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UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT
OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-06475
Strategic Global Income Fund, Inc.
Mark F. Kemper, Esq.
UBS Global Asset Management
51 West 52nd Street
New York, NY 10019-6114
(Name and address of agent for service)
Copy to:
Jack W. Murphy, Esq.
Dechert LLP
1775 I Street, N.W.
Washington,
DC 20006-2401
Registrants telephone number, including area code: 212-882 5000
Date of fiscal year end: November 30
Date of reporting period: November 30, 2008
Item 1. Reports to Stockholders.
Strategic Global Income Fund, Inc.
January 15, 2009
Dear shareholder,
We present you with the annual report for Strategic Global Income Fund, Inc. (the Fund) for the 12 months ended November 30, 2008. Performance Over the 12 months ended November 30, 2008, the Fund declined 10.52% on a net asset value basis, compared with the median net asset value decline of 22.81% for the Funds peer group, the Lipper Global Income Funds, and the decline of 3.70% for the Funds benchmark, the Strategic Global Benchmark(1) (the Benchmark). On a market price basis, the Fund declined 20.13% over the 12-month period, compared with its Lipper peer groups median market price decline of 27.49% over the same time period. (For more on performance, please refer to Performance at a glance on page 7.) |
Strategic Global Income Fund, Inc. Investment goals: Primarily, high level of current income; secondarily, capital appreciation Portfolio management: Portfolio management team, including Uwe Schillhorn UBS Global Asset Management (Americas) Inc. Commencement: February 3, 1992 NYSE symbol: SGL Distribution payments: Monthly |
The Funds exposure to local markets
benefited performance during the period. However, this was more than offset by an
overweight to Argentine debt, where political unrest weighed significantly on performance.
In addition, an overweight position in Russian debt, which performed poorly following
a drop in commodity prices, hurt Fund performance during the reporting period.
The Fund did not use leverage, which helped it to outperform many of its peers during
the reporting period. The Fund did not have preferred stock outstanding, or borrow
from banks for investment purposes as some of its peers may have done. Leverage
magnifies returns on both the upside and on the downside, and creates a wider range
of returns within the Funds peer group.
(1) | An unmanaged index compiled by the advisor, constructed as follows: 67% Citigroup World Government Bond Index (WGBI)SM and 33% JPMorgan Emerging Markets Bond Index Global (EMBI Global). Investors should note that indices do not reflect fees and expenses. |
Strategic Global Income Fund, Inc.
The Fund traded at a discount to its net
asset value (NAV) per share during the entire reporting period, as did
many of its peers. We believe this was due, in part, to investors aversion
to risk, given the escalating issues and uncertainty surrounding the financial markets
and the global economy.
A fund trades at a premium when the market price at which
its shares trade is more than its NAV. Alternatively, a fund trades at a discount
when the market price at which its shares trade is less than its NAV. The market
price is the price the market is willing to pay for shares of a fund at a given
time, and may be influenced by a range of factors, including supply and demand and
market conditions. NAV per share is determined by dividing the value of the Funds securities, cash and other assets, less all liabilities, by the total number
of common shares outstanding.
An interview with Portfolio Manager Uwe Schillhorn | ||
Q. | How would you describe the global economic environment during the reporting period? | |
A. | In the US and abroad, economic growth weakened during the 12-month reporting period. In the US, gross domestic product (GDP) grew a surprising 0.9% during the first quarter of 2008. The US Commerce Department then reported that second quarter 2008 GDP growth accelerated to 2.8%. This relatively strong showing was due in part to rising exports and the declining dollar, making US goods more attractive overseas. Economic growth then significantly weakened in the third quarter of 2008. Given a sharp decline in personal spending, intensification of the credit crunch and ongoing housing market weakness, third quarter GDP growth was -0.5%. | |
After the reporting period ended, the National Bureau of Economic Research (NBER) proclaimed that a recession began back in December 2007. The NBER defines a recession as being a significant decline in economic activity, lasting more than a few months, normally visible in production, employment, real income and other indicators. | ||
Overseas, the Eurozone and Japan, having both experienced two consecutive quarters of negative GDP growth, are said to have entered a recession. This marks the first recession in the Eurozone since the advent of the euro currency in 1999. The ongoing credit crunch, tepid consumer spending and rising unemployment have negatively impacted the region. Japans economy has been adversely affected by weakening export trade, triggered by the slowdown in overseas economies and the appreciation of the yen. |
Strategic Global Income Fund, Inc.
Throughout the reporting period, emerging markets countries generally posted superior growth rates versus their developed country counterparts. However, the prospect for slowing export growth and sharply falling commodity prices in the second half of the reporting period has cast a shadow over their economic prospects. | ||
Q. | How did the worlds bond markets perform over the reporting period? | |
A. | While the US bond market as a whole rose during the reporting period, this was largely driven by the rising price of Treasury securities. During the reporting period, investor risk aversion increased due to the ongoing credit crisis and turmoil in the financial markets. This resulted in several flights to quality, causing Treasury yields to move lower (and their prices higher). In contrast, riskier sectors in the US fixed income market performed poorly. Toward the end of the period, the yield available from short-term Treasuries fell to zero, as investors were willing to forgo any income in order to invest in government-backed securities. | |
The US Federal Reserve Board (the Fed) reduced short term interest rates on seven occasions during the reporting period, bringing them from 4.50% to 1.00%. In December 2008, after the reporting period ended, the Fed cut rates again to a range of zero to 0.25%. Central banks in other countries reduced interest rates as well and indicated that further cuts may be necessary given sharply weaker economic conditions. | ||
During approximately the first nine months of the reporting period, the emerging markets debt asset class performed relatively well versus non-US Treasury fixed income securities. During this time, emerging markets debt spreadsthe difference between the yields paid on US Treasury bonds and emerging markets debtwidened. However, they did so less than other spread (non-Treasury) sectors. Commodity-rich emerging markets debt countries enjoyed good economic conditions during this time as demand remained solid and commodity prices remained high. | ||
However, emerging markets debts relative outperformance was more than erased in September and October 2008. Fallout from financial troubles in the US and elsewhere, frozen credit markets, massive deleveraging and forced selling, coupled with recession expectations and plunging commodity prices, triggered a sharp increase in risk aversion. As a result, emerging markets debt prices fell sharply in September and October 2008. |
Strategic Global Income Fund, Inc.
Q. | How did you position the portfolio from a duration standpoint? | |
A. | We kept the Funds durationwhich measures its sensitivity to interest rate changelower than that of its benchmark throughout most of the reporting period. While this positioning was beneficial during much of this time, it detracted from performance toward the end of the period when interest rates fell sharply given the flight to quality. | |
Q. | Which currency strategies did you use during the period? | |
A. | We reduced the Funds longstanding position in carry trades and pared down its exposure to higher-yielding domestic markets. In a carry trade strategy, an investor sells a currency with a lower interest rate, and uses those funds to purchase a different currency yielding a higher interest rate. | |
The Fund continued to have an overweight position in local markets markets in which debt is denominated in local currency rather than in US dollarsas they generally offered higher yields than US dollar-denominated bonds. However, we pared down the Funds overweight position toward the end of the reporting period as the overall bond market sold off and local currencies were adversely affected. This was especially true in September and October 2008, when the US dollar appreciated during the flight to quality. Reducing our local market exposure also served to bring down the Funds risk exposure, benefiting performance. | ||
Q. | Which holdings or strategies generated strong results over the period? | |
A. | Overall, the Funds local market exposure benefited performance, especially during the first half of the reporting period. During that time, holdings in the Malaysian ringgit, Turkish lira and Russian ruble enhanced the Funds performance, as did an exposure to the euro. | |
Q. | Were there any particular strategies that didnt work well for the Fund? | |
A. | The Funds overweight position in Argentina detracted from performance during the 12-month reporting period. The governments inability to successfully negotiate with striking farmers negatively impacted the countrys export revenues. In a worst-case scenario that we did not believe was likely to unfold, continued political unrest, economic concerns and increased risk aversion dragged down both Argentinas US dollar-denominated and local currency debt. Given these issues, we believe that Argentinas debt is now trading at levels that suggest an increased likelihood of default and reduced the Funds position |
Strategic Global Income Fund, Inc.
accordingly. We continued to reduce the Funds position in Argentina after the reporting period had ended. | ||
While the Funds exposure to the Russian ruble contributed to performance during the first half of the reporting period, it later detracted from results. While initially supported by record high oil prices, Russias financial system became strained as oil prices fell due to slower global economic growth. As we increased the Funds exposure to Russia via quasi-sovereign bonds, the spreads of non-sovereign debt widened significantly, indicating increased levels of investor risk aversion. Despite the deteriorating financial situation of non-sovereign issuers, we do not believe that Russia is in jeopardy of default given the countrys financial surplus versus its outstanding debt. | ||
Q. | How was the Fund positioned at the end of the reporting period? | |
A. | Throughout the reporting period, we focused our investments in local markets in countries with balance surpluses, as opposed to countries with deficits. During the period as a whole, the Fund was conservatively positioned with regard to its risk exposure. However, given the extreme market sell-off in September and October, we took advantage of what we viewed to be attractive prices, selectively adding certain asset-backed and mortgage-backed securities to the Funds portfolio. To take advantage of attractive market opportunities and to diversify the Fund, we also purchased collateralized loan obligations (CLOs) and collateralized debt obligations (CDOs) during the reporting period. | |
Q. | What is your outlook on the global economy and fixed income markets? | |
A. | In our view, a decoupling of emerging and developed markets economies is highly unlikely. Rapidly weakening economies in the US, Europe, Japan and other developed countries are clearly having a negative impact on emerging markets countries. For example, slower growth in developed countries has driven oil and other commodity prices substantially lower. This, in turn, has hurt emerging markets commodity exporters, negatively impacting their current account surpluses. We also expect to see continued volatility in the emerging markets debt asset class, given further deleveraging, investor risk aversion and uncertainties regarding the length and depth of the global economic recession. | |
On the upside, commodity prices have fallen to levels not seen since 2005. We believe much of the negative economic news is already priced into commodity valuations and that another significant sell-off in commodity prices seems unlikely. In addition, given several years of |
Strategic Global Income Fund, Inc.
current account surpluses and improved domestic spending, we believe that emerging markets countries, overall, could be better positioned to withstand the current economic environment than they were during previous recessionary periods. | ||
We continue to favor local markets versus US dollar-denominated investments. With inflation expectations diminished by the decline in commodity prices, we believe central banks will have greater flexibility in terms of lowering interest rates. We have already seen this take place and expect this trend to continue given the global recession. |
Strategic Global Income Fund, Inc.
Performance at a glance (unaudited)
Average annual total returns for periods ended 11/30/08 | |||||||||
Net asset value returns | 1 year | 5 years | 10 years | ||||||
Strategic Global Income Fund, Inc. | (10.52 | )% | 3.56 | % | 6.25 | % | |||
Lipper Global Income Funds median | (22.81 | ) | 1.05 | 5.39 | |||||
Market price returns | |||||||||
Strategic Global Income Fund, Inc. | (20.13 | )% | (3.29 | )% | 5.63 | % | |||
Lipper Global Income Funds median | (27.49 | ) | (3.03 | ) | 6.13 | ||||
Index returns | |||||||||
Strategic Global Benchmark(1) | (3.70 | )% | 5.14 | % | 6.75 | % | |||
Citigroup World Government Bond Index (WGBI)SM(2) | 3.00 | % | 5.43 | % | 5.38 | % | |||
Past performance does not predict future performance. The return and value of an investment will fluctuate so that an investors shares, when sold, may be worth more or less than their original cost. The Funds net asset value (NAV) returns assume, for illustration only, that dividends and other distributions, if any, were reinvested at the NAV on the payable dates. The Funds market price returns assume that all dividends and other distributions, if any, were reinvested at prices obtained under the Funds Dividend Reinvestment Plan. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends and other distributions, if any, or the sale of Fund shares.
(1) | The Strategic Global Benchmark is an unmanaged index compiled by the advisor, constructed as follows: 67% Citigroup World Government Bond Index (WGBI)SM and 33% JPMorgan Emerging Markets Bond Index Global (EMBI Global). Investors should note that indices do not reflect fees and expenses. | |
(2) | The Citigroup World Government Bond Index (WGBI)SM is a market capitalization-weighted index composed of straight (i.e., not floating rate or index-linked) government bonds with a one-year minimum maturity. The average maturity is seven years. The Index includes the 23 government bond markets of Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Malaysia, the Netherlands, Norway, Poland, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom, and the United States. Investors should note that indices do not reflect fees and expenses. | |
Lipper peer group data calculated by Lipper Inc.; used with permission. The Lipper median is the return of the fund that places in the middle of the peer group. |
Strategic Global Income Fund, Inc.
Portfolio statistics (unaudited)
Characteristics* | 11/30/08 | 05/31/08 | 11/30/07 | ||||||
Net assets (mm) | $170.5 | $207.8 | $208.1 | ||||||
Weighted average maturity | 6.76 yrs | 4.89 yrs | 4.94 yrs | ||||||
Modified duration | 4.2% | 2.9% | 3.1% | ||||||
Currency exposure** | 11/30/08 | 05/31/08 | 11/30/07 | ||||||
US dollar denominated | 52.8 | % | 44.9 | % | 44.9 | % | |||
Non US dollar denominated | 47.2 | 55.1 | 55.1 | ||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | |||
Credit quality** | 11/30/08 | 05/31/08 | 11/30/07 | ||||||
AAA | 41.2 | % | 29.6 | % | 37.8 | % | |||
AA | 9.3 | 3.6 | 4.0 | ||||||
A | 12.7 | 10.1 | 6.1 | ||||||
BBB | 4.2 | 3.2 | 9.2 | ||||||
BB | 3.9 | 3.5 | 4.2 | ||||||
B | 3.1 | 8.2 | 8.9 | ||||||
CCC | 1.7 | 0.4 | 0.2 | ||||||
D | 0.1 | 0.6 | 0.7 | ||||||
Non-rated | 12.7 | 21.8 | 17.3 | ||||||
Equity/preferred | 0.7 | 1.2 | 1.4 | ||||||
Cash equivalents | 8.4 | 12.5 | 11.4 | ||||||
Other assets, less liabilities | 2.0 | 5.3 | (1.2 | ) | |||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | |||
* | Characteristics will vary over time. | |
** | Weightings represent percentages of net assets as of the dates indicated. The Funds portfolio is actively managed and its composition will vary over time. Credit quality ratings shown are based on those assigned by Standard & Poors, a division of the McGraw-Hill Companies, Inc. (S&P), to individual portfolio holdings. S&P is an independent ratings agency. | |
| Modified duration is the change in price, expressed as a percentage, expected in response to each 1% change in yield of the portfolios holdings. |
Strategic Global Income Fund, Inc.
Portfolio statistics (unaudited) (concluded)
Top 10 countries/ | |||||||||||||
supranationals | |||||||||||||
(other than short-term | |||||||||||||
investments)*** | 11/30/08 | 05/31/08 | 11/30/07 | ||||||||||
United States | 30.5 | % | United States | 18.4 | % | United States | 23.3 | % | |||||
Italy | 10.0 | Argentina | 10.5 | Germany | 15.0 | ||||||||
Malaysia | 7.7 | Malaysia | 8.0 | Argentina | 9.9 | ||||||||
Cayman Islands | 6.5 | Germany | 7.2 | Malaysia | 7.5 | ||||||||
Sovereign/ | |||||||||||||
Germany | 4.8 | Italy | 6.3 | supranational | 4.9 | ||||||||
Sovereign/ | |||||||||||||
Spain | 4.8 | supranational | 4.7 | Russia | 3.8 | ||||||||
France | 4.6 | Russia | 3.9 | Egypt | 3.6 | ||||||||
Argentina | 4.2 | Spain | 3.9 | Italy | 2.7 | ||||||||
Russia | 3.4 | France | 2.9 | France | 2.7 | ||||||||
Sovereign/ | |||||||||||||
supranational | 2.1 | Poland | 2.1 | Turkey | 2.2 | ||||||||
Total | 78.6 | % | 67.9 | % | 75.6 | % | |||||||
*** | Weightings represent percentages of net assets as of the dates indicated. The Funds portfolio is actively managed and its composition will vary over time. |
Strategic Global Income Fund, Inc.
Industry diversification | |||
As a percentage of net assets | |||
As of November 30, 2008 (unaudited) | |||
Bonds | |||
Corporate bonds | |||
Agriculture | 0.23 | % | |
Beverages | 0.55 | ||
Commercial banks | 6.88 | ||
Consumer finance | 0.03 | ||
Diversified financial services | 5.59 | ||
Diversified telecommunication services | 0.12 | ||
Electric utilities | 1.52 | ||
Household durables | 0.70 | ||
Oil, gas & consumable fuels | 0.24 | ||
Pharmaceuticals | 0.91 | ||
Pipelines | 0.27 | ||
Real estate investment trusts (REITs) | 7.72 | ||
Telecommunications | 0.72 | ||
Wireless telecommunication services | 0.34 | ||
Total corporate bonds | 25.82 | ||
Asset-backed securities | 5.74 | ||
Collateralized debt obligations | 6.46 | ||
Commercial mortgage-backed securities | 1.18 | ||
Mortgage & agency debt securities | 5.48 | ||
Stripped mortgage-backed security | 0.00 | (1) | |
US government obligations | 10.58 | ||
Non USgovernment obligations | 30.91 | ||
Sovereign/supranational bonds | 2.06 | ||
Credit-linked notes | 0.68 | ||
Total bonds | 88.91 | ||
Short-term investments | 8.36 | ||
Options purchased | 0.71 | ||
Total investments | 97.98 | ||
Cash and other assets, less liabilities | 2.02 | ||
Net assets | 100.00 | % | |
(1) Amount represents less than 0.005%. |
Strategic Global Income Fund, Inc.
Portfolio of investmentsNovember 30, 2008
Face | ||||||
Security description | amount | Value | ||||
Bonds88.91% | ||||||
Corporate bonds25.82% | ||||||
France1.58% | ||||||
Compagnie de Financement Foncier, | ||||||
4.000%, due 07/21/11 |
EUR | 2,110,000 | $ | 2,692,360 | ||
Germany2.35% | ||||||
DEPFA Deutsche Pfandbriefbank AG, | ||||||
5.500%, due 01/15/10 |
1,000,000 | 1,276,498 | ||||
Hypothekenbank in Essen AG, | ||||||
3.750%, due 09/28/12 |
2,140,000 | 2,736,437 | ||||
Total Germany corporate bonds | 4,012,935 | |||||
Ireland0.34% | ||||||
GE Capital European Funding, | ||||||
4.625%, due 08/23/10 |
460,000 | 570,665 | ||||
Italy0.33% | ||||||
Intesa Sanpaolo SpA, | ||||||
6.375%, due 04/06/10 |
440,000 | 567,321 | ||||
Malaysia7.72% | ||||||
Johor Corp., | ||||||
1.000%, due 07/31/09(1) |
MYR | 6,600,000 | 2,185,732 | |||
1.000%, due 07/31/12(1) |
38,240,000 | 10,975,466 | ||||
Total Malaysia corporate bonds | 13,161,198 | |||||
Netherlands1.17% | ||||||
E.ON International Finance BV, | ||||||
5.125%, due 10/02/12 |
EUR | 450,000 | 582,362 | |||
Rabobank Nederland NV, | ||||||
4.125%, due 04/04/12 |
1,110,000 | 1,419,809 | ||||
Total Netherlands corporate bonds | 2,002,171 | |||||
Russia2.06% | ||||||
Dali Capital PLC for Bank of Moscow, | ||||||
7.250%, due 11/25/09 |
RUB | 115,000,000 | 2,517,638 | |||
VTB Capital SA, | ||||||
6.250%, due 06/30/35 |
$ | 2,000,000 | 980,000 | |||
Total Russia corporate bonds | 3,497,638 | |||||
Strategic Global Income Fund, Inc.
