<PAGE>
STRATEGIC GLOBAL INCOME FUND, INC.
PORTFOLIO OF INVESTMENTS MAY 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000)* MATURITY DATES INTEREST RATES VALUE
--------- -------------------- --------------- ------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES - 76.49%
Argentina - 2.75%
US$ 10,395 Republic of Argentina... 03/31/05 6.313+% $ 8,010,595
------------
Australia - 4.48%
8,700 New South Wales Treasury
Corporation............ 12/01/01 12.000 7,890,498
6,000 Queensland Treasury
Corporation Global
Issue.................. 05/15/03 10.500 5,171,868
------------
13,062,366
------------
Brazil - 4.74%
US$ 6,700 Federal Republic of
Brazil, DCB............ 04/15/12 6.563+ 4,371,750
US$ 9,500 Federal Republic of
Brazil, EI............. 04/15/06 6.500+ 7,350,625
US$ 4,000 Federal Republic of
Brazil, PAR............ 04/15/24 5.000# 2,110,000
------------
13,832,375
------------
Canada - 3.91%
5,673 Government of Canada.... 09/01/99 7.750 4,269,604
6,562 Ontario Hydro Global.... 04/11/08 8.600@ 1,781,268
27,000 Province of British
Columbia Residual...... 01/09/12 8.590@ 5,350,341
------------
11,401,213
------------
Denmark - 3.67%
60,153 Government of Denmark... 05/15/03 to 03/15/06 8.000 10,692,542
------------
France - 1.20%
16,000 Government of France.... 04/25/03 8.500 3,507,168
------------
Germany - 9.28%
38,619 Federal Republic of
Germany................ 07/22/02 to 01/04/24 6.250 to 8.000 27,079,308
------------
Ireland - 1.67%
2,756 Republic of Ireland..... 07/11/03 9.250 4,857,578
------------
Italy - 3.37%
15,615,000 Republic of Italy....... 04/01/04 to 02/01/06 8.500 to 9.500 9,825,887
------------
Mexico - 8.63%
US$ 3,000 Fifth Mexican Acceptance
Corporation............ 12/15/98 8.000 880,938
US$ 5,000 Mexican Multi Year
Refinance Loan
Participation (Salomon
Brothers)(1)........... 03/20/05 6.500+ 3,968,750
US$ 20,500 United Mexican States,
DISC(2)................ 12/31/19 6.391 to 6.766+ 16,092,500
US$ 3,000 United Mexican States,
PAR(3)................. 12/31/19 6.250 1,923,750
US$ 2,500 United Mexican States,
Global Issue .......... 05/15/26 11.500 2,312,500
------------
25,178,438
------------
Morocco - 2.44%
US$ 5,000 Kingdom of Morocco Loan
Participation, Tranche
A
(JP Morgan)(1)......... 01/01/09 6.438+ 3,556,250
US$ 5,000 Kingdom of Morocco Loan
Participation, Tranche
A (Salomon
Brothers)(1)........... 01/01/09 6.438+ 3,556,250
------------
7,112,500
------------
New Zealand - 3.80%
17,239 Government of New
Zealand................ 02/15/00 to 03/15/02 6.500 to 10.000 11,087,684
------------
Philippines - 1.63%
US$ 5,000 Republic of Philippines. 12/01/09 6.500 4,750,000
------------
</TABLE>
1
<PAGE>
STRATEGIC GLOBAL INCOME FUND, INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000)* MATURITY DATES INTEREST RATES VALUE
--------- -------------------- ---------------- ------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES -
(CONCLUDED)
Poland - 4.77%
US$ 7,000 Republic of Poland,
DISC................... 10/27/24 6.438+% $ 6,440,000
US$10,000 Republic of Poland, PDI. 10/27/14 3.750# 7,468,700
------------
13,908,700
------------
South Africa - 1.61%
25,000 Republic of South
Africa................. 08/31/10 13.000 4,707,832
------------
Spain - 5.73%
1,979,260 Government of Spain..... 08/30/98 to 01/31/06 10.150 to 12.250 16,727,136
------------
United Kingdom - 5.44%
8,789 United Kingdom Gilt..... 09/30/98 to 02/26/01 10.000 to 15.500 15,854,901
------------
United States - 4.31%
12,724 U.S. Treasury Notes..... 11/15/00 to 04/30/01 5.625 to 8.500 12,570,021
------------
Venezuela - 3.06%
US$14,825 Republic of Venezuela,
PAR(4)................. 03/31/20 6.750 8,932,063
------------
Total Long-Term Debt Securities
(cost - $218,672,236).............. 223,098,307
------------
SHORT-TERM DEBT SECURITIES - 13.68%
Australia - 2.15%
4,235 Government of Australia
