UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-06475
______________________________________________
Strategic Global Income Fund, Inc.
______________________________________________________________________________
(Exact name of registrant as specified in charter)
51 West 52nd Street, New York, New York 10019-6114
______________________________________________________________________________
(Address of principal executive offices) (Zip code)
Mark F. Kemper, Esq.
UBS Global Asset Management
51 West 52nd Street
New York, NY 10019-6114
(Name and address of agent for service)
Copy to:
Jack W. Murphy, Esq.
Dechert LLP
1775 I Street, N.W.
Washington, DC 20006-2401
Registrant’s telephone number, including area code: 212-882 5000
Date of fiscal year end: November 30
Date of reporting period: May 31, 2009
Item 1. Reports to Stockholders.
![](https://capedge.com/proxy/N-CSRS/0001209286-09-000441/ubs_front.jpg)
Strategic Global Income
Fund, Inc.
Semiannual Report
May 31, 2009
Strategic Global Income Fund, Inc.: | |
Managed distribution policy—key points to note | |
• | The Fund has a managed distribution policy. Effective August 2009, the Fund makes regular monthly distributions at an annualized rate equal to 7% of the Fund’s net asset value, as determined as of the last trading day during the first week of a month (usually a Friday, unless the NYSE is closed that day). (From May 2005 through the monthly distribution for July 2009, the rate was 8%.) |
• | To the extent that the Fund’s taxable income in any fiscal year exceeds the aggregate amount distributed based on a fixed percentage of its net asset value, the Fund would make an additional distribution in the amount of that excess near the end of the fiscal year. To the extent that the aggregate amount distributed by the Fund (based on a percentage of its net assets) exceeds its current and accumulated earnings and profits, the amount of that excess would constitute a return of capital or net realized capital gains for tax purposes. A return of capital may occur, for example, when some or all of the money that shareholders invested in the Fund is deemed to be paid back to shareholders. A return of capital distribution does not necessarily reflect the Fund’s investment performance and should not be confused with “yield” or “income.” |
• | You should not draw any conclusions about the Fund’s investment performance from the amount of the monthly distribution or from the terms of the Fund’s managed distribution policy. |
• | The Fund periodically issues notices and press releases estimating the source characteristics of its monthly distributions. The amounts and sources reported in these materials are only estimates and are not being provided for tax reporting purposes. The actual amounts and sources of the amounts for accounting and tax reporting purposes will depend upon the Fund’s investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. The Fund will send you a Form 1099-DIV (or your financial intermediary should provide you with similar information) for the calendar year that will tell you how to report these distributions for federal income tax purposes. |
• | The Fund’s Board may change or terminate the managed distribution policy at any time without prior notice to Fund shareholders; any such change or termination may have an adverse effect on the market price for the Fund’s shares. |
• | Further information regarding the Fund’s managed distribution policy is contained in the section captioned “Distribution policy” towards the end of this report. |
Strategic Global Income Fund, Inc.
July 15, 2009
Dear shareholder, | Strategic Global Income Fund, Inc. Investment goals: Primarily, high level of current income; secondarily, capital appreciation Portfolio management: Portfolio management team, including Uwe Schillhorn UBS Global Asset Management (Americas) Inc. Commencement: February 3, 1992 | ||
NYSE symbol: SGL | |||
Distribution payments: Monthly | |||
(1) | The Strategic Global Benchmark is an unmanaged index compiled by the advisor, constructed as follows: 67% Citigroup World Government Bond Index (WGBI)SM and 33% JPMorgan Emerging Markets Bond Index Global (EMBI Global). Investors should note that indices do not reflect the deduction of fees, expenses or taxes. |
Strategic Global Income Fund, Inc.
regarding the weak global economy and continued issues in the financial system.(2)
An interview with Portfolio Manager Uwe Schillhorn | ||
Q. | How would you describe the global economic environment during the reporting period? | |
A. | Looking back, the economy, as measured by US gross domestic product (“GDP”), weakened significantly during the six-month period, hurt by the bursting of the housing bubble, a severe credit crunch, falling business spending and surging unemployment. In the fourth quarter of 2008, GDP declined 6.3%—the worst quarterly reading since 1982. The economy remained weak to start the year, as the estimate for first quarter GDP was a decline of 5.5%. | |
The news wasn’t much better overseas, as the troubles in the US quickly spread to other developed countries as well. During the first quarter of 2009, GDP in Germany fell 14.4%, while Mexico’s GDP fell 21.5%, and Japan’s economy contracted 15.2%—the worst reading since 1955. While emerging markets countries generally produced better growth rates than their developed country counterparts, they were not immune to the global economic downturn. | ||
Q. | How did the world’s bond markets perform over the reporting period? | |
A. | The US bond market as a whole generated a positive return during the six-month reporting period. After a lengthy period of heightened risk aversion, investors were gradually drawn to lower-quality, non-Treasury securities during the reporting period. This was prompted by signs that the US government’s stimulus efforts might take hold and hopes that positive growth would return later in 2009. In particular, both investment grade and high yield bonds posted solid returns over the six months ended May 31, 2009. | |
Although there were periods of heightened volatility, the emerging markets debt asset class as a whole performed extremely well during the reporting period. Despite continued poor liquidity and weak fundamentals in many areas, emerging markets debt spreads—that is, the difference |
(2) | A fund trades at a premium when the market price at which its shares trade is more than its NAV. Alternatively, a fund trades at a discount when the market price at which its shares trade is less than its NAV. The market price is the price the market is willing to pay for shares of a fund at a given time, and may be influenced by a range of factors, including supply and demand and market conditions. NAV per share is determined by dividing the value of the Fund’s securities, cash and other assets, less all liabilities, by the total number of common shares outstanding. |
Strategic Global Income Fund, Inc.
between the yield paid on US Treasury bonds and emerging markets debt—stabilized in November 2008. This occurred as concerns about the possibility of emerging markets countries defaulting on their debt lessened, given financial support from the International Monetary Fund and the World Bank. As spreads stabilized and investor risk aversion abated somewhat, liquidity and inflows into the asset class increased, especially toward the end of the reporting period. | |||
Q. | How did you position the portfolio from a duration standpoint? | ||
A. | In an attempt to reduce the Fund’s level of risk, we kept its duration—a measure of a fund’s sensitivity to interest rate changes—lower than that of its benchmark throughout the reporting period. While this positioning initially detracted from the Fund’s performance in the early part of the reporting period, it started to aid performance somewhat beginning in February 2009. Overall, the Fund’s duration positioning over the six-month period was slightly positive for performance. | ||
Q. | Which currency strategies did you use during the period? | ||
A. | Overall, we maintained a largely neutral currency position relative to the Fund’s benchmark. While we reduced holdings of emerging markets currencies at the beginning of the reporting period, we increased this position toward the end, as we believed that economic stabilization, combined with higher commodity prices, was likely to support these currencies. This positioning benefited the Fund’s performance as emerging markets currencies appreciated significantly. | ||
However, these positive effects were mitigated as hedged positions detracted from performance following the US dollar’s depreciation. Throughout the reporting period, we maintained relatively stable currency positioning, with the largest exposures to the US dollar, the Euro, and the Norwegian Krone. | |||
Q. | Which holdings or strategies generated positive results over the period? | ||
A. | • | Within emerging markets debt, the Fund’s overall country positioning and security selection benefited performance during the reporting period. In particular, the Fund’s exposure to quasi-government bonds—that is, bonds indirectly or directly guaranteed by a government—enhanced results. These bonds had sold off sharply in the fall of 2008, largely because they were viewed as being similar to bank bonds. However, it later became clear that they were more similar to government bonds—for example, some Russian quasi-government bonds had the Russian government’s |
Strategic Global Income Fund, Inc.
ownership and backing. Following this, the performance of quasi-government bonds rebounded, benefiting results. In addition, the Fund’s holdings in oil-related and commodity-exporting countries, such as Brazil, Turkey and Mexico, were positive contributors to performance as commodity prices stabilized over the reporting period. | |||
• | At the beginning of the reporting period, the Fund invested in US Treasury Inflation-Protected Securities (TIPS). At the time of investment, liquidity factors and significant economic pessimism drove market yields to what we considered to be extremely attractive levels. Due to increasing inflation expectations, spreads—the difference between the yield paid on US Treasury bonds and emerging markets debt—widened substantially, and the position in TIPS contributed positively to performance. Despite improvement in pricing toward the end of the reporting period, we continued to consider inflation-linked bonds to be attractive relative to nominal bonds—that is, bonds that pay a set rate of interest. | ||
• | The market for securitized products continued to recover, and the Fund’s holdings in this area benefited performance. Non-agency residential mortgage-backed securities benefited from declining agency mortgage rates, and commercial mortgage-backed securities also recovered significantly during the reporting period. Asset-backed security spreads narrowed, as the market for new issues began to function with the support of the Federal Reserve-sponsored Term Asset Loan Facility (TALF), and the credit yield curve flattened after reaching extreme levels. | ||
Q. | Were there any particular strategies that didn’t work well for the Fund? | ||
A. | • | As previously mentioned, our short duration position initially detracted from the Fund’s performance. However, it was a positive contributor later in the period. | |
• | In an effort to take advantage of market opportunities and to diversify the Fund, we also purchased collateralized loan obligations (CLOs) and collateralized debt obligations (CDOs). We focused on the higher levels of the capital structure—tranches originally rated single-A or above—which are less likely to suffer principal losses even under elevated corporate default scenarios. However, CLO prices continued to fall in the early part of 2009, even as the underlying collateral—high yield corporate credit—began to recover. |
Strategic Global Income Fund, Inc.
While these holdings were negative for performance overall, toward the end of the period, the CLO market started to respond to the improvements in corporate credit and other securitized markets, which helped performance during that portion of the reporting period. We maintained a focus on obligations originally rated single-A or above, as well as European CLOs, which have significantly lagged the US CLO market, and we believe may offer a more attractive liquidity premium. | |||
Q. | What is your outlook for the global economy and fixed income markets? | ||
A. | While the Fund benefited from stabilization in the asset class and declining investor risk aversion during the period, we believe the current environment could best be described as being “fragile” given the weak global economic conditions overall. | ||
Emerging markets exports, from metals to semiconductors, continue to feel the strains of contracting economies in developed countries. Emerging markets countries are also highly dependent on capital flows, and we expect these inflows to remain challenged in the near term. Additionally, spending from central banks has risen sharply, and we expect that it will put additional pressure on fiscal and economic conditions. | |||
However, we feel that emerging markets countries are well-positioned to meet their debt service payments. We believe that while fundamentals in emerging markets countries face challenges, this has already largely been priced into debt valuations. Also, we do not believe there is a significant risk that spreads will widen back to the levels of late 2008. | |||
Looking ahead, we believe that, while the US bond market has already responded to changes in monetary policy, the European government bond markets appear to have the potential for further monetary policy easing. | |||
Against this backdrop, the Fund maintains a position in short-term investments in order to take advantage of compelling opportunities as they arise. We believe that this approach has the potential to help the Fund generate attractive risk-adjusted performance. |
Strategic Global Income Fund, Inc.
We thank you for your continued support, and welcome any comments or questions you may have. For additional information on the UBS family of funds, please contact your financial advisor or visit us at www.ubs.com/globalam-us.
Sincerely,
Kai R. Sotorp
President
Strategic Global Income Fund, Inc.
Head—Americas
UBS Global Asset Management (Americas) Inc.
Uwe Schillhorn, CFA
Head of Emerging Markets Debt
Strategic Global Income Fund, Inc.
Executive Director
UBS Global Asset Management (Americas) Inc.
This letter is intended to assist shareholders in understanding how the Fund performed during the six months ended May 31, 2009. The views and opinions in the letter were current as of July 15, 2009. They are not guarantees of performance or investment results and should not be taken as investment advice. Investment decisions reflect a variety of factors, and we reserve the right to change our views about individual securities, sectors and markets at any time. As a result, the views expressed should not be relied upon as a forecast of the Fund’s future investment intent. We encourage you to consult your financial advisor regarding your personal investment program.
Strategic Global Income Fund, Inc.
Performance at a glance (unaudited)
Average annual total returns for periods ended 05/31/09
Net asset value returns | 6 months | 1 year | 5 years | 10 years | ||||||||
Strategic Global Income Fund, Inc. | 11.59 | % | (4.55 | )% | 5.53 | % | 7.56 | % | ||||
Lipper Global Income Funds median | 17.48 | (8.50 | ) | 4.74 | 7.40 | |||||||
Market price returns | ||||||||||||
Strategic Global Income Fund, Inc. | 25.91 | % | (8.16 | )% | 3.20 | % | 8.12 | % | ||||
Lipper Global Income Funds median | 35.77 | (7.54 | ) | 6.28 | 9.02 | |||||||
Index returns | ||||||||||||
Strategic Global Benchmark(1) | 10.63 | % | 2.89 | % | 7.03 | % | 7.95 | % | ||||
Citigroup World Government Bond | ||||||||||||
Index (WGBI)SM(2) | 5.39 | % | 4.35 | % | 6.08 | % | 6.33 | % | ||||
Past performance does not predict future performance. The return and value of an investment will fluctuate so that an investor’s shares, when sold, may be worth more or less than their original cost. The Fund’s net asset value (“NAV”) returns assume, for illustration only, that dividends and other distributions, if any, were reinvested at the NAV on the payable dates. The Fund’s market price returns assume that all dividends and other distributions, if any, were reinvested at prices obtained under the Fund’s Dividend Reinvestment Plan. Returns for periods of less than one year have not been annualized. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends and other distributions, if any, or the sale of Fund shares.
(1) | The Strategic Global Benchmark is an unmanaged index compiled by the advisor, constructed as follows: 67% Citigroup World Government Bond Index (WGBI)SM and 33% JPMorgan Emerging Markets Bond Index Global (EMBI Global). Investors should note that indices do not reflect the deduction of fees, expenses or taxes. | |
(2) | The Citigroup World Government Bond Index (WGBI)SM is a market capitalization-weighted index composed of straight (i.e., not floating rate or index-linked) government bonds with a one-year minimum maturity. The average maturity is seven years. The Index tracks the government bond markets of 23 developed countries. Investors should note that indices do not reflect the deduction of fees, expenses or taxes. | |
Lipper peer group data calculated by Lipper Inc.; used with permission. The Lipper median is the return of the fund that places in the middle of the peer group. |
Strategic Global Income Fund, Inc.
Portfolio statistics (unaudited)
Characteristics* | 05/31/09 | 11/30/08 | 05/31/08 | ||||||
Net assets (mm) | $183.8 | $170.5 | $207.8 | ||||||
Weighted average maturity | 7.7 yrs | 6.8 yrs | 4.9 yrs | ||||||
Modified duration† | 5.2% | 4.2% | 2.9% | ||||||
Currency exposure** | 05/31/09 | 11/30/08 | 05/31/08 | ||||||
US dollar denominated | 63.0 | % | 52.8 | % | 44.9 | % | |||
Non US dollar denominated | 37.0 | 47.2 | 55.1 | ||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | |||
Credit quality** | 05/31/09 | 11/30/08 | 05/31/08 | ||||||
AAA | 47.2 | % | 41.2 | % | 29.6 | % | |||
AA | 6.6 | 9.3 | 3.6 | ||||||
A | 11.3 | 12.7 | 10.1 | ||||||
BBB | 5.8 | 4.2 | 3.2 | ||||||
BB | 2.2 | 3.9 | 3.5 | ||||||
B | 4.1 | 3.1 | 8.2 | ||||||
CCC | 1.1 | 1.7 | 0.4 | ||||||
D | 0.6 | 0.1 | 0.6 | ||||||
Non-rated | 10.3 | 12.7 | 21.8 | ||||||
Equity/preferred | 0.0 | (1) | 0.7 | 1.2 | |||||
Cash equivalents | 5.9 | 8.4 | 12.5 | ||||||
Other assets, less lliabilities | 4.9 | 2.0 | 5.3 | ||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | |||
* | Characteristics will vary over time. | |
** | Weightings represent percentages of net assets as of the dates indicated. The Fund’s portfolio is actively managed and its composition will vary over time. Credit quality ratings shown are based on those assigned by Standard & Poor’s, a division of the McGraw-Hill Companies, Inc. (“S&P”), to individual portfolio holdings. S&P is an independent ratings agency. | |
(1) | Amount represents less than 0.05%. | |
† | Modified duration is the change in price, expressed as a percentage, expected in response to each 1% change in yield of the portfolio’s holdings. |
Strategic Global Income Fund, Inc.