Portfolio of investmentsNovember 30, 2008
Face | ||||||
Security description | amount | Value | ||||
Bonds(continued) | ||||||
Corporate bonds(continued) | ||||||
United Arab Emirates0.99% | ||||||
Abu Dhabi National Energy Co., | ||||||
6.500%, due 10/27/36 |
$ | 1,500,000 | $ | 996,000 | ||
7.250%, due 08/01/18(2) |
850,000 | 690,200 | ||||
Total United Arab Emirates corporate bonds | 1,686,200 | |||||
United Kingdom1.80% | ||||||
AstraZeneca PLC, | ||||||
5.400%, due 09/15/12 |
1,500,000 | 1,552,071 | ||||
Diageo Capital PLC, | ||||||
7.375%, due 01/15/14 |
300,000 | 312,608 | ||||
SABMiller PLC, | ||||||
6.500%, due 07/01/16(2) |
700,000 | 621,195 | ||||
Vodafone Group PLC, | ||||||
3.625%, due 11/29/12 |
EUR | 500,000 | 581,660 | |||
Total United Kingdom corporate bonds | 3,067,534 | |||||
United States7.48% | ||||||
Altria Group, Inc., | ||||||
9.700%, due 11/10/18 |
$ | 390,000 | 394,648 | |||
AT&T, Inc., | ||||||
6.500%, due 09/01/37 |
250,000 | 205,545 | ||||
Bank One Corp., | ||||||
7.875%, due 08/01/10 |
2,000,000 | 2,056,692 | ||||
Bear Stearns Cos, Inc., | ||||||
2.356%, due 05/18/10(3) |
1,000,000 | 955,155 | ||||
Citigroup, Inc., | ||||||
5.125%, due 02/14/11 |
2,000,000 | 1,897,800 | ||||
Fortune Brands, Inc., | ||||||
5.375%, due 01/15/16 |
1,475,000 | 1,191,380 | ||||
General Electric Capital Corp., | ||||||
5.875%, due 01/14/38 |
2,000,000 | 1,637,344 | ||||
GMAC LLC, | ||||||
6.875%, due 09/15/11 |
130,000 | 49,954 | ||||
HSBC Finance Corp., | ||||||
6.750%, due 05/15/11 |
2,000,000 | 1,945,530 | ||||
NGPL Pipeco LLC, | ||||||
6.514%, due 12/15/12(2) |
500,000 | 465,825 | ||||
Strategic Global Income Fund, Inc.
Portfolio of investmentsNovember 30, 2008
Face | ||||||
Security description | amount | Value | ||||
Bonds(continued) | ||||||
Corporate bonds(concluded) | ||||||
United States(concluded) | ||||||
Sempra Energy, | ||||||
8.900%, due 11/15/13 |
$ | 300,000 | $ | 297,600 | ||
Sprint Capital Corp., | ||||||
7.625%, due 01/30/11 |
1,000,000 | 720,000 | ||||
Valero Energy Corp., | ||||||
6.625%, due 06/15/37 |
125,000 | 93,680 | ||||
Verizon Communications, Inc., | ||||||
8.950%, due 03/01/39 |
500,000 | 512,993 | ||||
Virginia Electric and Power Co., | ||||||
8.875%, due 11/15/38 |
300,000 | 325,910 | ||||
Washington Mutual Preferred Funding LLC, | ||||||
9.750%, due 12/15/17(2),(3),(4), |
1,000,000 | 100 | ||||
Total United States corporate bonds | 12,750,156 | |||||
Total corporate bonds (cost$49,408,179) | 44,008,178 | |||||
Asset-backed securities5.74% | ||||||
United States5.74% | ||||||
ACE Securities Corp., | ||||||
Series 2006-NC1, Class A2B, |
||||||
1.545%, due 12/25/35(3) |
532,345 | 506,519 | ||||
Argent Securities, Inc., | ||||||
Series 2006-M3, Class A2A, |
||||||
1.445%, due 10/25/36(3) |
48,299 | 46,641 | ||||
Bear Stearns Asset Backed Securities Trust, | ||||||
Series 2006-SD2, Class A2, |
||||||
1.595%, due 06/25/36(3) |
1,547,106 | 1,311,498 | ||||
Citibank Credit Card Issuance Trust, | ||||||
Series 2002-A8, Class A8, |
||||||
2.146%, due 11/07/11(3) |
2,000,000 | 1,902,743 | ||||
Countrywide Asset-Backed Certificates, | ||||||
Series 2005-7, Class 3AV3, |
||||||
1.805%, due 11/25/35(3) |
286,052 | 274,511 | ||||
First Franklin Mortgage Loan Asset-Backed Certificates, | ||||||
Series 2006-FFB, Class A2, |
||||||
1.525%, due 12/25/26(3) |
435,712 | 130,714 | ||||
GSAMP Trust, | ||||||
Series 2006-HE7, Class A2A, |
||||||
1.435%, due 10/25/46(3) |
369,072 | 345,839 | ||||
Strategic Global Income Fund, Inc.
Portfolio of investmentsNovember 30, 2008
Face | ||||||
Security description | amount | Value | ||||
Bonds(continued) | ||||||
Asset-backed securities(continued) | ||||||
United States(continued) | ||||||
Harley-Davidson Motorcycle Trust, | ||||||
Series 2007-1, Class C, |
||||||
5.540%, due 04/15/15 |
$ | 450,000 | $ | 275,314 | ||
Home Equity Mortgage Trust, | ||||||
Series 2006-3, Class A1, |
||||||
5.472%, due 09/25/36(3) |
1,909,268 | 190,927 | ||||
Series 2006-5, Class A1, |
||||||
5.500%, due 01/25/37(5) |
360,027 | 82,161 | ||||
Series 2006-4, Class A1, |
||||||
5.670%, due 11/25/36(5) |
1,691,040 | 367,930 | ||||
Lake Country Mortgage Loan Trust, | ||||||
Series 2005-HE1, Class A2, |
||||||
1.775%, due 12/25/32(2),(3) |
52,322 | 51,641 | ||||
MBNA Credit Card Master Note Trust, | ||||||
Series 2004-A10, Class A, |
||||||
1.503%, due 03/15/12(3) |
1,000,000 | 954,146 | ||||
Merrill Lynch Mortgage Investors, Inc., | ||||||
Series 2006-AHL1, Class A2A, |
||||||
1.445%, due 05/25/37(3) |
76,721 | 73,569 | ||||
Series 2006-FF1, Class A2A, |
||||||
1.465%, due 08/25/36(3) |
439,625 | 410,064 | ||||
Series 2006-SL1, Class A, |
||||||
1.575%, due 09/25/36(3) |
96,806 | 29,477 | ||||
Nomura Asset Acceptance Corp., | ||||||
Series 2006-S4, Class A1, |
||||||
1.565%, due 08/25/36(3) |
849,762 | 163,579 | ||||
Park Place Securities, Inc., | ||||||
Series 2005-WCW2, Class A2C, |
||||||
1.655%, due 07/25/35(3) |
514,835 | 496,667 | ||||
Popular ABS Mortgage Pass-Through Trust, | ||||||
Series 2006-D, Class A1, |
||||||
1.455%, due 11/25/46(3) |
59,663 | 55,840 | ||||
Series 2006-E, Class A1, |
||||||
1.485%, due 01/25/37(3) |
85,251 | 75,344 | ||||
Renaissance Home Equity Loan Trust, | ||||||
Series 2006-4, Class AV1, |
||||||
1.465%, due 01/25/37(3) |
554,341 | 505,522 | ||||
Strategic Global Income Fund, Inc.
Portfolio of investmentsNovember 30, 2008
Face | ||||||
Security description | amount | Value | ||||
Bonds(continued) | ||||||
Asset-backed securities(concluded) | ||||||
United States(concluded) | ||||||
Residential Asset Mortgage Products, Inc., | ||||||
Series 2006-RZ3, Class A1, |
||||||
1.465%, due 08/25/36(3) |
$ | 319,386 | $ | 304,394 | ||
Series 2006-RS4, Class A1, |
||||||
1.475%, due 07/25/36(3) |
25,015 | 24,643 | ||||
Series 2006-RS5, Class A1, |
||||||
1.506%, due 09/25/36(3) |
26,692 | 25,835 | ||||
Residential Asset Securities Corp., | ||||||
Series 2005-KS11, Class AI3, |
||||||
1.595%, due 12/25/35(3) |
145,466 | 130,294 | ||||
SACO I Trust, | ||||||
Series 2006-5, Class 2A1, |
||||||
1.545%, due 05/25/36(3) |
846,640 | 164,311 | ||||
Soundview Home Equity Loan Trust, | ||||||
Series 2006-EQ2, Class A1, |
||||||
1.475%, due 01/25/37(3) |
122,234 | 115,477 | ||||
Series 2006-WF1, Class A1A, |
||||||
1.495%, due 10/25/36(3) |
28,650 | 28,061 | ||||
Series 2006-OPT3, Class 2A2, |
||||||
1.505%, due 06/25/36(3) |
74,940 | 69,997 | ||||
Series 2006-OPT2, Class A2, |
||||||
1.515%, due 05/25/36(3) |
1,420 | 1,398 | ||||
Series 2005-OPT1, Class 2A4, |
||||||
1.695%, due 06/25/35(3) |
727,723 | 661,133 | ||||
Total asset-backed securities (cost$12,477,291) | 9,776,189 | |||||
Collateralized debt obligations6.46% | ||||||
Cayman Islands6.46% | ||||||
Apidos CDO, | ||||||
Series 2007-CA, Class A2B, |
||||||
2.453%, due 05/14/20(1),(2),(3) |
2,000,000 | 990,000 | ||||
Atrium CDO Corp., | ||||||
Series 5A, Class A2B, |
||||||
2.538%, due 07/20/20(1),(2),(3) |
2,000,000 | 1,032,000 | ||||
BlueMountain CLO Ltd., | ||||||
Series 2005-1A, Class A2, |
||||||
2.519%, due 11/15/17(1),(2),(3) |
2,000,000 | 1,116,800 | ||||
Strategic Global Income Fund, Inc.
Portfolio of investmentsNovember 30, 2008
Face | ||||||
Security description | amount | Value | ||||
Bonds(continued) | ||||||
Collateralized debt obligations(concluded) | ||||||
Cayman Islands(concluded) | ||||||
Carlyle High Yield Partners, | ||||||
Series 2006-8A, Class B, |
||||||
2.553%, due 05/21/21(1),(2),(3) |
$ | 2,500,000 | $ | 1,003,125 | ||
Halcyon Loan Investors CLO Ltd., | ||||||
Series 2007-2A, Class A1J, |
||||||
3.861%, due 04/24/21(1),(2),(3) |
2,000,000 | 1,019,200 | ||||
ING Investment Management, | ||||||
Series 2006-3A, Class A2B, |
||||||
4.975%, due 12/13/20(1),(2),(3) |
2,000,000 | 1,060,000 | ||||
Limerock CLO, | ||||||
Series 2007-1A, Class A4, |
||||||
3.891%, due 04/24/23(1),(2),(3) |
2,000,000 | 780,000 | ||||
Mountain View Funding CLO, | ||||||
Series 2007-3A, Class A2, |
||||||
4.975%, due 04/16/21(1),(2),(3) |
2,500,000 | 975,450 | ||||
Series 2006-2A, Class B, |
||||||
5.219%, due 01/12/21(1),(2),(3) |
3,000,000 | 917,790 | ||||
Rockwall CDO Ltd., | ||||||
Series 2007-1A, Class A1LB, |
||||||
3.743%, due 08/01/24(1),(2),(3),(6) |
4,000,000 | 1,240,000 | ||||
Trimaran CLO Ltd., | ||||||
Series 2007-1A, Class A2L, |
||||||
3.189%, due 06/15/21(1),(2),(3),(6) |
2,000,000 | 880,000 | ||||
Total collateralized debt obligations (cost$11,888,325) | 11,014,365 | |||||
Commercial mortgage-backed securities1.18% | ||||||
United States1.18% | ||||||
GS Mortgage Securities Corp. II, | ||||||
Series 2007-GG10, Class A4, |
||||||
5.993%, due 08/10/45(3) |
1,250,000 | 774,843 | ||||
LB Commercial Conduit Mortgage Trust, | ||||||
Series 1998-C4, Class G, |
||||||
5.600%, due 10/15/35(2) |
1,000,000 | 487,062 | ||||
Morgan Stanley Dean Witter Capital I, | ||||||
Series 2000-LIF2, Class A2, |
||||||
7.200%, due 10/15/33 |
771,426 | 743,035 | ||||
Total commercial mortgage-backed securities (cost$2,399,802) | 2,004,940 | |||||
Strategic Global Income Fund, Inc.
Portfolio of investmentsNovember 30, 2008
Face | ||||||
Security description | amount | Value | ||||
Bonds(continued) | ||||||
Mortgage & agency debt securities5.48% | ||||||
United States5.48% | ||||||
American Home Mortgage Investment Trust, | ||||||
Series 2006-3, Class 4A, |
||||||
1.585%, due 11/25/35(3) |
$ | 1,436,332 | $ | 398,869 | ||
Banc of America Alternative Loan Trust, | ||||||
Series 2006-9, Class B2, |
||||||
6.250%, due 01/25/37 |
1,468,439 | 62,262 | ||||
Series 2006-9, Class B3, |
||||||
6.250%, due 01/25/37 |
734,220 | 33,040 | ||||
Banc of America Funding Corp., | ||||||
Series 2005-F, Class CB3, |
||||||
5.202%, due 09/20/35(3) |
4,719,133 | 118,450 | ||||
Series 2006-R2, Class A2, |
||||||
6.050%, due 07/28/46(2),(3) |
1,000,000 | 50,000 | ||||
Series 2007-4, Class NB1, |
||||||
6.100%, due 06/25/37(3) |
2,962,487 | 222,187 | ||||
Citicorp Mortgage Securities, Inc., | ||||||
Series 2006-3, Class B1, |
||||||
5.944%, due 06/25/36(3) |
547,663 | 82,150 | ||||
Citigroup Mortgage Loan Trust, Inc., | ||||||
Series 2005-WF2, Class AV2, |
||||||
1.635%, due 08/25/35(3) |
271,982 | 229,992 | ||||
Series 2005-7, Class 1B3, |
||||||
5.447%, due 10/25/35(3) |
3,094,413 | 92,832 | ||||
Series 2006-AR6, Class 1B2, |
||||||
6.059%, due 08/25/36(3) |
4,233,662 | 508,039 | ||||
Countrywide Alternative Loan Trust, | ||||||
Series 2006-26CB, Class M1, |
||||||
6.500%, due 09/25/36 |
1,225,675 | 67,412 | ||||
Series 2005-J2, Class 2A1, |
||||||
7.500%, due 12/25/34 |
187,493 | 110,914 | ||||
Countrywide Home Loan Mortgage Pass-Through Trust, | ||||||
Series 2006-16, Class B2, |
||||||
6.252%, due 11/25/36(3) |
1,719,886 | 74,471 | ||||
Credit Suisse Mortgage Capital Certificates, | ||||||
Series 2006-4, Class CB1, |
||||||
5.756%, due 05/25/36(3) |
935,976 | 21,059 | ||||
Strategic Global Income Fund, Inc.
Portfolio of investmentsNovember 30, 2008
Face | ||||||
Security description | amount | Value | ||||
Bonds(continued) | ||||||
Mortgage & agency debt securities(continued) | ||||||
United States(continued) | ||||||
Series 2006-7, Class B1, |
||||||
6.294%, due 08/25/36(3) |
$ | 988,127 | $ | 24,703 | ||
Series 2006-7, Class B3, |
||||||
6.294%, due 08/25/36(3) |
2,264,786 | 22,648 | ||||
Federal Home Loan Mortgage Corp., | ||||||
5.750%, due 09/15/10 |
EUR | 1,400,000 | 1,843,361 | |||
Harborview Mortgage Loan Trust, | ||||||
Series 2005-3, Class 2A1A, |
||||||
1.714%, due 06/19/35(3) |
$ | 243,283 | 103,747 | |||
IndyMac INDA Mortgage Loan Trust, | ||||||
Series 2007-AR1, Class B1, |
||||||
5.811%, due 03/25/37(3) |
448,148 | 22,407 | ||||
IndyMac INDX Mortgage Loan Trust, | ||||||
Series 2006-AR25, Class B1, |
||||||
6.208%, due 09/25/36(3) |
1,838,310 | 108,876 | ||||
Series 2006-AR19, Class 1B2, |
||||||
6.322%, due 08/25/36(3) |
1,242,817 | 37,285 | ||||
JPMorgan Alternative Loan Trust, | ||||||
Series 2006-A5, Class 2A6, |
||||||
5.800%, due 10/25/36(3) |
6,492,000 | 1,766,264 | ||||
Residential Accredit Loans, Inc., | ||||||
Series 2005-QA10, Class M3, |
||||||
5.624%, due 09/25/35(3) |
670,099 | 23,728 | ||||
Series 2006-QS5, Class M1, |
||||||
6.000%, due 05/25/36 |
1,264,041 | 218,504 | ||||
Residential Funding Mortgage Securities I, | ||||||
Series 2006-S6, Class M1, |
||||||
6.000%, due 07/25/36 |
981,062 | 138,572 | ||||
Structured Adjustable Rate Mortgage Loan Trust, | ||||||
Series 2006-2, Class B3I, |
||||||
5.679%, due 03/25/36(3) |
2,982,325 | 40,082 | ||||
Series 2006-8, Class 4A3, |
||||||
5.727%, due 09/25/36(3) |
1,500,000 | 533,531 | ||||
Series 2007-1, Class B2II, |
||||||
6.291%, due 02/25/37(3) |
1,457,534 | 99,958 | ||||
Series 2006-8, Class B3I, |
||||||
6.298%, due 09/25/36(3) |
2,243,915 | 103,467 | ||||
Strategic Global Income Fund, Inc.
Portfolio of investmentsNovember 30, 2008
Face | ||||||
Security description | amount | Value | ||||
Bonds(continued) | ||||||
Mortgage & agency debt securities(concluded) | ||||||
United States(concluded) | ||||||
WaMu Mortgage Pass-Through Certificates, | ||||||
Series 2006-AR18, Class LB3, |
||||||
5.380%, due 01/25/37(3) |
$ | 1,175,070 | $ | 68,001 | ||
Series 2007-HY1, Class LB2, |
||||||
5.792%, due 02/25/37(3) |
1,997,422 | 203,218 | ||||
Series 2007-HY7, Class LB1, |
||||||
5.844%, due 07/25/37(3) |
2,494,682 | 530,135 | ||||
Series 2006-AR12, Class LB1, |
||||||
5.982%, due 10/25/36(3) |
997,843 | 188,534 | ||||
Series 2006-AR10, Class LB1, |
||||||
5.990%, due 09/25/36(3) |
998,843 | 225,619 | ||||
Wells Fargo Alternative Loan Trust, | ||||||
Series 2007-PA1, Class B1, |
||||||
6.250%, due 03/25/37 |
1,480,076 | 5,920 | ||||
Wells Fargo Mortgage Backed Securities Trust, | ||||||
Series 2006-18, Class B1, |
||||||
6.000%, due 12/26/36 |
3,937,534 | 944,112 | ||||
Series 2006-AR12, Class 2B1, |
||||||
6.100%, due 09/25/36(3) |
497,959 | 24,898 | ||||
Total mortgage & agency debt securities (cost$18,820,385) | 9,349,247 | |||||
Stripped mortgage-backed security0.00%(7) | ||||||
United States0.00%(7) | ||||||
Federal Home Loan Mortgage Corp. REMICs, | ||||||
Series 3033, Class OI, IO, |
||||||
5.500%, due 10/15/22 (cost$1,688) |
7,716 | 3 | ||||
US government obligations10.58% | ||||||
US Treasury Bonds, | ||||||
4.750%, due 02/15/37 |
2,375,000 | 2,884,141 | ||||
US Treasury Inflation Indexed Bonds (TIPS), | ||||||
1.395%, due 07/15/18 |
5,580,960 | 4,998,012 | ||||
2.000%, due 01/15/16 |
5,512,300 | 4,908,962 | ||||
US Treasury Notes, | ||||||
2.750%, due 10/31/13 |
2,430,000 | 2,526,250 | ||||
4.000%, due 08/15/18 |
2,500,000 | 2,725,390 | ||||
Total US government obligations (cost$16,979,349) | 18,042,755 | |||||
Strategic Global Income Fund, Inc.
