<PAGE>
G L O B A L P A R T N E R S I N C O M E F U N D I N C .
April 15, 1999
Dear Shareholders:
We are pleased to provide this semi-annual report for the Global Partners Income
Fund Inc. ('Fund') as of February 26, 1999. Included within this report is an
analysis of the Fund's performance versus its benchmarks and its peer group, a
commentary on the emerging debt markets and U.S. high yield market, a listing of
the Fund's investments as of February 26 1999, and financial statements for the
six months ended February 26, 1999.
During the six months ended February 26, 1999, the net asset value of the Fund
increased from $9.76 per share at August 28, 1998 to $10.85 per share at
February 26, 1999. In addition, income dividends totalling $0.96075 were paid
during this period. Assuming reinvestment of these dividends in additional
shares of the Fund, the total rate of return based on net asset value for this
six month time frame was 21.61%. During the same period, the JP Morgan Emerging
Markets Bond Index Plus ('EMBI+'), a standard measure of return for the emerging
markets debt market, returned 17.86% and the Salomon Smith Barney High Yield
Market Index was up 5.45%. The Fund's outperformance was the result of several
factors which we will highlight below.
EMERGING MARKET DEBT SECURITIES
During the six months ended February 26, 1999, the emerging markets debt market
posted one of the more spectacular six-month performance advances we have seen
in years. Coming after an abysmal August 1998 when Russian defaults and hedge
fund liquidations caused the market to suffer its worst monthly decline since
its inception, the emerging debt market rebounded sharply to post returns in
excess of 5% for 3 out of the 6 months during the period.
The initial rebound was caused by a decision by the Federal Reserve Board
('Fed') to increase liquidity in the financial markets with a Federal Funds rate
cut of 25 basis points in September, October and November. This liquidity boost
caused the general bond market to firm and caused skittish investors to begin
migrating back into high yielding assets that held some risk. This marginal
appetite for yield caused incremental demand for the debt of most emerging
market countries, which began the period yielding above 20%. This demand, when
combined with a lack of sell pressure from the recently liquidated hedge fund
community, sustained the rally and caused the market to appreciate more than 23%
over this three month time frame.
While we were not completely convinced, at the end of August, that the emerging
markets debt market was headed straight up over the next three months, we were
confident in our conviction that the worst of the selling pressure was over and
we were very near the bottom. Our conviction, for the most part, was based on
experience we had gained during similar events in past years. These included the
high yield market decline during 1990, the decline due to the 1994 global bond
market implosion, and the decline suffered during the first quarter of 1995 as a
result of the devaluation of the Mexican Peso. While each event is unique unto
itself, many similarities exist. One of the similarities is that markets
generally overshoot on the downside and if you are vigilant in your analysis,
value can be found. Another similarity is that history teaches us that you can
never pick the exact market bottom but if you panic and remain in cash when you
PAGE 1
<PAGE>
G L O B A L P A R T N E R S I N C O M E F U N D I N C .
believe the market offers compelling value, you miss the initial upside and, in
turn, a significant portion of the return.
Accordingly, at the beginning of September, after concluding that the selling
pressure was nearing an end and the market was offering significant value under
a host of scenarios, we reinvested the Fund's cash into the market and were able
to capitalize on the upside.
As the market headed into December, our worries about a mounting domestic debt
problem in Brazil caused us to scale back our market exposure to Brazil and
neighbouring Argentina. Concern lay in our belief that the escalation of debt,
caused by the combination of lofty real interest rates and very high domestic
debt, would be unsustainable and the government would be forced to act.
Notwithstanding the November announcement of a new IMF aide package for Brazil
meant to avert a currency crisis, we believed the country was experiencing a
capital flight and domestic debt trap that would end in devaluation. We felt
that repositioning the assets into the debt of higher quality countries that did
not have a financing need for the foreseeable future and had not fully recovered
from the August decline, was prudent. These countries included Panama, Peru, and
Morocco. In addition, we repositioned some of the assets into Venezuelan
securities that we believed were oversold due to concerns that Presidential
frontrunner Hugo Chavez would announce market unfriendly reforms shortly after
his early December victory. Our analysis of the political environment at the
time led us to believe that Chavez's rhetoric would be more political in nature
and that his desire to radically change the economic climate was minimal.
This repositioning aided the Fund during the month of December as further
pressure on Brazil caused a 2.5% decline in the market while Venezuela rallied
11.81% as President elect Chavez proposed more pro-market reforms.
During January and February, Brazil's devaluation contributed to a 2.32% decline
in the market and reinforced our earlier decision to remain underweight the
credit. Also, during this period, Ecuador, an underweight, suffered an 11.31%
decline as the government was forced to devalue its currency amid mounting
political troubles and capital flight.
While we were happy with our asset allocation and market timing decisions during
the period, the performance of the Fund continued to be buffeted by our decision
to marginally overweight US dollar denominated Eurobonds from Russia. As we
mentioned in our last review, our original decision to invest in Russia was
predicated on our belief that the country's debt burden was very manageable and
its history of timely debt service during prior economic troubles would remain
unscathed. While we have not experienced default in our Eurobonds, and the yield
on these instruments is substantial, the lack of any meaningful demand for the
bonds caused the debt to trade down during the quarter. Subsequent to the end of
the period, we revisited the government in Moscow to further evaluate the
situation. While we left the country reasonably certain that Eurobonds would be
serviced, we are of the opinion that other securities, primarily debt inherited
from the former Soviet Union, will be restructured and ensuingly cause continued
volatility in our position.
PAGE 2
<PAGE>
G L O B A L P A R T N E R S I N C O M E F U N D I N C .
OUTLOOK
We remain optimistic with the prospects for continued strength in the emerging
debt market. Asia looks as if economic growth will turn positive this year. This
should help global demand for emerging market exports. We are also encouraged by
Brazil's ability to capture the positive effects of the devaluation, mainly
export competitiveness and lower interest rates, without capturing too many of
the negatives. In addition, commodity price gains appear to be sticking. This
should significantly improve government revenues for most countries, as they are
net commodity exporters. This combination of events should help drive yields
considerably below their current level which is above 14%.
