N-Q 1 e52414.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number: 811-06475


Strategic Global Income Fund, Inc.


(Exact name of registrant as specified in charter)

51 West 52nd Street, New York, New York 10019-6114


(Address of principal executive offices) (Zip code)

Mark F. Kemper, Esq.
UBS Global Asset Management 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 30

Date of reporting period: August 31, 2006


Item 1. Schedule of Investments

Strategic Global Income Fund, Inc.
Portfolio of investments – August 31, 2006 (unaudited)

      Face        
      amount   Value  
     
 
 
Bonds – 87.91%                  
US bonds – 21.19%                  
US corporate bonds – 8.67%                  
Bank One Corp.                  
7.875%, due 08/01/10   $   2,000,000     $ 2,176,460  
C.S. First Boston USA, Inc.                  
6.500%, due 01/15/12       2,000,000       2,097,938  
Fortune Brands, Inc.                  
5.375%, due 01/15/16       2,000,000       1,903,068  
General Electric Capital Corp.(e)                  
6.000%, due 06/15/12       2,000,000       2,066,928  
GMAC LLC                  
6.125%, due 09/15/06       1,000,000       999,695  
6.875%, due 09/15/11(e)       1,000,000       984,879  
HSBC Finance Corp.                  
6.750%, due 05/15/11       2,000,000       2,111,420  
Kraft Foods, Inc.                  
5.250%, due 06/01/07       1,000,000       997,633  
Miller Brewing Co.,144A                  
5.500%, due 08/15/13       1,000,000       984,183  
Residential Capital Corp.                  
6.125%, due 11/21/08       2,000,000       2,004,352  
Time Warner Cos., Inc.                  
7.480%, due 01/15/08       1,000,000       1,025,620  
Washington Mutual Preferred Funding Delaware,144A*                  
6.534%, due 03/15/11       1,000,000       978,390  
             
 
                18,330,566  
             
 
Asset-backed securities – 4.32%                  
Conseco Finance Securitizations Corp., 00-2, Class A4                  
8.480%, due 12/01/30       363,153       364,138  
Conseco Finance Securitizations Corp., 00-5, Class A5                  
7.700%, due 02/01/32       4,957,122       4,945,394  
Green Tree Financial Corp., 99-1, Class A5                  
6.110%, due 09/01/23       2,312,996       2,309,395  
New York City Tax Lien, 04-AA, Class C,144A                  
3.960%, due 12/11/17       532,700       506,503  
Providian Gateway Master Trust, 04-AA, Class D,144A                  
7.180%, due 03/15/11       1,000,000       1,008,594  
             
 
                9,134,024  
             
 
Commercial mortgage-backed securities – 2.63%                  
Bear Stearns Commercial Mortgage Securities, 05-LXR1, Class K,144A                  
7.180%, due 09/15/18       1,000,000       1,002,174  
Commercial Mortgage Acceptance Corp., 97-ML1, Class D                  
7.055%, due 12/15/30       977,000       1,001,385  
Commercial Mortgage Pass-Through Certificates, 01-FL5A, Class E,144A                  
6.830%, due 11/15/13       437,147       437,147  
Commercial Mortgage Pass-Through Certificates, 01-FL5A, Class F,144A                  
6.090%, due 11/15/13       1,000,000       980,000  
DLJ Commercial Mortgage Corp., 99-CG1, Class A1A                  
6.080%, due 03/10/32       317,932       318,526  
Four Times Square Trust, 00-4TS, Class A1,144A                  
7.690%, due 04/15/15       696,763       728,486  
Morgan Stanley Dean Witter Capital I, 00-LIF2, Class A2                  
7.200%, due 10/15/33       1,000,000       1,059,192  
Nomura Asset Securities Corp., 98-D6, Class A1A                  
6.280%, due 03/15/30       31,662       31,650  
             
 
                5,558,560  
             
 
Mortgage-backed securities – 2.29%                  
Countrywide Alternative Loan Trust, 05-J2, Class 2A1                  
7.500%, due 12/25/34       310,110       311,633  
Federal Home Loan Mortgage Corp.                  
4.613%, due 12/01/34       2,831,886       2,773,196  
Federal Home Loan Mortgage Corp., 3033, Class OI,IO(a)                  
5.500%, due 10/15/22       1,238,241       69,592  
Federal National Mortgage Association                  
4.916%, due 02/01/35       1,704,228       1,682,418  
             