Portfolio statistics (unaudited) (concluded)
Top ten countries/ | |||||||||||||
supranationals | |||||||||||||
(other than short-term | |||||||||||||
investments)*** | 05/31/09 | 11/30/08 | 05/31/08 | ||||||||||
United States | 43.0 | % | United States | 30.5 | % | United States | 18.4 | % | |||||
Germany | 9.6 | Italy | 10.0 | Argentina | 10.5 | ||||||||
France | 4.6 | Malaysia | 7.7 | Malaysia | 8.0 | ||||||||
Malaysia | 4.2 | Cayman Islands | 6.5 | Germany | 7.2 | ||||||||
Cayman Islands | 4.0 | Germany | 4.8 | Italy | 6.3 | ||||||||
Sovereign/ | |||||||||||||
Argentina | 3.9 | Spain | 4.8 | supranational | 4.7 | ||||||||
Italy | 3.6 | France | 4.6 | Russia | 3.9 | ||||||||
Spain | 2.6 | Argentina | 4.2 | Spain | 3.9 | ||||||||
Sovereign/supranational | 2.2 | Russia | 3.4 | France | 2.9 | ||||||||
Sovereign/ | |||||||||||||
Turkey | 2.1 | supranational | 2.1 | Poland | 2.1 | ||||||||
Total | 79.8 | % | 78.6 | % | 67.9 | % | |||||||
*** | Weightings represent percentages of net assets as of the dates indicated. The Fund’s portfolio is actively managed and its composition will vary over time. |
Strategic Global Income Fund, Inc.
Industry diversification | |||
As a percentage of net assets | |||
As of May 31, 2009 (unaudited) | |||
Bonds | |||
Corporate bonds | |||
Auto components | 0.12 | % | |
Beverages | 0.37 | ||
Capital markets | 0.27 | ||
Commercial banks | 8.62 | ||
Construction materials | 0.26 | ||
Diversified financial services | 4.63 | ||
Diversified telecommunication services | 0.72 | ||
Electric utilities | 0.51 | ||
Hotels, restaurants & leisure | 0.68 | ||
Household durables | 0.50 | ||
Independent power producers & energy traders | 0.21 | ||
IT services | 0.28 | ||
Media | 0.65 | ||
Metals & mining | 0.09 | ||
Multi-utilities | 1.32 | ||
Oil, gas & consumable fuels | 0.85 | ||
Real estate investment trusts (REITs) | 4.28 | ||
Road & rail | 0.05 | ||
Tobacco | 0.24 | ||
Wireless telecommunication services | 1.45 | ||
Total corporate bonds | 26.10 | ||
Asset-backed securities | 6.03 | ||
Collateralized debt obligations | 4.04 | ||
Commercial mortgage-backed securities | 7.22 | ||
Mortgage & agency debt securities | 5.04 | ||
US government obligations | 13.20 | ||
Non US-government obligations | 25.04 | ||
Sovereign/supranational bonds | 2.16 | ||
Total bonds | 88.83 | ||
Preferred stock | 0.01 | ||
Short-term investment | 5.93 | ||
Options purchased | 0.35 | ||
Total investments | 95.12 | ||
Cash and other assets, less liabilities | 4.88 | ||
Net assets | 100.00 | % | |
Strategic Global Income Fund, Inc.
Portfolio of investments—May 31, 2009 (unaudited)
Face | |||||||
Security description | amount | Value | |||||
Bonds—88.83% | |||||||
Corporate bonds—26.10% | |||||||
Australia—0.09% | |||||||
Rio Tinto Finance USA Ltd., | |||||||
9.000%, due 05/01/19 | $ | 150,000 | $ | 160,888 | |||
France—1.66% | |||||||
Compagnie de Financement Foncier, | |||||||
4.000%, due 07/21/11 | EUR | 2,110,000 | 3,058,252 | ||||
Germany—2.46% | |||||||
DEPFA Deutsche Pfandbriefbank AG, | |||||||
5.500%, due 01/15/10 | EUR | 1,000,000 | 1,428,213 | ||||
Hypothekenbank in Essen AG, | |||||||
3.750%, due 09/28/12 | 2,140,000 | 3,098,494 | |||||
Total Germany corporate bonds | 4,526,707 | ||||||
Ireland—0.36% | |||||||
GE Capital European Funding, | |||||||
4.625%, due 08/23/10 | EUR | 460,000 | 659,215 | ||||
Italy—0.34% | |||||||
Intesa Sanpaolo SpA, | |||||||
6.375%, due 04/06/10 | EUR | 440,000 | 634,975 | ||||
Liberia—0.68% | |||||||
Royal Caribbean Cruises Ltd., | |||||||
6.875%, due 12/01/13 | $ | 1,500,000 | 1,245,000 | ||||
Malaysia—4.15% | |||||||
Johor Corp., | |||||||
1.000%, due 07/31/09(1) | MYR | 6,600,000 | 2,247,532 | ||||
1.000%, due 07/31/12(1) | 20,240,000 | 5,386,522 | |||||
Total Malaysia corporate bonds | 7,634,054 | ||||||
Netherlands—1.24% | |||||||
E.ON International Finance BV, | |||||||
5.125%, due 10/02/12 | EUR | 450,000 | 674,488 | ||||
Rabobank Nederland NV, | |||||||
4.125%, due 04/04/12 | 1,110,000 | 1,615,011 | |||||
Total Netherlands corporate bonds | 2,289,499 | ||||||
Russia—0.87% | |||||||
VTB Capital SA, | |||||||
6.250%, due 06/30/35 | $ | 2,000,000 | 1,595,000 | ||||
Strategic Global Income Fund, Inc.
Portfolio of investments—May 31, 2009 (unaudited)
Face | |||||||
Security description | amount | Value | |||||
Bonds—(continued) | |||||||
Corporate bonds—(continued) | |||||||
South Korea—1.00% | |||||||
Korea Development Bank, | |||||||
8.000%, due 01/23/14 | $ | 1,700,000 | $ | 1,840,852 | |||
United Arab Emirates—1.00% | |||||||
Abu Dhabi National Energy Co., | |||||||
6.500%, due 10/27/36 | $ | 2,350,000 | 1,835,937 | ||||
United Kingdom—0.76% | |||||||
SABMiller PLC, | |||||||
6.500%, due 07/01/16(2) | $ | 700,000 | 681,257 | ||||
Vodafone Group PLC, | |||||||
3.625%, due 11/29/12 | EUR | 500,000 | 709,826 | ||||
Total United Kingdom corporate bonds | 1,391,083 | ||||||
United States—11.49% | |||||||
Altria Group, Inc., | |||||||
9.700%, due 11/10/18 | $ | 390,000 | 443,852 | ||||
AT&T, Inc., | |||||||
6.500%, due 09/01/37 | 250,000 | 241,150 | |||||
Bank of America Corp., | |||||||
7.625%, due 06/01/19 | 220,000 | 222,517 | |||||
Bank One Corp., | |||||||
7.875%, due 08/01/10 | 2,000,000 | 2,092,998 | |||||
Bear Stearns Cos, Inc., | |||||||
0.974%, due 05/18/10(3) | 1,000,000 | 997,358 | |||||
Caterpillar Financial Services Corp., | |||||||
6.125%, due 02/17/14 | 300,000 | 309,563 | |||||
Citigroup, Inc., | |||||||
5.125%, due 02/14/11 | 2,000,000 | 1,968,966 | |||||
Comcast Corp., | |||||||
6.300%, due 11/15/17 | 500,000 | 512,571 | |||||
CSX Corp., | |||||||
7.450%, due 04/01/38 | 100,000 | 96,769 | |||||
Dynegy Holdings, Inc., | |||||||
7.625%, due 10/15/26 | 750,000 | 446,250 | |||||
First Data Corp., | |||||||
9.875%, due 09/24/15 | 750,000 | 510,000 | |||||
Fortune Brands, Inc., | |||||||
5.375%, due 01/15/16 | 1,000,000 | 919,633 | |||||
Strategic Global Income Fund, Inc.
Portfolio of investments—May 31, 2009 (unaudited)
Face | |||||||
Security description | amount | Value | |||||
Bonds—(continued) | |||||||
Corporate bonds—(continued) | |||||||
United States—(continued) | |||||||
Frontier Communications Corp., | |||||||
9.000%, due 08/15/31 | $ | 560,000 | $ | 472,500 | |||
General Electric Capital Corp., | |||||||
5.875%, due 01/14/38 | 2,000,000 | 1,619,182 | |||||
GMAC LLC, | |||||||
6.750%, due 12/01/14 | 170,000 | 141,933 | |||||
6.875%, due 09/15/11(2) | 107,000 | 95,765 | |||||
8.000%, due 11/01/31 | 340,000 | 256,079 | |||||
Goldman Sachs Group, Inc., | |||||||
6.150%, due 04/01/18 | 250,000 | 241,344 | |||||
Goodyear Tire & Rubber Co., | |||||||
10.500%, due 05/15/16 | 225,000 | 223,875 | |||||
HSBC Finance Corp., | |||||||
6.750%, due 05/15/11 | 2,000,000 | 2,076,182 | |||||
Kinder Morgan Energy Partners LP, | |||||||
5.800%, due 03/15/35 | 300,000 | 239,291 | |||||
Morgan Stanley, | |||||||
6.625%, due 04/01/18 | 250,000 | 247,145 | |||||
News America, Inc., | |||||||
6.200%, due 12/15/34 | 200,000 | 163,195 | |||||
Nextel Communications, Inc., | |||||||
6.875%, due 10/31/13 | 500,000 | 416,250 | |||||
NGPL Pipeco LLC, | |||||||
6.514%, due 12/15/12(2) | 500,000 | 499,766 | |||||
Nisource Finance Corp., | |||||||
5.450%, due 09/15/20 | 150,000 | 118,396 | |||||
NRG Energy, Inc., | |||||||
7.375%, due 01/15/17 | 400,000 | 376,000 | |||||
ONEOK Partners LP, | |||||||
8.625%, due 03/01/19 | 250,000 | 275,757 | |||||
PLY Gem Industries, Inc., | |||||||
11.750%, due 06/15/13 | 750,000 | 480,000 | |||||
Prologis, | |||||||
5.625%, due 11/15/15 | 300,000 | 232,088 | |||||
Sempra Energy, | |||||||
8.900%, due 11/15/13 | 300,000 | 331,335 | |||||
9.800%, due 02/15/19 | 225,000 | 262,424 | |||||
Strategic Global Income Fund, Inc.
Portfolio of investments—May 31, 2009 (unaudited)
Face | |||||||
Security description | amount | Value | |||||
Bonds—(continued) | |||||||
Corporate bonds—(concluded) | |||||||
United States—(concluded) | |||||||
Sprint Capital Corp., | |||||||
7.625%, due 01/30/11 | $ | 1,000,000 | $ | 987,500 | |||
Texas Competitive Electric Holdings Co. LLC, | |||||||
10.250%, due 11/01/15 | 750,000 | 444,375 | |||||
Time Warner Cable, Inc., | |||||||
6.750%, due 07/01/18 | 250,000 | 258,247 | |||||
Time Warner, Inc., | |||||||
6.875%, due 05/01/12 | 250,000 | 263,195 | |||||
Valero Energy Corp., | |||||||
6.625%, due 06/15/37 | 125,000 | 102,580 | |||||
Verizon Communications, Inc., | |||||||
8.950%, due 03/01/39 | 500,000 | 611,505 | |||||
Verizon Wireless Capital LLC, | |||||||
5.550%, due 02/01/14(2) | 500,000 | 528,750 | |||||
Virginia Electric and Power Co., | |||||||
8.875%, due 11/15/38 | 300,000 | 391,380 | |||||
Washington Mutual Preferred Funding LLC, | |||||||
9.750%, due 12/15/17(1),(3),(4),(5),(6) | 1,000,000 | 500 | |||||
Total United States corporate bonds | 21,118,166 | ||||||
Total corporate bonds (cost—$47,469,565) | 47,989,628 | ||||||
Asset-backed securities—6.03% | |||||||
United States—6.03% | |||||||
ACE Securities Corp., | |||||||
Series 2006-NC1, Class A2B, | |||||||
0.459%, due 12/25/35(3) | 140,335 | 136,131 | |||||
American Express Credit Account Master Trust, | |||||||
Series 2008-1, Class A, | |||||||
0.794%, due 08/15/13(3) | 400,000 | 392,120 | |||||
Ameriquest Mortgage Securities, Inc., | |||||||
Series 2005-R6, Class A2, | |||||||
0.509%, due 08/25/35(3) | 155,305 | 133,770 | |||||
Argent Securities, Inc., | |||||||
Series 2006-M3, Class A2A, | |||||||
0.359%, due 10/25/36(3) | 9,155 | 8,938 | |||||
Strategic Global Income Fund, Inc.
Portfolio of investments—May 31, 2009 (unaudited)
Face | |||||||
Security description | amount | Value | |||||
Bonds—(continued) | |||||||
Asset-backed securities—(continued) | |||||||
United States—(continued) | |||||||
Asset Backed Funding Certificates, | |||||||
Series 2006-OPT3, Class A3A, | |||||||
0.369%, due 11/25/36(3) | $ | 186,831 | $ | 178,182 | |||
Bank of America Credit Card Trust, | |||||||
Series 2007-B1, Class B1, | |||||||
0.424%, due 06/15/12(3) | 600,000 | 586,794 | |||||
Bear Stearns Asset Backed Securities Trust, | |||||||
Series 2006-SD2, Class A2, | |||||||
0.509%, due 06/25/36(3) | 1,334,905 | 1,079,684 | |||||
Chase Issuance Trust, | |||||||
Series 2007-A9, Class A9, | |||||||
0.374%, due 06/16/14(3) | 700,000 | 675,138 | |||||
Series 2005-C2, Class C2, | |||||||
0.784%, due 01/15/15(3) | 575,000 | 473,842 | |||||
Series 2007-A16, Class A16, | |||||||
1.620%, due 06/16/14(3) | 550,000 | 535,179 | |||||
Citibank Credit Card Issuance Trust, | |||||||
Series 2002-A8, Class A8, | |||||||
0.591%, due 11/07/11(3) | 700,000 | 699,200 | |||||
Series 2006-C4, Class C4, | |||||||
0.621%, due 01/09/12(3) | 1,000,000 | 960,080 | |||||
Series 2006-C2, Class C2, | |||||||
5.700%, due 05/15/13 | 350,000 | 332,940 | |||||
Countrywide Asset-Backed Certificates, | |||||||
Series 2006-17, Class 2A1, | |||||||
0.359%, due 03/25/47(3) | 101,860 | 99,186 | |||||
Series 2006-20, Class 2A1, | |||||||
0.359%, due 04/25/47(3) | 144,635 | 134,151 | |||||
Series 2005-7, Class 3AV3, | |||||||
0.719%, due 11/25/35(3) | 195,177 | 188,781 | |||||
First Franklin Mortgage Loan Asset-Backed Certificates, | |||||||
Series 2006-FFB, Class A2, | |||||||
0.439%, due 12/25/26(3) | 407,658 | 74,613 | |||||
GSAMP Trust, | |||||||
Series 2006-HE7, Class A2A, | |||||||
0.349%, due 10/25/46(3) | 214,840 | 199,005 | |||||
Strategic Global Income Fund, Inc.