Treasury Bills......... 10/17/96 7.500@ 3,286,425
3,600 New South Wales Treasury
Corporation............ 04/01/97 12.500 2,978,935
------------
6,265,360
------------
Italy - 1.07%
4,782,400 Swiss Bank Corporation
TD..................... 08/22/96 10.000 3,109,183
------------
Poland - 2.60%
22,600 Government of Poland
Treasury Bills......... 07/03/96 to 04/23/97 20.906 to 21.250@ 7,598,506
------------
United States - 7.86%
23,000 U.S. Treasury Bills..... 06/06/96 to 06/27/96 4.940 to 4.950@ 22,935,170
------------
Total Short-Term Debt Securities
(cost - $39,795,931)............... 39,908,219
------------
REPURCHASE AGREEMENTS - 7.48%
13,000 Repurchase Agreement
dated 05/31/96 with
Citicorp Securities,
Inc., collateralized by
$13,040,000 U.S.
Treasury Notes, 6.250%
due 08/31/96; proceeds:
$13,005,742 (cost -
$13,000,000).......... 06/03/96 5.300 13,000,000
8,815 Repurchase Agreement
dated 05/31/96 with
Salomon Brothers, Inc.,
collateralized by
$8,789,000 U.S.
Treasury Notes, 6.000%
due 12/31/97; proceeds:
$8,818,857 (cost -
$8,815,000)........... 06/03/96 5.250 8,815,000
------------
Total Repurchase Agreements (cost -
$21,815,000)...................... 21,815,000
------------
Total Investments (cost -
$280,283,167) - 97.65%............ 284,821,526
Other assets in excess of
liabilities - 2.35%............... 6,856,451
------------
Net Assets - 100.00%............... $291,677,977
============
</TABLE>
- -------
Note: The Portfolio of Investments is listed by the issuer's country of origin.
* In local currency unless otherwise indicated
DCB - Debt Conversion Bonds
DISC - Discount Bonds
EI - Eligible Interest Bonds
PAR - Par Bonds
PDI - Past Due Interest Bonds
2
<PAGE>
STRATEGIC GLOBAL INCOME FUND, INC.
TD - Time Deposit
+ Reflects rate at May 31, 1996 on variable coupon rate instruments
# Reflects rate at May 31, 1996 on step coupon rate instruments
@ Yield to maturity for zero coupon bonds and discounted securities
(1) Participation interest was acquired through the financial institution
indicated parenthetically
(2) With an additional 23,844,000 recoverable rights attached maturing on
06/30/03 with no market value
(3) With an additional 3,000,000 recoverable rights attached maturing on
06/30/03 with no market value
(4) With 85,375 oil warrants attached expiring on 04/15/20 with no market value
FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS TO IN APPRECIATION
DELIVER EXCHANGE FOR MATURITY DATES (DEPRECIATION)
-------------- ------------------ -------------------- --------------
<S> <C> <C> <C> <C>
Australian Dollars...... 3,680,000 US$ 2,892,480 06/17/96 $ (42,052)
Australian Dollars...... 3,653,000 US$ 2,914,546 08/20/96 11,695
Australian Dollars...... 7,860,000 US$ 6,209,400 08/22/96 (35,467)
Belgian Francs.......... 219,755,635 US$ 7,272,165 06/04/96 261,520
Belgian Francs.......... 307,834,200 US$ 10,633,306 09/30/96 768,413
Belgian Francs.......... 66,225,000 US$ 2,311,518 09/30/96 187,014
British Pounds.......... 3,888,960 US$ 5,915,108 06/28/96 (111,895)
British Pounds.......... 3,564,000 US$ 5,392,332 01/13/97 (118,228)
Canadian Dollars........ 3,820,000 US$ 2,796,896 06/10/96 8,618
Canadian Dollars........ 4,951,700 US$ 3,642,161 02/24/97 27,226
Canadian Dollars........ 8,148,000 US$ 5,989,415 03/24/97 41,204
Danish Kronars.......... 10,930,000 US$ 1,894,281 07/15/96 34,871
Finnish Markka.......... 20,174,245 US$ 4,467,183 03/24/97 133,482
Finnish Markka.......... 33,521,414 US$ 7,574,306 06/10/96 to 02/24/97 448,300
French Francs........... 15,360,000 US$ 2,988,676 08/07/96 6,736
German Deutchemarks..... 9,900,000 US$ 6,606,210 07/12/96 98,545
German Deutchemarks..... 11,300,000 US$ 7,444,005 07/12/96 34,169
German Deutchemarks..... 6,135,000 US$ 4,028,284 08/14/96 (11,547)
German Deutchemarks..... 10,315,000 US$ 6,719,651 08/23/96 (75,609)