 
                4,836,839  
             
 

Strategic Global Income Fund, Inc.
Portfolio of investments – August 31, 2006 (unaudited)

      Face        
      amount   Value  
     
 
 
US government obligations – 3.28%                  
US Treasury Bonds                  
4.500%, due 02/15/36   $   1,900,000     $ 1,788,227  
6.250%, due 08/15/23       190,000       217,862  
8.500%, due 02/15/20       220,000       297,120  
8.875%, due 02/15/19       1,830,000       2,506,384  
US Treasury Notes                  
3.875%, due 02/15/13       445,000       424,436  
4.125%, due 05/15/15       435,000       416,156  
4.625%, due 02/29/08       465,000       463,329  
4.750%, due 05/15/14       835,000       835,913  
             
 
                6,949,427  
             
 
Total US bonds (cost $45,649,962)               44,809,416  
             
 
International bonds – 66.72%                  
International corporate bonds – 14.13%                  
Argentina – 2.95%                  
Banco de Galicia y Buenos Aires                  
5.000%, due 01/01/14††   $   4,340,000       3,873,450  
9.140%, due 01/01/10       1,750,000       1,763,125  
11.000%, due 01/01/19††       562,854       609,289  
             
 
                6,245,864  
             
 
Brazil – 0.70%                  
Barclays Bank PLC Inflation Credit-Linked Note,144A                  
0.000%, due 05/17/45   BRL   2,530,000       1,467,613  
             
 
Germany – 1.30%                  
Landwirtschaftliche Rentenbank                  
5.750%, due 01/21/15   AUD   3,705,000       2,756,037  
             
 
Malaysia – 6.19%                  
Johor Corp.                  
1.000%, due 07/31/09   MYR   6,600,000       1,972,290  
1.000%, due 07/31/12       38,240,000       11,115,675  
             
 
                13,087,965  
             
 
Mexico – 0.57%                  
PEMEX Project Funding Master Trust                  
8.625%, due 02/01/22   $   1,000,000       1,200,000  
             
 
Netherlands – 1.64%                  
Kazkommerts International BV,144A                  
8.000%, due 11/03/15   $   600,000       611,250  
TuranAlem Finance BV                  
7.750%, due 04/25/13,144A       770,000       771,925  
7.875%, due 06/02/10       770,000       789,250  
8.500%, due 02/10/15       1,250,000       1,287,500  
             
 
                3,459,925  
             
 
Philippines – 0.78%                  
National Power Corp.                  
0.000%, due 07/12/10@   $   1,270,000       949,325  
9.875%, due 03/16/10       650,000       704,438  
             
 
                1,653,763  
             
 
Total international corporate bonds (cost $28,720,845)               29,871,167  
             
 
Foreign government bonds – 50.12%                  
Argentina – 10.37%                  
Republic of Argentina                  
1.000%, due 05/01/20††   EUR   503,000       289,988  
2.000%, due 05/15/35††       5,060,000       3,014,418  
2.000%, due 05/15/35††   $   1,830,000       823,500  
3.000%, due 04/30/13       710,000       532,855  
5.589%, due 08/03/12(b)       13,300,000       9,310,000  
Republic of Argentina,DISC                  
5.830%, due 12/31/33   ARS   11,130,000       4,541,867  
Republic of Argentina,NGB                  
2.000%, due 02/04/18       7,750,000       3,417,134  
             
 
                21,929,762  
             
 

Strategic Global Income Fund, Inc.
Portfolio of investments – August 31, 2006 (unaudited)

      Face        
      amount   Value  
     
 
 
Austria – 1.15%                  
Republic of Austria,144A                  
3.800%, due 10/20/13   EUR   1,885,000     $ 2,430,547  
             
 
Belgium – 0.75%                  
Government of Belgium                  
5.750%, due 03/28/08   EUR   1,200,000       1,587,625  
             
 
Brazil – 2.44%                  
Brazil Real Credit-Linked Note,144A                  
12.374%, due 01/05/10   $   4,708,301       3,277,168  
18.870%, due 01/05/10   BRL   4,250,000       1,256,364  
Federal Republic of Brazil,EXIT Bond                  
6.000%, due 09/15/13   $   625,000       624,688  
             
