as to the value of the Shares acquired for the PAGE 29 GLOBAL PARTNERS INCOME FUND INC. ------------------------------------------------------------- Form of Terms and Conditions of Amended and Restated Dividend Reinvestment and Cash Purchase Plan (unaudited) (continued) Participant's account. The Agent may commingle amounts of all Participants to be used for open-market purchases of Shares and the price per Share allocable to each Participant in connection with such purchases shall be the average price (including brokerage commissions) of all Shares purchased by the Agent. 9. The Agent will maintain all Participants' accounts in the Plan and will furnish written confirmations of all transactions in each account, including information needed by Participants for personal and tax records. The Agent will hold Shares acquired pursuant to the Plan in noncertificated form in the Participant's name or that of its nominee, and each Participant's proxy will include those Shares purchased pursuant to the Plan. The Agent will forward to Participants any proxy solicitation material and will vote any Shares so held for Participants only in accordance with the proxy returned by Participants to the Fund. Upon written request, the Agent will deliver to Participants, without charge, a certificate or certificates for the full Shares. 10. The Agent will confirm to Participants each acquisition made for their respective accounts as soon as practicable but not later than 60 days after the date thereof. Although Participants may from time to time have an undivided fractional interest (computed to three decimal places) in a Share of the Fund, no certificates for fractional shares will be issued. Dividends and distributions on fractional shares will be credited to each Participant's account. In the event of termination of a Participant's account under the Plan, the Agent will adjust for any such undivided fractional interest in cash at the market value of the Fund's Shares at the time of termination less the pro rata expense of any sale required to make such an adjustment. 11. Any share dividends or split shares distributed by the Fund on Shares held by the Agent for Participants will be credited to their respective accounts. In the event that the Fund makes available to Participants rights to purchase additional Shares or other securities, the Shares held for Participants under the Plan will be added to other Shares held by the Participants in calculating the number of rights to be issued to Participants. 12. The Agent's service fee for handling capital gains distributions or income dividends will be paid by the Fund. Participants will be charged a pro rata share of brokerage commissions on all open-market purchases. 13. Participants may terminate their accounts under the Plan by notifying the Agent in writing. Such termination will be effective immediately if notice is received by the Agent not less than 10 days prior to any dividend or distribution record date; otherwise such termination will be effective on the first Trading Day after the payment date for such dividend or distribution with respect to any subsequent dividend or distribution. The Plan may be amended or terminated by the Fund as applied to any voluntary cash payments made and any income dividend or capital gains distribution paid subsequent to written notice of the change or termination sent to Participants at PAGE 30 GLOBAL PARTNERS INCOME FUND INC. ------------------------------------------------------------- Form of Terms and Conditions of Amended and Restated Dividend Reinvestment and Cash Purchase Plan (unaudited) (continued) least 30 days prior to the record date for the income dividend or capital gains distribution. The Plan may be amended or terminated by the Agent, with the Fund's prior written consent, on at least 30 days' written notice to Participants. Notwithstanding the preceding two sentences, the Agent or the Fund may amend or supplement the Plan at any time or times when necessary or appropriate to comply with applicable law or rules or policies of the Securities and Exchange Commission or any other regulatory authority. Upon any termination, the Agent will cause a certificate or certificates for the full Shares held by each Participant under the Plan and cash adjustment for any fraction to be delivered to each Participant without charge. 14. Any amendment or supplement shall be deemed to be accepted by each Participant unless, prior to the effective date thereof, the Agent receives written notice of the termination of the Participant's account under the Plan. Any such amendment may include an appointment by the Agent in its place and stead of a successor Agent under these terms and conditions, with full power and authority to perform all or any of the acts to be performed by the Agent under these terms and conditions. Upon any such appointment of an Agent for the purpose of receiving dividends and distributions, the Fund will be authorized to pay to such successor Agent, for each Participant's account, all dividends and distributions payable on Shares of the Fund held in each Participant's name or under the Plan for retention or application by such successor Agent as provided in these terms and conditions. 15. In the case of Participants, such as banks, broker-dealers or other nominees, which hold Shares for others who are beneficial owners ('Nominee Holders'), the Agent will administer the Plan on the basis of the number of Shares certified from time to time by each Nominee Holder as representing the total amount registered in the Nominee Holder's name and held for the account of beneficial owners who are to participate in the Plan. 16. The Agent shall at all times act in good faith and use its best efforts within reasonable limits to insure the accuracy of all services performed under this Agreement and to comply with applicable law, but assumes no responsibility and shall not be liable for loss or damage due to errors unless such error is caused by its negligence, bad faith, or willful misconduct or that of its employees. 17. All correspondence concerning the Plan should be directed to the Agent at 40 Wall Street, 46th Floor, New York, New York 10005. The report is transmitted to the shareholders of the Fund for their information. This is not a prospectus, circular or representation intended for use in the purchase of shares of the Fund or any securities mentioned in this report. Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940 that the Fund may purchase at market prices from time to time shares of its common stock in the open market. PAGE 31 GLOBAL PARTNERS INCOME FUND INC. ------------------------------------- Additional Information (unaudited) INFORMATION ABOUT DIRECTORS AND OFFICERS The business and affairs of Global Partners Income Fund Inc. ('Fund') are managed under the direction of the Board of Directors. Information pertaining to the Directors and Officers of the Fund is set forth below.