Italian Lira............ 11,688,000,000 US$ 7,422,696 07/12/96 (154,055)
New Zealand Dollars..... 6,270,000 US$ 4,301,220 06/10/96 43,982
New Zealand Dollars..... 8,350,000 US$ 5,694,690 06/04/96 to 07/05/96 30,176
South African Rand...... 18,000,000 US$ 3,924,561 08/12/96 (112,978)
Spanish Pesetas......... 244,721,875 US$ 1,915,481 08/13/96 18,997
Spanish Pesetas......... 1,752,543,500 US$ 13,815,128 06/04/96 to 08/23/96 207,134
Spanish Pesetas......... 948,000,000 US$ 7,375,437 08/09/96 to 11/20/96 50,288
U.S. Dollars............ 7,299,348 BFR 219,755,635 06/04/96 (288,703)
U.S. Dollars............ 1,059,688 CAD 1,449,767 06/10/96 (1,579)
U.S. Dollars............ 7,422,978 DEM 11,300,000 07/12/96 (13,142)
U.S. Dollars............ 7,182,298 ESP 900,000,000 06/04/96 (178,216)
U.S. Dollars............ 8,374,790 FIM 39,199,738 02/24/97 to 03/24/97 13,871
U.S. Dollars............ 7,450,613 ITL 11,688,000,000 07/12/96 126,138
U.S. Dollars............ 1,367,000 NZD 2,000,000 06/04/96 (7,500)
----------
$1,401,408
==========
</TABLE>
CURRENCY TYPE ABBREVIATIONS:
BFR - Belgian Francs
CAD - Canadian Dollars
DEM - German Deutchemarks
ESP - Spanish Pesetas
FIM - Finnish Markkas
ITL - Italian Lira
NZD - New Zealand Dollars
INVESTMENTS BY TYPE OF ISSUER
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS
--------------------------
LONG-TERM SHORT-TERM
------------ ------------
<S> <C> <C>
Government and other public issuers................ 76.49% 12.61%
Banks.............................................. -- 1.07
Repurchase Agreement............................... -- 7.48
------------ ------------
76.49% 21.16%
============ ============
</TABLE>
See accompanying notes to financial statements
3
<PAGE>
STRATEGIC GLOBAL INCOME FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES MAY 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
Assets
Investments in securities, at value (cost - $280,283,167)........ $284,821,526
Cash............................................................. 924
Cash denominated in foreign currencies, at value (cost -
$233,242)...................................................... 236,356
Interest receivable.............................................. 5,330,945
Receivables for investments sold................................. 3,210,417
Unrealized appreciation of forward foreign currency contracts.... 2,552,379
Receivable for foreign taxes withheld............................ 181,648
Deferred organizational expenses................................. 29,276
Other assets..................................................... 26,991
------------
Total assets..................................................... 296,390,462
------------
Liabilities
Payable for investments purchased................................ 3,056,563
Unrealized depreciation of forward foreign currency contracts.... 1,150,971
Payable to investment adviser and administrator.................. 247,602
Accrued expenses and other liabilities........................... 257,349
------------
Total liabilities................................................ 4,712,485
------------
Net Assets
Capital stock--$0.001 par value; total authorized shares--
100,000,000; 21,407,128 shares issued and outstanding........... 296,211,812
Distributions in excess of net investment income................. (2,210,341)
Accumulated net realized losses from investments................. (8,094,573)
Net unrealized appreciation of investments and other assets,
liabilities and forward contracts denominated in foreign
currencies...................................................... 5,771,079
------------
Net assets....................................................... $291,677,977
============
Net asset value per share........................................ $13.63
======
</TABLE>
See accompanying notes to financial statements
4
<PAGE>
STRATEGIC GLOBAL INCOME FUND, INC.
