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: 811-6475
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STRATEGIC GLOBAL INCOME FUND, INC.
------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
51 West 52nd Street, New York, New York 10019-6114
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(Address of principal executive offices) (Zip code)
Amy R. Doberman, Esq.
UBS Global Asset Management (US) Inc.
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 31, 2003
Date of reporting period: May 31, 2003
Item 1. Reports to Stockholders.
[LOGO] UBS Global Asset
Management
Strategic Global Income Fund, Inc.
Semiannual Report
May 31, 2003
Strategic Global Income Fund, Inc.
July 15, 2003
Dear Shareholder,
We present you with the semiannual report for Strategic Global Income Fund, Inc.
for the six months ended May 31, 2003.
An Interview with Portfolio Manager Stuart Waugh
Q. Can you summarize how the Fund performed during the review period?
A. For the six months ended May 31, 2003, the Fund returned 15.77% on a net
asset value basis. In comparison, developed bond markets, as measured by
the Citigroup World Government Bond Index (or WGBI, formerly known as the
Salomon Smith Barney World Government Bond Index), returned 14.34% on an
unhedged basis, and 5.19% on a currency-hedged basis measured in US
dollars. The difference between the hedged and unhedged returns primarily
reflects the US dollar's weakness against most other currencies comprising
the WGBI Index. Emerging market debt, as measured by the J.P. Morgan
Emerging Market Bond Index-Global (EMBI-G), returned 20.95% during the
same period. The EMBI-G consists of dollar denominated securities. (For
more on the Fund's performance, including market price returns, please
refer to "Performance At A Glance" on page 5.)
Q. Can you describe the global economic environment during the period?
A. Growth remained slower than policy makers hoped for worldwide. With the
continuation of disinflationary trends in the US and Europe, and
deflationary trends in Japan, government bond yields in developed markets
fell to historic or near-historic lows during the semiannual reporting
period.
Q. What holdings performed well over the period?
A. With interest rates low, and officials either actively lowering them
further (as was the case with the European Central Bank), or discussing
the prospect of
Strategic Global Income
Fund, Inc.
Investment Goals:
Primarily, high current income;
secondarily, capital appreciation.
Portfolio Manager:
Stuart Waugh
UBS Global Asset Management
(US) Inc.
Commencement:
February 3, 1992
NYSE Symbol:
SGL
Dividend Payments:
Monthly
- --------------------------------------------------------------------------------
1
Strategic Global Income Fund, Inc.
doing so (the US Federal Reserve Board), most bond valuations rose almost
everywhere during the period. Not surprisingly, the strongest performers
in the Fund were those bonds with the longest duration. In the bullish
bond market environment, emerging market spreads tightened generally, and
the Fund's long duration holdings in Malaysia, Mexico, Qatar, Russia, and
Trinidad and Tobago appreciated strongly.
Q. Were there any particular strategies that didn't work well for the Fund?
A. As was the case for the fiscal year ended November 30, 2002, the Fund's
overall duration strategy detracted from results. Because of the low
prevailing market yields, we took a cautious approach to the Fund's
duration exposure, managing it between 4.2 to 5.2 years. In contrast, the
interest rate durations of the WGBI and the EMBI Indexes varied around 5.7
years, plus or minus 0.4 years.
Q. What was your currency strategy during the period? What impact did it have
on the Fund?
A. Until the start of the war with Iraq, we maintained slightly less than one
third of the Fund's net assets in the euro and related currencies, such as
the Danish Krone and Hungarian Forint. As a US military victory looked
more assured, we reduced this exposure to roughly a quarter of the Fund's
net assets, thinking an end to the conflict would strengthen the dollar.
However, this didn't prove to be the case, and we bought back euros at
higher prices after reassessing the strategy. As of period end, the Fund
had approximately 32% of its net assets denominated in euros and related
currencies. In contrast, the WGBI had an approximate exposure of 41%.
We increased the Fund's exposure to the Australian and Canadian dollar
during the first quarter of 2003. The Fund's exposure to these currencies
is over 10% combined, greater than those in the WGBI; this has been
beneficial thus far as these currencies have appreciated against the
dollar. We think these currencies have broken out of multi-year, long-term
bear trends. Many fundamental influences support these currencies against
the US dollar, including interest rates and appreciating commodity prices.
Over the period, the Fund also invested in the Japanese yen and the
Mexican peso, and maintained its position in UK Sterling-denominated
British short-dated Gilts. These positions each constituted less than 5%
of net assets and produced mixed results. For a comprehensive picture of
the Fund's currency exposure at period-end, please see "Portfolio
Statistics" on page 6.
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2
Strategic Global Income Fund, Inc.
Q. Can you highlight some of the most important strategic transactions that
occurred over the period?
A. Activity was high during the six-month period. Among other things, we
reduced holdings where we thought yields had fallen enough or didn't
compensate for increasing risk. We sold the Fund's long-dated TIPs and
FNMA bonds, bought New Zealand government bonds, and extended duration in
Europe. We added exposure to lower-rated emerging market
debt--specifically in bonds issued by Brazil, Colombia and Peru. In
Brazil, President Lula's economic team has designed credible policy goals.
Clearly, there are implementation risks; however, social security and tax
reform would strengthen Brazil's credit-worthiness. We added Mexican
peso-denominated Bonos (government bonds) to the Fund on several occasions
over the period. We think Banco de Mexico monetary policy will likely
support a stable peso and, consequently, we regard Bonos yields as
attractive.
Ultimately, in the extremely bullish bond market environment that
prevailed over the period, just about everything we bought traded up, as
did almost everything we sold.
Q. What is your outlook for the global economy and the fixed income markets
in the coming months?