 
                5,158,220  
             
 
Ecuador – 2.46%                  
Republic of Ecuador††                  
10.000%, due 08/15/30   $   5,230,000       5,203,850  
             
 
El Salvador – 1.08%                  
Republic of El Salvador                  
7.750%, due 01/24/23   $   560,000       618,800  
8.250%, due 04/10/32       1,480,000       1,657,600  
             
 
                2,276,400  
             
 
Finland – 1.79%                  
Government of Finland                  
5.000%, due 07/04/07   EUR   2,350,000       3,048,288  
5.750%, due 02/23/11       530,000       738,711  
             
 
                3,786,999  
             
 
France – 4.51%                  
French Treasury Note                  
3.500%, due 07/12/09   EUR   1,569,000       2,007,435  
Government of France                  
3.750%, due 04/25/21       1,940,000       2,436,145  
4.000%, due 04/25/13       410,000       535,462  
4.250%, due 04/25/19       385,000       512,612  
5.000%, due 10/25/16       1,015,000       1,433,226  
5.500%, due 04/25/07       2,020,000       2,620,393  
             
 
                9,545,273  
             
 
Germany – 10.11%                  
Bundesobligation                  
3.250%, due 04/17/09   EUR   4,100,000       5,214,281  
Deutsche Bundesrepublik                  
3.500%, due 10/10/08       3,150,000       4,036,034  
3.750%, due 01/04/15       660,000       846,807  
4.750%, due 07/04/34       315,000       451,595  
5.000%, due 07/04/12       1,665,000       2,281,343  
6.000%, due 01/04/07       5,735,000       7,408,996  
6.250%, due 01/04/24       360,000       592,395  
6.500%, due 07/04/27       315,000       543,697  
             
 
                21,375,148  
             
 
Hungary – 0.95%                  
Republic of Hungary                  
7.500%, due 11/12/20   HUF   435,000,000       2,012,312  
             
 
Indonesia – 1.19%                  
Indonesia Government Credit-Linked Note,144A                  
11.000%, due 10/15/14   IDR   3,650,000,000       390,197  
Republic of Indonesia,144A                  
6.750%, due 03/10/14   $   270,000       272,700  
7.500%, due 01/15/16       850,000       897,813  
8.500%, due 10/12/35       830,000       957,571  
             
 
                2,518,281  
             
 

Strategic Global Income Fund, Inc.
Portfolio of investments – August 31, 2006 (unaudited)

      Face        
      amount   Value  
     
 
 
Italy – 0.76%                  
Buoni Poliennali Del Tesoro                  
5.250%, due 08/01/11   EUR   1,170,000     $ 1,602,524  
             
 
Netherlands – 0.85%                  
Government of Netherlands                  
4.000%, due 01/15/37   EUR   650,000       827,801  
5.750%, due 02/15/07       755,000       977,000  
             
 
                1,804,801  
             
 
Poland – 1.49%                  
Republic of Poland                  
5.750%, due 06/24/08   PLN   9,560,000       3,150,125  
             
 
Qatar – 3.06%                  
State of Qatar                  
9.500%, due 05/21/09,144A   $   770,000       848,925  
9.750%, due 06/15/30       3,870,000       5,621,175  
             
 
                6,470,100  
             
 
Russia – 2.28%                  
Russian Federation                  
5.000%, due 03/31/30††   $   480,000       533,664  
5.000%, due 03/31/30,144A††       1,536,462       1,708,239  
Russian Gazprom Credit-Linked Note,144A                  
8.110%, due 01/18/07   RUB   24,400,000       919,309  
Russian Ruble Credit-Linked Note,144A                  
7.580%, due 10/09/07       43,800,000       1,660,877  
             
 
                4,822,089  
             
 
South Africa – 0.19%                  
Republic of South Africa                  
7.375%, due 04/25/12   $   370,000       398,212  
             
 
Tunisia – 0.70%                  
Banque Centrale de Tunisie                  
7.375%, due 04/25/12   $   1,370,000       1,471,037  
             