U.S. HIGH-YIELD SECURITIES
During the six-month period ended February 26, 1999, the U.S. high yield market
was also impacted by the distress in the world financial markets ensuing from
the Russian crisis. This volatility was vividly illustrated in August, when the
market declined 6.70%, the worst monthly performance since the inception of the
Salomon Smith Barney High Yield Market Index in 1989. In addition, spreads
widened nearly 220 basis points during the month, going from 374 to 590 basis
points over the 10-Year Treasury on July 31st and August 31st, respectively.
In the final months of 1998, the Fed lowered its short-term lending rate by 25
basis points on three separate occasions, resulting in a recovery for the high
yield market. The Fed's intervention successfully restored liquidity and
confidence in the market. The shift in market sentiment brought investors back
to high yielding assets, pouring over $5 billion back into high yield mutual
funds during November -- an all time record monthly inflow. At the end of the
year, the high yield universe was represented by approximately 2,000 issuers and
over $480 billion in outstanding debt, having more than doubled from ten years
ago.
For the six months ended February 26, 1999, investors in the high yield market
favored the higher credit quality tiers, with BB-issues, B-issues and CCC-issues
returning 8.09%, 4.47% and 1.23%, respectively. The strongest outperforming
industries during the period included Cable & Media, Aerospace, Utilities and
Automotive. The worst of the underperformers included Energy, Consumer Products,
Textile/Apparel and Financials.
For the remainder of 1999, we expect slower, yet still robust economic growth in
the U.S. We believe the Fed will continue to be cautiously proactive in
addressing the market's liquidity and stability. We will continue to carefully
evaluate and select investments consistent with our research investment
philosophy. We remain confident that the Fund is well-positioned and generously
diversified among sectors and issuers. While we expect volatility to continue in
the global high yield markets, one should not lose sight of the opportunities
offered by current spread levels and this dynamic environment.
In a continuing effort to provide timely information concerning Global Partners
Income Fund Inc., shareholders may call 1-888-777-0102 (toll free), Monday
through Friday from 8:00 am to 6:00 pm EST for the Fund's current net asset
value, market price and other information regarding the Fund's portfolio
holdings and allocations. For information concerning your GDF
PAGE 3
<PAGE>
G L O B A L P A R T N E R S I N C O M E F U N D I N C .
stock account, please call American Stock Transfer & Trust Company at
1-800-937-5449 (1-718-921-8200 if you are calling from within New York City).
We appreciate the confidence you have demonstrated in the past and hope to
continue to serve you in the future years.
* * *
Sincerely,
<TABLE>
<S> <C>
/s/ Heath B. McLendon /s/ William D. Cvengros
Heath B. McLendon William D. Cvengros
Chairman and President Co-Chairman of the Board
/s/ Peter J. Wilby
Peter J. Wilby
Executive Vice President
</TABLE>
PAGE 4
<PAGE>
G L O B A L P A R T N E R S I N C O M E F U N D I N C .
Schedule of Investments (unaudited)
February 26, 1999
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Corporate Bonds -- 43.7%
Basic Industries -- 5.4%
$ 1,500,000 APP International Finance, 11.750% due 10/1/05(a)........................... $ 997,500
2,000,000 Berry Plastics, 12.250% due 4/15/04(a)...................................... 2,097,500
1,500,000 Envirosource Inc., 9.750% due 6/15/03(a).................................... 1,301,250
1,000,000 Equistar Chemicals L.P., 8.750% due 2/15/09(b).............................. 1,015,000
1,000,000 Glencore Nickel, 9.000% due 12/1/14(a)...................................... 861,250
2,000,000 PCI Chemicals Canada Inc., 9.250% due 10/15/07(a)........................... 1,425,000
1,500,000 P&L Coal Holdings Corp., Series B, 8.875% due 5/15/08....................... 1,554,375
2,000,000 Radnor Holdings, 10.000% due 12/1/03(a)..................................... 2,070,000
1,000,000 Tekni-Plex Inc., 11.250% due 4/1/07(a)...................................... 1,100,000
------------
12,421,875
------------
Consumer Cyclicals -- 1.3%
2,000,000 Cole National Group, 8.625% due 8/15/07(a).................................. 1,970,000
1,000,000 HMH Properties, Inc., Series C, 8.450% due 12/1/08.......................... 992,500
------------
2,962,500
------------
Consumer Non-Cyclicals -- 9.6%
1,000,000 B&G Foods Inc., 9.625% due 8/1/07(a)........................................ 965,000
2,000,000 Carr-Gottstein Foods Co., 12.000% due 11/15/05(a)........................... 2,280,000
2,000,000 CFP Holdings Inc., 11.625% due 1/15/04(a)................................... 1,670,000
1,000,000 Dade International Inc., 11.125% due 5/1/06(a).............................. 1,108,750
1,250,000 Harrahs Operating Co., Inc., 7.875% due 12/15/05............................ 1,250,000
1,461,000 Hines Horticulture, 11.750% due 10/15/05(a)................................. 1,585,185
1,500,000 Horseshoe Gaming, 9.375% due 6/15/07(a)..................................... 1,530,000
1,000,000 Imperial Holly Corp., 9.750% due 12/15/07(a)................................ 1,015,000
1,000,000 Jitney-Jungle Stores, 12.000% due 3/1/06.................................... 1,110,000
1,900,000 North Atlantic Trading, 11.000% due 6/15/04(a).............................. 1,945,125
2,000,000 Park Place Entertainment, 7.875% due 12/15/05(b)............................ 1,965,000
2,250,000 Revlon Worldwide, zero coupon due 3/15/01(a)................................ 1,254,375
900,000 SC International Services, 9.250% due 9/1/07(a)............................. 911,250
1,000,000 Shop Vac Corp., 10.625% due 9/1/03(a)....................................... 1,091,250
1,550,000 Stroh Brewery, 11.100% due 7/1/06(a)........................................ 1,315,563
946,000 Waterford Gaming LLC, 12.750% due 11/15/03(a)............................... 1,064,250
------------
22,060,748
------------
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
PAGE 5
<PAGE>
G L O B A L P A R T N E R S I N C O M E F U N D I N C .
