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.
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(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
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
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: November 30, 2003
Item 1. Reports to Stockholders.
[UBS LOGO] Global Asset
Management
Strategic Global
Income Fund, Inc.
Annual Report
November 30, 2003
Strategic Global Income Fund, Inc.
January 15, 2004
Dear Shareholder,
We present you with the annual report for Strategic Global Income Fund, Inc.
for the fiscal year ended November 30, 2003.
Performance
For the fiscal year ended November 30, 2003, Strategic Global Income Fund, Inc.
returned 17.53% on a net asset value basis, compared to the median return of
20.28% generated by the Lipper Global Income Funds closed-end fund peer group.
On a market price basis, the Fund returned 23.18% over the 12-month period,
underperforming the market price return of 28.00% for the Lipper median. (For
more on the Fund's performance, please refer to "Performance At A Glance" on
page 5.)
The primary reason behind the Fund's underperformance over the review period was
the fact that the Fund did not use leverage during the period, whereas some
other funds in its peer group did. Leverage magnifies returns on the upside and
on the downside, creating wider dispersions of returns within the Fund's peer
group.
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 16.06% on an unhedged basis, and 2.81% on a currency-hedged
basis measured in US dollars. Emerging markets debt, as measured by the J.P.
Morgan Emerging Market Bond Index-Global (EMBI-G), returned 25.83% during the
same period. The EMBI-G consists of dollar-denominated securities.
An Interview with Maria Mednikov Loucks and Uwe Schillhorn
Q. Can you describe the global economic environment during the period?
A. During the first half of the fiscal year, growth was tepid in the US and
Japan, and insignificant in Europe. However, global economic growth has
picked
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Strategic Global Income
Fund, Inc.
Investment Goals:
Primarily, high current income;
secondarily, capital appreciation.
Portfolio Manager:
Portfolio Management Team,
including Maria Mednikov Loucks
and Uwe Schillhorn
UBS Global Asset Management
(US) Inc.
Commencement:
February 3, 1992
NYSE Symbol:
SGL
Dividend Payments:
Monthly
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1
Strategic Global Income Fund, Inc.
up--in many cases substantially--in more recent months. In the US, the
combined effects of significantly higher military spending, an increase in
exports and a stronger manufacturing sector fueled an uptick in growth that
resulted in a second quarter 2003 GDP figure of 3.3%. This was followed by a
final third quarter 2003 GDP of 8.2%--far higher than anticipated and the
sharpest recorded advance since 1984.
In Japan, the economy grew at an annualized rate of 2.2% during the third
quarter of 2003, higher than anticipated. This marked the seventh straight
quarterly gain for the Japanese economy, following a prolonged downturn.
European growth, which has lagged many other regions, has also showed signs
of recent improvement. Germany, Europe's largest economy, expanded 0.2%
during the third quarter of 2003, its first positive showing since the third
quarter of 2002.
Q. Which holdings generated strong results over the period?
A. The bond market performed well over the fiscal year, so nearly all of the
Fund's holdings rose during the period. With interest rates generally
falling, those holdings with the longest duration produced the strongest
results. In addition, our emerging markets debt positions and a substantial
exposure to the euro enhanced results.
Q. Were there any particular strategies that didn't work well for the Fund?
A. Throughout the period, the Fund's duration was shorter than that of the WGBI
or the EMBI-G, since we took a cautious approach given the low yield
environment. This stance hurt results overall, given the general decline in
interest rates over the period. During the second quarter of 2003, we raised
the Fund's overall duration by close to one year, bringing it approximately
one year short of the duration of the WGBI. This was accomplished by
extending maturities primarily in Canada and Europe, as we felt that the
central banks in these countries had greater flexibility than the US Federal
Reserve Board to further lower interest rates.
Q. What was your currency strategy during the period?
A. Prior to the beginning of the war in Iraq, roughly a third of the Fund's net
assets were in the euro and related currencies, such as the Danish krone and
Hungarian forint. This weighting was then lowered to approximately a quarter
of the Fund's net assets at the commencement of the war in Iraq (mid March),
and we believed that a rapid end to the conflict would propel the US dollar
higher. However, the euro continued to appreciate. We subsequently (mid-May)
increased the Fund's exposure to the euro to about a third of the portfolio,
and maintained this stance for the remainder of the fiscal year.
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2
Strategic Global Income Fund, Inc.
At the beginning of the period, we held substantial weights in the Canadian
and Australian dollars and the British pound. Toward the end of the
reporting period, this exposure was eliminated, and we built positions in
the Japanese yen and Thai baht.
Q. What other strategic transactions occurred over the reporting period?
A. In the first three months of 2003, we increased the Fund's exposure to
lower-rated emerging market debt--including bonds issued by Brazil, Russia
and Peru. This enhanced results over the period, as this sector of the bond
market generated very strong results. Brazil's PT (Worker's Party)
government has made substantial progress in obtaining legislative approval
of its social security and tax reform initiatives--something the prior
Cardoso administration was unable to do with its own reform package.
Although growth in Brazil has suffered from the extremely high real interest
rates that have been maintained by the Brazilian central bank to ward off
inflationary pressure, the country may now stand to benefit from a cycle of
declining inflation and lower domestic interest rates.
Q. What is your outlook for the global economy and the fixed income markets in
the coming months?
A. We believe that the global economy will continue to expand, especially in
the US and Asia. In addition, we anticipate that the US budget deficit will
continue to move higher. This could be detrimental for US government bond
prices and the dollar, although positive for Asian currencies--specifically
for those countries that are running a large current account surplus with
the US.
While emerging markets debt valuations appreciated considerably over the
fiscal year, we remain positive on the sector overall. Low interest rates in
the US, high oil prices and positive developments in terms of fiscal reform
in Brazil appear to have provided the foundation for higher emerging markets
debt prices. We do not anticipate an influx of negative events that could
substantially hurt emerging markets debt in the near term.
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Portfolio Management Change
In November 2003, the Fund moved from having a single portfolio manager who was
primarily responsible for its day-to-day management, to management by an
investment team. Investment decisions for the Fund are now being made
collectively by a global fixed income portfolio management team that does not
include the former portfolio manager. This change brings the Fund more in line
with UBS Global Asset Management's team approach to investment management--an
approach that we believe provides a forum for intellectual debate and the
exploration of the ramifications of investment decisions.
-- continued
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3
Strategic Global Income Fund, Inc.