Portfolio of investmentsNovember 30, 2008
Face | ||||||
Security description | amount | Value | ||||
Bonds(continued) | ||||||
Non USgovernment obligations30.91% | ||||||
Argentina4.21% | ||||||
Argentina Prestamos Garantizadad, | ||||||
2.954%, due 04/15/10(3) |
ARS | 2,000,000 | $ | 326,047 | ||
4.000%, due 05/15/09(3) |
1,960,124 | 1,336,283 | ||||
Republic of Argentina, | ||||||
2.280%, due 12/15/35(3) |
$ | 17,250,000 | 750,375 | |||
3.127%, due 08/03/12(3) |
19,170,000 | 4,696,650 | ||||
7.000%, due 03/28/11 |
210,000 | 69,300 | ||||
7,178,655 | ||||||
Brazil0.88% | ||||||
Brazil Notas do Tesouro Nacional | ||||||
Series B, |
||||||
6.000%, due 05/15/45 |
BRL | 2,530,000 | 1,490,995 | |||
Dominican Republic0.90% | ||||||
Republic of Dominica, | ||||||
9.000%, due 03/31/10(6) |
DOP | 120,000,000 | 1,537,366 | |||
El Salvador1.02% | ||||||
Republic of El Salvador, | ||||||
7.750%, due 01/24/23 |
$ | 2,040,000 | 1,734,000 | |||
France3.05% | ||||||
Government of France, | ||||||
3.750%, due 04/25/21 |
EUR | 2,690,000 | 3,391,329 | |||
4.000%, due 04/25/55 |
1,390,000 | 1,805,253 | ||||
5,196,582 | ||||||
Germany2.43% | ||||||
Bundesschatzanweisungen, | ||||||
3.750%, due 12/12/08 |
EUR | 75,000 | 95,337 | |||
Deutsche Bundesrepublik, | ||||||
4.000%, due 01/04/37 |
690,000 | 914,753 | ||||
6.250%, due 01/04/24 |
180,000 | 292,561 | ||||
Kreditanstalt fuer Wiederaufbau, | ||||||
4.625%, due 10/12/12 |
640,000 | 848,060 | ||||
5.000%, due 07/04/11 |
1,500,000 | 1,995,825 | ||||
4,146,536 | ||||||
Strategic Global Income Fund, Inc.
Portfolio of investmentsNovember 30, 2008
Face | ||||||
Security description | amount | Value | ||||
Bonds(continued) | ||||||
Non USgovernment obligations(concluded) | ||||||
Hungary0.86% | ||||||
Republic of Hungary, | ||||||
7.000%, due 06/24/09 |
HUF | 306,000,000 | $ | 1,469,446 | ||
Indonesia0.64% | ||||||
Republic of Indonesia, | ||||||
9.500%, due 07/15/23 |
IDR | 20,000,000,000 | 1,090,714 | |||
Italy9.65% | ||||||
Buoni Poliennali Del Tesoro, | ||||||
4.000%, due 02/01/37 |
EUR | 3,430,000 | 3,704,448 | |||
4.250%, due 08/01/13 |
5,500,000 | 7,108,568 | ||||
4.500%, due 05/01/09 |
760,000 | 973,199 | ||||
5.000%, due 08/01/34 |
2,190,000 | 2,766,758 | ||||
6.500%, due 11/01/27 |
1,275,000 | 1,899,334 | ||||
16,452,307 | ||||||
Russia0.70% | ||||||
Russian Federation, | ||||||
7.500%, due 03/31/30(5) |
$ | 1,029,000 | 856,642 | |||
7.500%, due 03/31/30(2),(5) |
408,133 | 339,771 | ||||
1,196,413 | ||||||
Spain4.75% | ||||||
Government of Spain, | ||||||
5.150%, due 07/30/09 |
EUR | 2,740,000 | 3,543,100 | |||
5.750%, due 07/30/32 |
2,160,000 | 3,296,292 | ||||
6.150%, due 01/31/13 |
900,000 | 1,260,779 | ||||
8,100,171 | ||||||
Turkey1.82% | ||||||
Republic of Turkey, | ||||||
14.000%, due 01/19/11 |
TRY | 3,120,000 | 1,781,720 | |||
15.000%, due 02/10/10 |
2,180,000 | 1,314,468 | ||||
3,096,188 | ||||||
Total non USgovernment obligations (cost$68,366,721) | 52,689,373 | |||||
Sovereign/supranational bonds2.06% | ||||||
European Investment Bank, | ||||||
5.375%, due 10/15/12 |
EUR | 1,600,000 | 2,178,320 | |||
5.625%, due 10/15/10 |
1,000,000 | 1,327,275 | ||||
Total sovereign/supranational bonds (cost$3,849,131) | 3,505,595 | |||||
Strategic Global Income Fund, Inc.
Portfolio of investmentsNovember 30, 2008
Face | ||||||
Security description | amount | Value | ||||
Bonds(concluded) | ||||||
Credit-linked notes0.68% | ||||||
Russia0.68% | ||||||
ING Bank N.V., 7.798%, due 02/16/11 | ||||||
(linked to Russian Agricultural Bank OJSC, |
||||||
7.850%, due 02/16/11) |
||||||
(cost$1,399,336) |
RUB | 39,300,000 | $ | 1,168,758 | ||
Total bonds (cost$185,590,207) | 151,559,403 | |||||
Units | ||||||
Short-term investment8.36% | ||||||
Other8.36% | ||||||
UBS Supplementary TrustU.S. Cash | ||||||
Management Prime Fund, |
||||||
1.86%(8),(9),(10) (cost$14,250,718) |
14,250,718 | 14,250,718 | ||||
Number of | ||||||
contracts | ||||||
Options Purchased0.71% | ||||||
Call Options0.71% | ||||||
3 Month Euro Euribor Interest Rate Futures, | ||||||
strike @ EUR 96.75, |
||||||
expires September 2009* |
181 | 531,784 | ||||
30 Day Fed Fund Futures, strike @ USD 98.25, | ||||||
expires December 2008* |
120 | 676,304 | ||||
1,208,088 | ||||||
Put Options0.00%(7) | ||||||
30 Day Fed Fund Futures, strike @ USD 97.25, | ||||||
expires December 2008* |
120 | 1,250 | ||||
Total options purchased (cost$123,642) | 1,209,338 | |||||
Total investments(11)97.98% (cost$199,964,567) | 167,019,459 | |||||
Cash and other assets, less liabilities2.02% | 3,448,782 | |||||
Net assets100.00% | $ | 170,468,241 | ||||
Strategic Global Income Fund, Inc.
Portfolio of investmentsNovember 30, 2008
Notes to portfolio of investments | ||
* | Non-income producing security. | |
| As of September 29, 2008, the Fund is no longer accruing income on this security. | |
| On September 7, 2008, the Federal Housing Finance Agency placed the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation into conservatorship, and the US Treasury guaranteed the debt issued by those organizations. | |
(1) | Security is illiquid. At November 30, 2008, these securities amounted to $24,175,563 or 14.18% of net assets. | |
(2) | Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities are considered liquid, unless noted otherwise, and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At November 30, 2008, the value of these securities amounted to $13,720,159 or 8.05% of net assets. | |
(3) | Floating rate securityThe interest rates shown are the current rates as of November 30, 2008. | |
(4) | Perpetual bond security. The maturity date reflects the next call date. | |
(5) | Step bondCoupon rate increases in increments to maturity. Rate disclosed is as of November 30, 2008. Maturity date disclosed is the ultimate maturity date. | |
(6) | Security is being fair valued by a valuation committee under the direction of the Board of Directors. At November 30, 2008, the value of these securities amounted to $3,657,366 or 2.15% of net assets. | |
(7) | Amount represents less than 0.005% of net assets. | |
(8) | The table below details the Funds investments in a security issued by a fund that is advised by the same advisor as the Fund. The advisor does not earn a management fee from UBS Supplementary Trust. |
Income | ||||||||||
Purchases | Sales | earned from | ||||||||
during the | during the | affiliate for the | ||||||||
Security | Value | year ended | year ended | Value | year ended | |||||
description | 11/30/07 | 11/30/08 | 11/30/08 | 11/30/08 | 11/30/08 | |||||
UBS Supplementary | ||||||||||
TrustU.S. Cash | ||||||||||
Management | ||||||||||
Prime Fund | $23,377,429 | $101,524,750 | $110,651,461 | $14,250,718 | $803,274 | |||||
(9) | Investment in affiliated mutual fund. | |
(10) | The rate shown reflects the yield at November 30, 2008. | |
(11) | The table below details the Funds transaction activity in an affiliated issuer for the year ended November 30, 2008. The advisor earns a management fee from UBS Private Money Market Fund LLC. |
Net income | ||||||||||
Purchases | Sales | earned from | ||||||||
during the | during the | affiliate for the | ||||||||
Security | Value | year ended | year ended | Value | year ended | |||||
description | 11/30/07 | 11/30/08 | 11/30/08 | 11/30/08 | 11/30/08 | |||||
UBS Private Money | ||||||||||
Market Fund LLC | $364,670 | $45,517 | $410,187 | $0 | $660 | |||||
Strategic Global Income Fund, Inc.
Portfolio of investmentsNovember 30, 2008
CDO | Collateralized debt obligations | |
CLO | Collateralized loan obligations | |
GMAC | General Motors Acceptance Corp. | |
GS | Goldman Sachs | |
GSAMP | Goldman Sachs Mortgage Securities Corp. | |
IO | Interest onlyThis security entitles the holder to receive interest payments 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. | |
OJSC | Open Joint Stock Company | |
REMIC | Real Estate Mortgage Investment Conduit | |
TIPS | Treasury inflation protected securities (TIPS) are debt securities issued by the US Treasury whose principal and/or interest payments are adjusted for inflation, unlike debt securities that make fixed principal and interest payments. The interest rate paid by the TIPS is fixed, while the principal value rises or falls based on changes in a published Consumer Price Index (CPI). Thus, if inflation occurs, the principal and interest payments on the TIPS are adjusted accordingly to protect investors from inflationary loss. During a deflationary period, the principal and interest payments decrease, although the TIPS principal amounts will not drop below their face amounts at maturity. In exchange for the inflation protection, the TIPS generally pay lower interest rates than typical US Treasury securities. Only if inflation occurs will TIPS offer a higher real yield than a conventional Treasury security of the same maturity. |
ARS | Argentine Peso | |
BRL | Brazilian Real | |
DOP | Dominican Peso | |
EUR | Euro | |
HUF | Hungarian Forint | |
IDR | Indonesian Rupiah | |
MYR | Malaysian Ringgit | |
RUB | Russian Ruble | |
TRY | New Turkish Lira | |
USD | United States Dollar |
Strategic Global Income Fund, Inc.
Portfolio of investmentsNovember
30, 2008
Forward foreign currency contracts
Strategic Global Income
Fund, Inc. had the following open forward foreign currency contracts as of November 30,
2008:
Unrealized | |||||||||||
Contracts | In | Maturity | appreciation/ | ||||||||
to deliver | exchange for | dates | (depreciation) | ||||||||
Australian Dollar | 69,380,000 | JPY | 4,915,519,423 | 12/01/08 | $5,934,303 | ||||||
Australian Dollar | 3,310,000 | NZD | 4,144,517 | 12/01/08 | 107,750 | ||||||
Australian Dollar | 13,745,000 | USD | 12,750,963 | 12/01/08 | 3,736,992 | ||||||
Australian Dollar | 1,610,000 | USD | 1,010,034 | 12/01/08 | (45,805 | ) | |||||
Australian Dollar | 4,025,000 | USD | 2,506,891 | 03/02/09 | (120,227 | ) | |||||
Brazilian Real | 4,000,000 | USD | 2,390,914 | 12/04/08 | 665,369 | ||||||
Brazilian Real | 3,200,000 | USD | 1,364,024 | 12/04/08 | (16,412 | ) | |||||
Canadian Dollar | 34,785,241 | USD | 32,323,154 | 12/01/08 | 4,275,064 | ||||||
Canadian Dollar | 3,849,759 | USD | 3,026,064 | 12/01/08 | (78,079 | ) | |||||
Czech Koruna | 28,500,000 | EUR | 1,170,642 | 12/04/08 | 59,098 | ||||||
Euro | 5,147,733 | AUD | 8,745,000 | 12/01/08 | (805,224 | ) | |||||
Euro | 24,709,847 | CHF | 36,372,002 | 12/01/08 | (1,433,397 | ) | |||||
Euro | 4,518,475 | GBP | 3,670,000 | 12/01/08 | (96,446 | ) | |||||
Euro | 8,065,000 | JPY | 1,088,476,595 | 12/01/08 | 1,142,730 | ||||||
Euro | 22,245,000 | USD | 34,360,420 | 12/01/08 | 6,098,147 | ||||||
Euro | 1,290,000 | USD | 1,621,117 | 03/02/09 | (17,054 | ) | |||||
Great Britain Pound | 3,405,000 | CHF | 6,841,769 | 12/01/08 | 399,004 | ||||||
Great Britain Pound | 4,565,000 | CHF | 8,255,300 | 12/01/08 | (220,659 | ) | |||||
Great Britain Pound | 3,340,000 | JPY | 622,979,138 | 12/01/08 | 1,381,811 | ||||||
Great Britain Pound | 11,900,000 | USD | 22,901,180 | 12/01/08 | 4,599,575 | ||||||
Great Britain Pound | 2,965,000 | USD | 4,435,937 | 12/01/08 | (124,085 | ) | |||||
Japanese Yen | 363,034,364 | AUD | 5,810,000 | 12/01/08 | 11,575 | ||||||
Japanese Yen | 3,664,593,100 | AUD | 51,785,000 | 12/01/08 | (4,383,994 | ) | |||||
Japanese Yen | 1,632,653,100 | EUR | 10,650,000 | 12/01/08 | (3,552,497 | ) | |||||
Japanese Yen | 2,176,095,050 | NOK | 113,353,043 | 12/01/08 | (6,519,711 | ) | |||||
Japanese Yen | 1,315,699,542 | USD | 13,862,602 | 12/01/08 | 95,734 | ||||||
Japanese Yen | 803,400,000 | USD | 7,694,296 | 12/01/08 | (712,107 | ) | |||||
Malaysian Ringgit | 48,700,000 | USD | 13,501,525 | 12/04/08 | 61,728 | ||||||
Mexican Peso | 22,680,000 | USD | 2,242,325 | 12/01/08 | 548,398 | ||||||
New Turkish Lira | 4,700,000 | USD | 3,557,911 | 12/04/08 | 561,297 | ||||||
Strategic Global Income Fund, Inc.
Portfolio of investmentsNovember 30, 2008
Forward foreign currency contracts (continued)
Unrealized | |||||||||||
Contracts | In | Maturity | appreciation/ | ||||||||
to deliver | exchange for | dates | (depreciation) | ||||||||
New Turkish Lira | 4,800,000 | USD | 3,039,899 | 12/04/08 | $(20,472 | ) | |||||
New Zealand Dollar | 15,635,000 | USD | 11,940,450 | 12/01/08 | 3,345,108 | ||||||
Norwegian Krone | 102,630,000 | EUR | 12,588,611 | 12/01/08 | 1,281,118 | ||||||
Norwegian Krone | 10,723,043 | USD | 1,516,267 | 12/01/08 | (20,954 | ) | |||||
Saudi Arabian Riyal | 15,490,000 | USD | 4,133,422 | 12/16/08 | 7,338 | ||||||
Singapore Dollar | 6,525,000 | USD | 4,779,169 | 12/01/08 | 463,122 | ||||||
South African Rand | 31,660,000 | USD | 4,263,399 | 12/01/08 | 1,122,526 | ||||||
South African Rand | 26,000,000 | USD | 3,140,855 | 12/04/08 | 562,983 | ||||||
Swedish Krona | 190,282,799 | USD | 26,437,181 | 12/01/08 | 3,024,963 | ||||||
Swedish Krona | 136,912,441 | USD | 16,705,807 | 12/01/08 | (139,772 | ) | |||||
Swedish Krona | 140,302,248 | USD | 17,040,000 | 03/02/09 | (215,014 | ) | |||||
Swiss Franc | 24,161,875 | EUR | 16,579,303 | 12/01/08 | 1,161,307 | ||||||
Swiss Franc | 13,100,000 | EUR | 8,304,279 | 12/01/08 | (240,188 | ) | |||||
Swiss Franc | 8,132,956 | GBP | 4,620,000 | 12/01/08 | 406,025 | ||||||
Swiss Franc | 26,760,000 | USD | 24,936,763 | 12/01/08 | 2,893,929 | ||||||
Swiss Franc | 266,693 | USD | 218,263 | 12/01/08 | (1,419 | ) | |||||
Ukrainian Hyrvnia | 2,070,000 | USD | 366,372 | 05/18/09 | 119,598 | ||||||
United States Dollar | 4,197,948 | ARS | 15,323,500 | 11/16/09 | (1,498,337 | ) | |||||
United States Dollar | 2,519,650 | AUD | 4,025,000 | 12/01/08 | 119,945 | ||||||
United States Dollar | 14,123,269 | AUD | 17,680,000 | 12/01/08 | (2,528,725 | ) | |||||
United States Dollar | 1,709,402 | BRL | 4,000,000 | 12/04/08 | 16,143 | ||||||
United States Dollar | 3,502,627 | BRL | 8,000,000 | 12/04/08 | (51,537 | ) | |||||
United States Dollar | 35,785,756 | CAD | 38,635,000 | 12/01/08 | (4,633,523 | ) | |||||
United States Dollar | 19,573,010 | CHF | 20,952,453 | 12/01/08 | (2,313,988 | ) | |||||
United States Dollar | 221,815 | CHF | 270,000 | 03/02/09 | 1,769 | ||||||
United States Dollar | 10,792,225 | EUR | 8,595,409 | 12/01/08 | 128,243 | ||||||
United States Dollar | 11,720,000 | EUR | 7,968,453 | 12/01/08 | (1,596,081 | ) | |||||
United States Dollar | 4,417,089 | GBP | 2,910,000 | 12/01/08 | 58,345 | ||||||
United States Dollar | 29,136,319 | GBP | 14,975,000 | 12/01/08 | (6,105,518 | ) | |||||
United States Dollar | 4,439,020 | GBP | 2,965,000 | 03/02/09 | 123,670 | ||||||
United States Dollar | 32,635,788 | JPY | 3,328,500,000 | 12/01/08 | 2,192,087 | ||||||
United States Dollar | 13,927,173 | JPY | 1,315,700,000 | 03/02/09 | (104,108 | ) | |||||
United States Dollar | 2,132,401 | MXN | 22,680,000 | 12/01/08 | (438,473 | ) | |||||
Strategic Global Income Fund, Inc.