Schedule of Investments (unaudited) (continued)
February 26, 1999
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Energy -- 1.5%
$ 1,000,000 Dailey International Inc., 9.500% due 2/15/08(a)............................ $ 501,250
1,000,000 Magnum Hunter, 10.000% due 6/1/07........................................... 820,000
500,000 TransAmerican Energy, 11.500% due 6/15/02................................... 150,000
2,000,000 TransAmerican Energy, zero coupon until 6/15/99 (13.000% thereafter) due
6/15/02(a)................................................................ 600,000
2,000,000 United Refining, 10.750% due 6/15/07(a)..................................... 1,390,000
------------
3,461,250
------------
Financial -- 2.5%
1,000,000 Airplanes Pass Through Trust, 10.875% due 3/15/19(a)........................ 1,012,500
1,000,000 Contifinancial Corp., 7.500% due 3/15/02.................................... 650,000
1,000,000 Contifinancial Corp., 8.125% due 4/1/08..................................... 640,000
2,000,000 Morgan Stanley Aircraft Finance, Series 1A, Class D1, 8.700% due
3/15/23(a)(b)............................................................. 1,900,000
1,500,000 Williams Scotsman Inc., 9.875% due 6/1/07................................... 1,560,000
------------
5,762,500
------------
Industrial/Manufacturing -- 5.2%
1,000,000 Alvey Systems Inc., 11.375% due 1/31/03(a).................................. 1,016,250
1,500,000 Axiohm Transaction Solution, 9.750% due 10/1/07(a).......................... 1,387,500
1,750,000 Breed Technologies Inc., 9.250% 4/15/08(b).................................. 892,500
1,250,000 Foamex L.P., 9.875% due 6/15/07(a).......................................... 1,251,563
1,000,000 Hexcel Corp., 9.750% due 1/15/09(b)......................................... 1,008,750
1,900,000 High Voltage Engineering, 10.500% due 8/15/04(a)............................ 1,807,375
1,000,000 Jordan Industries, 10.375% due 8/1/07(a).................................... 1,025,000
1,000,000 Jordan Telecom Products, zero coupon until 8/1/00 (11.750% thereafter) due
8/1/07.................................................................... 810,000
2,000,000 L-3 Comms Corp., 10.375% due 5/1/07......................................... 2,207,500
500,000 Venture Holdings Trust, 9.500% due 7/1/05................................... 487,500
------------
11,893,938
------------
Media/Telecommunications -- 12.0%
1,250,000 Adelphia Communications, 9.875% due 3/1/07(a)............................... 1,395,313
1,500,000 American Media Operations, Inc., 11.625% due 11/15/04(a).................... 1,606,875
750,000 Big Flower Press, 8.875% due 7/1/07(a)...................................... 753,750
1,250,000 Big Flower Press, 8.625% due 12/1/08(a)(b).................................. 1,276,563
2,000,000 CSC Holdings Inc., 10.500% due 5/15/16(a)................................... 2,440,000
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
PAGE 6
<PAGE>
G L O B A L P A R T N E R S I N C O M E F U N D I N C .
Schedule of Investments (unaudited) (continued)
February 26, 1999
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Media/Telecommunications -- 12.0%
$ 4,000,000 Century Communications, zero coupon due 1/15/08(a)...................... $ 2,135,000
1,050,000 Diamond Cable Co., zero coupon until 12/15/00 (11.750% thereafter)
due 12/15/05(a)....................................................... 913,500
2,000,000 Granite Broadcasting, 10.375% due 5/15/05(a)............................ 2,070,000
1,750,000 ICG Holding Inc., zero coupon until 9/15/00 (13.500% thereafter) due
9/15/05(a)............................................................ 1,505,000
1,000,000 Intermedia Communication, 8.600% due 6/1/08(a).......................... 952,500
2,000,000 Lin Television Corp., 8.375% due 3/1/08(a).............................. 2,095,000
1,500,000 Nextel Communications, 9.750% due 8/15/04(a)............................ 1,526,250
750,000 Nextel Communications, zero coupon until 2/15/03, (9.950% thereafter)
due 2/15/08........................................................... 480,000
2,500,000 NTL Inc., zero coupon until 2/1/01 (11.500% thereafter) due 2/1/06(a)... 2,156,250
2,000,000 Rogers Communications, 8.875% due 7/15/07(a)............................ 2,100,000
987,000 SFX Broadcasting, 10.750% due 5/15/06(a)................................ 1,095,570
2,500,000 United International Holdings, zero coupon until 2/15/03 (10.750%
thereafter) due 2/15/08............................................... 1,631,250
2,250,000 Viatel Inc., zero coupon until 4/15/03 (12.500% thereafter) due 4/15/08. 1,361,250
------------
27,494,071
------------
Services/Other -- 3.8%
2,000,000 Allied Waste North America, 7.875% due 1/1/09........................... 2,025,000
750,000 APCOA Inc., 9.250% due 3/15/08.......................................... 700,313
1,000,000 Dyncorp Inc., 9.500% due 3/1/07(a)...................................... 1,001,250
1,000,000 Intertek Finance PLC, 10.250% due 11/1/06(a)............................ 931,250
2,000,000 Protection One Alarm Co., 8.125% due 1/15/09(b)......................... 2,030,000
2,000,000 Safety-Kleen Services, 9.250% due 6/1/08(a)............................. 2,090,000
------------
8,777,813
------------
Technology/Electronics -- 0.7%
1,500,000 Amphenol Corp., 9.875% due 5/15/07(a)................................... 1,556,250
900 units DecisionOne Corp., zero coupon until 8/1/02 (11.50% thereafter) due
8/1/08(c)............................................................. 31,500
------------
1,587,750
------------
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
PAGE 7
<PAGE>
G L O B A L P A R T N E R S I N C O M E F U N D I N C .