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Portfolio Management Change -- continued from prior page
The Fund's investment adviser and administrator remains UBS Global Asset
Management (US) Inc., an indirect, wholly owned subsidiary of UBS AG, and a
member of the UBS Global Asset Management division. UBS Global Asset Management
had approximately $434 billion in assets under management worldwide as of
September 30, 2003, and has a long history of managing global fixed income
assets dating back to 1981. As of September 30, 2003, this division was managing
global fixed income assets totaling approximately $15.7 billion. UBS Global
Asset Management (US) Inc. had approximately $66.5 billion in assets under
management as of September 30, 2003.
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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/globalam-us.
Sincerely,
/s/ Joseph A. Varnas
Joseph A. Varnas
President
Strategic Global Income Fund, Inc.
Managing Director
UBS Global Asset Management (US) Inc.
/s/ Maria Mednikov Loucks
Maria Mednikov Loucks
Portfolio Management Team Member
Strategic Global Income Fund, Inc.
Director
UBS Global Asset Management (US) Inc.
/s/ Uwe Schillhorn
Uwe Schillhorn
Portfolio Management Team Member
Strategic Global Income Fund, Inc.
Director
UBS Global Asset Management (US) Inc.
This letter is intended to assist shareholders in understanding how the Fund
performed during the fiscal year ended November 30, 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 11/30/03
6 months 1 year 5 years 10 years
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Net Asset Value Returns*
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Strategic Global Income Fund, Inc. 1.52% 17.53% 9.00% 8.04%
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Lipper Global Income Funds Median** 1.81% 20.28% 8.95% 7.75%
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Market Price Returns*
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Strategic Global Income Fund, Inc. 3.83% 23.18% 15.44% 10.83%
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Lipper Global Income Funds Median** 7.93% 28.00% 14.15% 10.45%
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* 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. NAV return assumes, for
illustration only, that distributions were reinvested at the net asset value
on the distribution dates. Market returns assume that distributions are
reinvested at prices according to the dividend reinvestment plan. NAV and
market price returns for periods of one year or less have not been
annualized. Returns do not reflect taxes paid on dividends/distributions or
brokerage commissions and taxes paid on the sale of shares.
** Lipper closed-end fund 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
Characteristics* 11/30/03 5/31/03 11/30/02
=======================================================================================================
Net Asset Value $ 12.93 $ 13.39 $ 12.15
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Market Price $ 14.44 $ 14.55 $ 12.84
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12-Month Dividend/
Distribution $ 1.2785 $ 1.2408 $ 1.1983
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Monthly Dividend/
Distribution at
Period-End $ 0.1065 $ 0.1081 $ 0.1017
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Net Assets (mm) $ 236.1 $ 244.5 $ 221.9
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Weighted Average
Maturity 8.16 yrs. 8.0 yrs. 7.7 yrs.
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Weighted Average
Duration 4.6 yrs. 5.1 yrs. 4.5 yrs.
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Currency Exposure** 11/30/03 5/31/03 11/30/02
=======================================================================================================
U.S. Dollar
Denominated 46.5% 50.4% 57.7%
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Foreign Denominated 53.5 49.6 42.3
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Total 100.0% 100.0% 100.0%
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Credit Quality** 11/30/03 5/31/03 11/30/02
=======================================================================================================
A1/P1 12.7% 4.3% 6.8%
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AAA 50.0 52.3 49.6
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AA 8.1 9.4 8.7
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A 0.8 3.7 4.3
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BBB 12.1 12.8 15.1
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BB 8.6 11.9 10.3
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B 4.9 3.3 2.1
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CCC 1.9 0.9 --
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Non-Rated -- -- 0.7
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Other Assets in Excess
of Liabilities 0.9 1.4 2.4
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Total 100.0% 100.0% 100.0%
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Top 10 Countries** 11/30/03 5/31/03 11/30/02
=======================================================================================================
France 11.0% France 10.8% United States*** 11.5%
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Germany 8.6 Germany 8.5 France 9.3
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Mexico 6.3 Mexico 6.7 Mexico 8.1
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Russia 5.2 United States*** 6.6 Germany 8.0
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Denmark 5.0 Netherlands 6.2 Netherlands 5.6
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Brazil 4.9 Russia 6.0 Russia 5.5
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United Kingdom 4.9 Canada 5.9 Denmark 5.0
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Italy 4.5 Australia 4.9 United Kingdom 4.7
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Canada 4.5 Denmark 4.9 Canada 4.5
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Netherlands 4.1 Italy 4.5 Italy 4.1
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Total 59.0% 65.0% 66.3%
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* 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. Credit quality ratings shown are based on those assigned by Standard &
Poor's, a division of The McGraw-Hill Companies, Inc., and/or Moody's
Investors Services, Inc. to individual portfolio holdings. Both are
independent ratings agencies.
*** Excludes cash, cash equivalents and other assets in excess of liabilities.
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6
Strategic Global Income Fund, Inc.
Portfolio of Investments -- November 30, 2003
Principal
Amount Maturity Interest
(000)* Dates Rates Value
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Long-Term Debt Securities-86.35%
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Australia-2.87%
9,310 New South Wales Treasury Corp. 04/01/04 7.000% $6,770,327
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Austria-2.47%
JPY 590,000 Republic of Austria 09/28/05 4.500 5,820,541
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Brazil-4.92%
U.S.$ 650 Braskem S.A. (1) 11/05/08 12.500 666,250
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07/26/07 to 8.875 to
U.S.$ 5,390 Federal Republic of Brazil 08/17/40 11.250 5,429,410
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U.S.$ 3,386 Federal Republic of Brazil, C 04/15/14 8.000 3,263,622
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U.S.$ 2,160 Federal Republic of Brazil, DCB 04/15/12 2.063+ 1,895,400
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U.S.$ 388 Federal Republic of Brazil, NMB 04/15/09 2.063+ 362,041
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11,616,723
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Canada-4.45%
06/01/04 to 3.000 to
13,351 Government of Canada 06/01/29 5.750 10,499,483
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China-1.25%
U.S.$ 3,015 People's Republic of China 10/29/13 4.750 2,961,589
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Denmark-4.97%
08/15/05 to 5.000 to
68,500 Kingdom of Denmark 11/15/11 6.000 11,742,019
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Finland-1.25%
2,350 Government of Finland 07/04/07 5.000 2,959,166
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France-10.98%
07/12/05 to 4.500 to
20,300 Republic of France 10/25/32 5.750 25,928,928
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Germany-8.61%
U.S.$ 4,700 Deutsche Ausgleich Bank 06/23/05 7.000 5,040,205
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02/17/04 to 3.250 to
12,550 Federal Republic of Germany 07/04/11 5.000 15,289,219
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20,329,424
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Hungary-0.79%
437,000 Republic of Hungary 05/12/06 8.500 1,868,720
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Ireland-1.25%
2,400 Government of Ireland 10/18/07 4.250 2,950,639
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Italy-4.53%
04/01/04 to 6.500 to
8,252 Republic of Italy 11/01/27 8.500 10,695,740
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Malaysia-1.28%
U.S.$ 2,708 Petroliam Nasional Berhad (1) 10/15/26 7.625 3,021,587
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7
Strategic Global Income Fund, Inc.