Portfolio of investmentsNovember 30,
2008
Forward foreign currency contracts (concluded)
Unrealized | |||||||||||
Contracts | In | Maturity | appreciation/ | ||||||||
to deliver | exchange for | dates | (depreciation) | ||||||||
United States Dollar | 1,510,310 | NOK | 10,730,000 | 03/02/09 | $19,727 | ||||||
United States Dollar | 8,246,375 | NZD | 11,490,483 | 12/01/08 | (1,929,482 | ) | |||||
United States Dollar | 4,141,600 | SAR | 15,490,000 | 12/16/08 | (15,516 | ) | |||||
United States Dollar | 17,040,000 | SEK | 140,895,240 | 12/01/08 | 295,619 | ||||||
United States Dollar | 29,368,018 | SEK | 186,300,000 | 12/01/08 | (6,445,840 | ) | |||||
United States Dollar | 16,695,525 | SEK | 136,920,000 | 03/02/09 | 143,525 | ||||||
United States Dollar | 4,836,407 | SGD | 6,525,000 | 12/01/08 | (520,360 | ) | |||||
United States Dollar | 2,797,692 | TRY | 4,800,000 | 12/04/08 | 262,679 | ||||||
United States Dollar | 372,973 | UAH | 2,070,000 | 05/18/09 | (126,199 | ) | |||||
United States Dollar | 3,911,220 | ZAR | 31,660,000 | 12/01/08 | (770,347 | ) | |||||
United States Dollar | 2,417,791 | ZAR | 26,800,000 | 12/04/08 | 239,400 | ||||||
Net unrealized depreciation on forward foreign currency contracts | $(173,806 | ) | |||||||||
Currency type abbreviations: | ||
ARS | Argentine Peso | |
AUD | Australian Dollar | |
BRL | Brazilian Real | |
CAD | Canadian Dollar | |
CHF | Swiss Franc | |
EUR | Euro | |
GBP | Great Britain Pound | |
JPY | Japanese Yen | |
MXN | Mexican Peso | |
NOK | Norwegian Krone | |
NZD | New Zealand Dollar | |
SAR | Saudi Arabian Riyal | |
SEK | Swedish Krona | |
SGD | Singapore Dollar | |
TRY | New Turkish Lira | |
UAH | Ukranian Hryvnia | |
USD | United States Dollar | |
ZAR | South African Rand |
Strategic Global Income Fund, Inc.
Portfolio of investmentsNovember 30,
2008
Futures contracts
Strategic Global Income Fund, Inc. had the following
open futures contracts as of November 30, 2008:
Unrealized | |||||||||||
Expiration | Cost/ | appreciation/ | |||||||||
dates | (proceeds) | Value | (depreciation) | ||||||||
US treasury futures buy contracts: | |||||||||||
10 Year US Treasury | |||||||||||
Notes, 195 contracts (USD) | March 2009 | $23,033,634 | $23,588,906 | $555,272 | |||||||
US treasury futures sell contracts: | |||||||||||
2 Year US Treasury Notes, | |||||||||||
29 contracts (USD) | December 2008 | (6,152,484 | ) | (6,332,875 | ) | (180,391 | ) | ||||
2 Year US Treasury Notes, | |||||||||||
183 contracts (USD) | March 2009 | (39,479,815 | ) | (39,676,687 | ) | (196,872 | ) | ||||
5 Year US Treasury Notes, | |||||||||||
9 contracts (USD) | December 2008 | (1,005,595 | ) | (1,074,094 | ) | (68,499 | ) | ||||
5 Year US Treasury Notes, | |||||||||||
91 contracts (USD) | March 2009 | (10,469,461 | ) | (10,620,695 | ) | (151,234 | ) | ||||
Interest rate futures buy contracts: | |||||||||||
90 Day Euro-Dollar, | |||||||||||
170 contracts (USD) | December 2008 | 41,517,493 | 41,596,875 | 79,382 | |||||||
Interest rate futures sell contracts: | |||||||||||
30 Day Fed Fund Futures, | |||||||||||
120 contracts (USD) | December 2008 | (49,565,292 | ) | (49,803,984 | ) | (238,692 | ) | ||||
30 Day Fed Fund Futures, | |||||||||||
102 contracts (USD) | January 2009 | (42,181,917 | ) | (42,324,886 | ) | (142,969 | ) | ||||
Net unrealized depreciation on futures contracts | $(344,003 | ) | |||||||||
USD | United States Dollar |
Options written
Strategic Global Income Fund, Inc. had the
following open options written as of November 30, 2008:
Expiration | Premiums | ||||||
date | received | Value | |||||
Put options | |||||||
90 Day Euro-Dollar Futures, | |||||||
365 contracts, strike @ USD 96.50 | June 2009 | $141,698 | $73,000 | ||||
USD | United States Dollar |
See accompanying notes to financial statements
Strategic Global Income Fund, Inc.
Statement of assets and liabilitiesNovember 30, 2008
Assets: | ||||
Investments in securities of unaffiliated issuers, at value (cost$185,713,849) | $152,768,741 | |||
Investments in securities of affiliated issuers, at value (cost$14,250,718) | 14,250,718 | |||
Total investments (cost$199,964,567) | 167,019,459 | |||
Foreign currency, at value (cost$2,062,192) | 1,888,116 | |||
Interest receivable | 2,224,740 | |||
Variation margin receivable | 440,681 | |||
Outstanding swap agreements, at value | 4,588,096 | |||
Unrealized appreciation on forward foreign currency contracts | 47,667,744 | |||
Other assets | 2,194 | |||
Total assets | 223,831,030 | |||
Liabilities: | ||||
Unrealized depreciation on forward foreign currency contracts | 47,841,550 | |||
Outstanding swap agreements, at value | 4,457,829 | |||
Due to broker | 466,899 | |||
Due to custodian | 193,281 | |||
Payable to investment advisor and administrator | 144,653 | |||
Options written, at value (premiums received$141,698) | 73,000 | |||
Directors fees payable | 2,114 | |||
Accrued expenses and other liabilities | 183,463 | |||
Total liabilities | 53,362,789 | |||
Net assets: | ||||
Capital stock$0.001 par value; 100,000,000 shares authorized; | ||||
18,258,828 shares issued and outstanding | 206,099,092 | |||
Accumulated undistributed net investment income | 1,181,417 | |||
Accumulated net realized loss from investment transactions | (3,258,627 | ) | ||
Net unrealized depreciation of investments, futures, swaps, | ||||
forward foreign currency contracts, options written and other | ||||
assets and liabilities denominated in foreign currencies | (33,553,641 | ) | ||
Net assets | $170,468,241 | |||
Net asset value per share | $9.34 | |||
See accompanying notes to financial statements
Strategic Global Income Fund, Inc.
Statement of operations
For the | ||||
year ended | ||||
November 30, 2008 | ||||
Investment income: | ||||
Interest income, net of foreign withholding taxes of $41,355 | ||||
(includes $803,274 earned from an affiliated entity) | $14,903,775 | |||
Securities lending income (all of which was earned | ||||
from an affiliated entity) | 660 | |||
Total income | 14,904,435 | |||
Expenses: | ||||
Investment advisory and administration fees | 1,987,329 | |||
Custody and accounting fees | 163,414 | |||
Professional fees | 111,900 | |||
Reports and notices to shareholders | 93,900 | |||
Listing fees | 23,816 | |||
Directors fees | 20,800 | |||
Transfer agency fees | 20,600 | |||
Insurance expenses | 6,046 | |||
Other expenses | 23,000 | |||
Total expenses | 2,450,805 | |||
Net investment income | 12,453,630 | |||
Realized and unrealized gains (losses) from investment activities: | ||||
Net realized gain (loss) from: | ||||
Investments | (4,466,265 | ) | ||
Futures | 1,188,613 | |||
Options written | 1,025,669 | |||
Swap agreements | 1,090,249 | |||
Forward foreign currency contracts and foreign currency transactions | 6,319,829 | |||
Net change in unrealized appreciation/(depreciation) of: | ||||
Investments | (38,103,519 | ) | ||
Futures | (355,276 | ) | ||
Options written | 72,974 | |||
Swap agreements | 240,978 | |||
Other assets and liabilities denominated in foreign currency and | ||||
forward foreign currency contracts | 741,856 | |||
Net realized and unrealized loss from investment activities | (32,244,892 | ) | ||
Net decrease in net assets resulting from operations | $(19,791,262 | ) | ||
See accompanying notes to financial statements
Strategic Global Income Fund, Inc.
Statement of changes in net assets
For the years ended November 30, | ||||||||
2008 | 2007 | |||||||
From operations: | ||||||||
Net investment income | $12,453,630 | $8,142,604 | ||||||
Net realized gain (loss) from investments | (4,466,265 | ) | 3,450,147 | |||||
Net realized gain from futures | 1,188,613 | 2,532,642 | ||||||
Net realized gain from options written | 1,025,669 | | ||||||
Net realized gain from swap agreements | 1,090,249 | 149,670 | ||||||
Net realized gain (loss) from forward foreign currency | ||||||||
contracts and foreign currency transactions | 6,319,829 | (577,936 | ) | |||||
Net change in unrealized appreciation/(depreciation) of: | ||||||||
Investments | (38,103,519 | ) | (3,498,228 | ) | ||||
Futures | (355,276 | ) | (72,384 | ) | ||||
Options written | 72,974 | (4,276 | ) | |||||
Swap agreements | 240,978 | (316,351 | ) | |||||
Other assets and liabilities denominated in foreign | ||||||||
currency and forward foreign currency contracts | 741,856 | (1,238,400 | ) | |||||
Net increase (decrease) in net assets resulting | ||||||||
from operations | (19,791,262 | ) | 8,567,488 | |||||
Dividends and distributions to shareholders from: | ||||||||
Net investment income | (16,372,691 | ) | (11,118,076 | ) | ||||
Net realized gains | (1,433,318 | ) | (5,782,295 | ) | ||||
Total dividends and distributions to shareholders | (17,806,009 | ) | (16,900,371 | ) | ||||
Net decrease in net assets | (37,597,271 | ) | (8,332,883 | ) | ||||
Net assets: | ||||||||
Beginning of year | 208,065,512 | 216,398,395 | ||||||
End of year | $170,468,241 | $208,065,512 | ||||||
Accumulated undistributed (distributions in excess of) | ||||||||
net investment income | $1,181,417 | $(3,712,312 | ) | |||||
See accompanying notes to financial statements
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, | ||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||
Net asset value, | ||||||||||||||||
beginning of year | $11.40 | $11.85 | $11.47 | $13.12 | $12.93 | |||||||||||
Net investment income | 0.68 | * | 0.45 | * | 0.51 | 0.54 | 0.54 | |||||||||
Net realized and unrealized gains | ||||||||||||||||
(losses) from investment activities | (1.76 | ) | 0.03 | 0.80 | (0.28 | ) | 0.94 | |||||||||
Net increase (decrease) from | ||||||||||||||||
investment operations | (1.08 | ) | 0.48 | 1.31 | 0.26 | 1.48 | ||||||||||
Dividends from net investment income | (0.90 | ) | (0.61 | ) | (0.83 | ) | (1.17 | ) | (1.29 | ) | ||||||
Distributions from net realized gains | (0.08 | ) | (0.32 | ) | (0.10 | ) | (0.63 | ) | | |||||||
Distributions from paid-in-capital | | | | (0.11 | ) | | ||||||||||
Total dividends and distributions | (0.98 | ) | (0.93 | ) | (0.93 | ) | (1.91 | ) | (1.29 | ) | ||||||
Net asset value, end of year | $9.34 | $11.40 | $11.85 | $11.47 | $13.12 | |||||||||||
Market price per share, | ||||||||||||||||
end of year | $7.53 | $10.38 | $11.67 | $10.56 | $14.60 | |||||||||||
Total net asset value return(1) | (10.52 | )% | 4.22 | % | 11.89 | % | 1.85 | % | 12.10 | % | ||||||
Total market price return(2) | (20.13 | )% | (3.45 | )% | 19.70 | % | (17.37 | )% | 10.89 | % | ||||||
Ratios/supplemental data: | ||||||||||||||||
Net assets, end of year (000s) | $170,468 | $208,066 | $216,398 | $209,404 | $239,538 | |||||||||||
Ratio of expenses to average | ||||||||||||||||
net assets: | 1.21 | % | 1.22 | % | 1.23 | % | 1.22 | % | 1.16 | % | ||||||
Ratio of net investment income to | ||||||||||||||||
average net assets: | 6.14 | % | 3.86 | % | 4.43 | % | 4.43 | % | 4.21 | % | ||||||
Portfolio turnover | 102 | % | 103 | % | 74 | % | 113 | % | 189 | % | ||||||
* | Calculated using the average shares method. | |
(1) | Total net asset value return is calculated assuming a $10,000 purchase of common stock at the current net asset value on the first day of each year reported and a sale at the current net asset value on the last day of each year reported, and assuming reinvestment of dividends and other distributions at the net asset value on the payable dates. Total net asset value return does not reflect brokerage commissions or the deduction of taxes that a shareholder would pay on Fund dividends/distributions or a sale of Fund shares. Total return based on net asset value is hypothetical as investors cannot purchase or sell Fund shares at the net asset value but only at market prices. | |
(2) | Total market price return is calculated assuming a purchase of $10,000 of common stock at the current market price on the first day of each 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 Funds Dividend Reinvestment Plan. Total market price return does not reflect brokerage commissions or the deduction of taxes that a shareholder would pay on Fund dividends/distributions or a sale of Fund shares. |
See accompanying notes to financial statements
Strategic Global Income Fund, Inc.
Notes to financial statementsNovember 30, 2008
Organization and significant accounting policies
Strategic
Global Income Fund, Inc. (the Fund) was incorporated in Maryland on
November 15, 1991 and is registered with the Securities and Exchange Commission as
a closed-end, non-diversified management investment company. The Funds shares
trade on the New York Stock Exchange (NYSE). The Funds primary
investment objective is to achieve a high level of current income. As a secondary
objective, the Fund seeks capital appreciation, to the extent consistent with its
primary objective.
In the normal course of business the Fund enters into contracts
that contain a variety of representations that provide general indemnification for
certain liabilities. The Funds maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the Fund that
have not yet occurred. However, the Fund has not had prior claims or losses pursuant
to these contracts and expects the risk of loss to be remote.
The preparation
of financial statements in accordance with US generally accepted accounting principles
requires Fund management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates. The following is a summary of significant accounting policies:
Valuation of investmentsThe 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 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
Strategic Global Income Fund, Inc.
Notes to financial statementsNovember
30, 2008
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 of the Fund. If a market value is not available
from an independent pricing source for a particular security, that security is valued
at fair value as determined in good faith by or under the direction of the Funds Board of Directors (the Board). Various factors may be reviewed
in order to make a good faith determination of a securitys fair value. These
factors include, but are not limited to, the type and cost of the security; contractual
or legal restrictions on resale of the security; relevant financial or business
developments of the issuer; actively traded similar or related securities; conversion
or exchange rights on the security; related corporate actions; and changes in overall
market conditions. Foreign currency exchange rates are generally determined as of
the close of the NYSE. Occasionally, events affecting the value of foreign investments
occur between the time at which they are determined and the close of the NYSE, which
will not be reflected in the computation of the Funds net asset value. If
events materially affecting the value of such securities occur during such time
periods, the securities will be valued at their fair value as determined in good
faith by or under the direction of the Board. The amortized cost method of valuation,
which approximates market value, generally is used to value short-term debt instruments
with sixty days or less remaining to maturity, unless the Board determines that
this does not represent fair value. Investments in open-end investment companies
are valued at the daily closing net asset value of the respective investment company
as provided by such other entity. Investment securities and other assets and liabilities
denominated in foreign currencies are translated daily into US dollars using foreign
currency exchange rates determined as of the close of regular trading on the New
York Stock Exchange.
The Fund adopted Statement of Financial Accounting Standards
No. 157, Fair value measurements (FAS 157). FAS 157
requires disclosure surrounding the various inputs that are used in determining
the value of the Funds investments. These inputs are summarized into the three
broad levels listed below.
Level 1Quoted prices in active markets for identical
securities.
Level 2Other significant observable inputs, including but not
limited to, quoted prices for similar securities, interest rates, prepayment speeds
and credit risk.
Level 3Unobservable inputs inclusive of the Funds
own assumptions in determining the value of investments.
Strategic Global Income Fund, Inc.
Notes to financial statementsNovember
30, 2008
The following is a summary of the inputs used as of November 30, 2008
in valuing the Funds assets and liabilities:
Measurements at 11/30/08 | ||||||||||||
Quoted prices in | Significant | |||||||||||
active markets | other | |||||||||||
for identical | observable | Unobservable | ||||||||||
assets | inputs | inputs | ||||||||||
Description | (Level 1) | (Level 2) | (Level 3) | Total | ||||||||
Assets: | ||||||||||||
Securities | $0 | $140,097,192 | $25,712,929 | $165,810,121 | ||||||||
Derivatives | 1,809,873 | 52,255,840 | 0 | 54,065,713 | ||||||||
Total | $1,809,873 | $192,353,032 | $25,712,929 | $219,875,834 | ||||||||
Liabilities: | ||||||||||||
Securities sold short | $0 | $0 | $0 | $0 | ||||||||
Derivatives | (999,483 | ) | (52,299,379 | ) | 0 | (53,298,862 | ) | |||||
Total | $(999,483 | ) | $(52,299,379 | ) | $0 | $(53,298,862 | ) | |||||
The following is a rollforward of the Funds assets that were valued using unobservable inputs for the period, which excludes from Total gains or losses (realized/unrealized) included in earnings unrealized losses of $1,681,710 related to transferred assets, presented at their end of period values:
Measurements using | |||||||||
unobservable inputs (Level 3) | |||||||||
Securities | Derivatives | Total | |||||||
Assets: | |||||||||
Beginning balance | $15,518,620 | $0 | $15,518,620 | ||||||
Total gains or losses (realized/unrealized) | |||||||||
included in earnings | (3,231,382 | ) | 0 | (3,231,382 | ) | ||||
Purchases, sales, issuances, and settlements (net) | 11,888,325 | 0 | 11,888,325 | ||||||
Transfers in and/or out of Level 3 | 1,537,366 | 0 | 1,537,366 | ||||||
Ending balance | $25,712,929 | $0 | $25,712,929 | ||||||
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets still held at 11/30/08. | $(5,080,671 | ) | $0 | $(5,080,671 | ) | ||||
In September 2008, the Financial Accounting Standards Board (FASB) issued FASB Staff Position No. FAS 133-1 and FIN 45-4, Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45 (the FSP). The FSP amends FASB Statement No. 133 (FAS 133), Accounting for Derivative
Strategic Global Income Fund, Inc.
Notes to financial statementsNovember
30, 2008
Instruments and Hedging Activities, and
also amends FASB Interpretation No. 45 (FIN 45), Guarantors Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. The
amendments to FAS 133 include required disclosure for (i) the nature
and terms of the credit derivative, reasons for entering into the credit derivative,
the events or circumstances that would require the seller to perform under the credit
derivative, and the current status of the payment/performance risk of the credit
derivative, (ii) the maximum potential amount of future payments (undiscounted) the
seller could be required to make under the credit derivative, (iii) the fair value
of the credit derivative, and (iv) the nature of any recourse provisions and assets
held either as collateral or by third parties. The amendments to FIN 45 require
additional disclosures about the current status of the payment/performance risk
of a guarantee. All changes to accounting policies have been made in accordance
with the FSP and incorporated for the current period as part of the Notes to the
portfolio of investments and disclosures within the footnote, Swap agreements.