Schedule of Investments (unaudited) (continued)
February 26, 1999
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Transportation -- 1.5%
$ 1,000,000 Atlantic Express, 10.750% due 2/1/04(a)..................................... $ 1,027,500
1,000,000 Holt Group, 9.750% due 1/15/06(a)(b)........................................ 697,500
2,000,000 TFM Sa De Cv, zero coupon until 6/15/02 (11.750% thereafter) due 6/15/09.... 1,055,000
750,000 TFM Sa De Cv, 10.250% due 6/15/07........................................... 637,500
------------
3,417,500
------------
Utilities -- 0.2%
500,000 Companhia Energetica De Sao Paulo, 9.125% until 6/26/02 (9.625% thereafter)
due 6/26/07............................................................... 327,500
------------
Total Corporate Bonds (Cost -- $106,057,300)............................... 100,167,445
------------
Sovereign Bonds -- 47.1%
Argentina -- 7.4%
16,010,000 Republic of Argentina, Global Bond, 11.000% due 12/4/05(a).................. 14,449,025
2,850,000 Republic of Argentina, Structured Note, 12.142% due 4/10/05(a)(d)........... 2,536,500
------------
16,985,525
------------
Brazil -- 5.1%
Federal Republic of Brazil:
10,490,000 Discount Bond, Series ZL, 6.125% due 4/15/24(a)(d)........................ 5,821,950
8,250,000 NMB, Series L Bearer, 6.188% due 4/15/09(a)(d)............................ 4,349,297
2,750,000 NMB, Series L Registered, 6.188% due 4/15/09(a)(d)........................ 1,449,766
------------
11,621,013
------------
Bulgaria -- 0.5%
Republic of Bulgaria:
1,250,000 Discount Bond, Series A, 5.875% due 7/28/24(d)............................ 878,875
500,000 FLIRB, Series A, 2.500% due 7/28/12(d).................................... 301,250
------------
1,180,125
------------
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
PAGE 8
<PAGE>
G L O B A L P A R T N E R S I N C O M E F U N D I N C .
Schedule of Investments (unaudited) (continued)
February 26, 1999
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Colombia -- 2.8%
Republic of Colombia:
$ 525,000 7.250% due 2/15/03........................................................ $ 462,000
1,000,000 7.270% due 6/15/03(b)..................................................... 865,000
5,475,000 10.986% due 8/13/05(a)(d)................................................. 4,927,500
200,000 7.625% due 2/15/07........................................................ 163,000
------------
6,417,500
------------
Costa Rica -- 3.5%
Costa Rica:
6,000,000 Principal Bond, Series A, 6.250% due 5/21/10.............................. 5,175,000
3,500,000 Principal Bond, Series B, 6.250% due 5/21/15.............................. 2,843,750
------------
8,018,750
------------
Croatia -- 1.1%
Croatia:
300,000 Series A, 5.813% due 7/31/10(d)........................................... 251,625
2,655,330 Series B, 5.813% due 7/31/06(a)(d)........................................ 2,303,499
------------
2,555,124
------------
Ecuador -- 1.3%
Republic of Ecuador:
2,026,106 PDI Bearer Bond, 6.000% due 2/27/15(d)(e)................................. 551,103
846,950 PDI Registered Bond, 6.000% due 2/27/15(d)(e)............................. 231,323
1,075,000 Discount Bond, 6.000% due 2/28/25(d)...................................... 491,168
400,000 IE Bond, 6.000% due 12/21/04(d)........................................... 206,000
4,000,000 Par Bond, 3.500% due 2/28/25(d)........................................... 1,599,000
------------
3,078,594
------------
Ivory Coast -- 0.2%
2,000,000 Ivory Coast, FLIRB, 2.000% due 3/29/18(d)................................... 540,000
------------
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
PAGE 9
<PAGE>
G L O B A L P A R T N E R S I N C O M E F U N D I N C .
Schedule of Investments (unaudited) (continued)
February 26, 1999
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Mexico -- 6.6%
United Mexican States:
$ 6,125,000 Global Bond, 10.375% due 2/17/09.......................................... $ 5,979,531
12,100,000 Par Bond, Series W-B, 6.250% due 12/31/19(a)(f)........................... 9,067,135
------------
15,046,666
------------
Panama -- 2.0%
Republic of Panama:
4,650,000 IRB, 4.000% due 7/17/14(a)(d)............................................. 3,493,313
1,473,379 PDI Bond, 5.938% due 7/17/16(a)(d)(e)..................................... 1,105,035
------------
4,598,348
------------
Peru -- 1.5%
6,000,000 Republic of Peru, PDI, 4.000% due 3/7/17(a)(d).............................. 3,528,000
------------
Philippines -- 1.6%
3,575,000 Republic of Philippines, 9.875% due 1/15/19(a).............................. 3,552,656
------------
Poland -- 0.9%
2,250,000 Republic of Poland, PDI Bond, 4.000% due 10/27/14(a)(d)..................... 2,046,150
------------
Russia -- 4.1%
Russia, Global Bond:
3,500,000 11.750% due 6/10/03(b).................................................... 1,010,625
32,100,000 11.000% due 7/24/18....................................................... 7,663,875
2,175,000 12.750% due 6/24/28....................................................... 592,144
1,269,896 Russia, IAN, 5.969% due 12/15/15(b)(d)...................................... 138,101
------------
9,404,745
------------
South Korea -- 1.5%
Export-Import Bank of Korea, Global Bond:
1,500,000 7.250% due 6/25/01........................................................ 1,469,775
350,000 6.500% due 2/10/02........................................................ 334,163
1,550,000 Korea Development Bank, Global Bond, 7.900% due 2/1/02...................... 1,536,438
165,000 Republic of Korea, 8.875% due 4/15/08....................................... 175,106
------------
3,515,482
------------
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
PAGE 10
<PAGE>
G L O B A L P A R T N E R S I N C O M E F U N D I N C .