A. Overall, we expect a resurgence of economic activity, although at a lower
level than in prior recoveries. Additionally, we expect that the world's
major central banks are likely to accept some higher inflation to
encourage growth. In a reflationary environment, bonds are unlikely to
replicate recent gains if investors reallocate their portfolios to
equities and reformulate their expectations regarding inflation.
By conventional standards, financial conditions in the US are
accommodative and should support economic growth. Short-term interest
rates are low, as are mortgages and corporate borrowing rates.
Additionally, the US dollar has weakened, affording an easier operating
environment for manufacturers, and the federal government continues to
spend despite the rising deficit. On the other hand, some interest
rate-sensitive sectors, such as housing and autos, have been generally
strong throughout the business downturn, and are therefore unlikely to add
incrementally to growth compared to previous recoveries. In addition, some
state and local governments may have begun to run into financing
constraints. Financial conditions in Europe and Japan have not eased as
much as in the US in the last six months, and growth prospects are less
clear. Latin America and Asia should generally follow the US economy.
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3
Strategic Global Income Fund, Inc.
Q. How do you envision positioning the Fund given your outlook?
A. Our key strategies are to maintain a moderate duration for the portfolio
because of low prevailing yields, and to target stable or improving
credits in the emerging market sector. We anticipate concentrating the
Fund's higher-quality credit exposure in European and Canadian government
bonds as opposed to US Treasuries, but we expect to concentrate credit
exposure in US dollar-denominated bonds.
With the accommodative financial conditions prevailing in the US, we
presently anticipate maintaining a diversified exposure to foreign
currencies.
The greatest risks, of course, are likely the ones we cannot or do not
foresee. For this reason, we always try to emphasize diversification to
the extent consistent with the Fund's income objective.
Our ultimate objective in managing your investments is to help you successfully
meet your financial goals. We thank you for your continued support and welcome
any comments or questions you may have. For additional information on the UBS
funds,* please contact your financial advisor or visit us at www.ubs.com.
Sincerely,
/s/ Joseph A. Varnas /s/ Stuart Waugh
Joseph A. Varnas Stuart Waugh
President Portfolio Manager
Strategic Global Income Fund, Inc. Strategic Global Income Fund, Inc.
Head of Product, Technology and Operations Executive Director
UBS Global Asset Management (US) Inc. UBS Global Asset Management
(US) Inc.
This letter is intended to assist shareholders in understanding how the Fund
performed during the six-month period ended May 31, 2003, and reflects our views
at the time of its writing. Of course, these views may change in response to
changing circumstances, and they do not guarantee the future performance of the
markets or the Fund. We encourage you to consult your financial advisor
regarding your personal investment program.
* Mutual funds are sold by prospectus only. The prospectus for a fund
contains more complete information regarding risks, charges and expenses,
and should be read carefully before investing.
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4
Strategic Global Income Fund, Inc.
Performance At A Glance
Average Annual Returns for Periods Ended 5/31/03 (unaudited)
Since
6 months 1 year 5 years 10 years inception*
==============================================================================================
Net Asset Value Returns**
- ----------------------------------------------------------------------------------------------
Strategic Global Income Fund, Inc. 15.77% 23.71% 9.37% 8.70% 8.78%
- ----------------------------------------------------------------------------------------------
Lipper Global Income Funds Median*** 17.35 23.71 9.17 7.15 7.22
==============================================================================================
Market Price Returns**
- ----------------------------------------------------------------------------------------------
Strategic Global Income Fund, Inc. 18.60% 34.45% 15.05% 11.49% 10.59%
- ----------------------------------------------------------------------------------------------
Lipper Global Income Funds Median*** 18.58 22.86 12.33 8.73 8.09
==============================================================================================
* Since inception returns for the Fund are calculated from the date of the
Fund's inception on February 3, 1992. Since inception returns for the
Lipper Median are calculated from the closest month end to the Fund's
inception: January 31, 1992.
** Past performance does not predict future performance. The return and
principal value of an investment will fluctuate, so that an investor's
shares, when sold, may be worth more or less than their original cost. NAV
return assumes, for illustration only, that distributions were reinvested
at the net asset value on the distribution dates. NAV and market price
returns for periods of one year or less have not been annualized. Returns
do not include brokerage commissions or taxes paid on dividends and
realized capital gains.
*** 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.
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5
Strategic Global Income Fund, Inc.
Portfolio Statistics (unaudited)
Characteristics* 5/31/03 11/30/02 5/31/02
=================================================================================
Net Asset Value $13.39 $12.15 $11.95
- ---------------------------------------------------------------------------------
Market Price $14.55 $12.84 $11.89
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12-Month Dividend/
Distribution $1.2408 $1.1983 $1.1920
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Monthly Dividend/Distribution
at Period-End $0.1081 $0.1017 $0.0989
- ---------------------------------------------------------------------------------
Net Assets (mm) $244.5 $221.9 $218.1
- ---------------------------------------------------------------------------------
Weighted Average Maturity 8.0 yrs. 7.7 yrs. 7.7 yrs.
- ---------------------------------------------------------------------------------
Weighted Average Duration 5.1 yrs. 4.5 yrs. 4.4 yrs.