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED
MAY 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
Investment income:
Interest (net of foreign withholding taxes)......................... $13,396,121
-----------
Expenses:
Investment advisory and administration.............................. 1,463,512
Custody and accounting.............................................. 164,314
Reports and notices to shareholders................................. 81,250
Legal and audit fees................................................ 44,834
Transfer agency fees................................................ 16,716
Directors' fees and expenses........................................ 15,793
Amortization of organizational expenses............................. 14,263
Other expenses...................................................... 22,483
-----------
1,823,165
-----------
Net investment income............................................... 11,572,956
-----------
Realized and unrealized gains from investment activities:
Net realized gains from:
Investment transactions............................................ 2,604,232
Foreign currency transactions...................................... 29,224
Net change in unrealized appreciation/depreciation of:
Investments........................................................ 3,061,488
Other assets, liabilities and forward contracts denominated in
foreign currencies................................................ 1,593,874
-----------
Net realized and unrealized gains from investment activities........ 7,288,818
-----------
Net increase in net assets resulting from operations................ $18,861,774
===========
</TABLE>
See accompanying notes to financial statements
5
<PAGE>
STRATEGIC GLOBAL INCOME FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR
MAY 31, 1996 ENDED
(UNAUDITED) NOVEMBER 30, 1995
------------ -----------------
<S> <C> <C>
From operations:
Net investment income......................... $ 11,572,956 $ 25,573,399
Net realized gains (losses) from investment
transactions................................. 2,604,232 (9,801,966)
Net realized gains (losses) from foreign
currency transactions........................ 29,224 (245,668)
Net change in unrealized
appreciation/depreciation of investments..... 3,061,488 18,526,720
Net change in unrealized
appreciation/depreciation of other assets,
liabilities and forward contracts denominated
in foreign currencies........................ 1,593,874 (2,797,304)
------------ ------------
Net increase in net assets resulting from
operations................................... 18,861,774 31,255,181
------------ ------------
Dividends and distributions to shareholders
from:
Net investment income......................... (13,460,801) (23,868,947)
Net realized gains from foreign currency
transactions................................. (881,974) --
------------ ------------
(14,342,775) (23,868,947)
------------ ------------
Net increase in net assets.................... 4,518,999 7,386,234
Net assets:
Beginning of period........................... 287,158,978 279,772,744
------------ ------------
End of period (including undistributed net
investment income of $559,478 at November 30,
1995)........................................ $291,677,977 $287,158,978
============ ============
</TABLE>
See accompanying notes to financial statements
6
<PAGE>
NOTES TO FINANCIAL STATEMENTS - (UNAUDITED)
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Strategic Global Income Fund, Inc. (the "Fund") was incorporated in the state
of Maryland on November 15, 1991 and is registered with the Securities and
Exchange Commission as a closed-end, non-diversified management investment
company. Organizational costs have been deferred and are being amortized using
the straight line method over a period not to exceed 60 months from the date
the Fund commenced operations.