 
Turkey – 2.80%                  
Republic of Turkey                  
6.875%, due 03/17/36   $   70,000       64,838  
8.000%, due 02/14/34       930,000       973,012  
9.000%, due 06/30/11       770,000       845,075  
9.500%, due 01/18/11   EUR   950,000       1,416,452  
11.500%, due 01/23/12   $   750,000       908,438  
Republic of Turkey Credit-Linked Note                  
0.000%, due 02/11/10@,144A       1,800,000       1,402,290  
15.000%, due 02/10/10   TRY   500,000       317,471  
             
 
                5,927,576  
             
 
Ukraine – 0.69%                  
ING Bank NV Credit-Linked Note,144A                  
7.790%, due 02/16/11   RUB   39,300,000       1,468,939  
             
 
Venezuela – 0.50%                  
Republic of Venezuela                  
5.375%, due 08/07/10   $   1,080,000       1,051,380  
             
 
Total foreign government bonds               105,991,200  
             
 
Sovereign/supranational bonds – 2.47%                  
Eurofima                  
6.000%, due 01/28/14   AUD   3,720,000       2,819,682  
Inter-American Development Bank                  
8.000%, due 01/26/16   MXN   20,700,000       1,855,611  
International Bank for Reconstruction & Development                  
1.000%, due 02/20/13   AUD   1,000,000       552,640  
             
 
                5,227,933  
             
 
Total international bonds (cost $135,936,555)               141,090,300  
             
 
Total bonds (cost $181,586,517)               185,899,716  
             
 
                   

Strategic Global Income Fund, Inc.
Portfolio of investments – August 31, 2006 (unaudited)

      Number of        
      rights   Value  
     
 
 
Rights – 0.02%                  
Mexico – 0.02%                  
United Mexican States Value Recovery                  
Rights, Series E, expiration date 06/30/07(c) (cost $0)       1,615,000     $ 42,797  
             
 
                   
      Number of        
      warrants        
     
       
Warrants – 0.13%                  
Argentina – 0.13%                  
Republic of Argentina, expires 12/15/35(d) (cost $58,980)       10,000,000       277,755  
             
 
                   
      Face        
      amount        
     
       
Short-term investments – 10.72%                  
US government obligations – 0.04%                  
US Treasury Bills**                  
yield of 5.19%, due 01/04/07   $   100,000       98,324  
             
 
                   
      Shares        
     
       
Other – 10.68%***                  
UBS Supplementary Trust – U.S. Cash Management                  
Prime Fund, yield of 5.327%**       22,581,138       22,581,138  
             
 
Total short-term investments (cost $22,679,367)               22,679,462  
             
 
Investment of cash collateral                  
for securities loaned – 1.15%                  
Money market fund – 1.15%                  
UBS Private Money Market Fund LLC                  
(cost $2,430,804)       2,430,804       2,430,804  
             
 
Total investments# (cost $206,755,668) – 99.93%               211,330,534  
Cash and other assets, less liabilities – 0.07%               145,483  
             
 
Net assets – 100.00%             $ 211,476,017  
             
 

Notes to schedule of investments
Aggregate cost for federal income tax purposes, which was substantially the same for book purposes, was $206,755,668; and net unrealized appreciation consisted of:

  Gross unrealized appreciation   $ 8,320,858  
  Gross unrealized depreciation     (3,745,992 )
     
 
  Net unrealized appreciation   $ 4,574,866  
     
 
           
Note:   The Portfolio of investments is listed by the issuer’s country of origin.
  Floating rate securities - The interest rates shown are the current rates as of August 31, 2006.
††   Step Bonds - Coupon rate increases in increments to maturity. Rate disclosed is as of August 31, 2006. Maturity date disclosed is the ultimate maturity date.
@   Reflects annualized yield at August 31, 2006 on zero coupon bonds.
*   Perpetual bond security. The maturity date reflects the next call date.
**   Interest rate reflects yield at August 31, 2006.
***   Security is issued by a fund that is advised by the advisor of the Fund.
(a)   Security is illiquid. This security amounted to $69,592 or 0.03% of net assets.
(b)   Bond interest in default.
(c)   Rights do not currently accrue income. Quarterly income, if any, will vary based on several factors including oil exports, prices and inflation.
(d)   Security represents an equity claim linked to Argentina’s Gross Domestic Product.
(e)   Securities, or portion thereof, were on loan at August 31, 2006.
144A   Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered liquid and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At August 31, 2006, the value of these securities amounted to $26,967,204 or 12.75% of net assets.
IO   Interest Only - This security entitles the holder to receive interest from an underlying pool of mortgages. The risk associated with this security is related to the speed of the principal paydowns. High prepayments would result in a smaller amount of interest being received and cause the yield to decrease. Low prepayments would result in a greater amount of interest being received and cause the yield to increase.