- ---------------------------------------------------------------------------------
Currency Exposure** 5/31/03 11/30/02 5/31/02
================================================================================
U.S. Dollar Denominated 50.4% 57.7% 52.8%
- --------------------------------------------------------------------------------
Foreign Denominated 49.6 42.3 47.2
- --------------------------------------------------------------------------------
Total 100.0% 100.0% 100.0%
================================================================================
Credit Quality** 5/31/03 11/30/02 5/31/02
================================================================================
A1/P1 4.3% 6.8% 17.2%
- --------------------------------------------------------------------------------
AAA 52.3 49.6 41.4
- --------------------------------------------------------------------------------
AA 9.4 8.7 8.1
- --------------------------------------------------------------------------------
A 3.7 4.3 5.0
- --------------------------------------------------------------------------------
BBB 12.8 15.1 15.3
- --------------------------------------------------------------------------------
BB 11.9 10.3 2.8
- --------------------------------------------------------------------------------
B 3.3 2.1 8.3
- --------------------------------------------------------------------------------
CCC 0.9 -- --
- --------------------------------------------------------------------------------
Non-Rated -- 0.7 0.8
- --------------------------------------------------------------------------------
Other Assets in Excess of
Liabilities 1.4 2.4 1.1
- --------------------------------------------------------------------------------
Total 100.0% 100.0% 100.0%
================================================================================
Top 10 Countries** 5/31/03 11/30/02 5/31/02
===========================================================================================
France 10.8% United States*** 11.5% United States*** 20.0%
- -------------------------------------------------------------------------------------------
Germany 8.5 France 9.3 Germany 7.5
- -------------------------------------------------------------------------------------------
Mexico 6.7 Mexico 8.1 France 5.6
- -------------------------------------------------------------------------------------------
United States*** 6.6 Germany 8.0 Russia 5.2
- -------------------------------------------------------------------------------------------
Netherlands 6.2 Netherlands 5.6 Netherlands 5.2
- -------------------------------------------------------------------------------------------
Russia 6.0 Russia 5.5 Mexico 5.1
- -------------------------------------------------------------------------------------------
Canada 5.9 Denmark 5.0 Canada 4.9
- -------------------------------------------------------------------------------------------
Australia 4.9 United Kingdom 4.7 United Kingdom 4.9
- -------------------------------------------------------------------------------------------
Denmark 4.9 Canada 4.5 Australia 4.8
- -------------------------------------------------------------------------------------------
Italy 4.5 Italy 4.1 Denmark 4.7
- -------------------------------------------------------------------------------------------
Total 65.0% 66.3% 67.9%
===========================================================================================
* Prices and other 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.
*** Excludes cash, cash equivalents and other assets in excess of liabilities.
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6
Strategic Global Income Fund, Inc.
Portfolio of Investments -- May 31, 2003 (unaudited)
Principal
Amount Maturity Interest
(000)* Dates Rates Value
=========================================================================================
Long-Term Debt Securities-91.86%
=========================================================================================
Australia-4.89%
18,000 New South Wales Treasury Corp. 04/01/04 7.000% $11,956,060
=========================================================================================
Brazil-3.34%
05/15/27 to 10.125 to
US$ 4,500 Federal Republic of Brazil 08/17/40 11.000 4,095,450
- -----------------------------------------------------------------------------------------
US$ 3,386 Federal Republic of Brazil, C 04/15/14 8.000 3,018,109
- -----------------------------------------------------------------------------------------
US$ 1,271 Federal Republic of Brazil, NMB 04/15/09 2.188+ 1,048,235
- -----------------------------------------------------------------------------------------
8,161,794
=========================================================================================
Canada-5.94%
06/01/04 to 3.500 to
19,025 Government of Canada 06/01/29 5.750 14,524,126
=========================================================================================
Colombia-1.03%
US$ 2,250 Republic of Colombia 01/23/12 10.000 2,508,750
=========================================================================================
Denmark-4.87%
08/15/05 to 5.000 to
68,500 Kingdom of Denmark 11/15/11 6.000 11,911,981
=========================================================================================
Finland-1.23%
2,350 Government of Finland 07/04/07 5.000 3,005,055
=========================================================================================
France-10.84%
07/12/05 to 4.500 to
20,300 Republic of France 10/25/32 5.750 26,494,618
=========================================================================================
Germany-8.48%
US$ 4,700 Deutsche Ausgleich Bank 06/23/05 7.000 5,210,970
- -----------------------------------------------------------------------------------------
02/17/04 to 3.250 to
12,550 Federal Republic of Germany 07/04/11 5.000 15,533,518
- -----------------------------------------------------------------------------------------
20,744,488
=========================================================================================
Hungary-1.77%
10/12/04 to 7.000 to
898,400 Republic of Hungary 08/12/05 8.500 4,334,876
=========================================================================================
Ireland-1.22%
2,400 Government of Ireland 10/18/07 4.250 2,988,408
=========================================================================================
Italy-4.49%
04/01/04 to 6.500 to
8,252 Republic of Italy 11/01/27 8.500 10,985,532
=========================================================================================
Malaysia-2.13%
US$ 4,516 Petroliam Nasional Berhad (1) 10/15/26 7.625 5,217,080
=========================================================================================
Mexico-6.68%
11/15/03 to 6.125 to
US$ 3,581 PEMEX Finance Ltd. 08/15/17 10.610 4,161,199
- -----------------------------------------------------------------------------------------
03/08/07 to 9.500 to
45,311 United Mexican States 07/14/11 10.500 4,825,377
- -----------------------------------------------------------------------------------------
12/30/19 to 8.125 to
US$ 5,660 United Mexican States 08/15/31 11.500 7,355,690
- -----------------------------------------------------------------------------------------
16,342,266
=========================================================================================
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7
Strategic Global Income Fund, Inc.