In March 2008, the FASB issued Statement of Financial Accounting Standards
No. 161, Disclosures about Derivative Instruments and Hedging Activities
(FAS 161). This standard requires enhanced disclosures about the Funds derivative and hedging activities. FAS 161 is effective for financial statements
issued for fiscal years beginning after November 15, 2008 and interim periods within
those fiscal years. Management is currently evaluating the impact the adoption of
FAS 161 will have on the Funds financial statement disclosures.
Investment
transactions and investment incomeInvestment 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 translationThe Fund uses the foreign currency exchange
rates determined as of the close of regular trading on the NYSE. For purposes of
calculating the US dollar equivalent value of a non-US dollar denominated obligation,
foreign currency amounts are translated into US dollars on the following basis:
(1) market value of investment securities and other assets and liabilitiesat
the exchange rates prevailing at the close of each business day; and (2) purchases
and sales of investment
Strategic Global Income Fund, Inc.
Notes to financial statementsNovember
30, 2008
securities and income and expensesat the rates of
exchange prevailing on the respective dates of such transactions.
Although the net assets and the market value of the Funds portfolio
are presented at the foreign exchange rates at the end of the Funds fiscal
period, the Fund does not generally isolate the effect of fluctuations in foreign
exchange rates from the effect of the changes in market prices of securities. However,
the Fund does isolate the effect of fluctuations in foreign exchange rates when
determining the gain or loss upon the sale or maturity of foreign currency-denominated
securities pursuant to US federal income tax regulations. Certain foreign exchange
gains and losses included in realized and unrealized gains and losses are included
in or are a reduction of ordinary income in accordance with US federal income tax
regulations.
Forward foreign currency contractsThe Fund may enter
into forward foreign currency exchange contracts (forward contracts)
in connection with planned purchases or sales of securities or to hedge the US dollar
value of portfolio securities denominated in a particular currency. The Fund may
also use forward contracts in an attempt to enhance income.
The Fund has no specific
limitation on the percentage of assets which may be committed to such contracts.
The Fund may enter into forward contracts or maintain a net exposure to forward
contracts only if (1) the consummation of the contracts would not obligate the Fund
to deliver an amount of foreign currency in excess of the value of the position
being hedged by such contracts or (2) the Fund identifies cash or liquid securities
in an amount not less than the value of its assets committed to the consummation
of the forward contracts and not covered as provided in (1) above, as marked-to-market
daily.
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 US dollar.
Fluctuations in the value of forward contracts are recorded for book purposes
as unrealized gains or losses by the Fund. Realized gains and losses include net
gains and losses recognized by the Fund on contracts which have been sold or matured.
Strategic Global Income Fund, Inc.
Notes to financial statementsNovember
30, 2008
Futures contractsThe Fund may use financial futures contracts for
hedging purposes and to adjust exposure to US and foreign fixed income markets in
connection with a reallocation of the Funds assets or to manage the average
duration of the Fund. However, imperfect correlations between futures contracts and the related securities or markets, or market disruptions,
do not normally permit full control of these risks at all times. Using financial
futures contracts involves various market risks. The maximum amount at risk from
the purchase of a futures contract is the contract value.
Upon entering into
a financial futures contract, the Fund is required to deliver to a broker an amount
of cash and/or liquid securities equal to a certain percentage of the contract amount.
This amount is known as the initial margin. Subsequent payments, known
as variation margin, are made or received by the Fund each day, depending
on the daily fluctuations in the value of the underlying financial futures contracts.
Such variation margin is recorded for financial statement purposes on a daily basis
as an unrealized gain or loss on futures until the financial futures contract is
closed or expires, at which time the net gain or loss is reclassified to realized
gain or loss on futures.
The Statement of operations reflects net realized and
net unrealized gains and losses on these contracts.
Swap agreementsThe
Fund may engage in swap agreements, including but not limited to interest rate,
currency, credit default and total return swap agreements. The Fund expects to enter
into these transactions to preserve a return or spread on a particular investment
or portion of the portfolios duration, to protect against any increase in
the price of securities the Fund anticipates purchasing at a later date, or to gain
exposure to certain markets in the most economical way possible.
The Fund may
enter into interest rate swap agreements with another party to receive or pay interest
(e.g., an exchange of fixed rate payments for floating rate payments) to protect
itself from interest rate fluctuations. This type of swap is an agreement that
obligates two parties to exchange a series of cash flows at specified intervals
based upon or calculated by reference to a specified interest rate(s) for a specified
amount. The payment flows are usually netted against each other, with the difference
being paid by one party to the other.
Strategic Global Income Fund, Inc.
Notes to financial statementsNovember
30, 2008
Credit default swap agreements involve
commitments to make or receive payments in the event of a default or a credit event
of a referenced security. As a buyer, the Fund would make periodic payments to the
counterparty, and the Fund would receive payments only upon the occurrence of a
credit event. If no credit event occurs, the Fund will lose its periodic stream
of payments over the term of the contract. However, if a credit event does
occur, the Fund typically would receive full notional value for a reference obligation
that may have little or no value. As a seller, the Fund would receive periodic payments
from the counterparty, and the Fund would make payments only upon the occurrence
of a credit event. If no credit event occurs, the Fund will gain the periodic stream
of payments it received over the term of the contract. However, if a credit event
occurs, the Fund will pay full notional value for a reference obligation that may
have little or no value. Credit default swaps may involve greater risks than if
the Fund had invested in the reference obligation directly and are subject to general
market risk, liquidity risk, counterparty risk and credit risk.
Credit default
swap agreements on corporate issues or sovereign issues of an emerging country involve
one party making a stream of payments to another party in exchange for the right
to receive a specified return in the event of a default or other credit event. If
a credit event occurs and cash settlement is not elected, a variety of other deliverable
obligations may be delivered in lieu of the specific referenced obligation. The
ability to deliver other obligations may result in a cheapest-to-deliver option
(the buyer of protections right to choose the deliverable obligation with
the lowest value following a credit event). The Fund may use credit default swaps
on corporate issues or sovereign issues of an emerging country to provide a measure
of protection against defaults of the issuers (i.e., to reduce risk where the Fund
owns or has exposure to the referenced obligation) or to take an active long or
short position with respect to the likelihood of a particular issuers default.
Total return swap agreements involve commitments to pay or receive interest
in exchange for a market-linked return based on a notional amount. To the extent
the total return of the security or index underlying the transaction exceeds or
falls short of the offsetting interest rate obligation, the Fund will receive a
payment from or make a payment to the counterparty, respectively. Total return swaps
are marked-to-market daily, and the change, if any, is recorded as unrealized appreciation
or depreciation.
Strategic Global Income Fund, Inc.
Notes to financial statementsNovember
30, 2008
The use of swaps involves investment techniques and risks different
from those associated with ordinary portfolio security transactions. If UBS Global
AM is incorrect in its forecast of market values, interest rates and other applicable
factors, the investment performance of the Fund will be less favorable than it would
have been if this investment technique was never used. Swaps do not involve the
delivery of securities and are subject to counterparty risk. If the other party
to a swap defaults and fails to consummate the transaction, the Funds risk
of loss will consist of the net amount of interest or other payments that the Fund
is contractually entitled to receive. Therefore, the Fund would consider the creditworthiness
of the counterparty to a swap agreement in evaluating potential credit risk.
The Fund accrues for interim payments on swap agreements on a daily basis, with the
net amount recorded within unrealized appreciation/depreciation of swap agreements
on the Statement of assets and liabilities. Once interim payments are settled in
cash, the net amount is recorded as realized gain/loss on swap agreements, in addition
to realized gain/loss recorded upon the termination of swap agreements on the Statement
of operations. Fluctuations in the value of swap agreements are recorded for financial
statement purposes as unrealized appreciation or depreciation of swap agreements.
The maximum potential amount of future payments (undiscounted) that the Fund
as a seller of protection could be required to make under a credit default swap
agreement would be an amount equal to the notional amount of the agreement. Notional
amounts of all credit default swap agreements outstanding as of November 30, 2008
for which the Fund is the seller of protection are disclosed on page 43 in the footnotes
to financial statements. These potential amounts would be partially offset by any
recovery values of the respective referenced obligations, upfront payments received
upon entering into the agreement, or net amounts received from the settlement of
buy protection credit default swap agreements entered into, if any, by the Fund
for the same referenced entity or entities.
Strategic Global Income Fund, Inc.
Notes to financial statementsNovember
30, 2008
At November 30, 2008, the Fund had outstanding interest rate swap contracts
with the following terms:
Payments | Payments | ||||||||||||||
Notional | Termination | made by | received by | ||||||||||||
Counterparty | amount | dates | the Fund | the Fund | Value | ||||||||||
Citigroup Global | |||||||||||||||
Markets Limited | USD | 13,100,000 | 02/28/13 | | %(1) | 3.4750 | %(2) | $374,077 | |||||||
Citigroup Global | |||||||||||||||
Markets Limited | USD | 8,000,000 | 08/15/16 | 4.3400 | (2) | | (1) | (692,672 | ) | ||||||
Citigroup Global | |||||||||||||||
Markets Limited | USD | 42,400,000 | 11/24/18 | 1.4038 | (4) | 2.1531 | (3) | 16,905 | |||||||
Deutsche Bank AG | USD | 3,400,000 | 09/15/10 | 2.8163 | (3) | 3.6000 | (2) | 94,369 | |||||||
Deutsche Bank AG | USD | 45,480,000 | 10/15/10 | | (1) | 3.2000 | (2) | 849,944 | |||||||
Deutsche Bank AG | GBP | 30,000,000 | 12/15/11 | | (5) | 4.1950 | (2) | 768,983 | |||||||
Deutsche Bank AG | GBP | 7,300,000 | 12/15/19 | 4.6425 | (2) | | (5) | (356,606 | ) | ||||||
Goldman Sachs | |||||||||||||||
International | USD | 84,700,000 | 11/24/09 | 2.1531 | (3) | 1.3988 | (4) | 168,931 | |||||||
Goldman Sachs | |||||||||||||||
International | USD | 3,400,000 | 09/15/10 | 2.8163 | (3) | 3.6000 | (2) | 94,369 | |||||||
JPMorgan | |||||||||||||||
Chase Bank | AUD | 85,500,000 | 08/24/11 | | (6) | 6.7500 | (2) | 2,220,518 | |||||||
JPMorgan | |||||||||||||||
Chase Bank | USD | 42,400,000 | 11/24/18 | 1.4088 | (4) | 2.1531 | (3) | (1,808 | ) | ||||||
JPMorgan | |||||||||||||||
Chase Bank | AUD | 22,500,000 | 08/24/19 | 6.5700 | (2) | | (5) | (1,396,449 | ) | ||||||
Merrill Lynch | |||||||||||||||
International | USD | 15,430,000 | 08/15/16 | 4.3300 | (2) | | (1) | (1,327,240 | ) | ||||||
$813,321 | |||||||||||||||
(1) | Rate based on 3 month LIBOR (USD BBA). This is a forward starting trade and, as such, a floating rate has not yet been assigned as of November 30, 2008. | |
(2) | Payments made or received are based on the notional amount. | |
(3) | Rate based on 3 month LIBOR (USD BBA). | |
(4) | Rate based on 1 month LIBOR (USD BBA). | |
(5) | Rate based on 6 month LIBOR (GBP BBA). This is a forward starting trade and, as such, a floating rate has not been assigned as of November 30, 2008. | |
(6) | Rate based on 3 month BBSW. This is a forward starting trade and, as such, a floating rate has not yet been assigned as of November 30, 2008. | |
BBA | British Banking Association | |
BBSW | Bank Bill Swap Reference Rate (Australian Financial Market) | |
LIBOR | London Interbank Offered Rate |
Strategic Global Income Fund, Inc.
Notes to financial statementsNovember 30, 2008
Currency type abbreviations: | ||
AUD | Australian Dollar | |
GBP | Great Britain Pound | |
USD | United States Dollar |
At November 30, 2008, the Fund had outstanding
a credit default swap contract with the following terms:
Credit default swap
on corporate and sovereign issuessell protection
CounterpartyCredit
Suisse International:
Upfront | |||||||||||||
Payments | Payments | payments | |||||||||||
Notional | Termination | made by | received by | made | Credit | ||||||||
amount(1) | date | the Fund | the Fund | (received) | Value | spread(2) | |||||||
USD 4,000,000 | 05/20/12 | (3) | 3.3000%(4) | $ | $(683,054) | 9.849% | |||||||
(1) | The notional amount represents the maximum potential payment the Fund could be required to make, as a credit protection seller, if a credit event, as defined by the terms of this particular agreement, occurs. | |
(2) | Credit spreads, represented in absolute terms, utilized in determining the market value as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entitys credit soundness and a greater likelihood of risk of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as Defaulted indicates a credit event has occurred for the referenced entity. | |
(3) | Payment to the counterparty will be made upon the occurrence of bankruptcy and/or restructuring event with respect to the Development Bank of Kazakhstan 7.375% bond, due 11/12/13. | |
(4) | Payments received are based on the notional amount. |
USD | United States Dollar |
Credit linked notesThe Fund may invest in structured notes whose values are based on the price movements of a referenced security or index. The value of these structured notes will rise and fall in response to changes in the referenced security or index. On the maturity date of each
Strategic Global Income Fund, Inc.
Notes to financial statementsNovember 30, 2008
structured note, the Fund will receive a payment from a counterparty based on the value of the referenced security (notional amount multiplied by price of the referenced security) and record a realized gain or loss.
Structured notes may present a greater degree of market risk than many types of securities and may be more volatile and less liquid than less complex securities. Structured notes are also subject to the risks that the issuer of the structured notes may fail to perform its contractual obligations.
Options writingThe Fund may write (sell) put and call options on foreign or US securities indices in order to gain exposure to or protect against changes in the markets. When the Fund writes a call or a put option, an amount equal to the premium received by the Fund is included in the Funds Statement of assets and liabilities as an asset and as an equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option written. If an option which the Fund has written either expires on its stipulated expiration date or the Fund enters into a closing purchase transaction, the Fund realizes a gain (or loss if the cost of a closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security or derivative instrument, and the liability related to such option is extinguished. If a call option which the Fund has written is exercised, the Fund recognizes a realized gain or loss (long-term or short-term, depending on the holding period of the underlying security) from the sale of the underlying security or derivative instrument and the proceeds from the sale are increased by the premium originally received. If a put option which the Fund has written is exercised, the amount of the premium originally received reduces the cost of the security or derivative instrument which the Fund purchases upon exercise of the option.
In writing an option, the Fund bears the market risk of an unfavorable change in the price of the derivative instrument, security or currency underlying the written option. Exercise of an option written by the Fund could result in the Fund selling or buying a derivative instrument, security or currency at a price different from current market value.
Strategic Global Income Fund, Inc.
Notes to financial statementsNovember 30, 2008
Written option activity for the year ended November 30, 2008 for the Fund was as follows:
Amount of | |||||||
Number of | premiums | ||||||
contracts | received | ||||||
Options outstanding at November 30, 2007 | 204 | $200,999 | |||||
Options written | 5,091 | 3,431,329 | |||||
Options terminated in closing purchase transactions | (3,878 | ) | (3,173,010 | ) | |||
Options expired prior to exercise | (1,052 | ) | (317,620 | ) | |||
Options outstanding at November 30, 2008 | 365 | $141,698 | |||||
Purchased optionsThe Fund may purchase put and call options on foreign or US securities and indices as well as exchange-listed call options on particular market segment indices to achieve temporary exposure to a specific security, industry or geographic region. Purchasing call options tends to increase exposure to the underlying instrument. Purchasing put options tends to decrease exposure to the underlying instrument. The Fund pays a premium which is included in the Statement of assets and liabilities as an investment and subsequently marked-to-market to reflect the current value of the option. Premiums paid for purchasing options which expire are treated as realized losses. The risk associated with purchasing put and call options is limited to the premium paid. Premiums paid for purchasing options which are exercised or closed are added to the amounts paid or offset against the proceeds on the underlying futures, security or currency transaction to determine the realized gain or loss.
Dividends and distributionsDividends and distributions to shareholders are recorded on the ex-dividend date. The amount of dividends from net investment income and distributions from net realized capital gains and/or return of capital is determined in accordance with US federal income tax regulations, which may differ from US generally accepted accounting principles. These book/tax differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the capital accounts based on their federal tax-basis treatment; temporary differences do not require reclassification.
Concentration of risk
Investing
in securities of foreign issuers and currency transactions may involve certain considerations
and risks not typically associated with
Strategic Global Income Fund, Inc.
Notes to financial statementsNovember 30, 2008
investments in the United States. These risks include revaluation of currencies, adverse fluctuations in foreign currency values and possible adverse political, social and economic developments, including those particular to a specific industry, country or region, which could cause the securities and their markets to be less liquid and prices more volatile than those of comparable US companies and US government securities. These risks are greater with respect to securities of issuers located in emerging market countries in which the Fund invests. The ability of the issuers of debt securities held by the Fund to meet their obligations may be affected by economic and political developments particular to a specific industry, country, state or region.
Investment advisor and administrator
The Funds Board has approved an investment advisory and administration
contract (Advisory Contract) with UBS Global AM. In accordance with
the Advisory Contract, the Fund pays UBS Global AM an investment advisory and administration
fee, which is accrued weekly and paid monthly, at the annual rate of 1.00% of the
Funds average weekly net assets. At November 30, 2008, the Fund owed UBS Global
AM $144,653 in investment advisory and administration fees.
Additional information regarding compensation
to affiliate of a board member
Effective March 1, 2005, Professor Meyer Feldberg
accepted the position of senior advisor to Morgan Stanley, resulting in him becoming
an interested director of the Fund. The Fund has been informed that Professor Feldbergs role at Morgan Stanley does not involve matters directly affecting any UBS
funds. Fund transactions are executed through Morgan Stanley based on that firms ability to provide best execution of the transactions. During the year ended
November 30, 2008, the Fund purchased and sold certain securities (e.g., fixed income
securities) in principal trades with Morgan Stanley having an aggregate value of
$16,213,301. Morgan Stanley received compensation in connection with these trades,
which may have been in the form of a mark-up or mark-down
of the price of the securities, a fee from the issuer for maintaining a commercial
paper program, or some other form of compensation. Although the precise amount of
this compensation is not generally known by UBS Global AM, UBS Global AM believes
that under normal circumstances it represents a small portion of the total value
of the transactions.
Strategic Global Income Fund, Inc.
Notes to financial statementsNovember 30, 2008
Securities lending
The Fund may
lend securities up to 331/3% of its total assets to qualified
broker-dealers or institutional investors. The loans are secured at all times by
cash, cash equivalents or US government securities in an amount at least equal to
the market value of the securities loaned, plus accrued interest and dividends,
determined on a daily basis and adjusted accordingly. The Fund will regain ownership
of loaned securities to exercise certain beneficial rights; however, the Fund may
bear the risk of delay in recovery of, or even loss of rights in, the securities
loaned should the borrower fail financially. The Fund receives compensation for
lending its securities from interest or dividends earned on the cash, cash equivalents
or US government securities held as collateral, net of fee rebates paid to the borrower
plus reasonable administrative and custody fees. UBS Financial Services Inc. and
other affiliated broker-dealers had been approved as borrowers under the Funds
securities lending program. UBS Securities LLC was the lending agent. For the year
ended November 30, 2008, UBS Securities LLC earned $189 in compensation as the Funds lending agent. At November 30, 2008, the Fund did not owe UBS Securities LLC
compensation as the Funds lending agent. At November 30, 2008, there were no
securities on loan and no related collateral outstanding. In November 2008, UBS
Securities LLC exited the securities lending business.