Portfolio of investments—May 31, 2009 (unaudited)
Face | |||||||
Security description | amount | Value | |||||
Bonds—(continued) | |||||||
Asset-backed securities—(continued) | |||||||
United States—(continued) | |||||||
Harley-Davidson Motorcycle Trust, | |||||||
Series 2007-1, Class C, | |||||||
5.540%, due 04/15/15 | $ | 450,000 | $ | 233,416 | |||
Home Equity Mortgage Trust, | |||||||
Series 2006-3, Class A1, | |||||||
5.472%, due 09/25/36(3) | 1,848,514 | 184,851 | |||||
Series 2006-5, Class A1, | |||||||
5.500%, due 01/25/37(7) | 347,538 | 47,190 | |||||
Series 2006-4, Class A1, | |||||||
5.671%, due 11/25/36(7) | 1,618,101 | 160,887 | |||||
MBNA Credit Card Master Note Trust, | |||||||
Series 2002-A3, Class A3, | |||||||
0.584%, due 09/15/14(3) | 450,000 | 435,397 | |||||
MBNA Master Credit Card Trust, | |||||||
Series 2001-B, Class C, | |||||||
7.250%, due 08/15/13(2) | 500,000 | 478,840 | |||||
Merrill Lynch Mortgage Investors, Inc., | |||||||
Series 2006-AHL1, Class A2A, | |||||||
0.359%, due 05/25/37(3) | 145,375 | 142,221 | |||||
Series 2006-FF1, Class A2A, | |||||||
0.379%, due 08/25/36(3) | 155,276 | 154,005 | |||||
Series 2006-SL1, Class A, | |||||||
0.489%, due 09/25/36(3) | 86,691 | 18,619 | |||||
Morgan Stanley ABS Capital I, | |||||||
Series 2006-HE6, Class A2A, | |||||||
0.349%, due 09/25/36(3) | 127,736 | 124,155 | |||||
Nomura Asset Acceptance Corp., | |||||||
Series 2006-S4, Class A1, | |||||||
0.479%, due 08/25/36(3) | 774,672 | 112,303 | |||||
Park Place Securities, Inc., | |||||||
Series 2005-WCW2, Class A2C, | |||||||
0.569%, due 07/25/35(3) | 385,790 | 363,036 | |||||
Popular ABS Mortgage Pass-Through Trust, | |||||||
Series 2006-D, Class A1, | |||||||
0.369%, due 11/25/46(3) | 41,145 | 37,722 | |||||
Series 2006-E, Class A1, | |||||||
0.399%, due 01/25/37(3) | 57,391 | 49,561 | |||||
Strategic Global Income Fund, Inc.
Portfolio of investments—May 31, 2009 (unaudited)
Face | |||||||
Security description | amount | Value | |||||
Bonds—(continued) | |||||||
Asset-backed securities—(concluded) | |||||||
United States—(concluded) | |||||||
Renaissance Home Equity Loan Trust, | |||||||
Series 2006-4, Class AV1, | |||||||
0.379%, due 01/25/37(3) | $ | 400,394 | $ | 378,547 | |||
Residential Asset Mortgage Products, Inc., | |||||||
Series 2006-RZ3, Class A1, | |||||||
0.379%, due 08/25/36(3) | 95,017 | 92,872 | |||||
Series 2006-RZ5, Class A1B, | |||||||
0.409%, due 08/25/46(3) | 203,901 | 193,720 | |||||
Residential Asset Securities Corp., | |||||||
Series 2005-KS11, Class AI3, | |||||||
0.509%, due 12/25/35(3) | 105,375 | 89,389 | |||||
SACO I Trust, | |||||||
Series 2006-5, Class 2A1, | |||||||
0.459%, due 05/25/36(3) | 804,615 | 116,045 | |||||
Soundview Home Equity Loan Trust, | |||||||
Series 2006-EQ2, Class A1, | |||||||
0.389%, due 01/25/37(3) | 46,638 | 45,244 | |||||
Series 2006-OPT3, Class 2A2, | |||||||
0.419%, due 06/25/36(3) | 51,053 | 46,995 | |||||
Series 2005-OPT1, Class 2A4, | |||||||
0.609%, due 06/25/35(3) | 695,277 | 558,498 | |||||
Structured Asset Investment Loan Trust, | |||||||
Series 2005-7, Class A4, | |||||||
0.499%, due 08/25/35(3) | 147,178 | 143,008 | |||||
Total asset-backed securities (cost—$13,751,511) | 11,094,255 | ||||||
Collateralized debt obligations—4.04% | |||||||
Cayman Islands—3.96% | |||||||
Apidos CDO, | |||||||
Series 2007-CA, Class A2B, | |||||||
1.226%, due 05/14/20(1),(3),(4) | 2,000,000 | 840,000 | |||||
Atrium CDO Corp., | |||||||
Series 5A, Class A2B, | |||||||
1.105%, due 07/20/20(1),(3),(4) | 2,000,000 | 500,000 | |||||
BlueMountain CLO Ltd., | |||||||
Series 2005-1A, Class A2, | |||||||
1.253%, due 11/15/17(1),(3),(4) | 2,000,000 | 660,000 | |||||
Strategic Global Income Fund, Inc.
Portfolio of investments—May 31, 2009 (unaudited)
Face | |||||||
Security description | amount | Value | |||||
Bonds—(continued) | |||||||
Collateralized debt obligations—(concluded) | |||||||
Cayman Islands—(concluded) | |||||||
Carlyle High Yield Partners, | |||||||
Series 2006-8A, Class B, | |||||||
1.133%, due 05/21/21(1),(3),(4) | $ | 2,500,000 | $ | 700,000 | |||
Gulf Stream Compass CLO Ltd., | |||||||
Series 2007-1A, Class C, | |||||||
3.073%, due 10/28/19(1),(3),(4) | 1,400,000 | 112,000 | |||||
Halcyon Loan Investors CLO Ltd., | |||||||
Series 2007-2A, Class A1J, | |||||||
1.419%, due 04/24/21(1),(3),(4) | 2,000,000 | 683,520 | |||||
ING Investment Management, | |||||||
Series 2006-3A, Class A2B, | |||||||
1.462%, due 12/13/20(1),(3),(4) | 2,000,000 | 560,000 | |||||
Limerock CLO, | |||||||
Series 2007-1A, Class A4, | |||||||
1.449%, due 04/24/23(1),(3),(4) | 2,000,000 | 500,000 | |||||
Mountain View Funding CLO, | |||||||
Series 2007-3A, Class A2, | |||||||
1.462%, due 04/16/21(1),(3),(4) | 2,500,000 | 1,000,000 | |||||
Series 2006-2A, Class B, | |||||||
1.539%, due 01/12/21(1),(3),(4) | 3,000,000 | 600,000 | |||||
Rockwall CDO Ltd., | |||||||
Series 2007-1A, Class A1LB, | |||||||
1.578%, due 08/01/24(1),(3),(4) | 4,000,000 | 520,000 | |||||
Trimaran CLO Ltd., | |||||||
Series 2007-1A, Class A2L, | |||||||
1.690%, due 06/15/21(1),(3),(4) | 2,000,000 | 460,000 | |||||
Wind River CLO Ltd., | |||||||
Series 2004-1A, Class B1, | |||||||
2.399%, due 12/19/16(1),(3),(4) | 1,000,000 | 140,000 | |||||
Total Cayman Islands collateralized debt obligations | 7,275,520 | ||||||
Netherlands—0.08% | |||||||
Cadogan Square CLO BV, | |||||||
Series 1, Class C, | |||||||
2.844%, due 02/01/22(1),(3),(8) | EUR | 2,000,000 | 141,370 | ||||
Total collateralized debt obligations (cost—$12,458,075) | 7,416,890 | ||||||
Strategic Global Income Fund, Inc.
Portfolio of investments—May 31, 2009 (unaudited)
Face | |||||||
Security description | amount | Value | |||||
Bonds—(continued) | |||||||
Commercial mortgage-backed securities—7.22% | |||||||
United States—7.22% | |||||||
Banc of America Commercial Mortgage, Inc., | |||||||
Series 2007-4, Class AM, | |||||||
5.812%, due 02/10/51(3) | $ | 900,000 | $ | 461,080 | |||
Citigroup Commercial Mortgage Trust, | |||||||
Series 2007-C6, Class AM, | |||||||
5.700%, due 12/10/49(3) | 4,950,000 | 2,609,316 | |||||
Greenwich Capital Commercial Funding Corp., | |||||||
Series 2007-GG9, Class A4, | |||||||
5.444%, due 03/10/39 | 1,000,000 | 786,642 | |||||
Series 2007-GG9, Class AM, | |||||||
5.475%, due 03/10/39 | 1,300,000 | 705,149 | |||||
GS Mortgage Securities Corp. II, | |||||||
Series 2006-GG8, Class A2, | |||||||
5.479%, due 11/10/39 | 500,000 | 471,866 | |||||
Series 2006-GG6, Class AM, | |||||||
5.622%, due 04/10/38(3) | 525,000 | 304,315 | |||||
Series 2007-GG10, Class A4, | |||||||
5.799%, due 08/10/45(3) | 4,000,000 | 3,058,950 | |||||
LB Commercial Conduit Mortgage Trust, | |||||||
Series 1998-C4, Class G, | |||||||
5.600%, due 10/15/35(2) | 1,000,000 | 509,029 | |||||
Morgan Stanley Dean Witter Capital I, | |||||||
Series 2000-LIF2, Class A2, | |||||||
7.200%, due 10/15/33 | 701,438 | 709,323 | |||||
Wachovia Bank Commercial Mortgage Trust, | |||||||
Series 2006-C23, Class AM, | |||||||
5.466%, due 01/15/45(3) | 5,150,000 | 2,942,604 | |||||
Series 2006-C27, Class A2, | |||||||
5.624%, due 07/15/45 | 750,000 | 708,547 | |||||
Total commercial mortgage-backed securities (cost—$13,226,800) | 13,266,821 | ||||||
Mortgage & agency debt securities—5.04% | |||||||
United States—5.04% | |||||||
American Home Mortgage Investment Trust, | |||||||
Series 2006-3, Class 4A, | |||||||
0.499%, due 11/25/35(3) | 1,169,133 | 239,555 | |||||
Strategic Global Income Fund, Inc.
Portfolio of investments—May 31, 2009 (unaudited)
Face | |||||||
Security description | amount | Value | |||||
Bonds—(continued) | |||||||
Mortgage & agency debt securities—(continued) | |||||||
United States—(continued) | |||||||
Banc of America Alternative Loan Trust, | |||||||
Series 2006-9, Class B2, | |||||||
6.250%, due 01/25/37 | $ | 1,458,759 | $ | 29,467 | |||
Series 2006-9, Class B3, | |||||||
6.250%, due 01/25/37 | 729,379 | 20,119 | |||||
Banc of America Funding Corp., | |||||||
Series 2005-F, Class CB3, | |||||||
5.178%, due 09/20/35(3) | 3,035,336 | 27,015 | |||||
Series 2006-R2, Class A2, | |||||||
6.026%, due 07/28/46(2),(3) | 990,955 | 43,008 | |||||
Series 2007-4, Class NB1, | |||||||
6.102%, due 06/25/37(3) | 2,947,086 | 99,022 | |||||
Citicorp Mortgage Securities, Inc., | |||||||
Series 2006-3, Class B1, | |||||||
5.945%, due 06/25/36(3) | 543,369 | 38,036 | |||||
Citigroup Mortgage Loan Trust, Inc., | |||||||
Series 2005-WF2, Class AV2, | |||||||
0.549%, due 08/25/35(3) | 175,974 | 153,975 | |||||
Series 2006-AR6, Class 1B2, | |||||||
6.058%, due 08/25/36(3) | 4,229,809 | 105,745 | |||||
Countrywide Alternative Loan Trust, | |||||||
Series 2006-26CB, Class M1, | |||||||
6.500%, due 09/25/36 | 1,219,606 | 53,201 | |||||
Series 2005-J2, Class 2A1, | |||||||
7.500%, due 12/25/34 | 169,831 | 107,471 | |||||
Countrywide Home Loan Mortgage Pass-Through Trust, | |||||||
Series 2006-16, Class B2, | |||||||
6.245%, due 11/25/36(3) | 1,712,142 | 67,440 | |||||
Credit Suisse Mortgage Capital Certificates, | |||||||
Series 2006-4, Class CB1, | |||||||
5.738%, due 05/25/36(3) | 921,937 | 13,829 | |||||
Series 2006-7, Class B1, | |||||||
6.245%, due 08/25/36(3) | 985,451 | 19,709 | |||||
Series 2006-7, Class B3, | |||||||
6.245%, due 08/25/36(3) | 1,699,773 | 65,697 | |||||
Federal Home Loan Mortgage Corp.,† | |||||||
5.750%, due 09/15/10 | EUR | 1,400,000 | 2,066,893 | ||||
Strategic Global Income Fund, Inc.
Portfolio of investments—May 31, 2009 (unaudited)
Face | |||||||
Security description | amount | Value | |||||
Bonds—(continued) | |||||||
Mortgage & agency debt securities—(continued) | |||||||
United States—(continued) | |||||||
Harborview Mortgage Loan Trust, | |||||||
Series 2005-3, Class 2A1A, | |||||||
0.568%, due 06/19/35(3) | $ | 235,776 | $ | 101,742 | |||
IndyMac INDA Mortgage Loan Trust, | |||||||
Series 2007-AR1, Class B1, | |||||||
5.771%, due 03/25/37(3) | 447,896 | 11,197 | |||||
IndyMac INDX Mortgage Loan Trust, | |||||||
Series 2006-AR25, Class B1, | |||||||
5.953%, due 09/25/36(3) | 1,838,378 | 119,030 | |||||
JPMorgan Alternative Loan Trust, | |||||||
Series 2006-A5, Class 2A6, | |||||||
5.800%, due 10/25/36(3) | 6,492,000 | 3,566,291 | |||||
Residential Accredit Loans, Inc., | |||||||
Series 2006-QS5, Class M1, | |||||||
6.000%, due 05/25/36 | 1,164,122 | 30,071 | |||||
Residential Funding Mortgage Securities I, | |||||||
Series 2006-S6, Class M1, | |||||||
6.000%, due 07/25/36 | 975,016 | 91,413 | |||||
Structured Adjustable Rate Mortgage Loan Trust, | |||||||
Series 2006-8, Class 4A3, | |||||||
5.730%, due 09/25/36(3) | 1,500,000 | 851,519 | |||||
Series 2007-1, Class B2II, | |||||||
6.284%, due 02/25/37(3) | 1,456,796 | 44,170 | |||||
Series 2006-8, Class B3I, | |||||||
6.298%, due 09/25/36(3) | 2,242,186 | 43,857 | |||||
WaMu Mortgage Pass-Through Certificates, | |||||||
Series 2006-AR18, Class LB3, | |||||||
5.351%, due 01/25/37(3) | 1,174,704 | 51,311 | |||||
Series 2007-HY1, Class LB2, | |||||||
5.771%, due 02/25/37(3) | 1,997,070 | 131,587 | |||||
Series 2007-HY7, Class LB1, | |||||||
5.791%, due 07/25/37(3) | 2,492,394 | 301,549 | |||||
Series 2006-AR12, Class LB1, | |||||||
5.974%, due 10/25/36(3) | 997,626 | 66,157 | |||||
Series 2006-AR10, Class LB1, | |||||||
5.984%, due 09/25/36(3) | 998,594 | 84,431 | |||||
Strategic Global Income Fund, Inc.
Portfolio of investments—May 31, 2009 (unaudited)
Face | |||||||
Security description | amount | Value | |||||
Bonds—(continued) | |||||||
Mortgage & agency debt securities—(concluded) | |||||||
United States—(concluded) | |||||||
Wells Fargo Alternative Loan Trust, | |||||||
Series 2007-PA1, Class B1, | |||||||
6.250%, due 03/25/37 | $ | 1,471,982 | $ | 32,880 | |||
Wells Fargo Mortgage Backed Securities Trust, | |||||||
Series 2006-18, Class B1, | |||||||
6.000%, due 12/26/36 | 3,918,578 | 568,752 | |||||
Series 2006-AR12, Class 2B1, | |||||||
6.097%, due 09/25/36(3) | 497,480 | 27,361 | |||||
Total mortgage & agency debt securities (cost—$18,230,816) | 9,273,500 | ||||||
US government obligations—13.20% | |||||||
US Treasury Bonds, | |||||||
3.500%, due 02/15/39 | 2,540,000 | 2,188,769 | |||||
US Treasury Inflation Indexed Bonds (TIPS), | |||||||
1.375%, due 07/15/18 | 2,598,584 | 2,540,927 | |||||
US Treasury Notes, | |||||||
1.875%, due 04/30/14 | 2,745,000 | 2,687,520 | |||||
3.125%, due 05/15/19 | 17,345,000 | 16,849,106 | |||||
Total US government obligations (cost—$23,958,156) | 24,266,322 | ||||||
Non US-government obligations—25.04% | |||||||
Argentina—3.85% | |||||||
Argentina Prestamos Garantizadad, | |||||||
4.000%, due 04/15/10(3),(5) | ARS | 2,000,000 | 277,444 | ||||
Republic of Argentina, | |||||||
1.315%, due 12/15/35(9) | $ | 17,250,000 | 557,175 | ||||
1.683%, due 08/03/12(3) | 19,170,000 | 6,115,230 | |||||
7.000%, due 03/28/11 | 210,000 | 126,840 | |||||
7,076,689 | |||||||
Brazil—1.19% | |||||||
Notas do Tesouro Nacional, | |||||||
Series B | |||||||
6.000%, due 05/15/45 | BRL | 2,530,000 | 2,195,312 | ||||
Dominican Republic—1.18% | |||||||
Republic of Dominica, | |||||||
9.000%, due 03/31/10 | DOP | 120,000,000 | 2,169,680 | ||||
Strategic Global Income Fund, Inc.