Strategic Global Income Fund, Inc.
Portfolio of investments – August 31, 2006 (unaudited)

#   Strategic Global Income Fund, Inc. (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 available prior to valuation. Securities which are listed on US and foreign stock exchanges normally are valued at the last sale price on the day the securities are valued or, lacking any sales on such day, at the last available bid price. In cases where securities are traded on more than one exchange, the securities are valued on the exchange designated as the primary market by UBS Global Asset Management (Americas) Inc. (“UBS Global AM”), the investment advisor 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 and Basel, 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”).
     
    Various factors may be reviewed in order to make a good faith determination of a security’s fair value. These factors include, but are not limited to, fundamental analytical data relating to the investment; the nature and duration of restrictions on disposition of the securities; and the evaluation of forces which influence the market in which the securities are purchased and sold. All investments quoted in foreign currencies will be valued weekly in US Dollars on the basis of the foreign currency exchange rates determined as of the close of regular trading on the NYSE. Occasionally, events affecting the value of the foreign investments and such exchange rates occured 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 occured during such time periods, the securities were valued at their fair value as determined in good faith by or under the direction of the Board. The amortized cost method of valuation, which approximates market value, generally is used to value short-term debt instruments with sixty days or less remaining to maturity, unless the Board determines that this does not represent fair value.
ARS   Argentina Peso
AUD   Australian Dollar
BRL   Brazilian Real
DISC   Discount Bond
EUR   Euro Dollar
EXIT Bond   A long-term bond with a low interest rate, often issued by a less developed country, that gives the buyer the right of exemption from taking part in any subsequent rescheduling.
HUF   Hungarian Forint
IDR   Indonesian Rupiah
MXN   Mexican Peso
MYR   Malaysian Ringgit
NGB   National Guaranteed Bonds
PLN   Polish Zloty
RUB   Russian Ruble
TRY   New Turkish Lira

Strategic Global Income Fund, Inc.
Portfolio of investments – August 31, 2006 (unaudited)

Forward foreign currency contracts
Strategic Global Income Fund, Inc had the following open forward foreign currency contracts as of August 31, 2006:

                    Unrealized
  Contracts to   In   Maturity     appreciation/
  deliver   exchange for   dates     (depreciation)
 
Australian Dollar 8,295,000   USD   6,333,233   11/27/06     $ 10,009  
Brazilian Real 10,900,000   USD   4,887,892   10/13/06       (150,113 )
British Pound 8,970,000   USD   17,011,497   11/27/06       (86,998 )
Canadian Dollar 19,250,000   USD   17,291,558   11/27/06       (168,234 )
Czech Koruna 189,280,000   EUR   6,670,191   11/27/06       (58,181 )
Euro Dollar 6,514,717   JPY   939,800,000   11/27/06       (288,067 )
Euro Dollar 11,800,000   USD   15,239,348   11/27/06       48,501  
Euro Dollar 2,580,000   USD   3,300,957   11/27/06       (20,432 )
Mexican Peso 20,000,000   USD   1,825,580   10/13/06       (3,848 )
New Turkish Lira 4,136,447   USD   2,474,248   04/27/07       (128,671 )
Swedish Krona 7,990,000   USD   1,124,261   11/27/06       14,829  
Swiss Franc 1,335,000   USD   1,100,759   11/27/06       6,824  
Thai Baht 350,000,000   USD   9,275,209   11/27/06       (28,642 )
Ukraine Hryvnia 2,070,000   USD   366,372   05/18/09       (16,373 )
United States Dollar 2,082,369   BRL   4,500,000   10/13/06       (2,459 )
United States Dollar 18,387,064   CHF   21,810,000   11/27/06       (515,360 )
United States Dollar 18,442,564   JPY   1,993,300,000   11/27/06       (1,265,317 )
United States Dollar 1,856,665   MXN   20,000,000   10/13/06       (27,237 )
United States Dollar 19,915,631   SEK   143,520,000   11/27/06       12,485  
United States Dollar 8,992,322   SGD   14,055,000   11/27/06       (24,591 )
United States Dollar 9,171,908   THB   350,000,000   11/27/06       131,943  
United States Dollar 2,693,876   TRY   4,136,447   04/27/07       (90,958 )
United States Dollar 372,973   UAH   2,070,000   05/18/09       9,772  
                   