Portfolio of Investments -- May 31, 2003 (unaudited)
Principal
Amount Maturity Interest
(000)* Dates Rates Value
==========================================================================================
Netherlands-6.17%
01/15/04 to 5.500 to
11,817 Government of Netherlands 01/15/28 5.750% $15,073,109
==========================================================================================
New Zealand-1.28%
5,000 Government of New Zealand 04/15/13 6.500 3,126,804
==========================================================================================
Panama-2.52%
04/22/08 to 8.250 to
US$ 4,450 Republic of Panama 01/16/23 9.375 4,972,250
- ------------------------------------------------------------------------------------------
US$ 1,432 Republic of Panama, PDI 07/17/16 2.250+ 1,181,225
- ------------------------------------------------------------------------------------------
6,153,475
==========================================================================================
Peru-1.77%
US$ 2,700 Republic of Peru 02/06/15 9.875 3,091,500
- ------------------------------------------------------------------------------------------
US$ 1,520 Republic of Peru, FLIRB 03/07/17 4.500++ 1,246,400
- ------------------------------------------------------------------------------------------
4,337,900
==========================================================================================
Philippines-0.64%
US$ 1,415 Republic of Philippines 01/15/19 9.875 1,554,378
==========================================================================================
Qatar-1.39%
US$ 2,373 State of Qatar (1) 06/15/30 9.750 3,399,323
==========================================================================================
Russia-5.97%
US$ 3,030 Russian Federation (1) 07/24/05 8.750 3,393,600
- ------------------------------------------------------------------------------------------
US$ 11,456 Russian Federation (1) 03/31/30 5.000++ 11,213,012
- ------------------------------------------------------------------------------------------
14,606,612
==========================================================================================
Spain-3.46%
07/30/05 to 4.950 to
6,655 Government of Spain 01/31/08 6.000 8,471,410
==========================================================================================
Trinidad and Tobago-2.31%
10/01/09 to 9.750 to
US$ 4,300 Republic of Trinidad & Tobago (1) 07/01/20 9.875 5,637,400
==========================================================================================
United Kingdom-4.41%
06/10/03 to 6.500 to
6,515 United Kingdom Gilt 12/07/03 8.000 10,790,366
==========================================================================================
United States-4.12%
2,735 FMR Corp. (1) 06/15/29 7.570 3,605,958
- ------------------------------------------------------------------------------------------
5,472 U.S. Treasury Inflation Index
Notes 01/15/10 4.250 6,453,599
- ------------------------------------------------------------------------------------------
10,059,557
==========================================================================================
Venezuela-0.91%
US$ 2,738 Republic of Venezuela, DCB 12/18/07 2.313+ 2,212,723
==========================================================================================
Total Long-Term Debt Securities
(cost--$188,474,751) 224,598,091
==========================================================================================
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8
Strategic Global Income Fund, Inc.
Portfolio of Investments -- May 31, 2003 (unaudited)
Number of
Rights
(000) Value
=======================================================================================================
Rights-0.02%
=======================================================================================================
Mexico-0.02%
13,132 United Mexican States Value Recovery Rights, Series A-E,
Expiration Dates 06/30/03 to 06/30/07 (2) $44,657
=======================================================================================================
Venezuela-0.00%
15 Venezuela Oil Indexed Payment Obligations,
Expiration Date 04/15/20 (2) 0
=======================================================================================================
Total Rights (cost--$0) 44,657
=======================================================================================================
Principal
Amount Maturity Interest
(000) Dates Rates
=========================================================================================
Short-Term Debt Securities-8.50%
=========================================================================================
United States-8.50%
$2,869 Federal Home Loan Bank 06/02/03 to 0.850 to
Discount Notes 06/04/03 1.153%@ 2,868,761
- -----------------------------------------------------------------------------------------
11,830 Federal Home Loan Mortgage Corp. 06/10/03 to 1.180 to
Discount Notes 06/16/03 1.181@ 11,819,781
- -----------------------------------------------------------------------------------------
6,000 General Motors Acceptance Corp. 11/10/03 5.750 6,095,694
=========================================================================================
Total Short-Term Debt Securities (cost--$20,686,493) 20,784,236
=========================================================================================
Number of
Shares
(000)
==========================================================================================
Money Market Fund-0.51%
==========================================================================================
1,236 JP Morgan U.S. Government Money
Market Fund (cost--$1,236,222) 0.715# 1,236,222
- ------------------------------------------------------------------------------------------
Total Investments (cost $210,397,466)--100.89% 246,663,206
- ------------------------------------------------------------------------------------------
Liabilities in excess of other assets--(0.89%) (2,163,929)
==========================================================================================
Net Assets--100% $244,499,277
==========================================================================================
Note: The Portfolio of Investments is listed by the issuer's country of origin.
* In local currency unless otherwise indicated.
+ Reflects rate at May 31, 2003 on variable coupon rate instruments.
++ Reflects rate at May 31, 2003 on step coupon rate instruments.
# Interest rate shown reflects yield at May 31, 2003.
@ Yield to maturity for discounted securities.
(1) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
(2) Rights do not currently accrue income. Quarterly income, if any, will vary
based on several factors including oil exports, prices and inflation.
C Front-Load Interest Reduction with Capitalized Interest Bond.
DCB Debt Conversion Bond.
FLIRB Front-Loaded Interest Reduction Bond.
NMB New Money Bond.
PDI Past Due Interest Bond.
US$ United States Dollars.
- --------------------------------------------------------------------------------
9
Strategic Global Income Fund, Inc.