TERM OF OFFICE(1) AND POSITION(S) LENGTH HELD WITH OF TIME PRINCIPAL OCCUPATION(S) NAME, ADDRESS, AND AGE FUND(1) SERVED DURING PAST FIVE YEARS ----------------------------------------------------------------------------------------- NON-INTERESTED DIRECTORS: Leslie H. Gelb Director and Since President, The Council The Council on Foreign Relations Member of the 2000 on Foreign Relations; 58 East 68th Street Audit Committee, formerly, Columnist, New York, NY 10021 Class I Deputy Editorial Page s Age 64 Editor and Editor, Op- e Ed Page, The New York Times Riordan Roett Director and Since Professor and Director, The Johns Hopkins University Member of the 1997 Latin American Studies 1740 Massachusetts Ave., NW Audit Committee, Program, Paul H. Nitze Washington, DC 20036 Class III School of Advanced Age 63 International Studies, The Johns Hopkins University Jeswald W. Salacuse Director and Since Henry J. Braker Tufts University Member of the 2000 Professor of Commercial The Fletcher School of Audit Committee, Law and formerly Dean, s Law & Diplomacy Class III The Fletcher School of e Packard Avenue Law & Diplomacy, Medford, MA 02155 Tufts University Age 64 INTERESTED DIRECTORS: R. Jay Gerken Director and Since Managing Director Salomon Smith Barney Inc. Co-Chairman, 2002 of Salomon Smith 125 Broad Street, 9th Floor Class II Barney Inc. ('SSB') New York, NY 10004 Age 51 Stephen Treadway Director and Since Managing Director of PIMCO Funds Distributors LLC Co-Chairman, 2000 Allianz Dresdner Asset 2187 Atlantic Street, Suite 100 Class I Management of America Stamford, CT 06902 L.P. ('ADAMA') Age 54 (formerly, PIMCO Advisors L.P.); Managing Director and Chief Executive Officer of PIMCO Funds Distributors LLC ('PFD') since May 1996; Managing Director and Chief Executive Officer, PIMCO Advisors NUMBER OF PORTFOLIOS ADVISED BY SBAM,(2) SBAM AND PIMCO ADVISORS,(3) AND PIMCO ADVISORS(4) AND OVERSEEN BY OTHER DIRECTOR (INCLUDING DIRECTORSHIPS NAME, ADDRESS, AND AGE THE FUND) HELD BY DIRECTOR ------------------------------------------------------------------------------ NON-INTERESTED DIRECTORS: Leslie H. Gelb 13(2) Britannica.com; The Council on Foreign Relations 6(3) Director of 2 58 East 68th Street 0(4) registered New York, NY 10021 investment companies Age 64 advised by Advantage Advisers, Inc. ('Advantage') Riordan Roett 13(2) The Latin America The Johns Hopkins University 6(3) Equity Fund, Inc. 1740 Massachusetts Ave., NW 0(4) Washington, DC 20036 Age 63 Jeswald W. Salacuse 13(2) Director of 2 Tufts University 6(3) registered The Fletcher School of 1(4) investment companies Law & Diplomacy advised by Advantage Packard Avenue Medford, MA 02155 Age 64 INTERESTED DIRECTORS: R. Jay Gerken 184(2) None Salomon Smith Barney Inc. 6(3) 125 Broad Street, 9th Floor 0(4) New York, NY 10004 Age 51 Stephen Treadway 0(2) None PIMCO Funds Distributors LLC 6(3) 2187 Atlantic Street, Suite 100 56(4) Stamford, CT 06902 Age 54
PAGE 32 GLOBAL PARTNERS INCOME FUND INC. ------------------------------------- Additional Information (unaudited) (continued)