 
Total net unrealized depreciation on forward foreign currency contracts   $ (2,641,118 )
                   
 
                         
Currency type abbreviations:
BRL   Brazilian Real
CHF   Swiss Franc
EUR   Euro Dollar
JPY   Japanese Yen
MXN   Mexican Peso
SEK   Swedish Krona
SGD   Singapore Dollar
THB   Thailand Baht
TRY   New Turkish Lira
UAH   Ukraine Hryvnia
USD   United States Dollar

1) Transactions with related entities

The Fund invests in shares of UBS Supplementary Trust — U.S. Cash Management Prime Fund (“Supplementary Trust”). Supplementary Trust is a business trust managed by UBS Global Asset Management (Americas) Inc., an affiliate of UBS Global AM and is offered as a cash management option only to mutual funds and certain other accounts. Distributions from Supplementary Trust are reflected as interest income. Amounts relating to those investments at August 31, 2006 and for the period ended are summarized as follows:

        Sale   Interest              
Fund   Purchases   proceeds   income   Value   % of Net assets

UBS Supplementary Trust–U.S. Cash Management Prime Fund   $82,746,409   $77,522,011   $654,954   $22,581,138     10.68 %  

The Fund also invests in shares of UBS Private Money Market Fund LLC (“Private Money Market Fund”). Private Money Market Fund is a money market fund managed by UBS Global Asset Management (Americas) Inc., an affiliate of UBS Global AM and is offered as a cash management option only to mutual funds and certain other accounts. The Fund invests in Private Money Market Fund as a short term investment of cash collateral on securities loaned. Amounts relating to those investments at August 31, 2006 and for the period ended are summarized as follows:

        Sale   Interest              
Fund   Purchases   proceeds   income   Value   % of Net assets

UBS Private Money Market Fund LLC   $5,653,632   $3,222,828   $610   $2,430,804     1.15 %  

Strategic Global Income Fund, Inc.
Portfolio of investments – August 31, 2006 (unaudited)

2) Swap agreements

Total return swaps
Total return swap agreements involve commitments to pay interest in exchange for a market-linked return based on a notional amount. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the offsetting interest rate obligation, the Fund will receive a payment from or make a payment to the counterparty, respectively. Total return swaps are marked-to-market daily, and the change, if any, is recorded as unrealized appreciation or depreciation. Periodic payments received or made at the end of each measurement period, but prior to termination, are recorded as realized gains or losses.

At August 31, 2006, the Fund had outstanding total return swap contracts with the following terms:

                Payments   Payments          
Notional   Termination   made by the   received by the   Unrealized
amount   dates   Fund   Fund   appreciation

RUB   24,400,000     10/09/07       $917,001 ^     7.58%#       $ 65,088  

USD   1,600,000     09/20/16       1.90 %     5.46%*          

                                  $ 65,088  
 

^   Payment made on 09/27/05 to fully fund the swap.
#   Rate is equal to total return on OAO Gazprom 7.58% bond, due 10/09/07.
*   Rate based on 6 month LIBOR (USD - BBA)
BBA   British Banking Association

Currency type abbreviations:
RUB   Russian Ruble
USD   United States Dollar
     

Credit default swaps
Credit default swap agreements involve commitments to pay interest and principal in the event of a default of a security. As a buyer, the Fund makes periodic payments to the counterparty and the Fund would receive payments only in the event of default. Credit default swaps are marked-to-market daily, and the change, if any, is recorded as unrealized appreciation or depreciation. Periodic payments received or made at the end of each measurement period, but prior to termination, are recorded as realized gains or losses. If no credit event occurs, the Fund will lose its periodic stream of payments over the term of the contract. However, if a credit event occurs, the Fund typically receives full notional value for a reference obligation that may have little or no value. Credit default swaps may involve greater risks than if the Fund had invested in the reference obligation directly. Credit default swaps are subject to general market risk, liquidity risk and credit risk.