Portfolio of Investments -- May 31, 2003 (unaudited)
Forward Foreign Currency Contracts
Unrealized
Contracts to Maturity Appreciation
Deliver In Exchange for Dates (Depreciation)
==========================================================================================
06/09/03 to
Canadian Dollar 10,800,000 USD 7,904,712 08/01/03 $43,370
- -----------------------------------------------------------------------------------------
06/05/03 to
Euro Dollar 22,027,944 USD 24,150,031 08/25/03 (1,739,075)
- -----------------------------------------------------------------------------------------
07/14/03 to
Japanese Yen 1,043,736,000 USD 8,797,419 07/22/03 48,209
- -----------------------------------------------------------------------------------------
New Zealand Dollar 4,837,500 USD 2,650,950 07/28/03 (121,482)
- -----------------------------------------------------------------------------------------
06/09/03 to
United States Dollar 7,401,230 CAD 10,800,000 08/01/03 460,111
- -----------------------------------------------------------------------------------------
United States Dollar 6,000,000 EUR 5,189,451 07/17/03 98,307
- -----------------------------------------------------------------------------------------
07/14/03 to
United States Dollar 9,000,000 JPY 1,043,736,000 07/22/03 (250,791)
- -----------------------------------------------------------------------------------------
$(1,461,351)
=========================================================================================
Currency Type Abbreviations:
CAD - Canadian Dollar
EUR - European Monetary Unit
JPY - Japanese Yen
USD - United States Dollar
Investments By Type of Issuer
Percentage of Net Assets
==========================
Other
Long-Term Investments
===================================================================================
Government and other public issuers 84.42% --
- -----------------------------------------------------------------------------------
U.S. Agency Obligations -- 6.01%
- -----------------------------------------------------------------------------------
Financial Services 5.31 2.49
- -----------------------------------------------------------------------------------
Oil 2.13 --
- -----------------------------------------------------------------------------------
Rights -- 0.02
- -----------------------------------------------------------------------------------
Money Market Fund -- 0.51
- -----------------------------------------------------------------------------------
91.86% 9.03%
===================================================================================
See accompanying notes to financial statements
- --------------------------------------------------------------------------------
10
Strategic Global Income Fund, Inc.
Statement of Assets and Liabilities -- May 31, 2003 (unaudited)
Assets:
Investments in securities, at value (cost--$210,397,466) $246,663,206
- -----------------------------------------------------------------------------------------------------
Cash (including foreign currency with a cost and market value of $1,808,480 and
$1,863,274, respectively) 627,746
- -----------------------------------------------------------------------------------------------------
Interest receivable 4,869,329
- -----------------------------------------------------------------------------------------------------
Unrealized appreciation on forward foreign currency contracts 649,997
- -----------------------------------------------------------------------------------------------------
Other assets 22,416
=====================================================================================================
Total assets 252,832,694
=====================================================================================================
Liabilities:
Payable for investments purchased 5,721,261
- -----------------------------------------------------------------------------------------------------
Unrealized depreciation on forward foreign currency contracts 2,111,348
- -----------------------------------------------------------------------------------------------------
Payable to investment advisor and administrator 206,518
- -----------------------------------------------------------------------------------------------------
Accrued expenses and other liabilities 294,290
=====================================================================================================
Total liabilities 8,333,417
=====================================================================================================
Net Assets:
Capital Stock--$0.001 par value; 100,000,000 shares authorized;
18,258,828 shares issued and outstanding 212,555,514
- -----------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (7,490,293)
- -----------------------------------------------------------------------------------------------------
Accumulated net realized gain from investment transactions 4,334,477
- -----------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments, forward foreign currency contracts and
other assets and liabilities denominated in foreign currencies 35,099,579
=====================================================================================================
Net assets $244,499,277
=====================================================================================================
Net asset value per share $13.39
=====================================================================================================
See accompanying notes to financial statements
- --------------------------------------------------------------------------------
11
Strategic Global Income Fund, Inc.
Statement of Operations
For the
Six Months
Ended
May 31, 2003
(unaudited)
==================================================================================================
Investment income:
Interest $6,262,791
=================================================================================================
Expenses:
Investment advisory and administration fees 1,155,641
- -------------------------------------------------------------------------------------------------
Custody and accounting fees 92,452
- -------------------------------------------------------------------------------------------------
Reports and notices to shareholders 38,766
- -------------------------------------------------------------------------------------------------
Professional fees 30,030
- -------------------------------------------------------------------------------------------------
Transfer agency fees 13,718
- -------------------------------------------------------------------------------------------------
Directors' fees 7,150
- -------------------------------------------------------------------------------------------------
Other expenses 39,163
=================================================================================================
1,376,920
=================================================================================================
Net investment income 4,885,871
=================================================================================================
Realized and unrealized gains (losses) from investment activities:
Net realized gains from:
Investment transactions 3,472,391
- -------------------------------------------------------------------------------------------------
Foreign currency transactions 862,086
- -------------------------------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation of:
Investments 25,936,923
- -------------------------------------------------------------------------------------------------
Forward foreign currency contracts and other assets and liabilities denominated
in foreign currencies (1,030,217)
- -------------------------------------------------------------------------------------------------
Net realized and unrealized gains from investment activities 29,241,183
=================================================================================================
Net increase in net assets resulting from operations $34,127,054
=================================================================================================
See accompanying notes to financial statements
- --------------------------------------------------------------------------------
12
Strategic Global Income Fund, Inc.
Statement of Changes in Net Asset
For the
Six Months
Ended For the
May 31, 2003 Year Ended
(unaudited) November 30, 2002
================================================================================================
From operations:
Net investment income $4,885,871 $9,578,925
- ------------------------------------------------------------------------------------------------
Net realized gains from investment transactions 3,472,391 5,091,061
- ------------------------------------------------------------------------------------------------
Net realized gains from foreign currency transactions 862,086 247,701
- ------------------------------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation of:
Investments 25,936,923 10,200,878
- ------------------------------------------------------------------------------------------------
Forward foreign currency contracts and other assets and
liabilities denominated in foreign currencies (1,030,217) (272,772)
================================================================================================
Net increase in net assets resulting from operations 34,127,054 24,845,793
================================================================================================
Dividends and distributions to shareholders from:
Net investment income (11,556,012)* (10,466,754)
- ------------------------------------------------------------------------------------------------
Net realized gains -- (4,066,103)
- ------------------------------------------------------------------------------------------------
Paid-in-capital -- (7,346,696)
================================================================================================
Total dividends and distributions to shareholders (11,556,012) (21,879,553)
================================================================================================
Net increase in net assets 22,571,042 2,966,240
================================================================================================
Net assets:
Beginning of period 221,928,235 218,961,995
================================================================================================
End of period $244,499,277 $221,928,235
================================================================================================
* The actual source of the Fund's fiscal year 2003 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 2003
fiscal year.