The preparation of financial statements in accordance with 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. Following is a
summary of significant accounting policies:
Valuation and Accounting for Investments - Securities which are listed on stock
exchanges are valued at the last sale price on the day the securities are being
valued or, lacking any sales on such day, at the last available bid price. In
cases where securities are traded on more than one exchange, the securities are
generally valued on the exchange designated as the primary market by Mitchell
Hutchins Asset Management Inc. ("Mitchell Hutchins"), an affiliate and wholly
owned subsidiary of PaineWebber Incorporated ("PaineWebber") and investment
adviser and administrator of the Fund. Securities traded in the
over-the-counter ("OTC") market and listed on the Nasdaq Stock Market are
valued at the last trade price on Nasdaq Stock Market prior to the time of
valuation; other OTC securities are valued at the last bid price available in
the OTC market prior to the time of valuation. The amortized cost method of
valuation generally is used to value short-term debt instruments with sixty
days or less remaining to maturity. Securities and assets for which market
quotations are not readily available (including restricted securities subject
to limitations as to their sale) are valued at fair value as determined in good
faith by or under the direction of the Fund's Board of Directors. All
investments quoted in foreign currencies will be valued weekly in U.S. dollars
on the basis of foreign currency exchange rates prevailing at the time such
valuation is determined by the Fund's custodian.
Foreign currency exchange rates are generally determined prior to the close of
the New York Stock Exchange ("NYSE"). Occasionally events affecting the value
of foreign investments and such exchange rates occur between the time at which
they are determined and the close of the NYSE, which will not be reflected in
the computation of the Fund's net asset value. If events occur materially
affecting the value of such securities or currency exchange rates during such
time period, the securities will be valued at their fair value as determined in
good faith by or under the direction of the Fund's Board of Directors.
7
<PAGE>
Repurchase Agreements - The Fund's custodian takes possession of the collateral
pledged for investments in repurchase agreements. The underlying collateral is
valued daily on a mark-to-market basis to ensure that the value, including
accrued interest, is at least equal to the repurchase price. In the event of
default of the obligation to repurchase, the Fund has the right to liquidate
the collateral and apply the proceeds in satisfaction of the obligation. Under
certain circumstances, in the event of default or bankruptcy by the other party
to the agreement, realization and/or retention of the collateral may be subject
to legal proceedings. The Fund occasionally participates in joint repurchase
agreement transactions with other funds managed by Mitchell Hutchins.
Investment Transactions and Investment Income - Investment transactions are
recorded on trade date. Realized gains and losses from investment transactions
and foreign exchange transactions are calculated using the identified cost
method. Interest income is recorded on an accrual basis. Discounts are accreted
as adjustments to interest income and the identified cost of investments.
Foreign Currency Translation - The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:
(1) Market value of investment securities, other assets and liabilities -
at the exchange rates prevailing at the end of the period.
(2) Purchases and sales of investment securities, income and expenses - at
the rates of exchange prevailing on the respective dates of such
transactions.
Although the net assets and the market value of the Fund are presented at the
foreign exchange rates at the close of the 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 debt obligations
pursuant to U.S. federal income tax regulations. Certain foreign exchange
gains/losses included in realized and unrealized gains/losses are included in
or are a reduction of ordinary income in accordance with federal income tax
purposes.
Forward Foreign Currency Contracts - The Fund may enter into forward foreign
currency exchange contracts ("forward contracts") in connection with planned
purchases or sales of securities or to hedge the U.S. dollar value of portfolio
securities denominated in a particular currency.
The Fund 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
8
<PAGE>
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 maintains cash, U.S. government securities or liquid, high-grade debt
securities in a segregated account in an amount not less than the value of its
total assets committed to the consummation of the forward contracts and not
covered as provided in (1) above, as marked to market daily.
Risks may arise upon entering into forward contracts from the potential
inability of counterparties to meet the terms of their forward contracts and
from unanticipated movements in the value of foreign currencies relative to the
U.S. dollar.
Fluctuations in the value of forward contracts are recorded for book purposes
as unrealized gains or losses by the Fund. Realized gains and losses include
net gains and losses recognized by the Fund on contracts which have matured.
Dividends and Distributions - Dividends and distributions to shareholders are
recorded on the ex-dividend date. Dividends from net investment income and
distributions from realized capital gains are determined in accordance with
federal income tax regulations, which may differ from 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
reclassifications.
CONCENTRATION OF RISK
Investing in securities of foreign issuers and currency transactions may
involve certain considerations and risks not typically associated with
investments in the United States. These risks include revaluation of
currencies, adverse fluctuations in foreign currency values and possible
adverse political, social and economic developments, including those particular
to a specific industry, country or region, which could cause the securities and
their markets to be less liquid and prices more volatile than those of
comparable U.S. companies and U.S. government securities. These risks are
greater with respect to securities of issuers located in emerging market
countries in which the Fund is authorized to invest. 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 specific industry, country
or region.