Schedule of Investments (unaudited) (continued)
February 26, 1999
<TABLE>
<CAPTION>
FACE
AMOUNT SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Venezuela -- 7.0%
Republic of Venezuela:
$ 1,071,444 DCB Trust, Series DL, 5.938% due 12/18/07(a)(d)........................... $ 669,010
2,500,000 Discount Bond, Series W-A, 5.813% due 3/31/20(a)(d)....................... 1,553,250
6,071,400 FLIRB, Series A, 6.125% due 3/31/07(a)(d)................................. 3,728,219
13,100,000 Global Bond, 13.625% due 8/15/18(a)....................................... 9,980,890
200,000 Global Bond, 9.125% due 6/18/07........................................... 149,000
------------
16,080,369
------------
Total Sovereign Bonds (Cost -- $113,492,907)............................... 108,169,047
------------
Loan Participations -- 8.3%
18,235,290 Kingdom of Morocco, Tranche B, 6.063% due 1/1/04 (Morgan Guaranty Trust
Company of New York, Morgan Stanley Emerging Markets Inc.)(d)(g).......... 15,203,673
25,375,000 Russia, Principal Loan, 5.969% due 12/15/20 (Chase Manhattan, Bank of
America, ING Securities, J.P. Morgan, Union Bank of
Switzerland)(d)(g)(h)..................................................... 1,807,969
627,272 The People's Democratic Republic of Algeria, Tranche A, 7.188% due 3/4/00
(Chase Manhattan)(d)(g)................................................... 526,909
1,254,545 The People's Democratic Republic of Algeria, Tranche 1, 6.375% due 9/4/06
(Chase Manhattan)(d)(g)................................................... 545,727
2,500,000 The People's Democratic Republic of Algeria, Tranche 3, 6.375% due 3/4/10
(Chase Manhattan)(d)(g)................................................... 1,050,000
------------
Total Loan Participations (Cost -- $34,353,306)............................ 19,134,278
------------
<CAPTION>
SHARES SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Preferred Stock -- 0.3%
1,000,000 APP Finance (II) Mauritius Ltd., Series A, 12.000%(d)....................... 490,000
TCR Holding Corp.:
4,091 Class B................................................................... 240
2,250 Class C................................................................... 126
5,932 Class D................................................................... 374
12,271 Class E................................................................... 773
1,132 Viatel, Inc., Convertible, Series A, 10.000%(e)............................. 118,882
------------
Total Preferred Stock (Cost -- $1,076,902)................................. 610,395
------------
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
PAGE 11
<PAGE>
G L O B A L P A R T N E R S I N C O M E F U N D I N C .
Schedule of Investments (unaudited) (continued)
February 26, 1999
<TABLE>
<CAPTION>
SHARES SECURITY VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Warrants and Rights(I) -- 0.6%
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.).................... $ 500
5,000 In Flight Phone (Exercise price of $0.01 per share expiring on 8/31/02. Each
warrant exercisable for one share of common stock.)....................... --
18,975 Republic of Argentina (Exercise price of 93.30% plus accrued interest per
1,000 bonds, expiring on 12/3/99.)........................................ 455,400
8,000 Terex Corporation Stock Appreciation Rights (Expiring 5/15/02).............. 136,000
6,000 United International Holdings (Exercise price of $15 per share expiring on
11/15/99. Each warrant exercisable for 4.535 shares of common stock.)..... 396,000
8,975 United Mexican States (Exchangeable into Mexican Global Bonds, expiring on
2/18/00).................................................................. 280,469
3,000 Wireless One Inc. (Exercise price of $11.55 per share. Each warrant
exercisable for one share of common stock.)............................... 750
------------
Total Warrants and Rights (Cost -- $459,003)............................... 1,269,119
------------
Total Investments -- 100% (Cost -- $255,439,418*)......................... $229,350,284
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
(a) All or a portion of the security is segregated as collateral pursuant to a
loan agreement.
(b) Pursuant to Rule 144A under the Securities Act of 1933, this security can
only be sold to qualified institutional investors.
(c) Each unit is comprised of a $1,000 par value Senior Note due 8/1/08 and a
warrant to purchase 1.9 shares of common stock at $23 per share expiring
8/1/07.
(d) Rate shown reflects current rate on instrument with variable rate or step
coupon rates.
(e) Payment-in-kind security for which part of the income earned is capitalized
as additional principal.
(f) Includes recovery rights.
(g) Participation interests were acquired through the financial institutions
indicated parenthetically.
(h) Security is currently in default.
(i) Non-income producing security.
* Aggregate cost for Federal income tax purposes is substantially the same.
<TABLE>
<S> <C> <C> <C>
DCB -- Debt Conversion Bond. IAN -- Interest in Arrears Note.
IE -- Interest Equalization. IRB -- Interest Reduction Bond.
FLIRB -- Front Loaded Interest Reduction Bond. NMB -- New Money Bond.
PDI -- Past Due Interest.
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
PAGE 12
<PAGE>
G L O B A L P A R T N E R S I N C O M E F U N D I N C .
Statement of Assets and Liabilities (unaudited)
February 26, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost -- $255,439,418)............................................ $229,350,284
Interest receivable...................................................................... 5,400,645
Receivable for securities sold........................................................... 2,074,947
Prepaid expenses......................................................................... 1,779
------------
TOTAL ASSETS............................................................................. 236,827,655
------------
LIABILITIES:
Loan payable (Note 4).................................................................... 75,000,000
Loan interest payable (Note 4)........................................................... 1,784,896
Due to custodian......................................................................... 482,012
Management fees payable.................................................................. 126,951
Payable for securities purchased......................................................... 48,059
Accrued expenses......................................................................... 168,826
------------
TOTAL LIABILITIES........................................................................ 77,610,744
------------
TOTAL NET ASSETS............................................................................. $159,216,911
------------
------------
NET ASSETS:
Common Stock ($0.001 par value, 100,000,000 shares authorized; 14,674,311 shares
outstanding)............................................................................ $ 14,674
Additional paid-in capital............................................................... 204,532,029
Overdistributed net investment income.................................................... (58,035)
Accumulated net realized loss from security transactions................................. (19,182,623)
Net unrealized depreciation of investments............................................... (26,089,134)
------------
TOTAL NET ASSETS............................................................................. $159,216,911
------------
------------
NET ASSET VALUE PER SHARE OF COMMON STOCK ($159,216,911 [div] 14,674,311 shares
outstanding)............................................................................... $10.85
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
PAGE 13
<PAGE>
G L O B A L P A R T N E R S I N C O M E F U N D I N C .