See accompanying notes to financial statements
- --------------------------------------------------------------------------------
13
Strategic Global Income Fund, Inc.
Notes to Financial Statements (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
under the Investment Company Act of 1940, as amended, as a closed-end,
non-diversified management investment company. The Fund's primary 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.
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States 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 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. 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
U.S. 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, the securities are valued on the exchange designated as the primary
market by UBS Global Asset Management (US) Inc. ("UBS Global AM"), the
investment advisor and administrator of the Fund. UBS Global AM is an indirect
wholly owned asset management subsidiary of UBS AG, an internationally
diversified organization with headquarters in Zurich, Switzerland and operations
in many areas of the financial services industry. 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"). All investments quoted
in foreign currencies will be valued weekly in U.S. dollars on the basis of the
foreign currency exchange rates prevailing at the time of such valuation.
- --------------------------------------------------------------------------------
14
Strategic Global Income Fund, Inc.
Notes to Financial Statements (unaudited)
Foreign currency exchange rates are generally determined prior to the close of
the New York Stock Exchange ("NYSE"). Occasionally, events affecting the value
of foreign investments and such exchange rates 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 or currency exchange rates 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.
Repurchase Agreements--The Fund may purchase securities or other obligations
from a bank or securities dealer (or its affiliate), subject to the seller's
agreement to repurchase them at an agreed upon date and price. The Fund
maintains custody of the underlying obligations prior to their repurchase,
either through its regular custodian or through a special "tri-party "custodian
or sub-custodian that maintains a separate account for both the Fund and its
counterparty. The underlying collateral is valued daily on a mark-to-market
basis to ensure that the value, including accrued interest, is at least equal to
the repurchase price. In the event of default of the obligation to repurchase,
the Fund has the right to liquidate the collateral and apply the proceeds in
satisfaction of the obligation. Repurchase agreements involving obligations
other than U.S. government securities (such as commercial paper, corporate bonds
and mortgage loans) may be subject to special risks and may not have the benefit
of certain protections in the event of the counterpart's insolvency. If the
seller (or seller's guarantor, if any) becomes insolvent, the Fund may suffer
delays, costs and possible losses in connection with the disposition of
retention of the collateral. Under certain circumstances, in the event of
default or bankruptcy by the other party to the agreement, realization and/or
retention of the collateral may be subject to legal proceedings. The Fund may
participate in joint repurchase agreement transactions with other funds managed,
advised or sub-advised by UBS Global AM.
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 books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis: (1) market value of investment securities and other assets
and liabilities--at the exchange rates prevailing at the end of the Fund's
fiscal period; and (2) purchases and sales of investment securities and income
- --------------------------------------------------------------------------------
15
Strategic Global Income Fund, Inc.
Notes to Financial Statements (unaudited)
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 U.S. 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 U.S. 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 U.S. dollar value of portfolio
securities denominated in a particular currency. The Fund may also use forward
contracts to enhance income.
The Fund has no specific limitation on the percentage of assets which may be
committed to such forward 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 forward
contracts or (2) the Fund identifies cash or liquid securities in an amount not
less than the value of its total assets committed to the consummation of the
forward contracts and not covered as provided in (1) above, as marked-to-market
daily.
Risks may 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
U.S. dollar.
Fluctuations in the value of forward contracts are recorded for book purposes as
unrealized gains or losses by the Fund. Realized gains and losses include net
gains and losses recognized by the Fund on contracts which have matured.
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 U.S. federal income tax regulations,
which may differ from accounting principles generally accepted in the United
States. These "book/tax" differences are either considered temporary or
permanent in nature. To the extent these differences are permanent in nature,
such amounts are reclas-
- --------------------------------------------------------------------------------
16
Strategic Global Income Fund, Inc.
Notes to Financial Statements (unaudited)
sified 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 U.S. companies and U.S.
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 or region.
Investment Advisor and Administrator
The Board has approved an investment advisory and administration contract
("Advisory Contract") with UBS Global AM, under which UBS Global AM serves as
investment advisor and administrator of the Fund. 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.
Security 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 U.S. 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 U.S. government securities held as
collateral, net of fee rebates paid to the borrower plus reasonable
administrative and custody fees. UBS Securities LLC, an indirect wholly owned
subsidiary of UBS AG, and other affiliated broker-dealers have been approved as
borrowers under the Fund's securities lending program. During the six months
ended May 31, 2003, the Fund did not lend securities.
- --------------------------------------------------------------------------------
17
Strategic Global Income Fund, Inc.
Notes to Financial Statements (unaudited)
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, 2003. For the six months ended May 31,
2003 and for the year ended November 30, 2002, the Fund did not repurchase any
shares of common stock.
For the period September 17, 1998 (commencement of repurchase program) through
November 30, 2001, the Fund repurchased 3,148,300 shares of common stock at an
average market price per share of $10.74 and a weighted average discount from
net asset value of 12.54%. At November 30, 2002, paid-in-capital has been
reduced by the cost of $34,013,476 of capital stock repurchased.