Portfolio of Investments -- November 30, 2003
Principal
Amount Maturity Interest
(000)* Dates Rates Value
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Mexico-6.32%
U.S.$ 1,300 Conproca S.A. de CV 06/16/10 12.000% $1,651,000
- ----------------------------------------------------------------------------------------------------------
05/15/07 to 8.020 to
U.S.$ 3,080 PEMEX Finance Ltd. 08/15/17 10.610 3,591,369
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12/30/19 to 8.125 to
U.S.$ 8,205 United Mexican States 08/15/31 11.500 9,677,780
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14,920,149
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Netherlands-4.13%
02/15/07 to 5.500 to
7,617 Government of Netherlands 01/15/28 5.750 9,757,147
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New Zealand-1.38%
5,000 Government of New Zealand 04/15/13 6.500 3,247,774
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Panama-1.87%
U.S.$ 2,200 Republic of Panama 01/16/23 9.375 2,376,000
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U.S.$ 2,348 Republic of Panama, PDI 07/17/16 1.938+ 2,031,134
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4,407,134
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Peru-0.93%
U.S.$ 2,520 Republic of Peru, FLIRB 03/07/17 4.500++ 2,192,400
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Philippines-0.59%
U.S.$ 1,415 Republic of Philippines 01/15/19 9.875 1,397,313
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Qatar-1.41%
U.S.$ 2,373 State of Qatar (1) 06/15/30 9.750 3,334,065
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Russia-5.21%
U.S.$ 4,000 Russian Federation 03/31/10 8.250 4,440,000
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U.S.$ 8,376 Russian Federation (1) 03/31/30 5.000++ 7,852,933
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12,292,933
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South Africa-0.96%
U.S.$ 2,000 Republic of South Africa 04/25/12 7.375 2,260,000
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Spain-3.56%
07/30/05 to 4.950 to
6,655 Government of Spain 01/31/08 6.000 8,408,526
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Trinidad and Tobago-0.88%
U.S.$ 1,580 Republic of Trinidad & Tobago (1) 07/01/20 9.750 2,069,800
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United Kingdom-4.88%
6,690 United Kingdom Gilt 12/07/03 6.500 11,526,402
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United States-2.69%
5,502 U.S. Treasury Inflation Index Notes (3) 01/15/10 4.250 6,354,067
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Venezuela-1.92%
08/07/10 to 5.375 to
U.S.$ 4,218 Republic of Venezuela 03/31/20 6.750 3,439,110
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U.S.$ 1,179 Republic of Venezuela, DCB 12/18/07 1.875+ 1,096,042
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4,535,152
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Total Long-Term Debt Securities (cost--$175,482,626) 203,867,748
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8
Strategic Global Income Fund, Inc.
Portfolio of Investments-- November 30, 2003
Number of
Rights
(000) Value
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Rights-0.01%
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Mexico-0.01%
6,460 United Mexican States Value Recovery Rights, Series B-E,
Expiration Dates 06/30/04 to 06/30/07 (2) $21,964
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Venezuela-0.00%
15 Venezuela Oil Indexed Payment Obligations,
Expiration Date 4/15/20 (2) 0
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Total Rights (cost-$0) 21,964
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Principal
Amount Maturity Interest
(000) Dates Rates@
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Short-Term Debt Securities-12.55%
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United States-12.55%
$ 9,834 Federal Home Loan Bank, 12/03/03 to 1.000% to
Discount Notes 12/17/03 1.010 9,832,797
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14,575 Federal National Mortgage Association, 12/03/03 to 1.000 to
Discount Notes 12/15/03 1.010 14,570,757
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5,225 Freddie Mac, Discount Notes 12/02/03 to
12/15/03 1.010 5,222,668
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Total Short-Term Debt Securities (cost--$29,628,059) 29,626,222
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Number of
Shares
(000)
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Money Market Fund-0.17%
412 JP Morgan U.S. Government Money Market Fund
(cost--$412,208) 0.540# 412,208
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Total Investments (cost--$205,522,893)--99.08% 233,928,142
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Other assets in excess of liabilities--0.92% 2,173,737
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Net Assets--100% $236,101,879
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Note: The Portfolio of Investments is listed by the issuer's country of origin.
* In local currency unless otherwise indicated.
+ Reflects rate at November 30, 2003 on variable coupon rate instruments.
++ Reflects rate at November 30, 2003 on step coupon rate instruments.
# Interest rate shown reflects yield at November 30, 2003.
@ Yield to maturity for discounted securities.
(1) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
(2) Rights do not currently accrue income. Quarterly income, if any, will vary
based on several factors including oil exports, prices and inflation.
(3) Principal amount for accrual purposes is periodically adjusted based on
changes in the Consumer Price Index.
C Front-load interest reduction with capitalized interest bond.
DCB Debt conversion bond.
FLIRB Front-load interest reduction bond.
JPY Japanese yen.
NMB New money bond.
PDI Past due interest bond.
U.S.$ United States dollars.
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9
Strategic Global Income Fund, Inc.