Portfolio of investments—May 31, 2009 (unaudited)
Face | |||||||
Security description | amount | Value | |||||
Bonds—(continued) | |||||||
Non US-government obligations—(concluded) | |||||||
France—2.95% | |||||||
Government of France, | |||||||
3.750%, due 04/25/21 | EUR | 2,690,000 | $ | 3,643,704 | |||
4.000%, due 04/25/55 | 1,390,000 | 1,772,213 | |||||
5,415,917 | |||||||
Germany—7.12% | |||||||
Bundesrepublik Deutschland, | |||||||
4.000%, due 01/04/37 | EUR | 1,740,000 | 2,298,989 | ||||
4.500%, due 01/04/13 | 4,750,000 | 7,240,127 | |||||
6.250%, due 01/04/24 | 180,000 | 310,906 | |||||
Kreditanstalt fuer Wiederaufbau, | |||||||
4.625%, due 10/12/12 | 640,000 | 968,499 | |||||
5.000%, due 07/04/11 | 1,500,000 | 2,263,259 | |||||
13,081,780 | |||||||
Italy—3.29% | |||||||
Buoni Poliennali Del Tesoro, | |||||||
4.000%, due 02/01/37 | EUR | 3,430,000 | 3,996,635 | ||||
6.500%, due 11/01/27 | 1,275,000 | 2,056,922 | |||||
6,053,557 | |||||||
Russia—0.76% | |||||||
Russian Federation, | |||||||
7.500%, due 03/31/30(7) | $ | 1,008,000 | 1,008,000 | ||||
7.500%, due 03/31/30(2),(7) | 399,804 | 399,804 | |||||
1,407,804 | |||||||
Spain—2.63% | |||||||
Government of Spain, | |||||||
5.750%, due 07/30/32 | EUR | 2,160,000 | 3,412,389 | ||||
6.150%, due 01/31/13 | 900,000 | 1,422,402 | |||||
4,834,791 | |||||||
Turkey—2.07% | |||||||
Republic of Turkey, | |||||||
12.000%, due 08/14/13 | TRY | 5,231,530 | 3,802,579 | ||||
Total non US-government obligations (cost—$51,375,946) | 46,038,109 | ||||||
Strategic Global Income Fund, Inc.
Portfolio of investments—May 31, 2009 (unaudited)
Face | |||||||
Security description | amount | Value | |||||
Bonds—(concluded) | |||||||
Sovereign/supranational bonds—2.16% | |||||||
European Investment Bank, | |||||||
5.375%, due 10/15/12 | EUR | 1,600,000 | $ | 2,472,374 | |||
5.625%, due 10/15/10 | 1,000,000 | 1,492,071 | |||||
Total sovereign/supranational bonds (cost—$3,849,131) | 3,964,445 | ||||||
Total bonds (cost—$184,320,000) | 163,309,970 | ||||||
Shares | |||||||
Preferred stock—0.01% | |||||||
United States—0.01% | |||||||
Preferred Blocker, Inc. | |||||||
7.000%, due 12/31/11(2),(10) | |||||||
(cost—$23,808) | 22 | 9,279 | |||||
Units | |||||||
Short-term investment—5.93% | |||||||
Investment company—5.93% | |||||||
UBS Cash Management Prime Relationship Fund, 0.540%(11),(12) | |||||||
(cost—$10,905,662) | 10,905,662 | 10,905,662 | |||||
Number of | |||||||
contracts | |||||||
Options Purchased—0.35% | |||||||
Call Options—0.27% | |||||||
90 Day Euro-Dollar Interest Rate Futures, strike @ USD 99.00, | |||||||
expires September 2009* | 174 | 141,375 | |||||
90 Day Euro-Dollar Interest Rate Futures, strike @ USD 99.13 | |||||||
expires June 2009* | 363 | 201,919 | |||||
5 Year US Treasury Futures, strike @ USD 116.50, | |||||||
expires August 2009* | 180 | 153,281 | |||||
496,575 | |||||||
Strategic Global Income Fund, Inc.
Portfolio of investments—May 31, 2009 (unaudited)
Number of | |||||||
Security description | contracts | Value | |||||
Options Purchased—(concluded) | |||||||
Put Options—0.08% | |||||||
90 Day Euro-Dollar Interest Rate Futures, | |||||||
strike @ USD 96.00, expires March 2011* | 226 | $ | 138,425 | ||||
Total options purchased (cost—$408,013) | 635,000 | ||||||
Total investments—95.12% (cost—$195,657,483) | 174,859,911 | ||||||
Cash and other assets, less liabilities—4.88% | 8,974,124 | ||||||
Net assets—100.00% | $ | 183,834,035 | |||||
Notes to portfolio of investments | |||||||
For federal income tax purposes, which was substantially the same as book purposes, the tax cost of investments and the components of net unrealized depreciation of investments at May 31, 2009 were as follows: | |||||||
Tax cost of investments | $ | 195,657,483 | |||||
Gross unrealized appreciation | 8,935,674 | ||||||
Gross unrealized depreciation | (29,733,246 | ) | |||||
Net unrealized depreciation of investments | $ | (20,797,572 | ) | ||||
* | Non-income producing security. | |
† | On September 7, 2008, the Federal Housing Finance Agency placed the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation into conservatorship, and the US Treasury guaranteed the debt issued by those organizations. | |
(1) | Security is illiquid. At May 31, 2009, the value of these securities amounted to $15,051,444 or 8.19% of net assets. | |
(2) | Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered liquid, unless noted otherwise, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At May 31, 2009, the value of these securities amounted to $3,245,498 or 1.77% of net assets. | |
(3) | Floating rate security—The interest rates shown are the current rates as of May 31, 2009. | |
(4) | Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities, which represent 3.96% of net assets as of May 31, 2009, are considered illiquid and restricted. (See restricted securities table for more information.) |
Strategic Global Income Fund, Inc. |
Portfolio of investments—May 31, 2009 (unaudited) |
05/31/09 | |||||||||||||||
Acquisition | Market | ||||||||||||||
cost as a | 05/31/09 | value as a | |||||||||||||
Acquisition | Acquisition | percentage | Market | percentage | |||||||||||
Restricted securities | dates | cost | of net assets | value | of net assets | ||||||||||
Apidos CDO, | |||||||||||||||
Series 2007-CA, Class A2B, | |||||||||||||||
1.226%, due 05/14/20 | 11/06/08 | $1,020,000 | 0.55 | % | $840,000 | 0.46 | % | ||||||||
Atrium CDO Corp., | |||||||||||||||
Series 5A, Class A2B, | |||||||||||||||
1.105%, due 07/20/20 | 11/17/08 | 1,040,200 | 0.57 | 500,000 | 0.27 | ||||||||||
BlueMountain CLO Ltd., | |||||||||||||||
Series 2005-1A, Class A2, | |||||||||||||||
1.253%, due 11/15/17 | 11/12/08 | 1,130,000 | 0.62 | 660,000 | 0.36 | ||||||||||
Cadogan Square CLO BV, | |||||||||||||||
Series 1, Class C, | |||||||||||||||
2.844%, due 02/01/22 | 05/22/09 | 240,160 | 0.13 | 141,370 | 0.08 | ||||||||||
Carlyle High Yield Partners, | |||||||||||||||
Series 2006-8A, Class B, | |||||||||||||||
1.133%, due 05/21/21 | 11/20/08 | 1,003,125 | 0.55 | 700,000 | 0.38 | ||||||||||
Gulf Stream Compass CLO Ltd., | |||||||||||||||
Series 2007-1A, Class C, | |||||||||||||||
3.073%, due 10/28/19 | 04/02/09 | 129,500 | 0.07 | 112,000 | 0.06 | ||||||||||
Halcyon Loan Investors CLO Ltd., | |||||||||||||||
Series 2007-2A, Class A1J, | |||||||||||||||
1.419%, due 04/24/21 | 11/06/08 | 1,020,000 | 0.55 | 683,520 | 0.37 | ||||||||||
ING Investment Management, | |||||||||||||||
Series 2006-3A, Class A2B, | |||||||||||||||
1.462%, due 12/13/20 | 11/20/08 | 942,500 | 0.51 | 560,000 | 0.31 | ||||||||||
Limerock CLO, | |||||||||||||||
Series 2007-1A, Class A4, | |||||||||||||||
1.449%, due 04/24/23 | 11/06/08 | 900,000 | 0.49 | 500,000 | 0.27 | ||||||||||
Mountain View Funding CLO, | |||||||||||||||
Series 2007-3A, Class A2, | |||||||||||||||
1.462%, due 04/16/21 | 10/30/08 | 1,362,500 | 0.74 | 1,000,000 | 0.54 | ||||||||||
Series 2006-2A, Class B, | |||||||||||||||
1.539%, due 01/12/21 | 10/30/08 | 1,350,000 | 0.73 | 600,000 | 0.33 | ||||||||||
Rockwall CDO Ltd., | |||||||||||||||
Series 2007-1A, Class A1LB, | |||||||||||||||
1.578%, due 08/01/24 | 10/21/08 | 1,240,000 | 0.67 | 520,000 | 0.28 | ||||||||||
Trimaran CLO Ltd., | |||||||||||||||
Series 2007-1A, Class A2L, | |||||||||||||||
1.690%, due 06/15/21 | 11/12/08 | 880,000 | 0.48 | 460,000 | 0.25 | ||||||||||
Washington Mutual Preferred Funding LLC, | |||||||||||||||
9.750%, due 12/15/17 | 10/19/07 | 1,025,000 | 0.56 | 500 | 0.00 | (a) | |||||||||
Wind River CLO Ltd., | |||||||||||||||
Series 2004-1A, Class B1 | |||||||||||||||
2.399%, due 12/19/16 | 03/09/09 | 140,000 | 0.08 | 140,000 | 0.08 | ||||||||||
$13,422,985 | 7.30 | % | $7,417,390 | 4.04 | % | ||||||||||
(a)Amount represents less than 0.005%. | |||||||||||||||
26 |
Strategic Global Income Fund, Inc. |
Portfolio of investments—May 31, 2009 (unaudited) |
(5) | Security is in default. | |
(6) | Perpetual bond security. The maturity date reflects the next call date. | |
(7) | Step bond—Coupon rate increases in increments to maturity. Rate disclosed is as of May 31, 2009. Maturity date disclosed is the ultimate maturity date. | |
(8) | Security exempt from registration under Regulation S of the Securities Act of 1933. Regulation S applies to securities offerings that are made outside of the United States and do not involve direct selling efforts in the United States. This security, which represents 0.08% of net assets as of May 31, 2009, is considered illiquid and restricted. (See restricted securities table for more information.) | |
(9) | Security represents an equity claim linked to Argentina’s gross domestic product. | |
(10) | Security is a multi-coupon preferred stock that had a coupon reset date of January 16, 2009 of 7.000% fixed until its end date of December 31, 2049. | |
(11) | The table below details the Fund’s investments in securities issued by funds that are advised by the same advisor as the Fund. The advisor does not earn a management fee from either UBS Supplementary Trust—U.S. Cash Management Prime Fund or UBS Cash Management Prime Relationship Fund. |
Income | |||||||||||||||
Purchases | Sales | earned from | |||||||||||||
during the | during the | affiliates for the | |||||||||||||
six months | six months | six months | |||||||||||||
Security | Value | ended | ended | Value | ended | ||||||||||
description | 11/30/08 | 05/31/09 | 05/31/09 | 05/31/09 | 05/31/09 | ||||||||||
UBS Cash | |||||||||||||||
Management Prime | |||||||||||||||
Relationship Fund | $— | $44,938,716 | $34,033,054 | $10,905,662 | $22,791 | ||||||||||
UBS Supplementary | |||||||||||||||
Trust—U.S. Cash | |||||||||||||||
Management | |||||||||||||||
Prime Fund | 14,250,718 | 46,942,733 | 61,193,451 | — | 85,683 | ||||||||||
(12) | The rate shown reflects the yield at May 31, 2009. | |
CDO | Collateralized debt obligations | |
CLO | Collateralized loan obligations | |
GMAC | General Motors Acceptance Corp. | |
GS | Goldman Sachs | |
GSAMP | Goldman Sachs Mortgage Securities Corp. | |
TIPS | Treasury inflation protected securities (“TIPS”) are debt securities issued by the US Treasury whose principal and/or interest payments are adjusted for inflation, unlike debt securities that make fixed principal and interest payments. The interest rate paid by the TIPS is fixed, while the principal value rises or falls based on changes in a published Consumer Price Index (“CPI”). Thus, if inflation occurs, the principal and interest payments on the TIPS are adjusted accordingly to protect investors from inflationary loss. During a deflationary period, the principal and interest payments decrease, although the TIPS principal amounts will not drop below their face amounts at maturity. In exchange for the inflation protection, the TIPS generally pay lower interest rates than typical US Treasury securities. Only if inflation occurs will TIPS offer a higher real yield than a conventional Treasury security of the same maturity. | |
27 |
Strategic Global Income Fund, Inc. |
Portfolio of investments—May 31, 2009 (unaudited) |
Currency type abbreviations: | ||
ARS | Argentine Peso | |
BRL | Brazilian Real | |
DOP | Dominican Peso | |
EUR | Euro | |
MYR | Malaysian Ringgit | |
TRY | Turkish Lira | |
USD | United States Dollar |
Forward foreign currency contracts
Strategic Global Income Fund, Inc. had the following open forward foreign currency contracts as of May 31, 2009:
Unrealized | |||||||||||||||
Contracts | In | Maturity | appreciation/ | ||||||||||||
to deliver | exchange for | dates | (depreciation) | ||||||||||||
Australian Dollar | 35,890,000 | USD | 25,123,439 | 09/02/09 | $(3,426,897 | ) | |||||||||
Brazilian Real | 12,100,000 | USD | 4,997,522 | 06/04/09 | (1,149,164 | ) | |||||||||
Canadian Dollar | 6,428,123 | USD | 5,060,000 | 06/04/09 | (827,979 | ) | |||||||||
Canadian Dollar | 22,885,000 | USD | 18,792,852 | 09/02/09 | (2,180,690 | ) | |||||||||
Chilean Peso | 2,100,000,000 | USD | 3,509,652 | 06/04/09 | (228,334 | ) | |||||||||
Chilean Peso | 2,100,000,000 | USD | 3,770,874 | 09/04/09 | 28,796 | ||||||||||
Czech Koruna | 28,500,000 | EUR | 1,007,352 | 06/04/09 | (71,647 | ) | |||||||||
Czech Koruna | 28,500,000 | EUR | 1,058,889 | 09/04/09 | 5,900 | ||||||||||
Euro | 1,061,453 | CZK | 28,500,000 | 06/04/09 | (4,834 | ) | |||||||||
Euro | 1,066,477 | HUF | 300,000,000 | 06/04/09 | (14,422 | ) | |||||||||
Euro | 1,037,524 | HUF | 300,000,000 | 09/04/09 | (373 | ) | |||||||||
Euro | 7,370,000 | JPY | 950,314,926 | 09/02/09 | (427,042 | ) | |||||||||
Euro | 15,105,000 | USD | 19,793,052 | 09/02/09 | (1,545,480 | ) | |||||||||
Great Britain Pound | 2,670,000 | USD | 3,878,909 | 09/02/09 | (435,247 | ) | |||||||||
Hungary Forint | 300,000,000 | EUR | 1,056,338 | 06/04/09 | 89 | ||||||||||
Japanese Yen | 589,835,200 | AUD | 9,357,489 | 09/02/09 | 1,246,783 | ||||||||||
Japanese Yen | 33,095,400 | CHF | 390,000 | 09/02/09 | 17,912 | ||||||||||
Japanese Yen | 625,298,260 | EUR | 4,870,000 | 09/02/09 | 310,104 | ||||||||||
Japanese Yen | 249,000,000 | GBP | 1,841,716 | 09/02/09 | 359,725 | ||||||||||