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, 2008. For the years ended November 30, 2008 and November 30, 2007,
there were no transactions involving common stock.
Purchases and sales of securities
For the year ended November 30, 2008, aggregate purchases and sales of portfolio
securities, excluding short-term securities, were $167,183,720 and $166,428,071,
respectively.
Federal tax status
It is the Funds policy to comply with all requirements of the Internal Revenue Code applicable
to regulated investment companies and to distribute substantially all of its taxable
income to its shareholders. In addition, by distributing during each calendar year
substantially all of its net investment income, net realized capital gains and certain
other amounts, if any,
Strategic Global Income Fund, Inc.
Notes to financial statementsNovember 30, 2008
the Fund intends not to be subject to a federal excise tax. Accordingly, no federal income tax provision was required.
The tax character of distributions paid during the fiscal year ended November 30, 2008 was as follows:
Distributions paid from: | 2008 | 2007 | ||||
Ordinary income | $15,766,753 | $12,824,898 | ||||
Net long-term capital gains | 2,039,256 | 4,075,473 | ||||
$17,806,009 | $16,900,371 | |||||
At November 30, 2008, the components of accumulated earnings (deficit) on a tax basis were as follows:
Undistributed ordinary income | $2,161,652 | |||
Accumulated capital and other losses | (2,815,708 | ) | ||
Net unrealized depreciation | (34,976,795 | ) | ||
Total accumulated deficit | $(35,630,851 | ) | ||
For federal income tax purposes, the tax cost of investments and the components of net unrealized depreciation of investments at November 30, 2008 were as follows:
Tax cost of investments | $201,643,005 | |||
Gross unrealized appreciation | 5,939,844 | |||
Gross unrealized depreciation | (40,563,390 | ) | ||
Net unrealized depreciation of investments | $(34,623,546 | ) | ||
The difference between book-basis and tax-basis
net unrealized depreciation of investments is attributable to premium amortization
adjustments and options marked to market.
To reflect reclassifications arising
from permanent book/tax differences for the year ended November 30, 2008,
the Funds accumulated undistributed net investment income was increased by
$8,812,790, accumulated net realized loss from investment activities was increased
by $8,812,779 and capital stock was decreased by $11. These differences are primarily
due to the tax treatment of foreign currency transactions, paydown gains and losses,
reclassification of distributions for tax purposes, adjustments for certain debt
obligations and the tax treatment of swap contracts.
Strategic Global Income Fund, Inc.
Notes to financial statementsNovember 30, 2008
At November 30, 2008, the Fund had a net
capital loss carryover of $2,650,085 for federal income tax purposes available to
offset future capital gains through November 30, 2016.
The Fund adopted the provisions
of FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty
in Income Taxes. The implementation of FIN 48 resulted in no material liabilities
for unrecognized tax benefits and no material changes to the beginning net asset
value of the Fund.
As of and during the year ended November 30, 2008, the Fund
did not have any liabilities for any unrecognized tax benefits. The Fund recognizes
interest and penalties, if any, related to unrecognized tax benefits as income tax
expense in the Statement of operations. During the period, the Fund did not incur
any interest or penalties.
Each of the tax years in the four year period ended
November 30, 2008 remains subject to examination by the Internal Revenue Service
and the state taxing authorities. The adoption of FIN 48 had no impact on the operations
of the Fund for the year ended November 30, 2008.
Strategic Global Income Fund, Inc.
Report of Ernst & Young LLP, independent registered public accounting firm
The Board
of Directors and Shareholders 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, 2008, 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 the financial highlights for each of the five years in the period then
ended. These financial statements and financial highlights are the responsibility
of the Funds 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 the standards of the Public Company Accounting Oversight Board (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. We were not engaged to perform an audit of the Funds internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of November 30, 2008, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. 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, 2008, 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 US generally accepted accounting principles.
New York, New York
January 27, 2009
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 Funds fiscal year is not the calendar year, another notification will be sent in respect of calendar year 2008. 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 2009. Shareholders are advised to consult their own tax advisors with respect to the tax consequences of their investment in the Fund.
The foreign taxes paid represent taxes incurred by the Fund on income received by the Fund from foreign sources. Foreign taxes paid may be included in taxable income with an offsetting deduction from gross income or may be taken as a credit for taxes paid to foreign governments. You should consult your tax advisor regarding the appropriate treatment of foreign taxes paid.
50 |
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
Funds primary investment objective is to achieve a high level of current income.
As a secondary objective, the Fund seeks capital appreciation, to the extent consistent
with its primary objective. There can be no assurance that the Funds investment
objective will be achieved. The Funds investment advisor and administrator
is UBS Global Asset Management (Americas) Inc. (UBS Global AM).
Shareholder information
The Funds NYSE trading symbol is SGL. Comparative net asset value and market
price information about the Fund is published weekly in various publications.
Update regarding the Funds investmentsinvestments
in certain structured products and certain attendant risks
The Fund may invest in a wide range of securities, including mortgage- and asset-backed
securities. Information regarding such securities was included in the Funds
original prospectus. Since that time, markets have continued to change, and the
Fund may invest to a greater extent in certain types of securities then it has in
the past.
As a result of current market opportunities, the Fund may invest significantly in mortgage-backed and asset-backed securities. The Fund may invest in asset-backed securities that are categorized as collateralized debt obligations (CDOs). CDOs include collateralized bond obligations (CBOs), collateralized loan obligations (CLOs) and other similarly structured securities. A CBO is a trust that is backed by a diversified pool of high risk, below investment grade fixed income securities. A CLO is a trust typically collateralized by a pool of loans, which may include, among others, domestic and foreign senior secured loans, senior unsecured loans, and subordinate corporate loans, including loans that may be rated below investment grade or equivalent unrated loans. CDOs may charge management fees and administrative expenses.
For CBOs and CLOs, the cash flows from the trust are split into two or more portions, called tranches, varying in risk and yield. The riskiest portion is the equity tranche which bears the bulk of defaults from the bonds or loans in the trust and serves to protect the other, more senior tranches
51 |
Strategic Global Income Fund, Inc.
General information (unaudited)
from default in all but the most severe circumstances. Since it is partially protected from defaults, a senior tranche from a CLO trust typically has higher ratings and lower yields than its underlying securities, and can be rated investment grade. Despite the protection from the equity tranche, CLO tranches can experience substantial losses due to actual defaults, increased sensitivity to defaults due to collateral default and disappearance of protecting tranches, market anticipation of defaults, as well as aversion to CLO securities as a class.
The risks of an investment in a CDO depend largely on the type of the collateral securities and the class of the CDO in which the Fund invests. Normally, CLOs and other CDOs are privately offered and sold, and thus, are not registered under the securities laws. As a result, investments in CDOs may be characterized by the Fund as illiquid securities, however an active dealer market may exist for CDOs allowing a CDO to qualify under the Rule 144A safe harbor from the registration requirements of the Securities Act for resales of certain securities to qualified institutional buyers. In addition to the normal risks associated with fixed income securities (e.g., interest rate risk, prepayment risk and default risk), CDOs carry additional risks including, but are not limited to, the risk that: (i) distributions from collateral securities may not be adequate to make interest or other payments; (ii) the quality of the collateral may decline in value or default; (iii) the Fund may invest in CDOs that are subordinate to other classes; and (iv) the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the issuer or unexpected investment results.
The Funds manager will weigh the potential benefits of an investment against perceived risks in determining whether to invest in such securities. The Funds manager believes that the Funds closed-end structure might make it particularly appropriate to take advantage of market opportunities to purchase such securities from other investors, such as those who are effectively forced to sell such securities at attractive prices in order to meet redemption requests from their own investors.
As noted in its prospectus, the Fund may invest up to 20% of its total assets in mortgage-backed securities; the Fund has not adopted a similar policy limiting the amount of its investments in asset-backed securities. Such investments would be made in light of the Funds overall primary investment goal to achieve a high level of current income, with capital appreciation a secondary objective in the selection of investments.
52 |
Strategic Global Income Fund, Inc.
General information (unaudited)
Quarterly Form N-Q portfolio schedule
The Fund will file its complete schedule of portfolio holdings with the Securities
and Exchange Commission (SEC) for the first and third quarters
of each fiscal year on Form N-Q. The Funds Forms N-Q are available on the
SECs Web site at http://www.sec.gov. The Funds Forms N-Q may be reviewed
and copied at the SECs Public Reference Room in Washington, D.C. Information
on the operation of the SECs Public Reference Room may be obtained by calling
1-800-SEC 0330. Additionally, you may obtain copies of Forms N-Q from the Fund upon
request by calling 1-800-647 1568.
Proxy voting policies, procedures and
record
You may obtain a description of the Funds (1) proxy voting policies,
(2) proxy voting procedures and (3) information regarding how the Fund voted any proxies
related to portfolio securities during the most recent 12-month period ended June 30
for which an SEC filing has been made, without charge, upon request by contacting
the Fund directly at 1-800-647 1568, online on the Funds Web site: www.ubs.com/ubsglobalam-proxy,
or on the EDGAR Database on the SECs Web site (http://www.sec.gov).
Dividend reinvestment plan
The
Funds Board has established a Dividend Reinvestment Plan (the Plan)
under which all shareholders whose shares are registered in their own names, or
in the name of UBS Financial Services Inc. or its nominee, will have all dividends
and other distributions on their shares of common stock automatically reinvested
in additional shares, unless such shareholders elect to receive cash. Shareholders
who elect to hold their shares in the name of another broker or nominee should contact
such broker or nominee to determine whether, or how, they may participate in the
Plan. The ability of such shareholders to participate in the Plan may change if
their shares are transferred into the name of another broker or nominee.
A shareholder may elect not to participate in the Plan or may terminate participation in the Plan at any time without penalty, and shareholders who have previously terminated participation in the Plan may rejoin it at any time. Changes in elections must be made in writing to the Funds transfer agent and should include the shareholders name and address as they appear on that share certificate or in the transfer agents 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
53 |
Strategic Global Income Fund, Inc.
General information (unaudited)
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 Funds market price exceeds its net asset value; a portion of a dividend/distribution may represent a return of capital, which would be reinvested in the Fund at a premium to net asset value. The number of shares of common stock purchased with each dividend/distribution will be equal to the result obtained by dividing the amount of the dividend/distribution payable to a particular shareholder by the average price per share (including applicable brokerage commissions) that the transfer agent was able to obtain in the open market. The Fund will not issue any new shares in connection with the Plan. There currently is no charge to participants for reinvesting dividends or other distributions. The transfer agents 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 agents open market purchases of common stock in connection with the reinvestment of distributions. The automatic reinvestment of dividends and other distributions in shares of common stock does not relieve participants of any income tax that may be payable on such distributions.
Experience under the Plan may indicate that changes are desirable. Accordingly, the Fund reserves the right to amend or terminate the Plan with respect to any dividend or other distribution if notice of the change is sent to Plan participants at least 30 days before the record date for such distribution. The Plan also may be amended or terminated by the transfer agent by at least 30 days written notice to all Plan participants. Additional information regarding the Plan may be obtained from, and all correspondence concerning the Plan should be directed to, the transfer agent at PNC Global Investment Servicing, P.O. Box 43027, Providence, Rhode Island 02940-3027. For further information regarding the Plan, you may also contact the transfer agent directly at 1-800-331 1710.
Distribution policy
The Funds
Board adopted a managed distribution policy in May 1998, which was revised effective
January 2000 and again in May 2005. Pursuant to the policy as in effect from January 2000
through early May 2005, the Fund
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Strategic Global Income Fund, Inc.
General information (unaudited)
made regular monthly distributions at an annualized rate equal to 10% of the Funds net asset value, as determined as of the last trading day during the first week of that month (usually a Friday unless the NYSE is closed that Friday). The Board approved reducing the annualized rate for distribution pursuant to the policy from 10% to 8% effective beginning with the June 2005 monthly distribution. From May 31, 1998 through January 2000, the Funds managed distribution was 8% of the Funds net asset value as determined as of the last trading day during the first week of the month. Prior to May 31, 1998, the Funds distributions varied based on the Funds net investment income and realized capital gains or losses. The Funds Board may change or terminate the managed distribution policy at any time; any such change or termination may have an adverse effect on the market price for the Funds shares.
To the extent that the Funds taxable income in any fiscal year exceeds the aggregate amount distributed based on a fixed percentage of its net asset value, the Fund would make an additional distribution in the amount of that excess near the end of the fiscal year. To the extent that the aggregate amount distributed by the Fund (based on a percentage of its net assets) exceeds its current and accumulated earnings and profits, the amount of that excess would constitute a return of capital or net realized capital gains for tax purposes.
Monthly distributions based on a fixed percentage of the Funds 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 Funds Board receives recommendations from UBS Global AM, the Funds investment advisor, periodically and no less frequently than annually will reassess the annualized percentage of net assets at which the Funds monthly distributions will be made.
55 |
Strategic Global Income Fund, Inc.
Board approval of investment advisory and administration contract (unaudited)
BackgroundAt a meeting of the board of Strategic Global Income Fund, Inc. (the Fund) on July 16, 2008, the members of the board, including the directors who are not interested persons of the Fund (Independent Directors), as defined in the Investment Company Act of 1940, as amended (the 1940 Act), considered and approved the continuance of the Investment Advisory and Administration Contract of the Fund with UBS Global Asset Management (Americas) Inc. (UBS Global AM). In preparing for the meeting, the board members had requested and received extensive information from UBS Global AM to assist them. The board received and considered a variety of information about UBS Global AM, as well as the advisory and administrative arrangements for the Fund.
The Independent Directors discussed the materials initially provided by management prior to the scheduled board meeting in a session with their independent legal counsel and requested, and received from management, supplemental materials to assist them in their consideration of the contracts. The Independent Directors also met in executive session after managements presentation was completed to review the disclosure that had been made to them at the meeting. At all of these sessions the Independent Directors met in session with their independent legal counsel. The Independent Directors also received a memorandum from their independent legal counsel discussing the duties of board members in considering approval of advisory and administration agreements.
In its consideration of the approval of the Investment Advisory and Administration Contract, the board considered the following factors:
Nature, extent and quality of the services under the investment advisory and administration contractThe board received and considered information regarding the nature, extent and quality of advisory services provided to the Fund by UBS Global AM under the Investment Advisory and Administration Contract during the past year. The board also considered the nature, extent and quality of administrative and other services performed by UBS Global AM and the resources devoted to, and the record of compliance with, the Funds compliance policies and procedures. The board noted that it received information at regular meetings throughout the year regarding the services rendered by UBS Global AM concerning the management of the Funds affairs and UBS Global AMs role in coordinating providers of other services to the Fund. The boards evaluation of the services provided by UBS Global AM took into account the boards knowledge and
56 |
Strategic Global Income Fund, Inc.
Board approval of investment advisory and administration contract (unaudited)
familiarity gained as board members of funds in the UBS New York fund complex, including the scope and quality of UBS Global AMs investment advisory and other capabilities and the quality of administrative and other services. The board observed that the scope of services provided by UBS Global AM had expanded over time as a result of regulatory and other developments, including maintaining and monitoring its own and the Funds expanded compliance programs.
The board had available to it the qualifications, backgrounds and responsibilities of the Funds senior personnel and the portfolio manager primarily responsible for the day-to-day portfolio management of the Fund and recognized that many of these persons report to the board regularly and that at each regular meeting the board receives a detailed report on the Funds performance. The board also considered, based on its knowledge of UBS Global AM and its affiliates, the financial resources available to management and its parent organization, UBS AG. In that regard, the board received extensive financial information regarding UBS Global AM and noted that it was a wholly owned, indirect subsidiary of one of the largest financial services firms in the world. It was also noted that UBS Global AM had well over $100 billion in assets under management and was part of the UBS Global Asset Management Division, which had well over $700 billion of assets under management worldwide as of March 2008. The board was also cognizant of, and considered, the regulatory and litigation actions and investigations occurring in the past year involving UBS AG, UBS Global AM and certain of their affiliates.
The board concluded that, overall, it was satisfied with the nature, extent and quality of services provided (and expected to be provided) to the Fund under the Investment Advisory and Administration Contract.
Advisory fees and expense ratiosThe board reviewed and considered the contractual management fee (Contractual Management Fee) payable by the Fund to UBS Global AM in light of the nature, extent and quality of the management and administrative services provided by UBS Global AM. The board also reviewed and considered any fee waiver and/or expense reimbursement arrangements currently in place and considered the actual fee rate (after taking any waivers and reimbursements into account) (Actual Management Fee). Additionally, the board received and considered information comparing the Funds Contractual Management
57 |
Strategic Global Income Fund, Inc.
Board approval of investment advisory and administration contract (unaudited)
Fee, Actual Management Fee and overall expenses with those of funds in a group of funds selected and provided by Lipper, Inc. (Lipper), an independent provider of investment company data (the Expense Group).
In connection with its consideration of the Funds advisory fees, the board also received information on UBS Global AMs standard institutional account fees for accounts of a similar investment type to the Fund. The board noted that, in general, these fees were lower than the Contractual Management Fee and Actual Management Fee for the Fund, but also noted managements explanation that comparisons with such accounts may be of limited relevance given the different structures and regulatory requirements of funds versus such accounts and the differences in the levels of services required by funds and such accounts. The board also received information on fees charged to other funds managed by UBS Global AM.
The comparative Lipper information showed that the Funds Contractual Management Fee and total expenses were in the third quintile and its Actual Management Fee was in the fourth quintile (with the first quintile representing that fifth of the funds in the Expense Group with the lowest level of fees or expenses, as applicable, and the fifth quintile representing that fifth of the funds in the Expense Group with the highest level of fees or expenses, as applicable). The board noted that the Funds Actual Management Fee was close to that of the Funds Expense Group median.
Taking all of the above into consideration, the board determined that the management fee was reasonable in light of the nature, extent and quality of the services provided to the Fund under the Investment Advisory and Administration Contract.
Fund performanceThe board received and considered (a) annualized total return information of the Fund compared to other funds (the Performance Universe) selected by Lipper over the one-, three-, five- and ten-year periods ended April 30, 2008 and (b) annualized performance information for each year in the ten-year period ended April 30. The board was provided with a description of the methodology Lipper used to determine the similarity of the Fund with the funds included in its Performance Universe. The board also noted that it had received information throughout the year at periodic intervals with respect to the Funds performance. The comparative Lipper information showed that the Funds
58 |
Strategic Global Income Fund, Inc.
Board approval of investment advisory and administration contract (unaudited)
performance was in the second quintile for the one-, three- and ten-year periods and the fourth quintile for the five-year period. (The first quintile represented that fifth of the funds in the Performance Universe with the highest performance, and the fifth quintile represented that fifth of the funds in the Performance Universe with the lowest performance.) Based on its review, the board concluded that the Funds investment performance was satisfactory.
Adviser profitabilityThe board received and considered a profitability analysis of UBS Global AM and its affiliates in providing services to the Fund. The board also received profitability information with respect to the UBS New York fund complex as a whole. UBS Global AMs profitability was considered not excessive in light of the nature, extent and quality of the services provided to the Fund.
Economies of scaleThe board received and considered information from management regarding whether UBS Global AM has achieved economies of scale with respect to the management of the Fund, whether the Fund has appropriately benefited from any economies of scale, and whether there is potential for realization of further economies of scale for the Fund. The board considered whether economies of scale in the provision of services to the Fund were being passed along to shareholders. The board also considered whether alternative fee structures (such as breakpoints) would be more appropriate or reasonable taking into consideration economies of scale or other efficiencies.