Portfolio of Investments-- November 30, 2003
Forward Foreign Currency Contracts
Unrealized
Contracts to Maturity Appreciation
Deliver In Exchange for Dates (Depreciation)
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European Monetary Unit 11,387,654 USD 12,720,174 12/04/03 to 02/17/04 $ (925,389)
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Japanese Yen 998,349,000 USD 9,124,284 12/01/03 to 12/02/03 9,439
- ---------------------------------------------------------------------------------------------------------------
New Zealand Dollars 4,675,000 USD 2,814,818 12/24/03 (167,494)
- ---------------------------------------------------------------------------------------------------------------
United States Dollars 21,116,537 JPY 2,315,604,750 12/01/03 to 02/17/04 44,480
- ---------------------------------------------------------------------------------------------------------------
United States Dollars 3,403,002 THB 135,881,860 02/24/04 (831)
- ---------------------------------------------------------------------------------------------------------------
$(1,039,795)
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Currency Type Abbreviations:
JPY - Japanese Yen
THB - Thailand Baht
USD - United States Dollars
Investments By Type of Issuer
Percentage of Net Assets
----------------------------------------------
Other
Long-Term Investments
- ---------------------------------------------------------------------------------------------------
Government and other public issuers 78.27% --
- ---------------------------------------------------------------------------------------------------
U.S. Agency Obligations -- 12.55%
- ---------------------------------------------------------------------------------------------------
Financial Services 5.00 --
- ---------------------------------------------------------------------------------------------------
Oil 3.08 --
- ---------------------------------------------------------------------------------------------------
Rights -- 0.01
- ---------------------------------------------------------------------------------------------------
Money Market Fund -- 0.17
- ---------------------------------------------------------------------------------------------------
86.35% 12.73%
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See accompanying notes to financial statements
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10
Strategic Global Income Fund, Inc.
Statement of Assets and Liabilities -- November 30, 2003
Assets:
Investments in securities, at value (cost--$205,522,893) $233,928,142
- ---------------------------------------------------------------------------------------------
Foreign currency, at value (cost--$270,358) 275,993
- ---------------------------------------------------------------------------------------------
Interest receivable 3,740,742
- ---------------------------------------------------------------------------------------------
Unrealized appreciation on forward foreign currency contracts 53,919
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Other assets 4,414
- ---------------------------------------------------------------------------------------------
Total assets 238,003,210
- ---------------------------------------------------------------------------------------------
Liabilities:
Unrealized depreciation on forward foreign currency contracts 1,093,714
- ---------------------------------------------------------------------------------------------
Payable to custodian 456,604
- ---------------------------------------------------------------------------------------------
Payable to investment advisor and administrator 194,031
- ---------------------------------------------------------------------------------------------
Accrued expenses and other liabilities 156,982
- ---------------------------------------------------------------------------------------------
Total liabilities 1,901,331
- ---------------------------------------------------------------------------------------------
Net Assets:
Capital Stock--$0.001 par value; 100,000,000 shares authorized; 18,258,828
shares issued and outstanding 209,447,866
- ---------------------------------------------------------------------------------------------
Distributions in excess of net investment income (827,331)
- ---------------------------------------------------------------------------------------------
Net unrealized appreciation of investments, forward foreign currency contracts,
and other assets and liabilities denominated in foreign currencies 27,481,344
- ---------------------------------------------------------------------------------------------
Net assets $236,101,879
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Net asset value per share $ 12.93
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See accompanying notes to financial statements
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11
Strategic Global Income Fund, Inc.
Statement of Operations
For the
Year Ended
November 30, 2003
- -----------------------------------------------------------------------------------------
Investment income:
Interest $12,491,100
- -----------------------------------------------------------------------------------------
Expenses:
Investment advisory and administration fees 2,338,882
- -----------------------------------------------------------------------------------------
Custody and accounting fees 187,112
- -----------------------------------------------------------------------------------------
Reports and notices to shareholders 77,745
- -----------------------------------------------------------------------------------------
Professional fees 60,225
- -----------------------------------------------------------------------------------------
Transfer agency fees 24,072
- -----------------------------------------------------------------------------------------
Directors' fees 21,790
- -----------------------------------------------------------------------------------------
Other expenses 66,315
- -----------------------------------------------------------------------------------------
2,776,141
- -----------------------------------------------------------------------------------------
Net investment income 9,714,959
- -----------------------------------------------------------------------------------------
Realized and unrealized gains (losses) from investment activities:
Net realized gains from:
Investment transactions 6,689,013
- -----------------------------------------------------------------------------------------
Forward foreign currency contracts and foreign currency transactions 3,825,112
- -----------------------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation of:
Investments 18,076,432
- -----------------------------------------------------------------------------------------
Forward foreign currency contracts and other assets and liabilities
denominated in foreign currencies (787,961)
- -----------------------------------------------------------------------------------------
Net realized and unrealized gains from investment activities 27,802,596
- -----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $37,517,555
- -----------------------------------------------------------------------------------------
See accompanying notes to financial statements
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12
Strategic Global Income Fund, Inc.
Statement of Changes in Net Assets
For the Years Ended
November 30,
-------------------------------
2003 2002
- -------------------------------------------------------------------------------------------------
From operations:
Net investment income $ 9,714,959 $ 9,578,925
- -------------------------------------------------------------------------------------------------
Net realized gains from investment transactions 6,689,013 5,091,061
- -------------------------------------------------------------------------------------------------
Net realized gains from forward foreign currency contracts and
foreign currency transactions 3,825,112 247,701
- -------------------------------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation of:
Investments 18,076,432 10,200,878
- -------------------------------------------------------------------------------------------------
Forward foreign currency contracts and other assets and
liabilities denominated in foreign currencies (787,961) (272,772)
- -------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 37,517,555 24,845,793
- -------------------------------------------------------------------------------------------------
Dividends and distributions to shareholders from:
Net investment income and net realized gains from foreign
currency transactions (14,140,229) (10,466,754)
- -------------------------------------------------------------------------------------------------
Net realized gains (6,096,034) (4,066,103)
- -------------------------------------------------------------------------------------------------
Return of capital (3,107,648) (7,346,696)
- -------------------------------------------------------------------------------------------------
Total dividends and distributions to shareholders (23,343,911) (21,879,553)
- -------------------------------------------------------------------------------------------------
Net increase in net assets 14,173,644 2,966,240
- -------------------------------------------------------------------------------------------------
Net assets:
Beginning of year 221,928,235 218,961,995
- -------------------------------------------------------------------------------------------------
End of year $236,101,879 $221,928,235
- -------------------------------------------------------------------------------------------------
See accompanying notes to financial statements
- --------------------------------------------------------------------------------
13
Strategic Global Income Fund, Inc.
Notes to Financial Statements
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
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 or
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 year; and (2) purchases and sales of investment securities and income and
- --------------------------------------------------------------------------------
15
Strategic Global Income Fund, Inc.