At August 31, 2006, the Fund had outstanding credit default swap contracts with the following terms:

                Payments   Payments   Unrealized
Notional   Termination   made by the   received by the   appreciation/
amount   dates   Fund   Fund   (depreciation)

USD   3,990,000     06/20/08       1.43%         0.00%*       $ (54,217 )

USD   2,110,000     06/20/16       3.06%          0.00%**         57,433  

                                  $ 3,216  
 

     
*   Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the Argentine Republic bond 8.28% due 12/31/33
**   Payment from the counterparty will be received upon the occurrence of bankruptcy and/or restructuring event with respect to the Republic of Turkey bond 11.875% due 01/15/30
     

Currency type abbreviation:
USD   United States Dollar

Securities lending
The Fund may lend securities up to 33 1/3% of its total assets to qualified broker-dealers or institutional investors. The loans are secured at all times by cash, cash equivalents or US government securities in an amount at least equal to the market value of the securities loaned, plus accrued interest and dividends, determined on a daily basis and adjusted accordingly. The Fund will regain ownership of loaned securities to exercise certain beneficial rights; however, the Fund may bear the risk of delay in recovery of, or even loss of rights in, the securities loaned should the borrower fail financially. The Fund receives compensation for lending its securities from interest or dividends earned on the cash, cash equivalents or US government securities held as collateral, net of fee rebates paid to the borrower plus reasonable administrative and custody fees. UBS Financial Services, Inc., 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. UBS Securities LLC is the Fund’s lending agent. For the nine months ended August 31, 2006, UBS Securities LLC earned $203 in compensation as the Fund’s lending agent. At August 31, 2006, the Fund owed UBS Securities LLC $50 in compensation as the Fund’s lending agent. The value of loaned securities and related collateral outstanding at August 31, 2006, were as follows:

              Market value of  
  Market value of     Collateral received     investments of cash  
  securities loaned     for securities loaned     collateral received  
 
   
   
 
  $2,422,460     $2,430,804     $2,430,804  

Strategic Global Income Fund, Inc.
Portfolio of investments – August 31, 2006 (unaudited)

Industry diversification      
As a percent of net assets      
As of August 31, 2006 (unaudited)      

Bonds      
US bonds      
US corporate bonds      
Beverages   0.47 %
Commercial banks   1.03  
Consumer finance   2.88  
Diversified financial services   1.97  
Food products   0.47  
Household durables   0.90  
Media   0.49  
Thrifts & mortgage finance   0.46  
   
 

Total US corporate bonds

  8.67  
Asset-backed securities   4.32  
Commercial mortgage-backed securities   2.63  
Mortgage-backed securities   2.29  
US government obligations   3.28  
   
 

Total US bonds

  21.19  
International bonds      
International corporate bonds      
Commercial banks   6.59  
Diversified financial services   6.19  
Electric utilities   0.78  
Oil & gas   0.57  
   
 

Total international corporate bonds

  14.13  
Foreign government bonds   50.12  
Sovereign/supranational bonds   2.47  
   
 
Total international bonds   66.72  

Total bonds

  87.91  
Rights   0.02  
Warrants   0.13  
Short-term investments   10.72  
Investment of cash collateral for securities loaned   1.15  
   
 
Total investments   99.93  
Cash and other assets, less liabilities   0.07  
   
 
Net assets   100.00 %
   
 

For more information regarding the Fund’s other significant accounting policies, please refer to the Fund’s semiannual report to shareholders dated May 31, 2006.


Item 2. 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 (“Investment Company Act”)) are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this document.
     
(b)  
The registrant’s principal executive officer and principal financial officer are aware of no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act) that occurred during the registrant’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

Item 3. Exhibits.

(a)  
Certifications of principal executive officer and principal financial officer of registrant pursuant to Rule 30a-2(a) under the Investment Company Act is attached hereto as Exhibit EX-99.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/ Kai Sotorp
   
    Kai Sotorp
    President
     
Date:   October 30, 2006
   

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By:   /s/ Kai Sotorp
   
    Kai Sotorp
    President
     
Date:   October 30, 2006
   
     
By:   /s/ Thomas Disbrow
   
    Thomas Disbrow
    Vice President and Treasurer
     
Date:   October 30, 2006