In conducting its review, the board noted that the Funds Contractual Management Fee did not contain any breakpoints. Further, the board noted that advisory contracts of closed-end funds frequently do not contain breakpoints. Management informed the board that the Fund, as a closed-end investment company, was not expected to materially increase in size; thus, UBS Global AM would not benefit from economies of scale.
The board members considered whether economies of scale could be realized because UBS Global AM advises other similar funds, and, based on their experience, the board accepted UBS Global AMs explanation that significant economies of scale would not be realized because the nature of the market in which the Fund invests did not provide significant savings.
59 |
Strategic Global Income Fund, Inc.
Board approval of investment advisory and administration contract (unaudited)
Other benefits to UBS Global AMThe board considered other benefits received by UBS Global AM and its affiliates as a result of its relationship with the Fund, including the opportunity to offer additional products and services to Fund shareholders.
In light of the costs of providing investment management, administrative and other services to the Fund and UBS Global AMs ongoing commitment to the Fund, the profits and other ancillary benefits that UBS Global AM and its affiliates received were considered reasonable.
In light of all of the foregoing, the board approved the Investment Advisory and Administration Contract to continue for another year. In making its decision, the board identified no single factor as being determinative in approving the Investment Advisory and Administration Contract. The Independent Directors were advised by separate independent legal counsel throughout the entire process. The board discussed the proposed continuance of the Investment Advisory and Administration Contract in a private session with their independent legal counsel at which no representatives of UBS Global AM were present.
60 |
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Strategic Global Income Fund, Inc.
Supplemental information (unaudited)
Board of Directors & Officers information
The Fund is governed by a Board of Directors (the Board), which
oversees the Funds operations. Each Director serves until the next annual
meeting of shareholders and 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 or Officer of the Fund, the Directors or Officers 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.
The Funds most recent proxy statement for an annual meeting of shareholders contains additional information about the Directors and is being mailed to shareholders concurrently with this annual report.
Interested Director
Term of | ||||||
Position(s) | office(1) and | |||||
held with | length of | Principal occupation(s) | ||||
Name, address, and age | Fund | time served | during past 5 years | |||
Meyer Feldberg;(2) 66 Morgan Stanley 1585 Broadway 33rd Floor New York, NY 10036 |
Director | Since 1992 | Professor Feldberg is Dean Emeritus and Professor of Leadership and Ethics at Columbia Business School, although on an extended leave of absence. He is also a senior advisor to Morgan Stanley (financial services) (since March 2005). Professor Feldberg also serves as president of New York City Global Partners (an organization located in part of the Office of the Mayor of the City of New York that promotes interaction with other cities around the world) (since May 2007). Prior to July 2004, he was Dean and Professor of Management of the Graduate School of Business at Columbia University (since 1989). |
62 |
Strategic Global Income Fund, Inc.
Supplemental information (unaudited)
Number of portfolios in fund complex | ||
overseen by director | Other directorships held by director | |
Professor Feldberg is a director or trustee of 29 investment companies (consisting of 61 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor, sub-advisor or manager. | Professor Feldberg is also a director of Primedia Inc. (publishing), Macys, Inc. (operator of department stores), Revlon, Inc. (cosmetics) and SAPPI, Ltd. (producer of paper). |
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Strategic Global Income Fund, Inc.
Supplemental information (unaudited)
Non-interested Directors | ||||||
Term of |
||||||
Position(s) | office(1) and | |||||
held with | length of | Principal occupation(s) | ||||
Name, address, and age | Fund | time served | during past 5 years | |||
Richard Q. Armstrong; 73 c/o Willkie Farr & Gallagher LLP 787 Seventh Avenue New York, NY 10019-6099 |
Director and Chairman of the Board of Directors | Since 1996 (Director) Since 2004 (Chairman of the Board of Directors) | Mr. Armstrong is chairman and principal of R.Q.A. Enterprises (management consulting firm) (since April 1991 and principal occupation since March 1995). | |||
Alan S. Bernikow; 68 207 Benedict Ave Staten Island, NY 10314 |
Director | Since 2006 | Mr. Bernikow is retired. He was a consultant on non-management matters for the firm of Deloitte & Touche (international accounting and consulting firm) (from June 2003 until 2007). Previously, he was deputy chief executive officer at Deloitte & Touche. | |||
Richard R. Burt; 61 McLarty Associates 900 17th Street, 8th Floor Washington, DC 20006 |
Director | Since 1996 | Mr. Burt is a senior advisor to McLarty Associates (a consulting firm) (since April 2007) and chairman of IEP Advisors (international investments and consulting firm). Prior to April 2007, he was chairman of Diligence Inc. (information and risk management firm). | |||
Bernard H. Garil; 68 6754 Casa Grande Way Delray Beach, FL 33446 |
Director | Since 2006 | Mr. Garil is retired (since 2001). He was a managing director at PIMCO Advisory Services (from 1999 to 2001) where he served as president of closed-end funds and vice-president of the variable insurance product funds advised by OpCap Advisors (until 2001). |
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Strategic Global Income Fund, Inc.
Supplemental information (unaudited)
Number of portfolios in fund complex | ||
overseen by director | Other directorships held by director | |
Mr. Armstrong is a director or trustee of 17 investment companies (consisting of 49 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor, sub-advisor or manager. | None | |
Mr. Bernikow is a director or trustee of 17 investment companies (consisting of 49 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor, sub-advisor or manager. | Mr. Bernikow is also a director of Revlon, Inc. (cosmetics) (and serves as the chair of its audit committee and as a member of its nominating and corporate governance committee), a director of Mack-Cali Realty Corporation (real estate investment trust) (and serves as the chair of its audit committee); and a director of the Casual Male Retail Group, Inc. (menswear) (and serves as a member of its audit committee and as a member of its nominating and corporate governance committee). | |
Mr. Burt is a director or trustee of 17 investment companies (consisting of 49 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor, sub-advisor or manager. | Mr. Burt is also a director of The Central European Fund, Inc., The Germany Fund, Inc., The New Germany Fund, Inc., IGT, Inc. (provides technology to gaming and wagering industry) and The Protective Group, Inc. (produces armor products). | |
Mr. Garil is a director or trustee of 17 investment companies (consisting of 49 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor, sub-advisor or manager. | Mr. Garil is also a director of OFI Trust Company (commercial trust company) and a trustee for the Brooklyn College Foundation, Inc. (charitable foundation). |
65 |
Strategic Global Income Fund, Inc.
Supplemental information (unaudited)
Non-interested Directors (concluded) | ||||||
Term of | ||||||
Position(s) | office(1) and | |||||
held with | length of | Principal occupation(s) | ||||
Name, address, and age | Fund | time served | during past 5 years | |||
Heather R. Higgins; 49 255 E. 49th St., Suite 23D New York, NY 10017 |
Director | Since 2006 | Ms. Higgins is the president and director of The Randolph Foundation (charitable foundation) (since 1991). Ms. Higgins also serves on the boards of several non-profit charitable groups, including the Independent Womens Forum (chairman) and the Philanthropy Roundtable (vice chairman). She also serves on the board of the Hoover Institution. |
66 |
Strategic Global Income Fund, Inc.
Supplemental information (unaudited)
Number of portfolios in fund complex | ||
overseen by director | Other directorships held by director | |
Ms. Higgins is a director or trustee of 17 investment companies (consisting of 49 portfolios) for which UBS Global AM or one of its affiliates serves as investment advisor, sub-advisor or manager. | None |
67 |
Strategic Global Income Fund, Inc.
Supplemental information (unaudited)
Officers | ||||||
Term of | Principal occupation(s) during | |||||
Position(s) | office(1) and | past 5 years; number of portfolios | ||||
Name, address, | held with | length of | in fund complex for which person | |||
and age | the Fund | time served | serves as officer | |||
Joseph Allessie*; 43 | Vice President and Assistant Secretary |
Since 2005 | Mr. Allessie is an executive director (since 2007) (prior to which he was a director) and deputy general counsel (since 2005) at UBS Global Asset Management (US) Inc. and UBS Global AM (collectively, UBS Global AMAmericas region). Prior to joining UBS Global AMAmericas region, he was senior vice president and general counsel of Kenmar Advisory Corp. (from 2004 to 2005). Prior to that, Mr. Allessie was general counsel and secretary of GAM USA Inc., GAM Investments, GAM Services, GAM Funds, Inc. and the GAM Avalon Funds (from 1999 to 2004). Mr. Allessie is a vice president and assistant secretary of 21 investment companies (consisting of 105 portfolios) for which UBS Global AMAmericas region or one of its affiliates serves as investment advisor, sub-advisor or manager. | |||
Thomas Disbrow*; 42 | Vice President and Treasurer |
Since 2000 (Vice President) and since 2004 (Treasurer) | Mr. Disbrow is an executive director (since 2007), (prior to which he was a director) (since 2000) and head of the US mutual fund treasury administration department of UBS Global AMAmericas region (since September 2006). Mr. Disbrow is a vice president and treasurer and/or principal accounting officer of 21 investment companies (consisting of 105 portfolios) for which UBS Global AMAmericas region or one of its affiliates serves as investment advisor, sub-advisor or manager. |
68 |
Strategic Global Income Fund, Inc.
Supplemental information (unaudited)
Officers (continued) | ||||||
Term of | Principal occupation(s) during | |||||
Position(s) | office(1) and | past 5 years; number of portfolios | ||||
Name, address, | held with | length of | in fund complex for which person | |||
and age | the Fund | time served | serves as officer | |||
Michael J. Flook*; 43 | Vice President and Assistant Treasurer |
Since 2006 | Mr. Flook is an associate director and a senior manager of the US mutual fund treasury administration department of UBS Global AMAmericas region (since 2006). Prior to joining UBS Global AMAmericas region, he was a senior manager with The Reserve (asset management firm) from May 2005 to May 2006. Prior to that he was a senior manager with PFPC Worldwide since October 2000. Mr. Flook is a vice president and assistant treasurer of 21 investment companies (consisting of 105 portfolios) for which UBS Global AMAmericas region or one of its affiliates serves as investment advisor, sub-advisor or manager. | |||
Mark F. Kemper**; 50 | Vice President and Secretary |
Since 2004 | Mr. Kemper is general counsel of UBS Global AMAmericas region (since 2004). Mr. Kemper also is a managing director of UBS Global AMAmericas region (since 2006). He was deputy general counsel of UBS Global Asset Management (Americas) Inc. (UBS Global AMAmericas) from July 2001 to July 2004. He has been secretary of UBS Global AMAmericas since 1999 and assistant secretary of UBS Global Asset Management Trust Company since 1993. Mr. Kemper is secretary of UBS Global AMAmericas region (since 2004). Mr. Kemper is vice president and secretary of 21 investment companies (consisting of 105 portfolios) for which UBS Global AMAmericas region or one of its affiliates serves as investment advisor, sub-advisor or manager. |
69 |
Strategic Global Income Fund, Inc.
Supplemental information (unaudited)
Officers (continued) | ||||||
Term of | Principal occupation(s) during | |||||
Position(s) | office(1) and | past 5 years; number of portfolios | ||||
Name, address, | held with | length of | in fund complex for which person | |||
and age | the Fund | time served | serves as officer | |||
Joanne M. Kilkeary*; 40 | Vice President and Assistant Treasurer |
Since 2004 | Ms. Kilkeary is a director (since 2008) (prior to which she was an associate director) (since 2000) and a senior manager (since 2004) of the US mutual fund treasury administration department of UBS Global AMAmericas region. Ms. Kilkeary is a vice president and assistant treasurer of 21 investment companies (consisting of 105 portfolios) for which UBS Global AMAmericas region or one of its affiliates serves as investment advisor, sub-advisor or manager. | |||
Tammie Lee*; 37 | Vice President and Assistant Secretary |
Since 2005 | Ms. Lee is a director and associate general counsel of UBS Global AMAmericas region (since 2005). Prior to joining UBS Global AMAmericas region, she was vice president and counsel at Deutsche Asset Management/Scudder Investments from 2003 to 2005. Prior to that she was assistant vice president and counsel at Deutsche Asset Management/Scudder Investments from 2000 to 2003. Ms. Lee is a vice president and assistant secretary of 21 investment companies (consisting of 105 portfolios) for which UBS Global AMAmericas region or one of its affiliates serves as investment advisor, sub-advisor or manager. |
70 |
Strategic Global Income Fund, Inc.
Supplemental information (unaudited)
Officers (continued) | ||||||
Term of | Principal occupation(s) during | |||||
Position(s) | office(1) and | past 5 years; number of portfolios | ||||
Name, address, | held with | length of | in fund complex for which person | |||
and age | the Fund | time served | serves as officer | |||
Steven J. LeMire*; 39 | Vice President and Assistant Treasurer |
Since 2007 | Mr. LeMire is a director and senior manager of the US mutual fund treasury administration department of UBS Global AMAmericas region (since October 2007). Prior to joining UBS Global AMAmericas region, he was an independent consultant with Third River Capital, LLC (formerly Two Rivers Capital, LLC) (from 2005 to 2007). Prior to that, he was vice president of operations and fund administration with Oberweis Asset Management, Inc. (from 1997 to 2005). Mr. LeMire is a vice president and assistant treasurer of 21 investment companies (consisting of 105 portfolios) for which UBS Global AMAmericas region or one of its affiliates serves as investment advisor, sub-advisor or manager. | |||
Joseph McGill*; 46 | Vice President and Chief Compliance Officer |
Since 2004 | Mr. McGill is a managing director (since 2006) and chief compliance officer (since 2003) of UBS Global AMAmericas region. Prior to joining UBS Global AMAmericas region, he was assistant general counsel at J.P. Morgan Investment Management (from 1999 to 2003). Mr. McGill is a vice president and chief compliance officer of 21 investment companies (consisting of 105 portfolios) for which UBS Global AMAmericas region or one of its affiliates serves as investment advisor, sub-advisor or manager. |
71 |
Strategic Global Income Fund, Inc.
Supplemental information (unaudited)
Officers (continued) | ||||||
Term of | Principal occupation(s) during | |||||
Position(s) | office(1) and | past 5 years; number of portfolios | ||||
Name, address, | held with | length of | in fund complex for which person | |||
and age | the Fund | time served | serves as officer | |||
Nancy D. Osborn*; 42 | Vice President and Assistant Treasurer |
Since 2007 | Mrs. Osborn is an associate director and a senior manager of the US mutual fund treasury administration department of UBS Global AMAmericas region (since 2006). Prior to joining UBS Global AMAmericas region, she was an assistant vice president with Brown Brothers Harriman since April 1996. Mrs. Osborn is a vice president and assistant treasurer of 21 investment companies (consisting of 105 portfolios) for which UBS Global AMAmericas region or one of its affiliates serves as investment advisor, sub-advisor or manager. | |||
Eric Sanders*; 43 | Vice President and Assistant Secretary |
Since 2005 | Mr. Sanders is a director and associate general counsel of UBS Global AMAmericas region (since 2005). From 1996 until June 2005, he held various positions at Fred Alger & Company, Incorporated, the most recent being assistant vice president and associate general counsel. Mr. Sanders is a vice president and assistant secretary of 21 investment companies (consisting of 105 portfolios) for which UBS Global AMAmericas region or one of its affiliates serves as investment advisor, sub-advisor or manager. |
72 |
Strategic Global Income Fund, Inc.
Supplemental information (unaudited)
Officers (continued) | ||||||
Term of | Principal occupation(s) during | |||||
Position(s) | office(1) and | past 5 years; number of portfolios | ||||
Name, address, | held with | length of | in fund complex for which person | |||
and age | the Fund | time served | serves as officer | |||
Uwe Schillhorn**; 44 | Vice President | Since 2004 | Mr. Schillhorn is an executive director, and head of emerging markets debt (since 2004) of UBS Global AMAmericas region. Mr. Schillhorn is a vice president of two investment companies (consisting of two portfolios) for which UBS Global AMAmericas region or one of its affiliates serves as investment advisor, sub-advisor or manager. | |||
Andrew Shoup*; 52 | Vice President and Chief Operating Officer |
Since 2006 | Mr. Shoup is a managing director and global head of the global treasury administration department of UBS Global AMAmericas region (since July 2006). Prior to joining UBS Global AMAmericas region, he was chief administrative officer for the Legg Mason Partner Funds (formerly Smith Barney, Salomon Brothers, and CitiFunds mutual funds) from November 2003 to July 2006. Prior to that, he held various positions with Citigroup Asset Management and related companies with their domestic and offshore mutual funds since 1993. Additionally, he has worked for another mutual fund complex as well as spending eleven years in public accounting. Mr. Shoup is a vice president and chief operating officer of 21 investment companies (consisting of 105 portfolios) for which UBS Global AMAmericas region or one of its affiliates serves as investment advisor, sub-advisor or manager. |
73 |
Strategic Global Income Fund, Inc.
Supplemental information (unaudited)
Officers (continued) | ||||||
Term of | Principal occupation(s) during | |||||
Position(s) | office(1) and | past 5 years; number of portfolios | ||||
Name, address, | held with | length of | in fund complex for which person | |||
and age | the Fund | time served | serves as officer | |||
Kai R. Sotorp**; 49 | President | Since 2006 | Mr. Sotorp is the head of the Americas for UBS Global Asset Management (since 2004); a member of the UBS Group Managing Board (since 2003) and a member of the UBS Global Asset Management Executive Committee (since 2001). Prior to his current role, Mr. Sotorp was head of UBS Global Asset ManagementAsia Pacific (20022004), covering Australia, Japan, Hong Kong, Singapore and Taiwan; head of UBS Global Asset Management (Japan) Ltd. (20012004); representative director and president of UBS Global Asset Management (Japan) Ltd. (20002004); and member of the board of Mitsubishi Corp. UBS Realty Inc. (20002004). Mr. Sotorp is president of 21 investment companies (consisting of 105 portfolios) for which UBS Global Asset ManagementAmericas region or one of its affiliates serves as investment advisor, sub-advisor or manager. |
74 |
Strategic Global Income Fund, Inc.
Supplemental information (unaudited)
Officers (concluded) | ||||||
Term of | Principal occupation(s) during | |||||
Position(s) | office(1) and | past 5 years; number of portfolios | ||||
Name, address, | held with | length of | in fund complex for which person | |||
and age | the Fund | time served | serves as officer | |||
Keith A. Weller*; 47 | Vice President and Assistant Secretary |
Since 1995 | Mr. Weller is an executive director and senior associate general counsel of UBS Global AMAmericas region (since 2005) and has been an attorney with affiliated entities since 1995. Mr. Weller is a vice president and assistant secretary of 21 investment companies (consisting of 105 portfolios) for which UBS Global AMAmericas region or one of its affiliates serves as investment advisor, sub-advisor or manager. |
(1) | Each director serves until the next annual meeting of shareholders and 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-five (75) years will be subject to retirement on the last day of the month in which he or she attains such age. Officers are appointed by the directors and serve at the pleasure of the Board. | |
(2) | Professor Feldberg is deemed an interested person of the Fund as defined in the Investment Company Act because he is a senior advisor to Morgan Stanley, a financial services firm with which the Fund may conduct transactions. | |
* | This persons business address is 51 West 52nd Street, New York, New York 10019-6114. | |
** | This persons business address is One North Wacker Drive, Chicago, Illinois 60606. |
75 |
Strategic Global Income Fund, Inc.