TERM OF OFFICE(1) AND POSITION(S) LENGTH HELD WITH OF TIME PRINCIPAL OCCUPATION(S) NAME, ADDRESS, AND AGE FUND(1) SERVED DURING PAST FIVE YEARS ------------------------------------------------------------------------------------------ OFFICERS: Peter J. Wilby, CFA President Since Managing Director of SSB 2002 SSB and Salomon 388 Greenwich Street Executive Vice 1994- Brothers Asset New York, NY 10013 President 2002 Management Inc ('SBAM') Age 43 since January 1996 Lewis E. Daidone Executive Vice Since Managing Director of SSB President and 2002 SSB; Chief Financial 125 Broad Street, 11th Floor Chief Officer of the Smith New York, NY 10004 Administrative Barney Mutual Funds; Age 44 Officer Director and Senior Treasurer 1998- Vice President of 2002 Smith Barney Fund Management LLC ('SBFM') and Travelers Investment Advisers, Inc. ('TIA') Irving P. David Chief Financial Since Director of SSB SSB Officer and 2002 125 Broad Street, 10th Floor Treasurer New York, NY 10004 May- July Age 41 Controller 2002 James E. Craige Executive Vice Since Managing Director of SSB President 1999 SSB and SBAM since 388 Greenwich Street December 1998; Director New York, NY 10013 of SSB and SBAM since Age 34 January 1998 and Vice President of SSB and SBAM from May 1992 to January 1998 Thomas K. Flanagan Executive Vice Since Managing Director of SSB President 1994 SSB and SBAM since 388 Greenwich Street December 1998; Prior to New York, NY 10013 December 1998, Director Age 49 of SSB and SBAM Newton B. Schott, Jr. Executive Vice Since Chief Administrative PFD President 1997 Officer, Managing 2187 Atlantic Street, Suite 100 Director and General Stamford, CT 06902 Counsel of PFD and Age 60 Managing Director and Chief Legal Officer of PIMCO Advisors Beth Semmel, CFA Executive Vice Since Managing Director of SSB President 1998 SSB and SBAM since 388 Greenwich Street December 1998; Director New York, NY 10013 of SSB and SBAM since Age 41 January 1996 NUMBER OF PORTFOLIOS ADVISED BY SBAM,(2) SBAM AND PIMCO ADVISORS,(3) AND PIMCO ADVISORS(4) AND OVERSEEN BY OTHER DIRECTOR (INCLUDING DIRECTORSHIPS NAME, ADDRESS, AND AGE THE FUND) HELD BY DIRECTOR ----------------------------------------------------------------------------- OFFICERS: Peter J. Wilby, CFA N/A N/A SSB 388 Greenwich Street New York, NY 10013 Age 43 Lewis E. Daidone N/A N/A SSB 125 Broad Street, 11th Floor New York, NY 10004 Age 44 Irving P. David N/A N/A SSB 125 Broad Street, 10th Floor New York, NY 10004 Age 41 James E. Craige N/A N/A SSB 388 Greenwich Street New York, NY 10013 Age 34 Thomas K. Flanagan SSB 388 Greenwich Street New York, NY 10013 Age 49 Newton B. Schott, Jr. N/A N/A PFD 2187 Atlantic Street, Suite 100 Stamford, CT 06902 Age 60 Beth Semmel, CFA N/A N/A SSB 388 Greenwich Street New York, NY 10013 Age 41
PAGE 33 GLOBAL PARTNERS INCOME FUND INC. ------------------------------------- Additional Information (unaudited) (continued)
TERM OF OFFICE(1) AND POSITION(S) LENGTH HELD WITH OF TIME PRINCIPAL OCCUPATION(S) NAME, ADDRESS, AND AGE FUND(1) SERVED DURING PAST FIVE YEARS ------------------------------------------------------------------------------------------- Frances M. Guggino Controller Since Vice President, Citibank, NA 2002 Citibank, NA 125 Broad Street, 10th Floor New York, NY 10004 Age 40 Christina T. Sydor Secretary Since Managing Director of SSB 1998 SSB; General Counsel 300 First Stamford Place and Secretary of SBFM Stamford, CT 06902 and TIA Age 51 NUMBER OF PORTFOLIOS ADVISED BY SBAM,(2) SBAM AND PIMCO ADVISORS,(3) AND PIMCO ADVISORS(4) AND OVERSEEN BY OTHER DIRECTOR (INCLUDING DIRECTORSHIPS NAME, ADDRESS, AND AGE THE FUND) HELD BY DIRECTOR ----------------------------------------------------------------------------- Frances M. Guggino N/A N/A Citibank, NA 125 Broad Street, 10th Floor New York, NY 10004 Age 40 Christina T. Sydor N/A N/A SSB 300 First Stamford Place Stamford, CT 06902 Age 51