Notes to Financial Statements
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 investment securities
are presented at the foreign exchange rates at the end of the Fund's fiscal
year, 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
- --------------------------------------------------------------------------------
16
Strategic Global Income Fund, Inc.
Notes to Financial Statements
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 foreign 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, which is included in interest income, 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 Financial Services
Inc. and UBS Securities LLC, indirect wholly owned subsidiaries of UBS AG, and
other affiliated broker-dealers have been approved as borrowers under the Fund's
securities lending program. The Fund's lending agent is UBS Securities LLC. (UBS
Financial Services Inc. provided such
- --------------------------------------------------------------------------------
17
Strategic Global Income Fund, Inc.
Notes to Financial Statements
services prior to UBS Securities LLC.) During the year ended November 30, 2003,
the Fund did not lend securities.
Capital Stock
There are 100,000,000 shares of $0.001 par value common stock authorized and
18,258,828 shares outstanding at November 30, 2003. For the years ended November
30, 2003 and 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, 2003, 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 November 30, 2003 were as follows:
Gross appreciation (investments having an excess of value over cost) $ 27,425,232
- ----------------------------------------------------------------------------------
Gross depreciation (investments having an excess of cost over value) (715,284)
- ----------------------------------------------------------------------------------
Net unrealized appreciation of investments $ 26,709,948
- ----------------------------------------------------------------------------------
For the year ended November 30, 2003, aggregate purchases and sales of portfolio
securities, excluding short-term securities, were $104,517,589 and $131,979,578,
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 distributions paid during the fiscal years ended November
30, 2003 and November 30, 2002 was as follows:
Distributions paid from: 2003 2002
- ----------------------------------------------------------
Ordinary income $16,347,710 $ 10,466,754
- ----------------------------------------------------------
Net realized gains 3,888,553 4,066,103
- ----------------------------------------------------------
Return of capital 3,107,648 7,346,696
- ----------------------------------------------------------
$23,343,911 $ 21,879,553
- ----------------------------------------------------------
- --------------------------------------------------------------------------------
18
Strategic Global Income Fund, Inc.
Notes to Financial Statements
At November 30, 2003, the components of accumulated earnings (deficit) on a tax
basis were as follows:
Accumulated realized capital and other losses $ (170,994)
- ----------------------------------------------------------
Unrealized appreciation of investments 26,825,007
- ----------------------------------------------------------
Total accumulated earnings $26,654,013
- ----------------------------------------------------------
The differences between book-basis and tax-basis unrealized appreciation is
attributable to premium amortization adjustments.
To reflect reclassifications arising from permanent "book/tax" differences for
the year ended November 30, 2003, distributions in excess of net investment
income were decreased by $13,621,773, accumulated net realized gain from
investment transactions was decreased by $10,514,125 and capital stock was
decreased by $3,107,648.
- --------------------------------------------------------------------------------
19
Strategic Global Income Fund, Inc.
Financial Highlights
Selected data for a share of common stock outstanding thoughout each year is
presented below:
For the Years Ended November 30,
------------------------------------------------------------
2003 2002+ 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year $12.15 $11.99 $11.92 $12.56 $13.55
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income 0.53 0.52 0.72 0.85@ 0.81@
- ----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gains (losses) from investment
and foreign currency transactions 1.53 0.83 0.55 (0.41)@ (0.89)@
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) from investment operations 2.06 1.35 1.27 0.44 (0.08)
- ----------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income and foreign
currency transactions (0.78) (0.57) (0.55) (0.29) (0.48)
- ----------------------------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.33) (0.22) -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
Distributions from paid-in-capital (0.17) (0.40) (0.66) (0.84) (0.56)
- ----------------------------------------------------------------------------------------------------------------------------
Distributions in excess of net investment income -- -- -- (0.08) --
- ----------------------------------------------------------------------------------------------------------------------------
Total dividends and distributions to shareholders (1.28) (1.19) (1.21) (1.21) (1.04)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase in net asset value resulting from repurchase of
common stock -- -- 0.01 0.13 0.13
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $12.93 $12.15 $11.99 $11.92 $12.56
- ----------------------------------------------------------------------------------------------------------------------------
Market value, end of year $14.44 $12.84 $11.40 $10.13 $10.00
- ----------------------------------------------------------------------------------------------------------------------------
Total investment return(1) 23.18% 24.39% 25.34% 13.75% (6.41)%
- ----------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of year (000's) $236,102 $221,928 $218,962 $219,674 $247,915
- ----------------------------------------------------------------------------------------------------------------------------
Expenses to average net assets 1.19% 1.18% 1.19% 1.19% 1.17%
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income to average net assets 4.15% 4.37% 5.94% 6.89% 6.21%
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 49% 51% 29% 53% 58%
- ----------------------------------------------------------------------------------------------------------------------------
@ 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 year 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.
+ 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.
- --------------------------------------------------------------------------------
20
Strategic Global Income Fund, Inc.
Report of Ernst & Young LLP, Independent Auditors
To the Board of Directors and Shareholders of
Strategic Global Income Fund, Inc.
We have audited the accompanying statement of assets and liabilities of
Strategic Global Income Fund, Inc. (the "Fund"), including the portfolio of
investments, as of November 30, 2003, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of the
two years in the period then ended and financial highlights for each of the five
years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned at November 30, 2003 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Strategic Global Income Fund, Inc. at November 30, 2003, and the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young LLP
New York, New York
January 14, 2004
- --------------------------------------------------------------------------------
21
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 2003. 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 2004. Shareholders are advised to consult their own tax
advisors with respect to the tax consequences of their investment in the Fund.
- --------------------------------------------------------------------------------
22
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 investment
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 $58.5 billion in assets under management as of December 31, 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.
Portfolio Management Change
In November 2003, the fund moved from having a single portfolio manager
primarily responsible for day-to-day management to management by an investment
team. Investment decisions for the Fund are now being made collectively by a
global fixed income portfolio management team which does not include the former
portfolio manager. This change brings the Fund more in line with UBS Global AM's
team approach to investment management.
Proxy Voting Policies and Procedures
You may obtain a description of the Fund's proxy voting policies and procedures,
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.
- --------------------------------------------------------------------------------
23
Strategic Global Income Fund, Inc.
General Information (unaudited)
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.
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.