New York Stock Exchange certifications (unaudited)
Strategic Global Income Fund, Inc. (the Fund) is listed on the New York Stock Exchange (NYSE). As a result, it is subject to certain corporate governance rules and related interpretations issued by the exchange. Pursuant to those requirements, the Fund must include information in this report regarding certain certifications. The Funds president and treasurer have filed certifications with the SEC regarding the quality of the Funds public disclosure. Those certifications were made pursuant to Section 302 of the Sarbanes-Oxley Act (Section 302 Certifications). The Section 302 Certifications are filed as exhibits to the Funds annual report on Form N-CSR, which includes a copy of this annual report along with other information about the Fund. After the Funds 2008 annual meeting of shareholders, it filed a certification with the NYSE on April 24, 2008 stating that its president was unaware of any violation of the NYSEs Corporate Governance listing standards.
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79 |
N.B.The following privacy notice applies to closed-end fund shares where the investors holdings are registered directly with the funds transfer agent and not held through an intermediary (e.g., in street name).
Privacy Notice
This privacy notice
is not a part of the shareholder report.
UBS family of funds privacy notice
This notice describes the privacy policy of the UBS family of funds, the UBS PACE Funds and all closed-end funds managed, advised or sub-advised by UBS Global Asset Management (collectively, the Funds). The Funds are committed to protecting the personal information that they collect about individuals who are prospective, current or former investors.
The Funds collect personal information in order to process requests and transactions and to provide customer service. Personal information which is obtained from applications may include name(s), address, social security number or tax identification number, bank account information, other Fund holdings and any affiliation the person has with UBS Financial Services Inc. or its subsidiaries (Personal information).
The Funds limit access to Personal Information to those individuals who need to know that information in order to process transactions and service accounts. These individuals are required to maintain and protect the confidentiality of Personal Information. The Funds maintain physical, electronic and procedural safeguards to protect Personal Information.
The Funds may share Personal Information described above with their affiliates, including UBS Financial Services Inc. and UBS AG, for marketing and other business purposes, such as to facilitate the servicing of accounts.
The Funds may share Personal Information described above with a non-affiliated third party if the entity is under contract to perform transaction processing or to service and maintain shareholder accounts on behalf of the Funds and otherwise as permitted by law. Any such contract will include provisions designed to ensure that the third party will uphold and maintain privacy standards when handling Personal Information. The Funds may disclose Personal Information to regulatory authorities as required by applicable law.
Except as described in this privacy notice, the Funds will not use Personal Information for any other purpose unless the Funds describe how such Personal Information will be used and clients are given an opportunity to decline approval of such use of Personal Information relating to them.
The Funds endeavor to keep their customer files complete and accurate. The Funds should be notified if any Personal Information needs to be corrected or updated. Please call 1-800-647 1568 with any questions or concerns regarding your Personal Information or this privacy notice.
Privacy Notice
This privacy notice
is not a part of the shareholder report.
80 |
Directors | ||
Richard Q. Armstrong | Meyer Feldberg | |
Chairman | ||
Bernard H. Garil | ||
Alan S. Bernikow | ||
Heather R. Higgins | ||
Richard R. Burt | ||
Principal Officers | ||
Kai R. Sotorp | Thomas Disbrow | |
President | Vice President and Treasurer | |
Mark F. Kemper | Uwe Schillhorn | |
Vice President and Secretary | Vice President | |
Investment Advisor and Administrator | ||
UBS Global Asset Management (Americas) Inc. | ||
51 West 52nd Street | ||
New York, New York 10019-6114 |
Notice is hereby given in accordance with Section 23(c) of the Investment Company Act of 1940 that from time to time the Fund may purchase shares of its common stock in the open market at market prices.
This report is sent to the shareholders of the Fund for their information. It is not a prospectus, circular or representation intended for use in the purchase or sale of shares of the Fund or of any securities mentioned in this report.
© 2009 UBS Global Asset Management (Americas) Inc. All rights reserved.
UBS Global Asset Management (Americas) Inc.
51 West 52nd Street
New York, New York 10019-6114
Item 2. Code of Ethics.
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 registrants Board has determined that the following person serving on the registrants Audit Committee is an audit committee financial expert as defined in item 3 of Form N-CSR: Alan S. Bernikow. Mr. Bernikow is independent as defined in Item 3 of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
(a) | Audit Fees: | ||
For the fiscal years ended November 30, 2008 and November 30, 2007, the aggregate Ernst & Young LLP (E&Y) audit fees for professional services rendered to the registrant were approximately $56,200 and $53,500, respectively. | |||
Fees included in the audit fees category are those associated with the annual audits of financial statements and services that are normally provided in connection with statutory and regulatory filings. | |||
(b) | Audit-Related Fees: | ||
In each of the fiscal years ended November 30, 2008 and November 30, 2007, the aggregate audit-related fees billed by E&Y for services rendered to the registrant that are reasonably related to the performance of the audits of the financial statements, but not reported as audit fees, were approximately $3,523 and $3,700, respectively. | |||
Fees included in the audit-related category are those associated with (1) the reading and providing of comments on the 2008 and 2007 semiannual financial statements, and (2) review of the consolidated 2007 and 2006 report on the profitability of the UBS Funds to UBS Global Asset Management (Americas) Inc. (UBS Global AM) and its affiliates to assist the board members in their annual advisory/administration contract reviews. | |||
There were no audit-related fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during the fiscal years indicated above. |
(c) | Tax Fees: | ||
In each of the fiscal years ended November 30, 2008 and November 30, 2007, the aggregate tax fees billed by E&Y for professional services rendered to the registrant were approximately $4,600 and $4,150, respectively. | |||
Fees included in the tax fees category comprise all services performed by professional staff in the independent accountants tax division except those services related to the audits. This category comprises fees for tax return preparation and review of excise tax calculations. | |||
There were no tax fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during the fiscal years indicated above. | |||
(d) | All Other Fees: | ||
In each of the fiscal years ended November 30, 2008 and November 30, 2007, there were no fees billed by E&Y for products and services, other than the services reported in Item 4(a)-(c) above, rendered to the registrant. | |||
Fees included in the all other fees category would consist of services related to internal control reviews, strategy and other consulting, financial information systems design and implementation, consulting on other information systems, and other tax services unrelated to the registrant. | |||
There were no all other fees required to be approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during the fiscal years indicated above. |
(e) | (1) | Audit Committee Pre-Approval Policies and Procedures: | ||
The registrants Audit Committee (audit committee) has adopted an Audit Committee Charter (Amended and Restated as of May 12, 2004-with revisions through July 2008) (the charter). The charter contains the audit committees pre-approval policies and procedures. Reproduced below is an excerpt from the charter regarding pre-approval policies and procedures: |
The [audit] Committee shall: | |||
. . . | |||
2. | Pre-approve (a) all audit and permissible non-audit services1 to be provided to the Fund and (b) all permissible non-audit services to be provided by the Funds independent auditors to UBS Global [AM] and any Covered Service Providers, if the engagement relates directly to the operations and financial reporting of the Fund. In carrying out this responsibility, the Committee shall seek periodically from UBS Global [AM] and from the independent auditors a list of such audit and permissible non-audit services that can be expected to be rendered to the Fund, UBS Global [AM] or any Covered Service Providers by the Funds independent auditors, and an estimate of the fees sought to be paid in connection with such services. The Committee may delegate its responsibility to pre-approve any such audit and permissible non-audit services to a sub-committee consisting of the Chairperson of the Committee and two other members of the Committee as the Chairperson, from time to time, may determine and appoint, and such sub-committee shall report to the Committee, at its next regularly scheduled meeting after the |
sub-committees meeting, its decision(s). From year to year, the Committee shall report to the Board whether this system of pre-approval has been effective and efficient or whether this Charter should be amended to allow for pre-approval pursuant to such policies and procedures as the Committee shall approve, including the delegation of some or all of the Committees pre-approval responsibilities to other persons (other than UBS Global [AM] or the Funds officers). |
1 The Committee will not approve non-audit services that the Committee believes may taint the independence of the auditors. Currently, permissible non-audit services include any professional services (including tax services) that are not prohibited services as described below, provided to the Fund by the independent auditors, other than those provided to the Fund in connection with an audit or a review of the financial statements of the Fund. Permissible non-audit services may not include: (i) bookkeeping or other services related to the accounting records or financial statements of the Fund; (ii) financial information systems design and implementation; (iii) appraisal or valuation services, fairness opinions or contribution-in-kind reports; (iv) actuarial services; (v) internal audit outsourcing services; (vi) management functions or human resources; (vii) broker or dealer, investment adviser or investment banking services; (viii) legal services and expert services unrelated to the audit; and (ix) any other service the Public Company Accounting Oversight Board determines, by regulation, is impermissible. | ||
Pre-approval by the Committee of any permissible non-audit services is not required so long as: (i) the aggregate amount of all such permissible non-audit services provided to the Fund, UBS Global [AM] and any service providers controlling, controlled by or under common control with UBS Global [AM] that provide ongoing services to the Fund (Covered Service Providers) constitutes not more than 5% of the total amount of revenues paid to the independent auditors (during the fiscal year in which the permissible non-audit services are provided) by (a) the Fund, (b) its investment adviser and (c) any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Fund during the fiscal year in which the services are provided that would have to be approved by the Committee; (ii) the permissible non-audit services were not recognized by the Fund at the time of the engagement to be non-audit services; and (iii) such services are promptly brought to the attention of the Committee and approved by the Committee (or its delegate(s)) prior to the completion of the audit. |
(e) | (2) | Services approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X: | ||
Audit-Related Fees: |
There were no amounts that were approved by the audit committee pursuant to the de minimis exception for the fiscal years ended November 30, 2008 and November 30, 2007 on behalf of the registrant. | |||
There were no amounts that were required to be approved by the audit committee pursuant to the de minimis exception for the fiscal years ended November 30, 2008 and November 30, 2007 on behalf of the registrants service providers that relate directly to the operations and financial reporting of the registrant. | |||
Tax Fees: | |||
There were no amounts that were approved by the audit committee pursuant to the de minimis exception for the fiscal years ended November 30, 2008 and November 30, 2007 on behalf of the registrant. | |||
There were no amounts that were required to be approved by the audit committee pursuant to the de minimis exception for the fiscal years ended November 30, 2008 and November 30, 2007 on behalf of the registrants service providers that relate directly to the operations and financial reporting of the registrant. | |||
All Other Fees: | |||
There were no amounts that were approved by the audit committee pursuant to the de minimis exception for the fiscal years ended November 30, 2008 and November 30, 2007 on behalf of the registrant. | |||
There were no amounts that were required to be approved by the audit committee pursuant to the de minimis exception for the fiscal years ended November 30, 2008 and November 30, 2007 on behalf of the registrants service providers that relate directly to the operations and financial reporting of the registrant. |
(f) | According to E&Y, for the fiscal year ended November 30, 2008, the percentage of hours spent on the audit of the registrants financial statements for the most recent fiscal year that were attributed to work performed by persons who are not full-time, permanent employees of E&Y was 0%. | ||
(g) | For the fiscal years ended November 30, 2008 and November 30, 2007, the aggregate fees billed by E&Y of $412,382 and $378,555, respectively, for non-audit services rendered on behalf of the registrant (covered), its investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser) and any entity controlling, controlled by, or under common control with the adviser (non-covered) that provides ongoing services to the registrant for each of the last two fiscal years of the registrant is shown in the table below: |
2008 | 2007 | ||||||
Covered Services | $8,123 | $7,850 | |||||
Non-Covered Services | 404,259 | 370,705 |
(h) | The registrants audit committee was not required to consider whether the provision of non-audit services that were rendered to the registrants investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under |
common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountants independence. |
Item 5. Audit Committee of Listed Registrants.
The registrant has a separately designated standing audit committee (the Audit Committee) established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended. The Audit Committee is comprised of the following board members: Mr. Armstrong, Mr. Bernikow, Mr. Burt, Mr. Garil and Ms. Higgins.
Item 6. Investments
(a) | Included as part of the report to shareholders filed under Item 1 of this form. | ||
(b) | Not applicable. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
The registrants 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 registrants 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 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 determines 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 AMs proxy voting policy.
When UBS Global AMs view of a companys management is favorable, UBS Global AM generally supports current management initiatives. When UBS Global AMs 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 interest in voting a particular proxy proposal, which may arise as a result of its or its affiliates client relationships,
marketing efforts or 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. Portfolio Managers of Closed-End Management Investment Companies.
(a) | (1) | Name Uwe Schillhorn | |
Title Vice President | |||
Length of Service Since 2004 | |||
Business Experience Last 5 Years Mr. Schillhorn is an executive director and head of emerging markets debt (since 2004) of UBS Global AM. Mr. Schillhorn is a vice president of two investment companies (consisting of two portfolios) for which UBS Global AM serves as investment advisor, sub-advisor or manager. |
|||
Information is as of January 29, 2009 | |||
(a) | (2) | (i) Portfolio Manager | |
Uwe Schillhorn | |||
(a) | (2) | (ii) (A) Registered Management Investment Companies | |
The portfolio manager is responsible for four other Registered Management Investment Companies (not including the Registrant) totaling approximately $272 million as of November 30, 2008. |
|||
(a) | (2) | (ii) (B) Other Pooled Investment Vehicles | |
The portfolio manager is responsible for nine Other Pooled Investment Vehicles totaling approximately $1.9 billion as of November 30, 2008. |
|||
(a) | (2) | (ii) (C) Other accounts | |
The portfolio manager is responsible for 13 other accounts totaling approximately $2.2 billion as of November 30, 2008. |
|||
(a) | (2) | (iii) Accounts with respect to which an advisory fee is based on the performance of the account. | |
None | |||
(a) | (2) | (iv) Conflicts. | |
The management of the registrant and other accounts by a portfolio manager could result in potential conflicts of interest if the registrant and other accounts have different objectives, benchmarks and fees because the portfolio manager and his team must allocate time and |
investment expertise across multiple accounts, including the registrant. The portfolio manager and his team manage the registrant and other accounts utilizing an approach that groups similar accounts by characteristics and objectives. The Advisor manages accounts according to their respective objectives, including where possible, those accounts that have specific investment restrictions. Accordingly, portfolio holdings, position sizes, and industry and sector exposures tend to be similar across accounts, which may minimize the potential for conflicts of interest. | ||
If a portfolio manager identifies a limited investment opportunity that may be suitable for more than one account, the registrant may not be able to take full advantage of that opportunity due to an allocation of filled purchase or sale orders across all eligible portfolios and accounts. To deal with these situations, the Advisor has adopted procedures for allocating portfolio trades across multiple accounts to provide fair treatment to all accounts. | ||
The management of personal accounts by a portfolio manager may also give rise to potential conflicts of interest. The Advisor and the registrant have adopted a Code of Ethics that governs such personal trading, but there is no assurance that the Code will adequately address all such conflicts. | ||
(Information in Item 8(a)(2) is provided as of the Registrants fiscal year end of November 30, 2008.) |
(a) | (3) | Compensation. | |
The compensation received by portfolio managers at UBS Global AM, including Mr. Schilhorn, includes a base salary and incentive compensation as detailed below. Overall compensation can be grouped into three categories: base salary, annual bonuses and UBS AG equity. Base salary is fixed compensation used to recognize the experience, skills and knowledge that the investment professionals bring to their roles. Annual bonuses, which are discretionary, are correlated with performance and are based on three components: 1) the firms overall business success; 2) the performance of the respective asset class and/or investment mandate; and 3) an individuals specific contribution to the firms results. Senior investment professionals may receive a portion of their annual performance-based incentive in the form of deferred or restricted UBS AG shares or employee stock options. Broader equity share ownership is encouraged for all employees through Equity Plus. This long-term incentive program gives employees the opportunity to purchase UBS stock with after-tax funds from their bonus or salary. Two UBS stock options are given for each share acquired and held for two years. The performance related component of the portfolio managers bonus is based on the performance of the funds he manages as compared to each funds broad-based benchmark over one, two and three year periods. With respect to the Registrant, the benchmark in effect as of November 2008 is a blended benchmark composed of 67% of Citigroup World Government Bond Index and 33% JP Morgan Emerging Markets Bond Index Global. (Information in Item 8(a)(3) is provided as of the Registrants fiscal year end of November 30, 2008, except as otherwise noted.) | |||
(a) | (4) | Dollar Range of Securities of Registrant Beneficially Owned by Portfolio Manager. |
None | |||
(Information in Item 8(a)(4) is provided as of the Registrants fiscal year end of November 30, 2008.) |
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
There were no purchases made by or on behalf of the Registrant or any affiliated purchaser, as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended, of shares of the Registrants equity securities that are registered by the Registrant pursuant to Section 12 of the Exchange Act made in the period covered by this report.
Item 10. Submission of Matters to a Vote of Security Holders.
The registrants Board has established a Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee will consider nominees recommended by shareholders if a vacancy occurs among those board members who are not interested persons as defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended. In order to recommend a nominee, a shareholder should send a letter to the chairperson of the Nominating and Corporate Governance Committee, Richard Burt, care of the Secretary of the registrant at UBS Global Asset Management, UBS Building, One North Wacker Drive, Chicago, IL 60606, and indicate on the envelope Nominating and Corporate Governance Committee. The shareholders letter should state the nominees name and should include the nominees resume or curriculum vitae, and must be accompanied by a written consent of the individual to stand for election if nominated for the Board and to serve if elected by shareholders.
Item 11. Controls and Procedures.
(a) | The registrants principal executive officer and principal financial officer have concluded that the registrants 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 registrants principal executive officer and principal financial officer are aware of no changes in the registrants internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940, as amended) that occurred during the registrants last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting. |
Item 12. 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 incorporated by reference herein from Exhibit EX-99 CODE ETH to the registrants Report on Form N-CSR filed February 5, 2004 (Accession Number: 0001206774-04-000032)(SEC File No. 811-06475). | ||
(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. | ||
(a) | (3) Written solicitation to purchase securities under Rule 23c-1 under the Investment Company Act of 1940 sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons The registrant has not engaged in such a solicitation during the period covered by this report. | ||
(b) | Certifications of principal executive officer and principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 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/ Kai R. Sotorp | |
Kai R. Sotorp | ||
President | ||
Date: | January 29, 2009 | |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ Kai R. Sotorp | |
Kai R. Sotorp | ||
President | ||
Date: | January 29, 2009 | |
By: | /s/ Thomas Disbrow | |
Thomas Disbrow | ||
Vice President and Treasurer | ||
Date: | January 29, 2009 |
Exhibit EX-99.CERT
Certifications
I, Kai R. Sotorp, President of Strategic Global Income Fund, Inc. certify that:
1. | I have reviewed this report on Form N-CSR of Strategic Global Income Fund, Inc.; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; | |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and | ||
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and | ||
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
By: | /s/ Kai R. Sotorp | |
Kai R. Sotorp | ||
President | ||
Date: | January 29, 2009 |
I, Thomas Disbrow, Vice President and Treasurer of Strategic Global Income Fund, Inc., certify that:
1. | I have reviewed this report on Form N-CSR of Strategic Global Income Fund, Inc.; | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; | |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: | |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and | ||
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and | ||
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
By: | /s/ Thomas Disbrow | |
Thomas Disbrow | ||
Vice President and Treasurer | ||
Date: | January 29, 2009 |
Exhibit EX-99.906CERT
Certification Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section
1350, Chapter 63 of Title 18, United States Code)
In connection with the attached report of Strategic Global Income Fund, Inc. (the Registrant) on Form N-CSR (the Report), each of the undersigned officers of the Registrant does hereby certify that, to the best of such officers knowledge:
1) | the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; | |
2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant as of, and for, the periods presented in the Report. |
Dated: | January 29, 2009 | |
By: | /s/ Kai R. Sotorp | |
Kai R. Sotorp | ||
President | ||
Dated: | January 29, 2009 | |
By: | /s/ Thomas Disbrow | |
Thomas Disbrow | ||
Vice President and Treasurer | ||
This certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document.
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