--------- (1) The Fund's Board of Directors is divided into three classes: Class I, Class II and Class III. The terms of office of the Class I, II and III Directors expire at the Annual Meeting of Stockholders in the year 2003, year 2002 and year 2004, respectively, or thereafter in each case when their respective successors are duly elected and qualified. The Fund's executive officers are chosen each year at the first meeting of the Fund's Board of Directors following the Annual Meeting of Stockholders, to hold office until the meeting of the Board following the next Annual Meeting of Stockholders and until their successors are duly elected and qualified. (2) Number of portfolios advised by Salomon Brothers Asset Management Inc ('SBAM') or affiliates of SBAM. (3) Number of portfolios advised by both SBAM or affiliates of SBAM and PIMCO Funds Advisors LLC ('PIMCO Advisors') or affiliates of PIMCO Advisors. (4) Number of portfolios advised by PIMCO Advisors or affiliates of PIMCO Advisors. PAGE 34 GLOBAL PARTNERS INCOME FUND INC. --------- Directors LESLIE H. GELB President, The Council on Foreign Relations R. JAY GERKEN Co-Chairman of the Board; Managing Director, Salomon Smith Barney Inc. RIORDAN ROETT Professor and Director, Latin American Studies Program, Paul H. Nitze School of Advanced International Studies, Johns Hopkins University JESWALD W. SALACUSE Henry J. Braker Professor of Commercial Law, and formerly Dean, The Fletcher School of Law & Diplomacy Tufts University STEPHEN TREADWAY Co-Chairman of the Board; Managing Director, Allianz Dresdner Asset Management of America L.P. Managing Director and Chief Executive Officer PIMCO Funds Distributors LLC CHARLES F. BARBER, Emeritus Consultant; formerly Chairman, ASARCO Inc. ------- Officers R. JAY GERKEN Co-Chairman of the Board STEPHEN TREADWAY Co-Chairman of the Board PETER J. WILBY, CFA President LEWIS E. DAIDONE Executive Vice President and Chief Administrative Officer IRVING P. DAVID Chief Financial Officer and Treasurer JAMES E. CRAIGE Executive Vice President THOMAS K. FLANAGAN Executive Vice President NEWTON B. SCHOTT Executive Vice President BETH A. SEMMEL, CFA Executive Vice President FRANCES M. GUGGINO Controller CHRISTINA T. SYDOR Secretary ----------------- Global Partners Income Fund Inc. 125 Broad Street 10th Floor, MF-2 New York, New York 10004 Telephone 1-888-777-0102 INVESTMENT MANAGER PIMCO Funds Advisors LLC 1345 Avenue of the Americas New York, New York 10105 INVESTMENT ADVISER Salomon Brothers Asset Management Inc 388 Greenwich Street New York, New York 10013 CUSTODIAN State Street Bank and Trust Company 225 Franklin Street Boston, Massachusetts 02110 DIVIDEND DISBURSING AND TRANSFER AGENT American Stock Transfer & Trust Company 40 Wall Street New York, New York 10005 INDEPENDENT ACCOUNTANTS PricewaterhouseCoopers LLP 1177 Avenue of the Americas New York, New York 10036 LEGAL COUNSEL Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 NEW YORK STOCK EXCHANGE SYMBOL GDF -------------------------------------------------------------------------------- Global Partners Income Fund Inc. Annual Report August 31, 2002 American Stock Transfer & Trust Company 59 Maiden Lane New York, New York 10038 ---------------- FIRST-CLASS MAIL U.S. POSTAGE PAID BROOKLYN, NY PERMIT No. 1726 ---------------- GDFANN 8/02 02-3978 STATEMENT OF DIFFERENCES ------------------------ The division sign shall be expressed as.................................. [div]