Japanese Yen | 49,800,000 | USD | 509,724 | 09/02/09 | (13,496 | ) | |||||||||
Malaysian Ringgit | 43,200,000 | USD | 11,648,915 | 06/04/09 | (712,309 | ) | |||||||||
Malaysian Ringgit | 43,200,000 | USD | 12,341,094 | 09/04/09 | 19,160 | ||||||||||
Mexican Peso | 49,500,000 | USD | 3,213,764 | 06/04/09 | (542,996 | ) | |||||||||
28 |
Strategic Global Income Fund, Inc. |
Portfolio of investments—May 31, 2009 (unaudited) |
Forward foreign currency contracts (concluded) |
Unrealized | |||||||||||||||
Contracts | In | Maturity | appreciation/ | ||||||||||||
to deliver | exchange for | dates | (depreciation) | ||||||||||||
Turkish Lira | 4,900,000 | USD | 3,007,980 | 06/04/09 | $(184,739 | ) | |||||||||
Turkish Lira | 4,900,000 | USD | 3,125,399 | 09/04/09 | 1,390 | ||||||||||
Norwegian Krone | 14,132,823 | CAD | 2,635,000 | 06/04/09 | 171,659 | ||||||||||
Norwegian Krone | 9,435,660 | CHF | 1,560,000 | 09/02/09 | (29,945 | ) | |||||||||
Norwegian Krone | 63,785,498 | CHF | 10,840,000 | 09/02/09 | 73,507 | ||||||||||
Norwegian Krone | 43,779,376 | USD | 6,887,207 | 09/02/09 | (37,434 | ) | |||||||||
South African Rand | 35,000,000 | USD | 3,439,634 | 06/04/09 | (957,839 | ) | |||||||||
Swedish Krona | 62,290,000 | EUR | 5,693,066 | 09/02/09 | (187,432 | ) | |||||||||
Swiss Franc | 29,443,291 | USD | 25,608,924 | 09/02/09 | (1,994,278 | ) | |||||||||
United States Dollar | 4,197,948 | ARS | 15,323,500 | 11/16/09 | (570,215 | ) | |||||||||
United States Dollar | 17,864,757 | AUD | 25,650,000 | 09/02/09 | 2,539,704 | ||||||||||
United States Dollar | 5,580,829 | BRL | 12,100,000 | 06/04/09 | 565,858 | ||||||||||
United States Dollar | 1,987,427 | BRL | 4,110,000 | 09/04/09 | 56,929 | ||||||||||
United States Dollar | 3,410,036 | CAD | 3,793,123 | 06/04/09 | 64,358 | ||||||||||
United States Dollar | 14,906,644 | CAD | 19,090,000 | 09/02/09 | 2,588,873 | ||||||||||
United States Dollar | 3,756,708 | CLP | 2,100,000,000 | 06/04/09 | (18,723 | ) | |||||||||
United States Dollar | 23,670,314 | EUR | 17,525,000 | 09/02/09 | 1,086,903 | ||||||||||
United States Dollar | 5,613,730 | GBP | 3,960,000 | 09/02/09 | 784,793 | ||||||||||
United States Dollar | 17,392,789 | JPY | 1,630,400,000 | 09/02/09 | (263,118 | ) | |||||||||
United States Dollar | 941,849 | JPY | 91,900,000 | 09/02/09 | 23,691 | ||||||||||
United States Dollar | 3,600,000 | MXN | 49,500,000 | 06/04/09 | 156,760 | ||||||||||
United States Dollar | 12,367,592 | MYR | 43,200,000 | 06/04/09 | (6,369 | ) | |||||||||
United States Dollar | 2,212,142 | NOK | 14,132,823 | 06/04/09 | 29,785 | ||||||||||
United States Dollar | 34,839,597 | NOK | 232,219,814 | 09/02/09 | 1,890,915 | ||||||||||
United States Dollar | 6,870,120 | SEK | 62,290,000 | 09/02/09 | 1,359,794 | ||||||||||
United States Dollar | 3,194,263 | TRY | 4,900,000 | 06/04/09 | (1,544 | ) | |||||||||
United States Dollar | 3,767,086 | ZAR | 35,000,000 | 06/04/09 | 630,387 | ||||||||||
Net unrealized depreciation on forward foreign currency contracts | $(1,818,771 | ) | |||||||||||||
29 |
Strategic Global Income Fund, Inc. |
Portfolio of investments—May 31, 2009 (unaudited) |
Currency type abbreviations: | ||
ARS | Argentine Peso | |
AUD | Australian Dollar | |
BRL | Brazilian Real | |
CAD | Canadian Dollar | |
CHF | Swiss Franc | |
CLP | Chilean Peso | |
CZK | Czech Koruna | |
EUR | Euro | |
GBP | Great Britain Pound | |
HUF | Hungary Forint | |
JPY | Japanese Yen | |
MXN | Mexican Peso | |
MYR | Malaysian Ringgit | |
NOK | Norwegian Krone | |
SEK | Swedish Krona | |
TRY | Turkish Lira | |
USD | United States Dollar | |
ZAR | South African Rand |
Futures contracts
Strategic Global Income Fund, Inc. had the following open futures contracts as of May 31, 2009:
Unrealized | ||||||||||||
Expiration | Cost/ | appreciation/ | ||||||||||
dates | (proceeds) | Value | (depreciation) | |||||||||
US treasury futures buy contracts: | ||||||||||||
US Long Bond, | ||||||||||||
150 contracts (USD) | September 2009 | $17,592,492 | $17,648,437 | $55,945 | ||||||||
5 Year US Treasury Notes, | ||||||||||||
26 contracts (USD) | June 2009 | 3,016,637 | 3,026,969 | 10,332 | ||||||||
10 Year US Treasury Notes, | ||||||||||||
258 contracts (USD) | September 2009 | 30,018,991 | 30,186,000 | 167,009 | ||||||||
US treasury futures sell contracts: | ||||||||||||
5 Year US Treasury Notes, | ||||||||||||
26 contracts (USD) | June 2009 | (3,011,692 | ) | (3,026,968 | ) | (15,276 | ) | |||||
5 Year US Treasury Notes, | ||||||||||||
361 contracts (USD) | September 2009 | (41,475,117 | ) | (41,684,219 | ) | (209,102 | ) | |||||
Interest rate futures sell contracts: | ||||||||||||
90 Day Euro-Dollar Interest Rate | ||||||||||||
Futures,182 contracts (USD) | June 2009 | (45,171,854 | ) | (45,199,700 | ) | (27,846 | ) | |||||
Net unrealized depreciation on futures contracts | $(18,938 | ) | ||||||||||
Currency type abbreviation: | ||||||||||||
USD United States Dollar | ||||||||||||
30 |
Strategic Global Income Fund, Inc. |
Portfolio of investments—May 31, 2009 (unaudited) |
Swap agreements
Strategic Global Income Fund, Inc. had outstanding interest rate swap agreements with the following terms as of May 31, 2009:
Counterparty—Citigroup Global Markets Limited: | ||||||||||||||||||||||||
Payments | Upfront | |||||||||||||||||||||||
Payments | received | payments | Unrealized | |||||||||||||||||||||
Notional | Termination | made by | by the | (made)/ | appreciation/ | |||||||||||||||||||
amount | dates | the Fund | Fund | received | Value | (depreciation) | ||||||||||||||||||
USD | 11,200,000 | 08/15/16 | 4.3400%(1) | 0.8831%(2) | $ | 198,737 | $(877,771 | ) | $(679,034 | ) | ||||||||||||||
USD | 42,400,000 | 11/24/18 | 0.3138(3) | 0.6613(2) | — | 144,319 | 144,319 | |||||||||||||||||
$ | 198,737 | $(733,452 | ) | $(534,715 | ) | |||||||||||||||||||
Counterparty—Deutsche Bank AG: | |||||||||||||||||||||||
Payments | Upfront | ||||||||||||||||||||||
Payments | received | payments | Unrealized | ||||||||||||||||||||
Notional | Termination | made by | by the | (made)/ | appreciation/ | ||||||||||||||||||
amount | dates | the Fund | Fund | received | Value | (depreciation) | |||||||||||||||||
USD | 360,000,000 | 06/19/09 | 0.3163 | %(3) | 0.7400 | %(1) | $ | — | $127,102 | $127,102 | |||||||||||||
AUD | 34,700,000 | 01/15/12 | — | (4) | 3.9350 | (1) | — | (209,939 | ) | (209,939 | ) | ||||||||||||
USD | 43,900,000 | 11/30/13 | — | (5) | 2.9400 | (1) | — | 311,537 | 311,537 | ||||||||||||||
AUD | 4,400,000 | 01/20/19 | 3.4567 | (6) | 4.2700 | (1) | — | (367,373 | ) | (367,373 | ) | ||||||||||||
AUD | 8,500,000 | 01/15/20 | 4.4550 | (1) | — | (7) | — | 765,332 | 765,332 | ||||||||||||||
USD | 15,800,000 | 11/15/24 | 4.1160 | (1) | — | (5) | — | (78,822 | ) | (78,822 | ) | ||||||||||||
AUD | 2,300,000 | 01/20/39 | 3.1000 | (1) | 3.4567 | (6) | — | 626,397 | 626,397 | ||||||||||||||
$ | — | $1,174,234 | $1,174,234 | ||||||||||||||||||||
Counterparty—Goldman Sachs International: | |||||||||||||||||||||||
Payments | Upfront | ||||||||||||||||||||||
Payments | received | payments | |||||||||||||||||||||
Notional | Termination | made by | by the | (made)/ | Unrealized | ||||||||||||||||||
amount | date | the Fund | Fund | received | Value | appreciation | |||||||||||||||||
USD | 84,700,000 | 11/24/09 | 0.6613 | %(2) | 0.5913 | %(3) | $ | — | $12,514 | $12,514 | |||||||||||||
Counterparty—JPMorgan Chase Bank: | |||||||||||||||||||||||
Payments | Upfront | ||||||||||||||||||||||
Payments | received | payments | |||||||||||||||||||||
Notional | Termination | made by | by the | (made)/ | Unrealized | ||||||||||||||||||
amount | dates | the Fund | Fund | received | Value | appreciation | |||||||||||||||||
USD | 124,100,000 | 01/09/10 | 1.1494 | %(2) | 0.7406 | %(3) | $ | — | $13,090 | $13,090 | |||||||||||||
USD | 42,300,000 | 11/24/18 | 0.3188 | (3) | 0.6613 | (2) | — | 126,217 | 126,217 | ||||||||||||||
USD | 124,100,000 | 01/09/19 | 0.3319 | (3) | 1.1494 | (2) | — | 546,834 | 546,834 | ||||||||||||||
$ | — | $686,141 | $686,141 | ||||||||||||||||||||
31 |
Strategic Global Income Fund, Inc. |
Portfolio of investments—May 31, 2009 (unaudited) |
Counterparty—Merrill Lynch International: | ||||||||||||||||||||||||
Payments | Upfront | |||||||||||||||||||||||
Payments | received | payments | Unrealized | |||||||||||||||||||||
Notional | Termination | made by | by the | (made)/ | appreciation/ | |||||||||||||||||||
amount | dates | the Fund | Fund | received | Value | (depreciation) | ||||||||||||||||||
USD | 84,700,000 | 11/24/10 | — | (5) | — | (8) | $ | — | $(53,641 | ) | $(53,641 | ) | ||||||||||||
USD | 15,430,000 | 08/15/16 | 4.3300 | %(1) | 0.8831 | %(2) | — | (1,202,483 | ) | (1,202,483 | ) | |||||||||||||
CAD | 11,350,000 | 03/09/19 | 2.6300 | (1) | 0.6829 | (9) | — | 545,756 | 545,756 | |||||||||||||||
USD | 9,400,000 | 03/11/19 | 0.6475 | (2) | 3.1100 | (1) | — | (386,097 | ) | (386,097 | ) | |||||||||||||
CAD | 7,050,000 | 03/09/29 | 0.6829 | (9) | 3.7575 | (1) | — | (344,700 | ) | (344,700 | ) | |||||||||||||
USD | 5,500,000 | 03/12/29 | 0.6475 | (2) | 3.2775 | (1) | — | 537,831 | 537,831 | |||||||||||||||
$ | — | $(903,334 | ) | $(903,334 | ) | |||||||||||||||||||
(1) | Payments made or received are based on the notional amount. | |
(2) | Rate based on 3 month LIBOR (USD BBA). | |
(3) | Rate based on 1 month LIBOR (USD BBA). | |
(4) | Rate based on 3 month BBSW. This is a forward starting trade and, as such, a floating rate has not yet been assigned as of May 31, 2009. | |
(5) | Rate based on 3 month LIBOR (USD BBA). This is a forward starting trade and, as such, a floating rate has not yet been assigned as of May 31, 2009. | |
(6) | Rate based on 6 month BBSW. | |
(7) | Rate based on 6 month BBSW. This is a forward starting trade and, as such, a floating rate has not yet been assigned as of May 31, 2009. | |
(8) | Rate based on 1 month LIBOR (USD BBA). This is a forward starting trade and, as such, a floating rate has not yet been assigned as of May 31, 2009. | |
(9) | Rate based on 3 month Canada Bankers’ Acceptance rate. | |
BBA | British Banking Association | |
BBSW | Bank Bill Swap Reference Rate (Australian Financial Market) | |
LIBOR | London Interbank Offered Rate | |
Currency type abbreviations: | ||
AUD | Australian Dollar | |
CAD | Canadian Dollar | |
USD | United States Dollar | |
32 |
Strategic Global Income Fund, Inc. |
Portfolio of investments—May 31, 2009 (unaudited) |
Strategic Global Income Fund, Inc. had outstanding a credit default swap agreement with the following terms as of May 31, 2009:
Credit default swap on corporate and sovereign issues—sell protection(1)
Counterparty—Credit Suisse International:
Payment | Upfront | ||||||||||||||||||||||||||
Payment | received | payment | |||||||||||||||||||||||||
Notional | Termination | made by | by the | (made)/ | Unrealized | Credit | |||||||||||||||||||||
amount | date | the Fund | Fund | received | Value | depreciation | spread(2) | ||||||||||||||||||||
USD | 4,000,000 | 05/20/12 | — | (3) | 3.3000 | %(4) | $ | — | $ | (540,638 | ) | $ | (540,638 | ) | 8.651% | ||||||||||||
(1) | If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation. | |
(2) | Credit spreads, where available, represented in absolute terms, utilized in determining the market value as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood of risk of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as “Defaulted” indicates a credit event has occurred for the referenced entity. | |
(3) | Payment of notional amount to the counterparty will be made upon the occurrence of a credit event with respect to the Development Bank of Kazakhstan 7.375% bond, due 11/12/13. | |
(4) | Payments received are based on the notional amount. | |
Currency type abbreviation: | ||
USD | United States Dollar | |
33 |
Strategic Global Income Fund, Inc. |
Portfolio of investments—May 31, 2009 (unaudited) |
Options written
Strategic Global Income Fund, Inc. had the following open options written as of May 31, 2009:
Expiration | Premiums | |||||||
dates | received | Value | ||||||
Call option | ||||||||
5 Year US Treasury Futures, | ||||||||
360 contracts, strike @ USD 118.00 | August 2009 | $184,842 | $146,250 | |||||
Put option | ||||||||
3 Month Sterling Interest Rate Futures, | ||||||||
533 contracts, strike @ GBP 97.50 | March 2010 | 264,738 | 107,686 | |||||
Total options written | $449,580 | $253,936 | ||||||
Currency type abbreviations: | ||
GBP | Great Britain Pound | |
USD | United States Dollar |
Written option activity for the six months ended May 31, 2009 for Strategic Global Income Fund, Inc. was as follows:
Number of | Amount of | |||||||
contracts | premiums received | |||||||
Options outstanding at November 30, 2008 | 365 | $141,698 | ||||||
Options written | 1,401 | 456,542 | ||||||
Options terminated in closing purchase transactions | (873 | ) | (148,660 | ) | ||||
Options expired prior to exercise | — | — | ||||||
Options outstanding at May 31, 2009 | 893 | $449,580 | ||||||
The following is a summary of the inputs used as of May 31, 2009 in valuing the Fund’s investments.