INVESTMENT ADVISER AND ADMINISTRATOR
The Fund has an Investment Advisory and Administration Contract ("Advisory
Contract") with Mitchell Hutchins. In accordance with the Advisory Contract,
the Fund pays Mitchell Hutchins an investment advisory and administration fee,
which is accrued weekly and paid monthly, at the annual rate of 1.00% of the
Fund's average weekly net assets.
9
<PAGE>
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at May 31, 1996,
was substantially the same as the cost of securities for financial statement
purposes.
At May 31, 1996, the components of net unrealized appreciation of investments
were as follows:
<TABLE>
<S> <C>
Gross appreciation (from investments having an excess of
value over cost).................................................. $11,791,687
Gross depreciation (from investments having an excess of
cost over value).................................................. (7,253,328)
-----------
Net unrealized appreciation of investments......................... $ 4,538,359
===========
</TABLE>
For the six months ended May 31, 1996, aggregate purchases and sales of
portfolio securities, excluding short-term securities, were $137,351,703 and
$150,748,042, respectively.
CAPITAL STOCK
There are 100,000,000 shares of $0.001 par value capital stock authorized. Of
the 21,407,128 shares outstanding at May 31, 1996, Mitchell Hutchins owned
7,128 shares.
FEDERAL INCOME TAX STATUS
The Fund intends to distribute substantially all of its taxable income and to
comply with the other requirements of the Internal Revenue Code applicable to
regulated investment companies. Accordingly, no provision for federal income
taxes is required. In addition, by distributing during each calendar year
substantially all of its net investment income, capital gains and certain other
amounts, if any, the Fund intends not to be subject to a federal excise tax.
At November 30, 1995, the Fund had a capital loss carryforward of $10,143,147
which will expire by November 30, 2003. To the extent that such losses are
used, as provided in the regulations, to offset future net realized capital
gains, it is probable that the gains will not be distributed.
10
<PAGE>
STRATEGIC GLOBAL INCOME FUND, INC.
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OF CAPITAL STOCK OUTSTANDING
THROUGHOUT EACH OF THE PERIODS IS PRESENTED BELOW:
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS FOR THE YEARS ENDED FOR THE PERIOD
ENDED NOVEMBER 30, FEBRUARY 3, 1992+
MAY 31, 1996 ----------------------------- TO
(UNAUDITED) 1995 1994 1993 NOVEMBER 30, 1992
------------ -------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $13.41 $13.07 $14.92 $13.47 $14.03
-------- -------- -------- -------- --------
Net investment income... 0.54 1.19 1.08 1.12 1.02
Net realized and
unrealized gains
(losses) from
investment and foreign
currency transactions.. 0.35 0.27 (1.80) 1.51 (0.82)
-------- -------- -------- -------- --------
Total increase
(decrease) from
investment operations.. 0.89 1.46 (0.72) 2.63 0.20
-------- -------- -------- -------- --------
Dividends from net
investment income...... (0.63) (1.12) (0.82) (1.12) (0.70)
Distributions from net
realized gains from
investment and foreign
currency transactions.. (0.04) -- (0.15) (0.06) (0.03)
Return of capital....... -- -- (0.16) -- --
-------- -------- -------- -------- --------
Total dividends and
distributions.......... (0.67) (1.12) (1.13) (1.18) (0.73)
-------- -------- -------- -------- --------
Offering costs charged
to capital............. -- -- -- -- (0.03)
-------- -------- -------- -------- --------
Net asset value, end of
period................. $13.63 $13.41 $13.07 $14.92 $13.47
======== ======== ======== ======== ========
Market value, end of
period................. $11.50 $11.25 $11.13 $14.25 $12.88
======== ======== ======== ======== ========
Total investment
return(1).............. 8.22% 11.81% (14.53)% 19.92% (9.67)%
======== ======== ======== ======== ========
Ratios/Supplemental
Data:
Net assets, end of
period (000's)......... $291,678 $287,159 $279,773 $319,496 $288,251
Ratio of expenses to
average net assets..... 1.25%* 1.24% 1.27% 1.58%** 1.34%*
Ratio of net investment
income to average net
assets................. 7.91%* 9.20% 8.01% 7.81%** 8.79%*
Portfolio turnover rate. 59% 121% 82% 111% 94%
</TABLE>
-------
* Annualized
** Includes 0.31% of interest expense relating to reverse
repurchase agreement transactions entered into during the
fiscal year.