Statement of Operations (unaudited)
For the Six Months Ended February 26, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest................................................................................. $ 15,837,046
------------
EXPENSES:
Interest expense (Note 4)................................................................ 2,171,615
Management fees (Note 2)................................................................. 847,170
Custodian................................................................................ 35,310
Transfer agent........................................................................... 21,553
Directors' fees and expenses (Note 2).................................................... 16,384
Shareholder annual meeting............................................................... 12,260
Listing fee.............................................................................. 11,886
Shareholder communications............................................................... 10,788
Legal.................................................................................... 6,217
Audit and tax services................................................................... 4,168
Amortization of deferred organization costs (Note 1)..................................... 3,479
Other.................................................................................... 8,838
------------
TOTAL EXPENSES........................................................................... 3,149,668
------------
NET INVESTMENT INCOME........................................................................ 12,687,378
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 3):
Net Realized Loss From Security Transactions (excluding short-term securities):
Proceeds from sales.................................................................. 147,376,020
Cost of securities sold.............................................................. 161,742,341
------------
NET REALIZED LOSS........................................................................ (14,366,321)
------------
Change in Net Unrealized Depreciation of Investments:
Beginning of period.................................................................. (57,768,610)
End of period........................................................................ (26,089,134)
------------
DECREASE IN NET UNREALIZED DEPRECIATION.................................................. 31,679,476
------------
NET GAIN ON INVESTMENTS...................................................................... 17,313,155
------------
INCREASE IN NET ASSETS FROM OPERATIONS....................................................... $ 30,000,533
------------
------------
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
PAGE 14
<PAGE>
G L O B A L P A R T N E R S I N C O M E F U N D I N C .
Statements of Changes in Net Assets
For the Six Months Ended February 26, 1999 (unaudited)
and the Year Ended August 31, 1998
<TABLE>
<CAPTION>
FEBRUARY 26 AUGUST 31
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income.................................................... $ 12,687,378 $ 22,512,979
Net realized gain (loss)................................................. (14,366,321) 1,510,650
(Increase) decrease in net unrealized depreciation....................... 31,679,476 (81,994,340)
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS........................ 30,000,533 (57,970,711)
------------- -------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income.................................................... (14,045,848) (23,476,177)
Net realized gains....................................................... -- (7,150,029)
Excess of net realized capital gains..................................... -- (4,816,302)
------------- -------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS TO SHAREHOLDERS................ (14,045,848) (35,442,508)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued in reinvestment of distributions (105,157 and
62,020
shares issued)......................................................... 1,132,804 807,789
------------- -------------
INCREASE (DECREASE) IN NET ASSETS............................................ 17,087,489 (92,605,430)
NET ASSETS:
Beginning of period...................................................... 142,129,422 234,734,852
------------- -------------
END OF PERIOD*........................................................... $ 159,216,911 $ 142,129,422
------------- -------------
------------- -------------
*Includes undistributed (overdistributed) net investment income of.......... $(58,035) $1,300,435
------------- -------------
------------- -------------
</TABLE>
Statement of Cash Flows (unaudited)
For the Six Months Ended February 26, 1999
<TABLE>
<S> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:
Proceeds from sales of portfolio securities.............................................. $ 148,442,702
Purchases of portfolio securities........................................................ (147,563,630)
Net sales of short-term securities....................................................... 1,625,000
-------------
2,504,072
Net investment income.................................................................... 12,687,378
Accretion of discount on securities...................................................... (3,164,723)
Capitalized income on payment-in-kind securities......................................... (818,579)
Amortization of deferred organization costs (Note 1)..................................... 3,479
Net change in receivables/payables related to operations................................. 1,218,477
-------------
NET CASH PROVIDED BY OPERATING ACTIVITIES................................................ 12,430,104
-------------
CASH FLOWS USED BY FINANCING ACTIVITIES:
Proceeds from shares issued in reinvestment of distributions............................. 1,132,804
Distributions paid....................................................................... (14,045,848)
-------------
NET CASH USED BY FINANCING ACTIVITIES.................................................... (12,913,044)
-------------
Net Decrease in Cash......................................................................... (482,940)
Cash, Beginning of Period.................................................................... 928
-------------
DUE TO CUSTODIAN, END OF PERIOD.............................................................. $ (482,012)
-------------
-------------
</TABLE>
- --------------------------------------------------------------------------------
See notes to financial statements.
PAGE 15
<PAGE>
G L O B A L P A R T N E R S I N C O M E F U N D I N C .
Notes to Financial Statements (unaudited)
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 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 generally accepted accounting principles
('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 on securities purchased is accreted 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 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.
PAGE 16
<PAGE>
G L O B A L P A R T N E R S I N C O M E F U N D I N C .
Notes to Financial Statements (unaudited) (continued)
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 financial reporting purposes but not
for tax purposes are reported as distributions in excess of net investment
income or distributions in excess of net realized capital gains. To the extent
they exceed net investment income and net realized capital gains for tax
purposes, they are reported as tax return of capital.
UNAMORTIZED ORGANIZATION EXPENSES. Organization expenses amounting to $113,655
were incurred in connection with the organization of the Fund. These costs have
been deferred and amortized ratably over a five-year period from commencement of
operations. As of February 26, 1999, the amortization of the deferred
organization costs had been completed.
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 on debt obligations. For the six months ended February 26,
1999, the Fund paid interest expense of $2,358,984.
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, 1998, 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.
PAGE 17
<PAGE>
G L O B A L P A R T N E R S I N C O M E F U N D I N C .
Notes to Financial Statements (unaudited) (continued)
Note 2. Management and Advisory Fees and Other Transactions
The Fund has entered into a management agreement with Value Advisors LLC
('Investment Manager'), a subsidiary of PIMCO Advisors L.P. ('PIMCO'), 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 agreement with the Investment Manager was approved by shareholders at a
special meeting held on October 14, 1997, and has been in effect since the
closing of the sale of the Investment Manager by Oppenheimer Group Inc. to
PIMCO, which occurred on November 4, 1997. The Investment Manager was the
transferee of the investment management responsibilities for the Fund which were
previously provided by Advantage Advisers, Inc.
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'), 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 SSBC Fund Management Inc. ('SSBC'), formerly known as
Mutual Management Corp., an affiliate of the Investment Adviser, pursuant to a
Sub-Administration Agreement between the Investment Adviser and SSBC.
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 February 26, 1999, the Investment Adviser 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.
The Fund pays each Director not affiliated with the Investment Manager or the
Investment Adviser a fee of $5,000 per year, $700 for attendance at each board
meeting, $100 for participation in each telephonic meeting and reimbursement for
travel and out-of-pocket expenses for each board and committee meeting attended.