Federal Tax Status
For federal income tax purposes, the components of net unrealized appreciation
of investments at May 31, 2003 were as follows:
Gross appreciation (investments having an excess of value over cost) $37,008,807
- -------------------------------------------------------------------------------------
Gross depreciation (investments having an excess of cost over value) (743,067)
=====================================================================================
Net unrealized appreciation of investments $36,265,740
=====================================================================================
For the six months ended May 31, 2003, total aggregate purchases and sales of
portfolio securities, excluding short-term securities, were $58,309,133 and
$61,769,444, respectively.
The Fund intends to distribute substantially all of its taxable income and to
comply with the other requirements of the Internal Revenue Code applicable to
regulated investment companies. Accordingly, no provision for federal income
taxes is required. In addition, by distributing during each calendar year
substantially all of its net investment income, realized capital gains and
certain other amounts, if any, the Fund intends not to be subject to a federal
excise tax.
The tax character of dividends/distributions paid during the fiscal year ended
November 30, 2002 was as follows:
Dividends/Distributions paid from:
================================================================================
Ordinary income $10,466,754
- --------------------------------------------------------------------------------
Realized capital gains 4,066,103
- --------------------------------------------------------------------------------
Return of Capital 7,346,696
- --------------------------------------------------------------------------------
Total $21,879,553
================================================================================
The tax character of dividends/distributions paid and the components of
accumulated earnings (deficit) on a tax basis for the current fiscal year will
be calculated for the Fund after the Fund's fiscal year end, at November 30,
2003.
- --------------------------------------------------------------------------------
18
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 For the Years Ended November 30,
May 31, 2003 ==========================================================
(unaudited) 2002+ 2001 2000 1999 1998
==================================================================================================================
Net asset value, beginning of period $12.15 $11.99 $11.92 $12.56 $13.55 $14.03
- ------------------------------------------------------------------------------------------------------------------
Net investment income 0.27 0.52 0.72 0.85@ 0.81@ 0.94
- ------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains (losses)
from investment and foreign currency
transactions 1.60 0.83 0.55 (0.41)@ (0.89)@ (0.02)
==================================================================================================================
Net increase (decrease) from investment
operations 1.87 1.35 1.27 0.44 (0.08) 0.92
==================================================================================================================
Dividends from net investment income (0.63)(2) (0.57) (0.55) (0.29) (0.48) (0.87)
- ------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains from
investment and foreign currency
transactions -- (0.22) -- -- -- (0.49)
- ------------------------------------------------------------------------------------------------------------------
Distributions from paid-in-capital -- (0.40) (0.66) (0.84) (0.56) (0.06)
- ------------------------------------------------------------------------------------------------------------------
Distributions in excess of net investment
income -- -- -- (0.08) -- --
==================================================================================================================
Total dividends and distributions to
shareholders (0.63) (1.19) (1.21) (1.21) (1.04) (1.42)
==================================================================================================================
Net increase in net asset value resulting
from repurchase of common stock -- -- 0.01 0.13 0.13 0.02
==================================================================================================================
Net asset value, end of period $13.39 $12.15 $11.99 $11.92 $12.56 $13.55
==================================================================================================================
Market value, end of period $14.55 $12.84 $11.40 $10.13 $10.00 $11.75
==================================================================================================================
Total investment return1 18.60% 24.39% 25.34% 13.75% (6.41)% 10.66%
==================================================================================================================
Ratios/Supplemental Data:
Net assets, end of period (000's) $244,499 $221,928 $218,962 $219,674 $247,915 $286,495
- ------------------------------------------------------------------------------------------------------------------
Expenses to average net assets 1.19%* 1.18% 1.19% 1.19% 1.17% 1.16%
- ------------------------------------------------------------------------------------------------------------------
Net investment income to average net
assets 4.24%* 4.37% 5.94% 6.89% 6.21% 6.82%
- ------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 27% 51% 29% 53% 58% 120%
==================================================================================================================
* Annualized.
@ Calculated using average monthly shares outstanding for the year.
1 Total investment return is calculated assuming a purchase of common stock
at the current market price on the first day of each year 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 investment
return does not reflect brokerage commissions or the deduction of taxes
that a shareholder would pay on Fund dividends/distributions or the sale
of Fund shares, and has not been annualized for a period of less than one
year.
2 The actual sources of the Fund's fiscal year 2003 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 2003
fiscal year.
+ As required, effective as of December 1, 2001, the Fund has adopted the
provisions of the AICPA Audit and Accounting Guide, Audits of Investment
Companies, and began amortizing premiums on debt securities for financial
statement reporting purposes only. The effect of this change for the year
ended November 30, 2002 was to decrease net investment income per share by
$0.06, increase net realized and unrealized gains from investment and
foreign currency activities per share by $0.06, and decrease the ratio of
net investment income to average net assets from 4.82% to 4.37%. Per share
ratios and supplemental data for periods prior to December 1, 2001 have
not been restated to reflect this change in presentation.
- --------------------------------------------------------------------------------
19
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. The Fund's invest-ment
advisor and administrator is UBS Global Asset Management (US) Inc. ("UBS Global
AM"), an indirect wholly owned asset management subsidiary of UBS AG, which had
over $72.1 billion in assets under management as of June 30, 2003.
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 The Wall Street
Journal, The New York Times and Barron's, as well as in numerous other
publications.
An annual meeting of shareholders of the Fund was held on March 20, 2003. At the
meeting, Margo N. Alexander, Richard Q. Armstrong, David J. Beaubien, E. Garrett
Bewkes, Jr., Richard R. Burt, Meyer Feldberg, George W. Gowen, William W.