Measurements at 05/31/09 | |||||||||||||||
Quoted prices in | Significant | ||||||||||||||
active markets | other | ||||||||||||||
for identical | observable | Unobservable | |||||||||||||
investments | inputs | inputs | |||||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | |||||||||||
Investments, at value | $— | $159,173,467 | $15,051,444 | $174,224,911 | |||||||||||
Other financial instruments(1) | 403,693 | (1,924,569 | ) | — | (1,520,876 | ) | |||||||||
Total | $403,693 | $157,248,898 | $15,051,444 | $172,704,035 | |||||||||||
(1) | Other financial instruments may include open futures contracts, swap contracts, options and forward foreign currency contracts. | |
34 |
Strategic Global Income Fund, Inc. |
Portfolio of investments—May 31, 2009 (unaudited) |
Level 3 rollforward disclosure
The following is a rollforward of the Fund’s investments that were valued using unobservable inputs for the period:
Measurements using unobservable inputs (Level 3) | ||||||||||||
Other financial | ||||||||||||
Investments | instruments | Total | ||||||||||
Assets | ||||||||||||
Beginning balance | $ | 25,712,929 | $ | — | $ | 25,712,929 | ||||||
Total gains or losses (realized/unrealized) | ||||||||||||
included in earnings | (3,838,364 | ) | — | (3,838,364 | ) | |||||||
Purchases, sales, issuances, and settlements (net) | (5,679,624 | ) | — | (5,679,624 | ) | |||||||
Transfers in and/or out of Level 3 | (1,143,497 | ) | — | (1,143,497 | ) | |||||||
Ending balance | $ | 15,051,444 | $ | — | $ | 15,051,444 | ||||||
The amount of total gains or losses for the | ||||||||||||
period included in earnings attributable to the | ||||||||||||
change in unrealized gains or losses relating | ||||||||||||
to investments still held at 05/31/09(a) | $ | (5,893,986 | ) | $ | — | $ | (5,893,986 | ) | ||||
(a) | Excludes from total gains or losses (realized/unrealized) included in earnings, unrealized losses of $1,200,879 related to transferred assets, presented at their end of period values. | |
See accompanying notes to financial statements | ||
35 |
Strategic Global Income Fund, Inc. |
Statement of assets and liabilities—May 31, 2009 (unaudited) |
Assets: | |||
Investments in securities of unaffiliated issuers, at value (cost—$184,751,821) | $163,954,249 | ||
Investments in securities of affiliated issuers, at value (cost—$10,905,662) | 10,905,662 | ||
Total investments (cost—$195,657,483) | 174,859,911 | ||
Foreign currency, at value (cost—$3,748,162) | 3,599,645 | ||
Cash | 530,397 | ||
Interest receivable | 2,317,717 | ||
Receivable for investments sold | 8,152,641 | ||
Due from broker* | 955,242 | ||
Variation margin receivable | 230,861 | ||
Outstanding swap agreements, at value | 3,756,929 | ||
Unrealized appreciation on forward foreign currency contracts | 14,013,775 | ||
Other assets | 17,647 | ||
Total assets | 208,434,765 | ||
Liabilities: | |||
Unrealized depreciation on forward foreign currency contracts | 15,832,546 | ||
Payable for investments purchased | 4,178,189 | ||
Outstanding swap agreements, at value** | 4,061,464 | ||
Options written, at value*** | 253,936 | ||
Payable to investment advisor and administrator | 156,442 | ||
Directors’ fees payable | 2,924 | ||
Accrued expenses and other liabilities | 115,229 | ||
Total liabilities | 24,600,730 | ||
Net assets: | |||
Capital stock—$0.001 par value; 100,000,000 shares authorized; | |||
18,258,828 shares issued and outstanding | 206,099,092 | ||
Distributions in excess of net investment income | (810,075 | ) | |
Accumulated net realized gain from investment transactions | 1,141,377 | ||
Net unrealized depreciation of investments, futures, swaps, options, | |||
forward foreign currency contracts and other assets and liabilities | |||
denominated in foreign currencies | (22,596,359 | ) | |
Net assets | $183,834,035 | ||
Net asset value per share | $10.07 | ||
* | Represents cash collateral on open futures contacts. | |
** | Upfront payments received by the Fund amounted to $198,737. | |
*** | Premiums received by the Fund on options written amounted to $449,580. | |
See accompanying notes to financial statements | ||
36 |
Strategic Global Income Fund, Inc. |
Statement of operations |
For the | |||
six months ended | |||
May 31, 2009 | |||
(unaudited) | |||
Investment income: | |||
Interest income, net of foreign withholding taxes of $11,705 | |||
(includes $108,474 earned from affiliated entities) | $5,960,465 | ||
Dividends | 597 | ||
Total investment income | 5,961,062 | ||
Expenses: | |||
Investment advisory and administration fees | 863,410 | ||
Custody and accounting fees | 73,853 | ||
Professional fees | 53,497 | ||
Reports and notices to shareholders | 51,365 | ||
Directors’ fees | 12,432 | ||
Listing fees | 11,777 | ||
Transfer agency fees | 9,740 | ||
Insurance expense | 797 | ||
Other expenses | 10,364 | ||
Total expenses | 1,087,235 | ||
Net investment income | 4,873,827 | ||
Realized and unrealized gains/(losses) from investment activities: | |||
Net realized gain/(loss) from: | |||
Investments | 1,393,623 | ||
Futures | 151,625 | ||
Options written | 142,820 | ||
Swap agreements | 4,060,339 | ||
Forward foreign currency contracts and foreign currency transactions | (1,348,403 | ) | |
Net change in unrealized appreciation/(depreciation) of: | |||
Investments | 12,147,536 | ||
Futures | 325,065 | ||
Options written | 126,946 | ||
Swap agreements | (236,065 | ) | |
Other assets and liabilities denominated in foreign currency and | |||
forward foreign currency contracts | (1,406,200 | ) | |
Net realized and unrealized gain from investment activities | 15,357,286 | ||
Net increase in net assets resulting from operations | $20,231,113 | ||
See accompanying notes to financial statements | |||
37 |
Strategic Global Income Fund, Inc. |
Statement of changes in net assets |
For the six | ||||||||
months ended | For the | |||||||
May 31, 2009 | year ended | |||||||
(unaudited) | November 30, 2008 | |||||||
From operations: | ||||||||
Net investment income | $4,873,827 | $12,453,630 | ||||||
Net realized gain/(loss) from investments | 1,393,623 | (4,466,265 | ) | |||||
Net realized gain from futures | 151,625 | 1,188,613 | ||||||
Net realized gain from options written | 142,820 | 1,025,669 | ||||||
Net realized gain from swap agreements | 4,060,339 | 1,090,249 | ||||||
Net realized gain/(loss) from forward foreign currency | ||||||||
contracts and foreign currency transactions | (1,348,403 | ) | 6,319,829 | |||||
Net change in unrealized appreciation/(depreciation) of: | ||||||||
Investments | 12,147,536 | (38,103,519 | ) | |||||
Futures | 325,065 | (355,276 | ) | |||||
Options written | 126,946 | 72,974 | ||||||
Swap agreements | (236,065 | ) | 240,978 | |||||
Other assets and liabilities denominated in foreign | ||||||||
currency and forward foreign currency contracts | (1,406,200 | ) | 741,856 | |||||
Net increase/(decrease) in net assets resulting | ||||||||
from operations | 20,231,113 | (19,791,262 | ) | |||||
Dividends and distributions to shareholders from: | ||||||||
Net investment income | (6,865,319 | )* | (16,372,691 | ) | ||||
Net realized gains | — | (1,433,318 | ) | |||||
Total dividends and distributions to shareholders | (6,865,319 | ) | (17,806,009 | ) | ||||
Net increase/(decrease) in net assets | 13,365,794 | (37,597,271 | ) | |||||
Net assets: | ||||||||
Beginning of period | 170,468,241 | 208,065,512 | ||||||
End of period | $183,834,035 | $170,468,241 | ||||||
Accumulated undistributed/(distributions in excess of) | ||||||||
net investment income | $(810,075 | ) | �� | $1,181,417 | ||||
* | The actual sources of the Fund’s fiscal year 2009 dividends/distributions may be net investment income, net realized capital gains, return of capital or a combination of the foregoing and may be subject to retroactive recharacterization at the end of the Fund’s fiscal year based on tax regulations. Shareholders will be informed of the tax characteristics of dividends/distributions after the close of the 2009 fiscal year. | |
See accompanying notes to financial statements | ||
38 |
(This page has been left blank intentionally)
Strategic Global Income Fund, Inc. |
Financial highlights |
Selected data for a share of common stock outstanding thoughout each period is presented below:
For the six | ||||
months ended | ||||
May 31, 2009 | ||||
(unaudited) | ||||
Net asset value, beginning of period | $9.34 | |||
Net investment income | 0.27 | * | ||
Net realized and unrealized gains/(losses) from investment activities | 0.84 | |||
Net increase/(decrease) from investment operations | 1.11 | |||
Dividends from net investment income | (0.38 | )(1) | ||
Distributions from net realized gains | — | |||
Distribution from paid-in-capital | — | |||
Total dividends and distributions | (0.38 | ) | ||
Net asset value, end of period | $10.07 | |||
Market price per share, end of period | $9.05 | |||
Total net asset value return(2) | 11.59 | % | ||
Total market price return(3) | 25.91 | % | ||
Ratios/supplemental data: | ||||
Net assets, end of period (000’s) | $183,834 | |||
Ratio of expenses to average net assets: | 1.26 | %(4) | ||
Ratio of net investment income to average net assets: | 5.64 | %(4) | ||
Portfolio turnover rate | 64 | % | ||
* | Calculated using the average shares method. | |
(1) | The actual sources of the Fund’s fiscal year 2009 dividends/distributions may be net investment income, net realized capital gains, return of capital or a combination of the foregoing and may be subject to retroactive recharacterization at the end of the Fund’s fiscal year based on tax regulations. Shareholders will be informed of the tax characteristics of dividends/distributions after the close of the 2009 fiscal year. | |
(2) | Total net asset value return is calculated assuming a $10,000 purchase of common stock at the current net asset value on the first day of each period reported and a sale at the current net asset value on the last day of each period reported, and assuming reinvestment of dividends and other distributions at the net asset value on the payable dates. Total net asset value return does not reflect brokerage commissions or the deduction of taxes that a shareholder would pay on Fund dividends/distributions or a sale of Fund shares. Total return based on net asset value is hypothetical as investors cannot purchase or sell Fund shares at the net asset value but only at market prices. | |
See accompanying notes to financial statements | ||
40 |
For the years ended November 30, | |||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | |||||||||
$11.40 | $11.85 | $11.47 | $13.12 | $12.93 | |||||||||
0.68 | * | 0.45 | * | 0.51 | 0.54 | 0.54 | |||||||
(1.76 | ) | 0.03 | 0.80 | (0.28 | ) | 0.94 | |||||||
(1.08 | ) | 0.48 | 1.31 | 0.26 | 1.48 | ||||||||
(0.90 | ) | (0.61 | ) | (0.83 | ) | (1.17 | ) | (1.29 | ) | ||||
(0.08 | ) | (0.32 | ) | (0.10 | ) | (0.63 | ) | — | |||||
— | — | — | (0.11 | ) | — | ||||||||
(0.98 | ) | (0.93 | ) | (0.93 | ) | (1.91 | ) | (1.29 | ) | ||||
$9.34 | $11.40 | $11.85 | $11.47 | $13.12 | |||||||||
$7.53 | $10.38 | $11.67 | $10.56 | $14.60 | |||||||||
(10.52 | )% | 4.22 | % | 11.89 | % | 1.85 | % | 12.10 | % | ||||
(20.13 | )% | (3.45 | )% | 19.70 | % | (17.37 | )% | 10.89 | % | ||||
$170,468 | $208,066 | $216,398 | $209,404 | $239,538 | |||||||||
1.21 | % | 1.22 | % | 1.23 | % | 1.22 | % | 1.16 | % | ||||
6.14 | % | 3.86 | % | 4.43 | % | 4.43 | % | 4.21 | % | ||||
102 | % | 103 | % | 74 | % | 113 | % | 189 | % | ||||
(3) | Total market price return is calculated assuming a purchase of 10,000 of common stock at the current market price on the first day of each period reported and a sale at the current market price on the last day of each period reported, and assuming reinvestment of dividends and other distributions at prices obtained under the Fund’s Dividend Reinvestment Plan. Total market price return does not reflect brokerage commissions or the deduction of taxes that a shareholder would pay on Fund dividends/distributions or a sale of Fund shares. | |
(4) | Annualized. | |
41 |
Strategic Global Income Fund, Inc.
Notes to financial statements—May 31, 2009 (unaudited)
Organization and significant accounting policies
Strategic Global Income Fund, Inc. (the “Fund”) was incorporated in Maryland on November 15, 1991 and is registered with the Securities and Exchange Commission as a closed-end, non-diversified management investment company. The Fund’s shares trade on the New York Stock Exchange (“NYSE”). The Fund’s primary investment objective is to achieve a high level of current income. As a secondary objective, the Fund seeks capital appreciation, to the extent consistent with its primary objective.
In the normal course of business the Fund enters into contracts that contain a variety of representations that provide general indemnification for certain liabilities. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
The preparation of financial statements in accordance with US generally accepted accounting principles requires Fund management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies:
Valuation of investments—The Fund calculates its net asset value based on the current market value, where available, for its portfolio securities. The Fund normally obtains market values for its securities and other instruments from independent pricing sources and broker-dealers. Independent pricing sources may use reported last sale prices, current market quotations or valuations from computerized “matrix” systems that derive values based on comparable securities or instruments. A matrix system incorporates parameters such as security quality, maturity and coupon, and/or research and evaluations by its staff, including review of broker-dealer market price quotations, if available, in determining the valuation of the portfolio securities. Securities traded in the over-the-counter (“OTC”) market and listed on The NASDAQ Stock Market, Inc. (“NASDAQ”) normally are valued at the NASDAQ Official Closing Price. Other OTC securities are valued at the last bid price on the valuation date available prior to valuation. Securities which are listed on US and foreign stock exchanges normally are valued at the last sale price on the day the securities are valued or, lacking any sales on such day, at the last available bid price. In cases where securities are traded on more than one exchange,
Strategic Global Income Fund, Inc.
Notes to financial statements—May 31, 2009 (unaudited)
the securities are valued on the exchange designated as the primary market by UBS Global Asset Management (Americas) Inc. (“UBS Global AM”), the investment advisor of the Fund. If a market value is not available from an independent pricing source for a particular security, that security is valued at fair value as determined in good faith by or under the direction of the Fund’s Board of Directors (the “Board”). Various factors may be reviewed in order to make a good faith determination of a security’s fair value. These factors include, but are not limited to, the type and cost of the security; contractual or legal restrictions on resale of the security; relevant financial or business developments of the issuer; actively traded similar or related securities; conversion or exchange rights on the security; related corporate actions; and changes in overall market conditions. Foreign currency exchange rates are generally determined as of the close of the NYSE. Occasionally, events affecting the value of foreign investments occur between the time at which they are determined and the close of the NYSE, which will not be reflected in the computation of the Fund’s net asset value. If events materially affecting the value of such securities occur during such time periods, the securities will be valued at their fair value as determined in good faith by or under the direction of the Board. The amortized cost method of valuation, which approximates market value, generally is used to value short-term debt instruments with sixty days or less remaining to maturity, unless the Board determines that this does not represent fair value. Investments in open-end investment companies are valued at the daily closing net asset value of the respective investment company as provided by such other entity. All investments quoted in foreign currencies will be valued in US dollars on the basis of the foreign currency exchange rates prevailing at the time such valuation is determined by the Fund’s custodian.
Futures contracts are generally valued at the settlement price established each day on the exchange on which they are traded. Forward foreign currency contracts are valued daily using forward exchange rates quoted by independent pricing services.
Swaps are marked to market daily based upon values from third party vendors or quotations from market makers to the extent available and the change in value, if any, is recorded as an unrealized gain or loss on the Statement of assets and liabilities. In the event that market quotations are not readily available or deemed unreliable, the swap is valued at fair value as determined in good faith by or under the direction of the Board.
Strategic Global Income Fund, Inc.
Notes to financial statements—May 31, 2009 (unaudited)
The Fund adopted Statement of Financial Accounting Standards No. 157 “Fair Value Measurements” (“FAS 157”). FAS 157 requires disclosure regarding the various inputs that are used in determining the value of the Fund’s investments. These inputs are summarized into the three broad levels listed below:
Level 1—Quoted prices in active markets for identical investments.
Level 2—Other significant observable inputs, including but not limited to, quoted prices for similar investments, interest rates, prepayment speeds and credit risk.
Level 3—Unobservable inputs inclusive of the Fund’s own assumptions in determining the fair value of investments.