Note 3. Portfolio Activity
Purchases and sales of investment securities, other than short-term investments,
for the six months ended February 26, 1999, aggregated $147,611,689 and
$147,376,020, respectively. The federal
PAGE 18
<PAGE>
G L O B A L P A R T N E R S I N C O M E F U N D I N C .
Notes to Financial Statements (unaudited) (continued)
income tax cost basis of the Fund's investments at February 26, 1999 was
substantially the same as the cost basis for financial reporting. Gross
unrealized appreciation and depreciation amounted to $8,486,676 and $34,575,810,
respectively, resulting in net unrealized depreciation of $26,089,134.
Note 4. Bank Loan
The Fund has outstanding a $75,000,000 loan pursuant to a secured loan agreement
with ING Baring (U.S.) Capital Corporation. The current interest rate on the
loan is equal to six-month LIBOR plus 0.4375% and the maturity date is April 1,
1999. The collateral for the loan was valued at $137,934,679 on February 26,
1999 and is being held in a segregated account by the Fund's custodian. In
accordance with the terms of the loan agreement, the Fund must maintain a level
of collateral to debt of at least 150%. The loan was renewed on April 1, 1999
with an interest rate equal to six month LIBOR plus 2.00% and a maturity date of
April 30, 1999.
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. The market value of the Fund's
loan participations at February 26, 1999 was $19,134,278.
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.
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 gain or loss recorded on such transactions.
PAGE 19
<PAGE>
G L O B A L P A R T N E R S I N C O M E F U N D I N C .
Notes to Financial Statements (unaudited) (continued)
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 involve 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. Dividends Subsequent to February 26, 1999
On March 1 and April 1, 1999, the Board of Directors of the Fund declared a
dividend from net investment income, each in the amount of $0.11875 per share,
payable on March 26 and April 23, 1999, to shareholders of record on March 16
and April 13, 1999, respectively.
PAGE 20
<PAGE>
G L O B A L P A R T N E R S I N C O M E F U N D I N C .
Financial Highlights
Data for a share of common stock outstanding throughout each fiscal year ended
August 31, except where noted:
<TABLE>
<CAPTION>
1999(1) 1998 1997 1996 1995 1994(2)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD............ $ 9.76 $ 16.18 $ 13.88 $ 11.11 $ 12.01 $ 14.02
-------- -------- -------- -------- -------- --------
INCOME (LOSS) FROM OPERATIONS:
Net investment income.......... 0.87 1.55 1.55 1.70 1.54 0.97
Net realized and unrealized
gain (loss).................. 1.18 (5.53) 2.46 2.56 (1.02) (1.86)
-------- -------- -------- -------- -------- --------
Total Income (Loss) From
Operations..................... 2.05 (3.98) 4.01 4.26 0.52 (0.89)
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS FROM:
Net investment income.......... (0.96) (1.62) (1.71) (1.49) (1.42) (0.98)
Excess of net investment
income....................... -- -- -- -- -- (0.02)
Net realized gains............. -- (0.49) -- -- -- (0.07)
Excess of net realized capital
gains........................ -- (0.33) -- -- -- --
-------- -------- -------- -------- -------- --------
Total Distributions.............. (0.96) (2.44) (1.71) (1.49) (1.42) (1.07)
-------- -------- -------- -------- -------- --------
OFFERING COSTS ON ISSUANCE OF
COMMON STOCK................... -- -- -- -- -- (0.05)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD... $ 10.85 $ 9.76 $ 16.18 $ 13.88 $ 11.11 $ 12.01
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
MARKET VALUE, END OF PERIOD...... $ 11.125 $ 8.5625 $15.4375 $ 13.25 $ 11.125 $ 11.75
TOTAL RETURN, BASED ON MARKET
VALUE(3)....................... 41.91% (34.35)% 31.28% 34.22% 8.01% (9.02)%'DD'
RATIOS TO AVERAGE NET ASSETS:
Total expenses, including
interest expense............. 4.07%'D' 3.54% 3.55% 4.19% 4.85% 2.77%'D'
Total expenses, excluding
interest expense (operating
expenses).................... 1.26%'D' 1.31% 1.31% 1.32% 1.39% 1.38%'D'
Net investment income.......... 16.38%'D' 10.56% 10.14% 13.51% 14.10% 9.05%'D'
PORTFOLIO TURNOVER RATE.......... 65% 144% 107% 92% 85% 12%
NET ASSETS, END OF PERIOD
(000).......................... $159,217 $142,129 $234,735 $201,398 $161,178 $174,252
Bank Loans Outstanding, End of
Period (000)................... $ 75,000 $ 75,000 $ 75,000 $ 75,000 $ 75,000 $ 75,000
Weighted Average Bank Loans
(000).......................... $ 75,000 $ 75,000 $ 75,000 $ 75,000 $ 75,000 $ 47,272
Weighted Average Interest Rate on
Bank Loans..................... 5.90%'D' 6.34% 6.65% 6.99% 7.34% 5.44%'D'
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the six months ended February 26, 1999 (unaudited).
(2) For the period October 29, 1993 (commencement of investment operations)
through August 31, 1994.
(3) 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. This
calculation is not annualized.
'DD' Return calculated based on beginning of period price of $14.02 (initial
offering price of $15.00 less sales load of $0.98) and end of period
market value of $11.75 per share. This calculation is not annualized.
'D' Annualized.
PAGE 21
<PAGE>
G L O B A L P A R T N E R S I N C O M E F U N D I N C .
Selected Quarterly Financial Information (unaudited)
SUMMARY OF QUARTERLY RESULTS OF OPERATIONS:
<TABLE>
<CAPTION>
NET REALIZED GAIN
(LOSS) & CHANGE
IN NET UNREALIZED
NET INVESTMENT APPRECIATION
INCOME (DEPRECIATION)
---------------------- ---------------------
QUARTERS ENDED* TOTAL PER SHARE TOTAL PER SHARE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
November 30, 1996............................................. $6,038 $ 0.42 $ 18,781 $ 1.29
February 28, 1997............................................. 5,658 0.39 10,982 0.76
May 31, 1997.................................................. 5,426 0.37 (1,100) (0.07)
August 31, 1997............................................... 5,440 0.37 6,991 0.48
November 30, 1997............................................. 5,502 0.38 (8,712) (0.60)
February 27, 1998............................................. 5,521 0.38 5,620 0.39
May 29, 1998.................................................. 5,518 0.38 (5,824) (0.40)
August 31, 1998............................................... 5,972 0.41 (71,568) (4.92)
November 30, 1998............................................. 6,790 0.46 26,849 1.84
February 26, 1999............................................. 5,897 0.41 (9,536) (0.66)
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
* Totals expressed in thousands of dollars except per share amounts.