Hewitt, Jr., Morton L. Janklow, Frederic V. Malek, Carl W. Schafer and William
D. White were elected to serve as directors until the next annual meeting of
shareholders or until his or her successor is elected and qualified or until he
or she resigns or is otherwise removed. The shares were voted as indicated
below:
Shares
Shares Withhold
To vote for or withhold authority in the election of: Voted For Authority
=================================================================================================
Margo N. Alexander 17,054,794.9119 265,508.0000
- -------------------------------------------------------------------------------------------------
Richard Q. Armstrong 17,073,349.8375 246,953.0744
- -------------------------------------------------------------------------------------------------
David J. Beaubien 17,082,283.8375 238,019.0744
- -------------------------------------------------------------------------------------------------
E. Garrett Bewkes, Jr. 17,023,461.7792 296,841.1327
- -------------------------------------------------------------------------------------------------
Richard R. Burt 17,042,880.8375 277,422.0744
- -------------------------------------------------------------------------------------------------
Meyer Feldberg 17,058,606.9119 261,696.0000
- -------------------------------------------------------------------------------------------------
George W. Gowen 17,038,084.8375 282,218.0744
- -------------------------------------------------------------------------------------------------
William W. Hewitt, Jr. 16,993,883.8375 326,419.0744
- -------------------------------------------------------------------------------------------------
Morton L. Janklow 16,963,255.8536 357,047.0583
- -------------------------------------------------------------------------------------------------
Frederic V. Malek 17,003,148.9119 317,154.0000
- -------------------------------------------------------------------------------------------------
Carl W. Schafer 17,059,755.8375 260,547.0744
- -------------------------------------------------------------------------------------------------
William D. White 17,081,812.8375 238,490.0744
=================================================================================================
Broker non-votes amounted to 938,524.6361 shares.
Messrs. Bewkes, Gowen, Hewitt and Janklow left the Fund's board effective June
30, 2003, pursuant to the Fund's retirement policy. Brian M. Storms was
appointed a director and chairman of the Fund's board effective as of that date.
- --------------------------------------------------------------------------------
20
Strategic Global Income Fund, Inc.
General Information (unaudited)
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 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 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 will be equal to the result obtained
by dividing the amount of the dividend 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.
- --------------------------------------------------------------------------------
21
Strategic Global Income Fund, Inc.
General Information (unaudited)
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 may also 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 PFPC Inc., 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.
Distribution Policy
Effective January 2000, the Board revised the Fund's managed distribution policy
to make 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 the month (usually a Friday, unless the NYSE is closed that
Friday). Prior to 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 13, 1998, the Fund's distributions varied based
on the Fund's net investment income and realized capital gains or losses.
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 distribute the excess after the end of the fiscal year. If the
aggregate amount distributed by the Fund (based on a fixed percentage of its net
asset value) 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.
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 Board will
annually reassess the annualized percentage of net assets at which the Fund's
monthly distributions will be made.
- --------------------------------------------------------------------------------
22
Directors
Brian M. Storms Frederic V. Malek
Chairman
Carl W. Schafer
Margo N. Alexander
William D. White
Richard Q. Armstrong
David J. Beaubien
Richard R. Burt
Meyer Feldberg
Principal Officers
Joseph A. Varnas Stuart Waugh
President Vice President
Amy R. Doberman W. Douglas Beck
Vice President and Secretary Vice President
Paul H. Schubert
Vice President and Treasurer
Investment Advisor and Administrator
UBS Global Asset Management (US) Inc.
51 West 52nd Street
New York, New York 10019-6114
The financial information included herein is taken from the records of the Fund
without examination by independent auditors who do not express an opinion
thereon.
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.
This report is sent to the shareholders of the Fund for their information. It is
not a prospectus, circular or representation intended for the use in the
purchase or sale of shares of the Fund or of any securities mentioned in this
report.
(C)2003 UBS Global Asset Management (US) Inc. All rights reserved.
[LOGO] UBS Global Asset -------------
Management Presorted
51 West 52nd Street Standard
New York, NY 10019-6114 U.S. Postage
PAID
Smithtown, NY
Permit 700
-------------
Item 2. Code of Ethics.
Form N-CSR disclosure requirement not yet effective with respect to the
registrant.
Item 3. Audit Committee Financial Expert.
Form N-CSR disclosure requirement not yet effective with respect to the
registrant.
Item 4. Principal Accountant Fees and Services.
Form N-CSR disclosure requirement not yet effective with respect to the
registrant.
Item 5. Audit Committee of Listed Registrants.
Form N-CSR disclosure requirement not yet effective with respect to the
registrant.
Item 6. [Reserved by SEC for future use. ]
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed - End
Management Investment Companies.
Form N-CSR disclosure requirement does not apply to this semi-annual report
filing.
Item 8. [Reserved by SEC for future use. ]
Item 9. 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-2(c) under the Investment Company Act
of 1940) provide reasonable assurances that material information relating
to the registrant is made known to them by the appropriate persons, based
on
their evaluation of these controls and procedures as of a date within 90
days of the filing date of this report.
(b) There were no significant changes in the registrant's internal controls
or in other factors that could significantly affect these controls
subsequent to the date of the evaluation referenced in (a) above,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
Item 10. Exhibits.
(a) Form N-CSR disclosure requirement not yet effective with respect to the
registrant.
(b)(1) Certification pursuant to Rule 30a-2 under the Investment Company Act
of 1940 attached hereto as Exhibit 99.CERT.
(2) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
attached hereto as Exhibit 99.906 CERT.
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/ Joseph A. Varnas
--------------------------------
Joseph A. Varnas
President
Date: August 7, 2003
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/ Joseph A. Varnas
--------------------------------
Joseph A. Varnas
President
Date: August 7, 2003
By:/s/ Paul H. Schubert
--------------------------------
Paul H. Schubert
Treasurer
Date: August 7, 2003