- --------------------------------------------------------------------------------
24
Strategic Global Income Fund, Inc.
General Information (unaudited)
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.
- --------------------------------------------------------------------------------
25
Strategic Global Income Fund, Inc.
Supplemental Information (unaudited)
Board of Directors & Officers
The Fund is governed by a Board of Directors which oversees the Fund's
operations. Each director serves 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. Officers are appointed by the directors and
serve at the pleasure of the Board. The table below shows, for each director and
officer, his or her name, address and age, the position held with the Fund, the
length of time served as a director and officer of the Fund, the director's or
officer's principal occupations during the last five years, the number of funds
in the UBS fund complex overseen by the director or for which a person served as
an officer, and other directorships held by the director.
Interested Directors
Term of
Office+ and
Position(s) Length of
Name, Address, Held with Time Principal Occupation(s)
and Age Fund Served During Past 5 Years
- ---------------------------------------------------------------------------------------------
Margo N. Alexander*++; 56 Director Since 1996 Mrs. Alexander is retired. She
was an executive vice president
of UBS Financial Services Inc.
(March 1984 to December 2002).
She was chief executive officer
(from January 1995 to October
2000), a director (from January 1995
to September 2001) and chairman
(from March 1999 to September
2001) of UBS Global AM (formerly
known as Mitchell Hutchins Asset
Management Inc.).
Brian M. Storms*++; 49 Director Since 2003 Mr. Storms is chief executive officer
and of UBS Global Asset Management--
Chairman Americas region (since July 2002).
of the Mr. Storms was chief executive
Board of officer, president and/or chief
Directors operating officer of UBS Global AM
and certain affiliated asset
management companies from 1999
to July 2002. From 1996 to 1999,
he was president of Prudential
Investments.
- --------------------------------------------------------------------------------
26
Strategic Global Income Fund, Inc.
Supplemental Information (unaudited)
Number of
Portfolios in Fund Complex Other Directorships
Overseen by Director Held by Director
- ------------------------------------------------------------------------
Mrs. Alexander is a director or trustee None
of 17 investment companies (consisting
of 37 portfolios) for which UBS Global
AM or one of its affiliates serves as
investment advisor, sub-advisor or manager.
Mr. Storms is a director or trustee of 21 None
investment companies (consisting of 80
portfolios) for which UBS Global AM or one
of its affiliates serves as investment advisor,
sub-advisor or manager.
- --------------------------------------------------------------------------------
27
Strategic Global Income Fund, Inc.
Supplemental Information (unaudited)
Independent Directors
Term of
Office+ and
Position(s) Length of
Name, Address, Held with Time Principal Occupation(s)
and Age Fund Served During Past 5 Years
- -------------------------------------------------------------------------------------------------
Richard Q. Armstrong; 68 Director Since 1995 Mr. Armstrong is chairman and
c/o Willkie Farr & Gallagher LLP principal of R.Q.A. Enterprises
787 Seventh Avenue (management consulting firm)
New York, NY 10019-6099 (since April 1991 and principal
occupation since March 1995).
David J. Beaubien; 69 Director Since 2001 Mr. Beaubien is retired. From 1991
84 Doane Road to 2003 he was chairman of
Ware, MA 01082 Yankee Environmental Systems,
Inc., a manufacturer of
meteorological measuring systems.
Richard R. Burt; 56 Director Since 1995 Mr. Burt is chairman of Diligence
1275 Pennsylvania Ave., N.W. LLC (international information and
Washington, D.C. 20004 security firm) and IEP Advisors
(international investments and
consulting firm).
Meyer Feldberg; 61 Director Since 1996 Mr. Feldberg is Dean and Professor
Columbia University of Management of the Graduate
101 Uris Hall School of Business, Columbia
New York, New York 10027 University (since 1989).
Carl W. Schafer; 67 Director Since 1996 Mr. Schafer is president of the
66 Witherspoon Street Atlantic Foundation (charitable
#1100 foundation) (since 1990).
Princeton, NJ 08542
- --------------------------------------------------------------------------------
28
Strategic Global Income Fund, Inc.
Supplemental Information (unaudited)
Number of
Portfolios in Fund Complex Other Directorships
Overseen by Director Held by Director
- -------------------------------------------------------------------------------------------------
Mr. Armstrong is a director or trustee of 17 None
investment companies (consisting of 37
portfolios) for which UBS Global AM or one
of its affiliates serves as investment advisor,
sub-advisor or manager.
Mr. Beaubien is a director or trustee of 17 Mr. Beaubien is also a director of IEC
investment companies (consisting of 37 Electronics, Inc., a manufacturer of
portfolios) for which UBS Global AM or one electronic assemblies.
of its affiliates serves as investment advisor,
sub-advisor or manager.
Mr. Burt is a director or trustee of 17 Mr. Burt is also a director of Hollinger
investment companies (consisting of 37 International, Inc. (publishing), HCL
portfolios) for which UBS Global AM or one Technologies, Ltd. (software and
of its affiliates serves as investment advisor, information technologies), The Central
sub-advisor or manager. European Fund, Inc., The Germany Fund,
Inc., IGT, Inc. (provides technology to
gaming and wagering industry) and
chairman of Weirton Steel Corp. (makes
and finishes steel products). He is also
a director or trustee of funds in the
Scudder Mutual Funds Family (consisting
of 47 portfolios).
Dean Feldberg is a director or trustee of 31 Dean Feldberg is also a director of
investment companies (consisting of 51 Primedia Inc. (publishing), Federated
portfolios) for which UBS Global AM or one Department Stores, Inc. (operator of
of its affiliates serves as investment advisor, department stores), Revlon, Inc.
sub-advisor or manager. (cosmetics) and Select Medical Inc.
(healthcare services) and SAPPI, Ltd.
(producer of paper).
Mr. Schafer is a director or trustee of 17 Mr. Schafer is also a director of Labor
investment companies (consisting of 37 Ready, Inc. (temporary employment),
portfolios) for which UBS Global AM or one Guardian Life Insurance Company Mutual
of its affiliates serves as investment advisor, Funds (consisting of 25 portfolios), the
sub-advisor or manager. Harding, Loevner Funds (consisting of three
portfolios), E.I.I. Realty Securities Trust
(investment company) and Frontier Oil
Corporation.
- --------------------------------------------------------------------------------
29
Strategic Global Income Fund, Inc.