PAGE 22
<PAGE>
G L O B A L P A R T N E R S I N C O M E F U N D I N C .
Additional Shareholder Information (unaudited)
On December 10, 1998, the Annual Meeting of the Fund's Stockholders was held for
the purpose of voting on the following matters:
1. The election of Heath B. McLendon, Dr. Riordan Roett and Charles F.
Barber as directors of the Fund; and
2. The ratification of the selection of PricewaterhouseCoopers LLP as the
Fund's independent accountants for the fiscal year ended August 31,
1999.
The results of the vote on Proposal 1 were as follows:
<TABLE>
<CAPTION>
% OF SHARES VOTES % OF SHARES
NAME OF DIRECTORS VOTES FOR VOTED AGAINST VOTED
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Heath B. McLendon 13,173,807 99.3% 96,959 0.7%
Dr. Riordan Roett 13,172,830 99.3% 97,936 0.7%
Charles F. Barber 13,174,211 99.3% 96,555 0.7%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
The results of the vote on Proposal 2 were as follows:
<TABLE>
<CAPTION>
% OF SHARES VOTES % OF SHARES VOTES % OF SHARES
VOTES FOR VOTED AGAINST VOTED ABSTAINED ABSTAINED
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
13,134,327 99.0% 40,505 0.3% 95,934 0.7%
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
PAGE 23
<PAGE>
G L O B A L P A R T N E R S I N C O M E F U N D I N C .
Other Information (unaudited)
Year 2000. The investment management services provided to the Fund by the
Investment Adviser depend in large part on the smooth functioning of its
computer systems. Many computer software systems in use today cannot recognize
the year 2000, but revert to 1900 or some other date, due to the manner in which
the dates were encoded or calculated. The capability of these systems to
recognize the year 2000 could have a negative impact on the Investment Adviser's
provision of investment advisory services, including handling of securities
trades, pricing and account services. The Investment Adviser has advised the
Fund that it has been reviewing all of their computer systems and actively
working on necessary changes to its systems to prepare for the year 2000 and
expects that given the extensive testing which it is undertaking, its systems
will be year 2000 compliant before such date. In addition, the Investment
Adviser has been advised by certain of the Fund's service providers that they
are also in the process of modifying their systems with the same goal. There
can, however, be no assurance that the Investment Adviser or any other service
provider will be successful in achieving year 2000 compliance, or that
interaction with other non-complying computer systems will not impair services
to the Fund at that time.
PAGE 24
<PAGE>
G L O B A L P A R T N E R S I N C O M E F U N D I N C .
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
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
PAGE 25
<PAGE>
G L O B A L P A R T N E R S I N C O M E F U N D I N C .
Form of Terms and Conditions of Amended and Restated Dividend
Reinvestment and Cash Purchase Plan (continued)
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.
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
PAGE 26
<PAGE>
G L O B A L P A R T N E R S I N C O M E F U N D I N C .
Form of Terms and Conditions of Amended and Restated Dividend
Reinvestment and Cash Purchase Plan (continued)
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 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
PAGE 27
<PAGE>
G L O B A L P A R T N E R S I N C O M E F U N D I N C .
Form of Terms and Conditions of Amended and Restated Dividend
Reinvestment and Cash Purchase Plan (continued)
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 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.
PAGE 28
<PAGE>
G L O B A L P A R T N E R S I N C O M E F U N D I N C .
DIRECTORS
CHARLES F. BARBER
Consultant; formerly Chairman,
ASARCO Incorporated
WILLIAM D. CVENGROS
Co-Chairman of the Board;
Chief Executive Officer and
President of Value Advisors LLC and
Chief Executive Officer and
President of PIMCO Advisors L.P.
LESLIE H. GELB
President, The Council on Foreign Relations
HEATH B. MCLENDON
Co-Chairman of the Board;
Managing Director, Salomon Smith Barney Inc.
President and Director, Mutual Management
Corp. and Travelers Investment Advisers, Inc.;
Chairman, Smith Barney Strategy Advisors 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
OFFICERS
WILLIAM D. CVENGROS
Co-Chairman of the Board
HEATH B. MCLENDON
Co-Chairman of the Board
STEPHEN J. TREADWAY
President
LEWIS E. DAIDONE
Executive Vice President and Treasurer
THOMAS K. FLANAGAN
Executive Vice President
NEWTON B. SCHOTT
Executive Vice President
BETH A. SEMMEL
Executive Vice President
PETER J. WILBY
Executive Vice President
ANTHONY PACE
Assistant Controller
CHRISTINA T. SYDOR
Secretary
GLOBAL PARTNERS
INCOME FUND INC.
7 World Trade Center
New York, New York 10048
Telephone 1-888-777-0102
INVESTMENT MANAGER
Value Advisors LLC
800 Newport Center Drive
Suite 100
Newport Beach, California 92660
INVESTMENT ADVISER
Salomon Brothers Asset Management Inc
Seven World Trade Center
New York, New York 10048
CUSTODIAN
The Chase Manhattan Bank
Four Metrotech Center
Brooklyn, New York 11245
DIVIDEND DISBURSING AND TRANSFER AGENT
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
LEGAL COUNSEL
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
NEW YORK STOCK EXCHANGE SYMBOL
GDF
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
GLOBAL PARTNERS
INCOME FUND INC.
SEMI-ANNUAL REPORT
FEBRUARY 26, 1999
AMERICAN STOCK TRANSFER & TRUST COMPANY
40 WALL STREET
NEW YORK, NEW YORK 10005
---------------------
BULK RATE
U.S. POSTAGE
PAID
STATEN ISLAND, NY
PERMIT No.
169
---------------------
STATEMENT OF DIFFERENCES
------------------------
The dagger symbol shall be expressed as ................................. 'D'
The double dagger symbol shall be expressed as........................... 'DD'
The division sign shall be expressed as ................................. [div]