In September 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position No. FAS 133-1 and FIN 45-4, “Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45” (the “FSP”). The FSP amends FASB Statement No. 133 (“FAS 133”), “Accounting for Derivative Instruments and Hedging Activities”, and also amends FASB Interpretation No. 45 (“FIN 45”), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others”. The amendments to FAS 133 include required disclosure for (i) the nature and terms of the credit derivative, reasons for entering into the credit derivative, the events or circumstances that would require the seller to perform under the credit derivative, and the current status of the payment/performance risk of the credit derivative, (ii) the maximum potential amount of future payments (undiscounted) the seller could be required to make under the credit derivative, (iii) the fair value of the credit derivative, and (iv) the nature of any recourse provisions and assets held either as collateral or by third parties. The amendments to FIN 45 require additional disclosures about the current status of the payment/performance risk of a guarantee. All changes to accounting policies have been made in accordance with the FSP and incorporated for the current period as part of the Notes to the portfolio of investments and disclosures within the footnote, “Swap agreements”.
In April 2009, the FASB issued FASB Staff Position No. 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP 157-4”). FSP 157-4 provides additional guidance for estimating fair value in accordance with FAS 157, when the volume and
Strategic Global Income Fund, Inc.
Notes to financial statements—May 31, 2009 (unaudited)
level of activity for the asset or liability have significantly decreased as well as guidance on identifying circumstances that indicate a transaction is not orderly. FSP 157-4 is effective for fiscal years and interim periods ending after June 15, 2009. Management is currently evaluating the impact the adoption of FSP 157-4 will have on the Fund’s financial statement disclosures.
In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“FAS 161”), which changes the disclosure requirements for derivative instruments and hedging activities. FAS 161 requires that (1) objectives for using derivative instruments be disclosed in terms of underlying risk and accounting designation, (2) the fair values of derivative instruments and their gains and losses be disclosed in a tabular format, and (3) information be disclosed about credit-risk contingent features of derivatives contracts. FAS 161 is effective for financial statements for fiscal years and interim periods beginning after November 15, 2008. Details of this disclosure can be found below as well as in the Portfolio of investments and Notes to financial statements beginning on page 47.
Fair value of derivative instruments | ||||||||||||
Derivative | ||||||||||||
contracts not | ||||||||||||
accounted for | As of May 31, 2009 | |||||||||||
as hedging | ||||||||||||
instruments | Balance | Balance | ||||||||||
under | sheet | Derivative | sheet | Derivative | ||||||||
Statement 133 | location | assets | location | liabilities | ||||||||
Receivables, | Payables, | |||||||||||
Net Assets - | Net Assets - | |||||||||||
Unrealized | Unrealized | |||||||||||
Interest rates | appreciation | $4,625,215 | * | depreciation | $(3,828,249 | )* | ||||||
Credit | Receivables | — | Payables | (540,638 | ) | |||||||
Currencies | Receivables | 14,013,775 | Payables | (15,832,546 | ) | |||||||
Gross fair | ||||||||||||
value of | ||||||||||||
derivative | ||||||||||||
contracts | $18,638,990 | $(20,201,433 | ) | |||||||||
* | Includes cumulative appreciation/(depreciation) of futures contracts as reported in the Portfolio of investments. Only current day’s variation margin is reported within the Statement of assets and liabilities. | |
45 |
Strategic Global Income Fund, Inc.
Notes to financial statements—May 31, 2009 (unaudited)
The effect of derivative instruments on the Statement | |||||||||||||||
of operations for the six months ended May 31, 2009 | |||||||||||||||
Derivatives | Amount of realized gains/(losses) on derivatives recognized in income | ||||||||||||||
not accounted | |||||||||||||||
for as hedging | Forward | ||||||||||||||
instruments | foreign | ||||||||||||||
under | currency | ||||||||||||||
Statement 133 | contracts | Futures | Swaps | Options | Total | ||||||||||
Interest rates | $— | $151,625 | $4,403,291 | $803,615 | $5,358,531 | ||||||||||
Credit | — | — | (342,952 | ) | — | (342,952 | ) | ||||||||
Currencies | 2,619,870 | — | — | — | 2,619,870 | ||||||||||
$2,619,870 | $151,625 | $4,060,339 | $803,615 | $7,635,449 | |||||||||||
Amount of unrealized appreciation/(depreciation) on | |||||||||||||||||||
Derivatives | derivatives recognized in income | ||||||||||||||||||
not accounted | |||||||||||||||||||
for as hedging | Forward | ||||||||||||||||||
instruments | foreign | ||||||||||||||||||
under | currency | ||||||||||||||||||
Statement 133 | contracts | Futures | Swaps | Options | Total | ||||||||||||||
Interest rates | $— | $325,065 | $(378,481 | ) | $(731,763 | ) | $(785,179 | ) | |||||||||||
Credit | — | — | 142,416 | — | 142,416 | ||||||||||||||
Currencies | (1,644,965 | ) | — | — | — | (1,644,965 | ) | ||||||||||||
$(1,644,965 | ) | $325,065 | $(236,065 | ) | $(731,763 | ) | $(2,287,728 | ) | |||||||||||
Restricted securities—The Fund may invest in securities that are subject to legal or contractual restrictions on resale. Frequently, these securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included in the Fund’s “Notes to portfolio of investments.”
Investment transactions and investment income—Investment transactions are recorded on the trade date. Realized gains and losses from investment and foreign exchange transactions are calculated using the identified cost method. Interest income is recorded on an accrual basis. Discounts are accreted and premiums are amortized as adjustments to interest income and the identified cost of investments.
Foreign currency translation—The Fund uses the foreign currency exchange rates determined as of the close of regular trading on the NYSE. For purposes of calculating the US dollar equivalent value of a non-US dollar denominated obligation, foreign currency amounts are translated into US dollars on the following basis: (1) market value of investment securities
Strategic Global Income Fund, Inc.
Notes to financial statements—May 31, 2009 (unaudited)
and other assets and liabilities—at the exchange rates prevailing at the close of each business day; and (2) purchases and sales of investment securities and income and expenses—at the rates of exchange prevailing on the respective dates of such transactions.
Although the net assets and the market value of the Fund’s portfolio are presented at the foreign exchange rates at the end of the Fund’s fiscal period, the Fund does not generally isolate the effect of fluctuations in foreign exchange rates from the effect of the changes in market prices of securities. However, the Fund does isolate the effect of fluctuations in foreign exchange rates when determining the gain or loss upon the sale or maturity of foreign currency-denominated securities pursuant to US federal income tax regulations. Certain foreign exchange gains and losses included in realized and unrealized gains and losses are included in or are a reduction of ordinary income in accordance with US federal income tax regulations.
Forward foreign currency contracts—The Fund may enter into forward foreign currency exchange contracts (“forward contracts“) in connection with planned purchases or sales of securities or to hedge the US dollar value of portfolio securities denominated in a particular currency. The Fund may also use forward contracts in an attempt to enhance income.
The Fund has no specific limitation on the percentage of assets which may be committed to such contracts. The Fund may enter into forward contracts or maintain a net exposure to forward contracts only if (1) the consummation of the contracts would not obligate the Fund to deliver an amount of foreign currency in excess of the value of the position being hedged by such contracts or (2) the Fund identifies cash or liquid securities in an amount not less than the value of its assets committed to the consummation of the forward contracts and not covered as provided in (1) above, as marked-to-market daily.
Forward foreign currency contracts involve, to varying degrees, elements of market risk (specifically foreign currency risk). Risks may also arise upon entering into forward contracts from the potential inability of counterparties to meet the terms of their forward contracts and from unanticipated movements in the value of foreign currencies relative to the US dollar.
Fluctuations in the value of forward contracts are recorded for book purposes as unrealized gains or losses by the Fund. Realized gains and
Strategic Global Income Fund, Inc.
Notes to financial statements—May 31, 2009 (unaudited)
losses include net gains and losses recognized by the Fund on contracts which have been sold or matured.
Futures contracts—The Fund may use financial futures contracts for hedging purposes and to adjust exposure to US and foreign fixed income markets in connection with a reallocation of the Fund’s assets or to manage the average duration of the Fund. However, imperfect correlations between futures contracts and the related securities or markets, or market disruptions, do not normally permit full control of these risks at all times. Using financial futures contracts involves various market risks, including interest rate risk. The maximum amount at risk from the purchase of a futures contract is the contract value.
Upon entering into a financial futures contract, the Fund is required to deliver to a broker an amount of cash and/or liquid securities equal to a certain percentage of the contract amount. This amount is known as the “initial margin”. Subsequent payments, known as “variation margin”, are made or received by the Fund each day, depending on the daily fluctuations in the value of the underlying financial futures contracts. Such variation margin is recorded for financial statement purposes on a daily basis as an unrealized gain or loss on futures until the financial futures contract is closed or expires, at which time the net gain or loss is reclassified to realized gain or loss on futures.
The Statement of operations reflects net realized and net unrealized gains and losses on these contracts.
Swap agreements—The Fund may engage in swap agreements, including but not limited to interest rate, currency, total return, and credit default swap agreements. The Fund expects to enter into these transactions to preserve a return or spread on a particular investment or to hedge a portion of the portfolio’s duration, to protect against any increase in the price of securities the Fund anticipates purchasing at a later date, or to gain exposure to certain markets in the most economical way possible.
The Fund may enter into interest rate swap agreements with another party to receive or pay interest (e.g., an exchange of fixed rate payments for floating rate payments) to protect itself from interest rate fluctuations. This type of swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to a specified interest rate(s) for a specified amount. The payment flows are usually netted against each other, with the difference
Strategic Global Income Fund, Inc.
Notes to financial statements—May 31, 2009 (unaudited)
being paid by one party to the other. Interest rate swap agreements are subject to general market risk, liquidity risk, counterparty risk and interest rate risk.
Credit default swap agreements involve commitments to make or receive payments in the event of a default or other credit event of a referenced security. As a buyer, the Fund would make periodic payments to the counterparty, and the Fund would receive payments only upon the occurrence of a credit event. If no credit event occurs, the Fund will lose its periodic stream of payments over the term of the contract. However, if a credit event does occur, the Fund typically would receive full notional value for a reference obligation that may have little or no value. As a seller, the Fund would receive periodic payments from the counterparty, and the Fund would make payments only upon the occurrence of a credit event. If no credit event occurs, the Fund will gain the periodic stream of payments it received over the term of the contract. However, if a credit event occurs, the Fund will pay full notional value for a reference obligation that may have little or no value. Credit default swaps may involve greater risks than if the Fund had invested in the reference obligation directly and are subject to general market risk, liquidity risk, counterparty risk and credit risk.
Credit default swap agreements on corporate issues or sovereign issues of an emerging market country involve one party making a stream of payments to another party in exchange for the right to receive a specified return in the event of a default or other credit event. If a credit event occurs and cash settlement is not elected, a variety of other deliverable obligations may be delivered in lieu of the specific referenced obligation. The ability to deliver other obligations may result in a cheapest-to-deliver option (the buyer of protection’s right to choose the deliverable obligation with the lowest value following a credit event). The Fund may use credit default swaps on corporate issues or sovereign issues of an emerging market country to provide a measure of protection against defaults of the issuers (i.e., to reduce risk where the Fund owns or has exposure to the referenced obligation) or to take an active long or short position with respect to the likelihood of a particular issuer’s default.
Total return swap agreements involve commitments to pay or receive interest in exchange for a market-linked return based on a notional amount. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. Total return swaps are marked-to-market
Strategic Global Income Fund, Inc.
Notes to financial statements—May 31, 2009 (unaudited)
daily, and the change, if any, is recorded as unrealized appreciation or depreciation. Total return swap agreements are subject to general market risk, liquidity risk, counterparty risk and that there may be unfavorable changes in the underlying investments or instruments.
The use of swaps involves investment techniques and risks different from those associated with ordinary portfolio security transactions. If UBS Global AM is incorrect in its forecast of market values, interest rates and other applicable factors, the investment performance of the Fund will be less favorable than it would have been if this investment technique was never used. Swaps do not involve the delivery of securities and are subject to counterparty risk. If the other party to a swap defaults and fails to consummate the transaction, the Fund’s risk of loss will consist of the net amount of interest or other payments that the Fund is contractually entitled to receive. Therefore, the Fund would consider the creditworthiness of the counterparty to a swap agreement in evaluating potential credit risk.
The Fund accrues for interim payments on swap agreements on a daily basis, with the net amount recorded within unrealized appreciation/depreciation of swap agreements on the Statement of assets and liabilities. Once interim payments are settled in cash, the net amount is recorded as realized gain/loss on swap agreements, in addition to realized gain/loss recorded upon the termination of swap agreements on the Statement of operations. Fluctuations in the value of swap agreements are recorded for financial statement purposes as unrealized appreciation or depreciation of swap agreements.
The maximum potential amount of future payments (undiscounted) that the Fund as a seller of protection could be required to make under a credit default swap agreement would be an amount equal to the notional amount of the agreement. Notional amounts of all credit default swap agreements outstanding as of May 31, 2009 for which the Fund is the seller of protection are disclosed under the section “Credit default swaps on corporate and sovereign issues—sell protection” in the portfolio of investments. These potential amounts would be partially offset by any recovery values of the respective referenced obligations, upfront payments received upon entering into the agreement, or net amounts received from the settlement of buy protection credit default swap agreements entered into, if any, by the Fund for the same referenced entity or entities.
Options writing—The Fund may write (sell) put and call options on foreign or US securities indices in order to gain exposure to or protect against
Strategic Global Income Fund, Inc.
Notes to financial statements—May 31, 2009 (unaudited)
changes in the markets. When the Fund writes a call or a put option, an amount equal to the premium received by the Fund is included in the Fund’s Statement of assets and liabilities as an asset and as an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option written. If an option which the Fund has written either expires on its stipulated expiration date or the Fund enters into a closing purchase transaction, the Fund realizes a gain (or loss if the cost of a closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security or derivative instrument, and the liability related to such option is extinguished. If a call option which the Fund has written is exercised, the Fund recognizes a realized gain or loss (long-term or short-term, depending on the holding period of the underlying security) from the sale of the underlying security or derivative instrument and the proceeds from the sale are increased by the premium originally received. If a put option which the Fund has written is exercised, the amount of the premium originally received reduces the cost of the security or derivative instrument which the Fund purchases upon exercise of the option.
In writing an option, the Fund bears the market risk (specifically interest rate risk) of an unfavorable change in the price of the derivative instrument, security, index or currency underlying the written option. Exercise of an option written by the Fund could result in the Fund selling or buying a derivative instrument, security or currency at a price different from current market value.
Purchased options—The Fund may purchase put and call options on foreign or US securities and indices as well as exchange-listed call options on particular market segment indices to achieve temporary exposure to a specific security, industry or geographic region. Purchasing call options tends to increase exposure to the underlying instrument. Purchasing put options tends to decrease exposure to the underlying instrument. The Fund pays a premium which is included in the Statement of assets and liabilities as an investment and subsequently marked-to-market to reflect the current value of the option. Premiums paid for purchasing options which expire are treated as realized losses. Purchased options involve general market risk and interest rate risk. The risk associated with purchasing put and call options is limited to the premium paid. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the underlying futures, security or currency transaction to determine the realized gain or loss.
Strategic Global Income Fund, Inc.
Notes to financial statements—May 31, 2009 (unaudited)
Dividends and distributions— Dividends and distributions to shareholders are recorded on the ex-dividend date. The amount of dividends from net investment income and distributions from net realized capital gains and/or return of capital is determined in accordance with US federal income tax regulations, which may differ from US generally accepted accounting principles. These “book/tax” differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification.
Concentration of risk
Investing in securities of foreign issuers and currency transactions may involve certain considerations and risks not typically associated with investments in the United States. These risks include revaluation of currencies, adverse fluctuations in foreign currency values and possible adverse political, social and economic developments, including those particular to a specific industry, country or region, which could cause the securities and their markets to be less liquid and prices more volatile than those of comparable US companies and US government securities. These risks are greater with respect to securities of issuers located in emerging market countries in which the Fund invests. The ability of the issuers of debt securities held by the Fund to meet their obligations may be affected by economic and political developments particular to a specific industry, country, state or region.
Investment advisor and administrator transactions with related entities
The Fund’s Board has approved an investment advisory and administration contract (“Advisory Contract”) with UBS Global AM. In accordance with the Advisory Contract, the Fund pays UBS Global AM an investment advisory and administration fee, which is accrued weekly and paid monthly, at the annual rate of 1.00% of the Fund’s average weekly net assets. At May 31, 2009, the Fund owed UBS Global AM $156,442 in investment advisory and administration fees.