Supplemental Information (unaudited)
Independent Directors (concluded)
Term of
Office+ and
Position(s) Length of
Name, Address, Held with Time Principal Occupation(s)
and Age Fund Served During Past 5 Years
- -------------------------------------------------------------------------------------------
William D. White; 70 Director Since 2001 Mr. White is retired (since 1994).
P.O. Box 199
Upper Black Eddy, PA 18972
- --------------------------------------------------------------------------------
30
Strategic Global Income Fund, Inc.
Supplemental Information (unaudited)
Number of
Portfolios in Fund Complex Other Directorships
Overseen by Director Held by Director
- ------------------------------------------------------------------------
Mr. White is a director or trustee of 17 None
investment companies (consisting of 37
portfolios) for which UBS Global AM or one
of its affiliates serves as investment advisor,
sub-advisor or manager.
- --------------------------------------------------------------------------------
31
Strategic Global Income Fund, Inc.
Supplemental Information (unaudited)
Officers
Term of Principal Occupation(s) During
Office+ and Past 5 Years; Number of
Position(s) Held Length of Portfolios in Fund Complex for
Name, Address, and Age with the Fund Time Served Which Person Serves as Officer
- ---------------------------------------------------------------------------------------------
W. Douglas Beck*; 36 Vice President Since 2003 Mr. Beck is an executive director
and head of mutual fund
product management of UBS
Global AM (since 2002). From
March 1998 to November
2002, he held various positions
at Merrill Lynch, the most recent
being first vice president and
co-manager of the managed
solutions group. Mr. Beck is vice
president of 20 investment
companies (consisting of 78
portfolios) for which UBS Global
AM or one of its affiliates serves
as investement adivsor, sub-
advisor or manager.
Thomas Disbrow*; 37 Vice President Since 2000 Mr. Disbrow is a director and a
and Assistant senior manager of the mutual
Treasurer fund finance department of
UBS Global AM. Prior to
November 1999, he was a
vice president of Zweig/Glaser
Advisers. Mr. Disbrow is a
vice president and assistant
treasurer of 17 investment
companies (consisting of 37
portfolios) for which UBS
Global AM or one of its
affiliates serves as investment
advisor, sub-advisor or
manager.
- --------------------------------------------------------------------------------
32
Strategic Global Income Fund, Inc.
Supplemental Information (unaudited)
Officers (continued)
Term of Principal Occupation(s) During
Office+ and Past 5 Years; Number of
Position(s) Held Length of Portfolios in Fund Complex for
Name, Address, and Age with the Fund Time Served Which Person Serves as Officer
- -------------------------------------------------------------------------------------------------
Amy R. Doberman*; 41 Vice President Since 2000 Ms. Doberman is a managing
and Secretary director and general counsel of
UBS Global AM. From December
1997 through July 2000, she
was general counsel of Aeltus
Investment Management, Inc.
Ms. Doberman is vice president
and assistant secretary of five
investment companies
(consisting of 44 portfolios) and
vice president and secretary of
17 investment companies
(consisting of 37 portfolios) for
which UBS Global AM or one of
its affiliates serves as investment
advisor, sub-advisor or manager.
David M. Goldenberg*; 37 Vice President Since 2002 Mr. Goldenberg is an executive
and Assistant director and deputy general
Secretary counsel of UBS Global AM.
From 2000 to 2002 he was
director, legal affairs at Lazard
Asset Management. Mr.
Goldenberg served in various
capacities, including most
recently as global director of
compliance at SSB Citi Asset
Management Group from
1996 to 2000. Mr. Goldenberg
is a vice president and
secretary of five investment
companies (consisting of 44
portfolios) and a vice president
and assistant secretary of 17
investment companies
(consisting of 37 portfolios) for
which UBS Global AM or one
of its affiliates serves as
investment advisor, sub-advisor
or manager.
- --------------------------------------------------------------------------------
33
Strategic Global Income Fund, Inc.
Supplemental Information (unaudited)
Officers (continued)
Term of Principal Occupation(s) During
Office+ and Past 5 Years; Number of
Position(s) Held Length of Portfolios in Fund Complex for
Name, Address, and Age with the Fund Time Served Which Person Serves as Officer
- -------------------------------------------------------------------------------------------
Kevin J. Mahoney*; 38 Vice President Since 1999 Mr. Mahoney is a director
and Assistant and a senior manager of
Treasurer the mutual fund finance
department of UBS Global
AM. Prior to April 1999, he
was the manager of the
mutual fund internal control
group of Salomon Smith
Barney. Mr. Mahoney is a
vice president and assistant
treasurer of 17 investment
companies (consisting of 37
portfolios) for which UBS
Global AM or one of its
affiliates serves as investment
advisor, sub-advisor or
manager.
John Penicook+++; 45 Vice President Since 2002 Mr. Penicook is a managing
director and global head of
fixed income of UBS Global
Asset Management (Americas)
Inc. and UBS Global AM. Mr.
Penicook is a vice president of
three investment companies
(consisting of three portfolios)
for which UBS Global AM or
one of its affiliates serves as
investment advisor, sub-advisor
or manager.
- --------------------------------------------------------------------------------
34
Strategic Global Income Fund, Inc.
Supplemental Information (unaudited)
Officers (continued)
Term of Principal Occupation(s) During
Office+ and Past 5 Years; Number of
Position(s) Held Length of Portfolios in Fund Complex for
Name, Address, and Age with the Fund Time Served Which Person Serves as Officer
- -------------------------------------------------------------------------------------------
Paul H. Schubert*; 40 Vice President Since 1994 Mr. Schubert is an executive
and Treasurer director and head of the
mutual fund finance
department of UBS Global
AM. Mr. Schubert is treasurer
and principal accounting
officer of three investment
companies (consisting of 41
portfolios) a vice president and
treasurer of 18 investment
companies (consisting of 38
portfolios), and treasurer and
chief financial officer of one
investment company
(consisting of two portfolios)
for which UBS Global AM or
one of its affiliates serves as
investment advisor, sub-advisor
or manager.
Joseph A. Varnas*; 36 President Since 2003 Mr. Varnas is a managing
director (since March 2003),
chief technology officer (since
March 2001) and head of
product, technology and
operations of UBS Global
AM (since November 2002).
From 2000 to 2001, he
was manager of product
development in Investment
Consulting Services at UBS
Financial Services Inc. Mr.