Additional information regarding compensation to affiliate of a board member
Professor Meyer Feldberg serves as a senior advisor to Morgan Stanley, resulting in him being an interested director of the Fund. The Fund has been informed that Professor Feldberg’s role at Morgan Stanley does not involve matters directly affecting any UBS funds. Fund transactions are executed through Morgan Stanley based on that firm’s ability to provide
Strategic Global Income Fund, Inc.
Notes to financial statements—May 31, 2009 (unaudited)
best execution of the transactions. During the six months ended May 31, 2009, the Fund purchased and sold certain securities (e.g., fixed income securities) in principal trades with Morgan Stanley having an aggregate value of $2,820,192. Morgan Stanley received compensation in connection with these trades, which may have been in the form of a “mark-up” or “mark-down” of the price of the securities, a fee from the issuer for maintaining a commercial paper program, or some other form of compensation. Although the precise amount of this compensation is not generally known by UBS Global AM, UBS Global AM believes that under normal circumstances it represents a small portion of the total value of the transactions.
Securities lending
The Fund may lend securities up to 331/3% of its total assets to qualified broker-dealers or institutional investors. The loans are secured at all times by cash, cash equivalents or US government securities in an amount at least equal to the market value of the securities loaned, plus accrued interest and dividends, determined on a daily basis and adjusted accordingly. The Fund will regain ownership of loaned securities to exercise certain beneficial rights; however, the Fund may bear the risk of delay in recovery of, or even loss of rights in, the securities loaned should the borrower fail financially. The Fund receives compensation for lending its securities from interest or dividends earned on the cash, cash equivalents or US government securities held as collateral, net of fee rebates paid to the borrower plus reasonable administrative and custody fees. The Fund did not lend any securities during the six month period ended May 31, 2009.
Capital stock
There are 100,000,000 shares of $0.001 par value common stock authorized and 18,258,828 shares outstanding at May 31, 2009. For the six months ended May 31, 2009 and for the year ended November 30, 2008, there were no transactions involving common stock.
Purchases and sales of securities
For the six months ended May 31, 2009, aggregate purchases and sales of portfolio securities, excluding short-term securities, were $99,354,847 and $97,028,165, respectively.
Federal tax status
It is the Fund’s policy to comply with all requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. In addition, by
Strategic Global Income Fund, Inc.
Notes to financial statements—May 31, 2009 (unaudited)
distributing during each calendar year substantially all of its net investment income, net realized capital gains and certain other amounts, if any, the Fund intends not to be subject to a federal excise tax. Accordingly, no federal income tax provision was required.
The tax character of distributions paid during the fiscal year ended November 30, 2008 was as follows:
Distributions paid from: | 2008 | |
Ordinary income | $15,766,753 | |
Net long-term capital gains | 2,039,256 | |
$17,806,009 | ||
The tax character of distributions paid and components of accumulated earnings (deficit) on a tax basis for the current fiscal year will be calculated after the Fund’s fiscal year ending November 30, 2009.
As of and during the six months ended May, 31, 2009, the Fund did not have any liabilities for any unrecognized tax positions. The Fund recognizes interest and penalties, if any, related to unrecognized tax positions as income tax expense in the Statement of operations. During the period, the Fund did not incur any interest or penalties.
Each of the tax years in the four year period ended November 30, 2008 remains subject to examination by the Internal Revenue Service and state taxing authorities.
Subsequent events
Subsequent events after the date of the Statement of assets and liabilities are evaluated through the date of issuance of the report. For the Fund, there were no material subsequent events that occurred between the date of the Statement of assets and liabilities through the date of issuance of the report that required disclosure in the financial statements other than the following:
In July 2009, the Board approved a reduction in the annualized rate for the Fund’s managed distribution policy from 8% to 7%, effective beginning with the August 2009 monthly distribution. Further information is provided on the inside front cover of this report as well as below in the section captioned “Distribution policy.”
UBS Global AM has voluntarily agreed to waive 0.05% of its investment advisory and administration fee, effective August 1, 2009, through July 31, 2010, thereby reducing the fee to 0.95% for such period.
Strategic Global Income Fund, Inc.
Tax information (unaudited)
Dividends received by tax-exempt recipients (e.g., IRAs and Keoghs) need not be reported as taxable income. Some retirement trusts (e.g., corporate, Keogh and 403(b)(7) plans) may need this information for their annual reporting. Since the Fund’s fiscal year is not the calendar year, another notification will be sent in respect of calendar year 2009. The second notification, which will reflect the amount to be used by calendar year taxpayers on their federal income tax returns, will be made in conjunction with Form 1099 DIV and will be mailed in January 2010. Shareholders are advised to consult their own tax advisors with respect to the tax consequences of their investment in the Fund.
The foreign taxes paid represent taxes incurred by the Fund on income received by the Fund from foreign sources. Foreign taxes paid may be included in taxable income with an offsetting deduction from gross income or may be taken as a credit for taxes paid to foreign governments. You should consult your tax advisor regarding the appropriate treatment of foreign taxes paid.
Strategic Global Income Fund, Inc.
General information (unaudited)
The Fund
Strategic Global Income Fund, Inc. (the “Fund”) is a non-diversified, closed-end management investment company whose shares trade on the New York Stock Exchange (“NYSE”). The Fund’s primary investment objective is to achieve a high level of current income. As a secondary objective, the Fund seeks capital appreciation, to the extent consistent with its primary objective. There can be no assurance that the Fund’s investment objective will be achieved. The Fund’s investment advisor and administrator is UBS Global Asset Management (Americas) Inc. (“UBS Global AM”). As of March 31, 2009, UBS Global AM had approximately $142 billion in assets under management. UBS Global AM is an indirect wholly owned asset management subsidiary of UBS AG and a member of the UBS Global Asset Management division, which had approximately $507 billion in assets under management as of March 31, 2009.
Shareholder information
The Fund’s NYSE trading symbol is “SGL.” Comparative net asset value and market price information about the Fund is published weekly in various publications.
Shareholder meeting information
An annual meeting of shareholders of the Fund was held on March 19, 2009. At the meeting, Richard Q. Armstrong, Alan S. Bernikow, Richard R. Burt, Meyer Feldberg, Bernard H. Garil and Heather R. Higgins were elected to serve as board members until the next annual meeting of shareholders, and until their successors are duly elected and qualified or until they retire, resign or are earlier removed. The shares were voted as indicated below:
Shares | ||||
To vote for or withhold authority | Shares | withhold | ||
in the election of: | voted for | authority | ||
Richard Q. Armstrong | 14,139,918.67 | 566,396.01 | ||
Alan S. Bernikow | 14,111,652.01 | 594,662.66 | ||
Richard R. Burt | 14,127,793.01 | 578,521.66 | ||
Bernard H. Garil | 14,120,254.01 | 586,060.66 | ||
Meyer Feldberg | 14,102,326.01 | 603,988.66 | ||
Heather R. Higgins | 14,177,038.90 | 529,275.78 | ||
Strategic Global Income Fund, Inc.
General information (unaudited)
The Fund is not aware of any broker non-votes. (Broker non-votes are shares held in street name for which the broker indicates that instructions have not been received from the beneficial owners or other persons entitled to vote and for which the broker does not have discretionary voting authority.)
Quarterly Form N-Q portfolio schedule
The Fund will file its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the SEC’s Web site at http://www.sec.gov. The Fund’s Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the SEC’s Public Reference Room may be obtained by calling 1-800-SEC 0330. Additionally, you may obtain copies of Forms N-Q from the Fund upon request by calling 1-800-647 1568.
Proxy voting policies, procedures and record
You may obtain a description of the Fund’s (1) proxy voting policies, (2) proxy voting procedures and (3) information regarding how the Fund voted any proxies related to portfolio securities during the most recent 12-month period ended June 30 for which an SEC filing has been made, without charge, upon request by contacting the Fund directly at 1-800-647 1568, online on the Fund’s Web site: www.ubs.com/ubsglobalam-proxy, or on the EDGAR Database on the SEC’s Web site (http://www.sec.gov).
Dividend reinvestment plan
The Fund’s Board has established a Dividend Reinvestment Plan (the “Plan”) under which all shareholders whose shares are registered in their own names, or in the name of UBS Financial Services Inc. or its nominee, will have all dividends and other distributions on their shares of common stock automatically reinvested in additional shares, unless such shareholders elect to receive cash. Shareholders who elect to hold their shares in the name of another broker or nominee should contact such broker or nominee to determine whether, or how, they may participate in the Plan. The ability of such shareholders to participate in the Plan may change if their shares are transferred into the name of another broker or nominee.
A shareholder may elect not to participate in the Plan or may terminate participation in the Plan at any time without penalty, and shareholders who have previously terminated participation in the Plan may rejoin it at any time. Changes in elections must be made in writing to the Fund’s transfer agent and should include the shareholder’s name and address as they appear on
Strategic Global Income Fund, Inc.
General information (unaudited)
that share certificate or in the transfer agent’s records. An election to terminate participation in the Plan, until such election is changed, will be deemed an election by a shareholder to take all subsequent distributions in cash. An election will be effective only for distributions declared and having a record date at least ten days after the date on which the election is received.
Additional shares of common stock acquired under the Plan will be purchased in the open market, on the NYSE or otherwise, at prices that may be higher or lower than the net asset value per share at the time of the purchase. Investors should consider whether continued participation in the dividend reinvestment plan is appropriate for them when the Fund’s market price exceeds its net asset value; a portion of a dividend/distribution may represent a return of capital, which would be reinvested in the Fund at a premium to net asset value. The number of shares of common stock purchased with each dividend/distribution will be equal to the result obtained by dividing the amount of the dividend/distribution payable to a particular shareholder by the average price per share (including applicable brokerage commissions) that the transfer agent was able to obtain in the open market. The Fund will not issue any new shares in connection with the Plan. There currently is no charge to participants for reinvesting dividends or other distributions. The transfer agent’s fees for handling the reinvestment of distributions are paid by the Fund. However, each participant pays a pro rata share of brokerage commissions incurred with respect to the transfer agent’s open market purchases of common stock in connection with the reinvestment of distributions. The automatic reinvestment of dividends and other distributions in shares of common stock does not relieve participants of any income tax that may be payable on such distributions.
Experience under the Plan may indicate that changes are desirable. Accordingly, the Fund reserves the right to amend or terminate the Plan with respect to any dividend or other distribution if notice of the change is sent to Plan participants at least 30 days before the record date for such distribution. The Plan also may be amended or terminated by the transfer agent by at least 30 days’ written notice to all Plan participants. Additional information regarding the Plan may be obtained from, and all correspondence concerning the Plan should be directed to, the transfer agent at PNC Global Investment Servicing, P.O. Box 43027, Providence, Rhode Island 02940-3027. For further information regarding the Plan, you may also contact the transfer agent directly at 1-800-331 1710.
Strategic Global Income Fund, Inc.
General information (unaudited)
Distribution policy
The Fund’s Board adopted a managed distribution policy in May 1998, which was revised effective January 2000, in May 2005 and again effective August 2009. Pursuant to the policy as in effect from January 2000 through early May 2005, the Fund made regular monthly distributions at an annualized rate equal to 10% of the Fund’s net asset value, as determined as of the last trading day during the first week of that month (usually a Friday unless the NYSE is closed that Friday). The Board approved reducing the annualized rate for distribution pursuant to the policy from 10% to 8% effective beginning with the June 2005 monthly distribution. The Board approved a further reduction in the annualized rate for distribution pursuant to the policy from 8% to 7% in July 2009, effective beginning with the August 2009 monthly distribution. From May 31, 1998 through January 2000, the Fund’s managed distribution was 8% of the Fund’s net asset value as determined as of the last trading day during the first week of the month. Prior to May 31, 1998, the Fund’s distributions varied based on the Fund’s net investment income and realized capital gains or losses.
Monthly distributions based on a fixed percentage of the Fund’s net asset value may require the Fund to make multiple distributions of long-term capital gains during a single fiscal year. The Fund has received exemptive relief from the Securities and Exchange Commission that enables it to do so. The Fund’s Board receives recommendations from UBS Global Asset Management (Americas) Inc., the Fund’s investment advisor, periodically and no less frequently than annually will reassess the annualized percentage of net assets at which the Fund’s monthly distributions will be made.
The above information supplements that contained on the inside front cover of this report.
(This page has been left blank intentionally)
(This page has been left blank intentionally)
(This page has been left blank intentionally)
(This page has been left blank intentionally)
(This page has been left blank intentionally)
Directors | ||
Richard Q. Armstrong | Meyer Feldberg | |
Chairman | ||
Bernard H. Garil | ||
Alan S. Bernikow | ||
Heather R. Higgins | ||
Richard R. Burt | ||
Principal Officers | ||
Kai R. Sotorp | Thomas Disbrow | |
President | Vice President and Treasurer | |
Mark F. Kemper | Uwe Schillhorn | |
Vice President and Secretary | Vice President | |
Investment Advisor and Administrator | ||
UBS Global Asset Management (Americas) Inc. | ||
51 West 52nd Street | ||
New York, New York 10019-6114 |
Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940 that from time to time the Fund may purchase shares of its common stock in the open market at market prices.
The financial information included herein is taken from the records of the Fund without examination by independent registered public accountants who do not express an opinion thereon.
This report is sent to the shareholders of the Fund for their information. It is not a prospectus, circular or representation intended for use in the purchase or sale of shares of the Fund or of any securities mentioned in this report.
© 2009 UBS Global Asset Management (Americas) Inc. All rights reserved.
UBS Global Asset Management (Americas) Inc.
51 West 52nd Street
New York, New York 10019-6114
Item 2. Code of Ethics.
Form N-CSR disclosure requirement not applicable to this filing of a semi-annual report.
Item 3. Audit Committee Financial Expert.
Form N-CSR disclosure requirement not applicable to this filing of a semi-annual report.
Item 4. Principal Accountant Fees and Services.
Form N-CSR disclosure requirement not applicable to this filing of a semi-annual report.
Item 5. Audit Committee of Listed Registrants.
Form N-CSR disclosure requirement not applicable to this filing of a semi-annual report.
Item 6. Investments
(a) | Included as part of the report to shareholders filed under Item 1 of this form. | |
(b) | Not applicable. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Form N-CSR disclosure requirement not applicable to this filing of a semi-annual report.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Form N-CSR disclosure requirement not applicable to this filing of a semi-annual report.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
There were no purchases made by or on behalf of the Registrant or any “affiliated purchaser,” as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended, of shares of the Registrant’s equity securities that are registered by the Registrant pursuant to Section 12 of the Exchange Act made in the period covered by this report.
Item 10. Submission of Matters to a Vote of Security Holders.
The registrant’s Board has established a Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee will consider nominees recommended by shareholders if a vacancy occurs among those board members who are not “interested persons” as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended. In order to recommend a nominee, a
shareholder should send a letter to the chairperson of the Nominating and Corporate Governance Committee, Richard Burt, care of the Secretary of the registrant at UBS Global Asset Management, UBS Building, One North Wacker Drive, Chicago, IL 60606, and indicate on the envelope “Nominating and Corporate Governance Committee.” The shareholder’s letter should state the nominee’s name and should include the nominee’s resume or curriculum vitae, and must be accompanied by a written consent of the individual to stand for election if nominated for the Board and to serve if elected by shareholders.
Item 11. Controls and Procedures. | ||
(a) | The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended) are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document. | |
(b) | The registrant’s principal executive officer and principal financial officer are aware of no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940, as amended) that occurred during the registrant’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. | |
Item 12. Exhibits. | ||
(a) | (1) Code of Ethics – Form N-CSR disclosure requirement not applicable to this filing of a semi-annual report. | |
(a) | (2) Certifications of principal executive officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto as Exhibit EX-99.CERT. | |
(a) | (3) Written solicitation to purchase securities under Rule 23c-1 under the Investment Company Act of 1940 sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons – The registrant has not engaged in such a solicitation during the period covered by this report. | |
(b) | Certifications of principal executive officer and principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto as Exhibit EX-99.906CERT. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Strategic Global Income Fund, Inc.
By: | /s/ Kai R. Sotorp | |
Kai R. Sotorp | ||
President | ||
Date: | July 30, 2009 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ Kai R. Sotorp | |
Kai R. Sotorp | ||
President | ||
Date: | July 30, 2009 | |
By: | /s/ Thomas Disbrow | |
Thomas Disbrow | ||
Vice President and Treasurer | ||
Date: | July 30, 2009 |