Varnas was a senior analyst in
the Global Securities Research
and Economics Group at
Merrill Lynch from 1995 to
1999. Mr. Varnas is president
of 21 investment companies
(consisting of 79 portfolios)
for which UBS Global AM or
one of its affiliates serves as
investment advisor, sub-advisor
or manager.
- --------------------------------------------------------------------------------
35
Strategic Global Income Fund, Inc.
Supplemental Information (unaudited)
Officers (concluded)
Term of Principal Occupation(s) During
Office+ and Past 5 Years; Number of
Position(s) Held Length of Portfolios in Fund Complex for
Name, Address, and Age with the Fund Time Served Which Person Serves as Officer
- --------------------------------------------------------------------------------------------
Keith A. Weller*; 42 Vice President Since 1995 Mr. Weller is a director and
and Assistant senior associate general
Secretary counsel of UBS Global AM.
Mr. Weller is a vice president
and assistant secretary of 17
investment companies
(consisting of 37 portfolios) for
which UBS Global AM or one
of its affiliates serves as
investment advisor, sub-advisor
or manager.
- ------------------------------
* This person's business address is 51 West 52nd Street, New York, New York
10019-6114.
+ Each Director serves 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. Each director who has attained the age of
seventy-two (72) years will be subject to retirement on the last day of
the month in which he or she attains such age. Officers of the Fund are
appointed by the Directors and serve at the pleasure of the Board.
++ Mrs. Alexander and Mr. Storms are "interested persons" of the Fund as
defined in the Investment Company Act by virtue of their positions with
UBS Global AM and/or any of its affiliates.
+++ This person's business address is One North Wacker Drive, Chicago, IL
60606.
- --------------------------------------------------------------------------------
36
Directors
Brian M. Storms
Chairman
Margo N. Alexander
Richard Q. Armstrong
David J. Beaubien
Richard R. Burt
Meyer Feldberg
Carl W. Schafer
William D. White
Principal Officers
Joseph A. Varnas
President
Amy R. Doberman
Vice President and Secretary
Paul H. Schubert
Vice President and Treasurer
W. Douglas Beck
Vice President
Investment Advisor and Administrator
UBS Global Asset Management (US) 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.
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)2004 UBS Global Asset Management (US) Inc. All rights reserved.
[UBS LOGO]
UBS Global Asset Management
51 West 52nd Street
New York, New York 10019-6114
Item 2. Code of Ethics.
The registrant has adopted a code of ethics that applies to its principal
executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions pursuant to Section 406 of
the Sarbanes-Oxley Act of 2002. (The registrant has designated the code of
ethics adopted pursuant to Sarbanes-Oxley as a "Code of Conduct" to lessen the
risk of confusion with its separate code of ethics adopted pursuant to Rule
17j-1 under the Investment Company Act of 1940, as amended.)
Item 3. Audit Committee Financial Expert.
The registrant's Board of Directors has determined that the following persons
serving on the registrant's Audit and Contract Review Committee are "audit
committee financial experts" as defined in item 3 of Form N-CSR : Richard Q.
Armstrong and Carl W. Schafer. Each of Mr. Armstrong and Mr. Schafer is
independent as defined in item 3 of Form N-CSR.
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.
The registrant's Board of Directors believes that the voting of proxies on
securities held by the registrant is an important element of the overall
investment process. As such, the Board has delegated the responsibility to vote
such proxies to the registrant's advisor. Following is a summary of the proxy
voting policy of the advisor.
Corporate Governance Philosophy, Voting Guidelines and Policy Summary
The proxy voting policy of UBS Global Asset Management (US) Inc. ("UBS Global
AM") is based on its belief that voting rights have economic value and must be
treated accordingly. Generally, UBS Global AM expects the boards of directors of
companies issuing securities held by its clients to act as stewards of
the financial assets of the company, to exercise good judgment and practice
diligent oversight with the management of the company. While there is no
absolute set of rules that determine appropriate corporate governance under all
circumstances and no set of rules will guarantee ethical behavior, there are
certain benchmarks, which, if substantial progress is made toward, give evidence
of good corporate governance. UBS Global AM may delegate to an independent proxy
voting and research service the authority to exercise the voting rights
associated with certain client holdings. Any such delegation shall be made with
the direction that the votes be exercised in accordance with UBS Global AM's
proxy voting policy.
When UBS Global AM's view of a company's management is favorable, UBS Global AM
generally supports current management initiatives. When UBS Global AM's view is
that changes to the management structure would probably increase shareholder
value, UBS Global AM may not support existing management proposals. In general,
UBS Global AM (1) opposes proposals which act to entrench management; (2)
believes that boards should be independent of company management and composed of
persons with requisite skills, knowledge and experience; (3) opposes structures
which impose financial constraints on changes in control; (4) believes
remuneration should be commensurate with responsibilities and performance; and
(5) believes that appropriate steps should be taken to ensure the independence
of auditors.
UBS Global AM has implemented procedures designed to identify whether it has a
conflict of interests in voting a particular proxy proposal, which may arise as
a result of its or its affiliates' client relationships, marketing efforts or
banking, investment banking and broker/dealer activities. To address such
conflicts, UBS Global AM has imposed information barriers between it and its
affiliates who conduct banking, investment banking and broker/dealer activities
and has implemented procedures to prevent business, sales and marketing issues
from influencing our proxy votes. Whenever UBS Global AM is aware of a conflict
with respect to a particular proxy, its appropriate local corporate governance
committee is required to review and agree to the manner in which such proxy is
voted.
Item 8. Purchase of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Form N-CSR disclosure requirement not yet effective with respect to the
registrant.
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-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 that occurred during the registrant's most
recent fiscal half-year that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting.
Item 10. Exhibits.
(a) (1) Code of Ethics as required pursuant to Section 406 of the
Sarbanes-Oxley Act of 2002 (and designated by registrant as a "Code
of Conduct") is attached hereto as Exhibit EX-99.CODE ETH.
(a) (2) Certifications of principal executive officer and principal
financial officer pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002 is attached hereto as Exhibit EX-99.CERT.
(b) Certifications of principal executive officer and principal
financial officer pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 is 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/ Joseph A. Varnas
---------------------
Joseph A. Varnas
President
Date: February 5, 2004
----------------
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: February 5, 2004
----------------
By: /s/ Paul H. Schubert
--------------------
Paul H. Schubert
Treasurer
Date: February 5, 2004
----------------