+ Commencement of operations
(1) Total investment return is calculated assuming a purchase of
one share at the current market price on the first day of each
period reported and a sale at the current market price on the
last day of each period reported, and assuming reinvestment of
dividends and distributions at prices obtained under the
Fund's Dividend Reinvestment Plan. Investment returns do not
reflect brokerage commissions and have not been annualized for
periods of less than one year.
11
<PAGE>
STRATEGIC GLOBAL INCOME FUND, INC.
GENERAL INFORMATION
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, Inc. ("NYSE"). The Fund's
primary investment objective is to achieve a high level of current
income; capital appreciation is a secondary objective in the
selection of investments. The Fund's investment adviser and
administrator is Mitchell Hutchins Asset Management Inc., a wholly
owned subsidiary of PaineWebber Incorporated, which has
approximately $44 billion in assets under management as of June
30, 1996.
MANAGEMENT OF THE FUND
Stuart Waugh, a managing director and portfolio manager of
Mitchell Hutchins responsible for global fixed income and currency
trading, is responsible for the day-to-day management of the
Fund's portfolio. He is also a vice president of the Fund and of
other investment companies for which Mitchell Hutchins serves as
investment adviser. Mr. Waugh has been employed by Mitchell
Hutchins since 1983. He is a portfolio manager of Global High
Income Dollar Fund Inc., PaineWebber Global Income Fund,
PaineWebber Series Trust--Global Income Portfolio and Strategic
Income Fund Inc. with aggregate assets at June 30, 1996 of
approximately $1.7 billion. Other members of the Mitchell
Hutchins' global investing group provide input on market outlook,
interest rate forecasts, investment research and other
considerations pertaining to the Fund's investments.
SHAREHOLDER INFORMATION
The Fund's NYSE trading symbol is "SGL". Comparative net asset
value and market price information about the Fund is published
weekly in The Wall Street Journal, The New York Times and
Barron's, as well as numerous other newspapers.
The 1996 Annual Meeting of Shareholders of the Fund was held on
April 11, 1996. At the meeting Margo N. Alexander, Richard Q.
Armstrong, E. Garrett Bewkes, Jr., Richard R. Burt, Mary C.
Farrell, Meyer Feldberg, George W. Gowen, Frederic V. Malek, Carl
W. Schafer, and John R. Torell III were elected to serve as
directors until the next annual meeting of shareholders, or until
their successors are elected and qualified.
12
<PAGE>
STRATEGIC GLOBAL INCOME FUND, INC.
THE FOLLOWING WERE VOTES ON THE PROPOSALS INDICATED BELOW:
1. To elect ten members of its Board of Directors:
<TABLE>
<CAPTION>
SHARES SHARES
VOTED WITHHOLD
FOR AUTHORITY
---------- ----------
<S> <C> <C>
Margo N. Alexander............................... 10,325,374 1,036,352
Richard Q. Armstrong............................. 10,332,052 1,029,674
E. Garrett Bewkes, Jr. .......................... 10,328,723 1,033,003
Richard Burt..................................... 10,328,211 1,033,515
Mary C. Farrell.................................. 10,329,173 1,032,553
Meyer Feldberg................................... 10,328,676 1,033,050
George W. Gowen.................................. 10,333,204 1,028,522
Frederic V. Malek................................ 10,331,046 1,030,680
Carl W. Schafer.................................. 10,325,879 1,035,847
John R. Torell III............................... 10,330,467 1,031,259
</TABLE>
2. Ratification of the selection of Ernst & Young LLP as the
independent auditors for its current fiscal year:
<TABLE>
<CAPTION>
SHARES SHARES SHARES
VOTED FOR AGAINST ABSTAIN
---------- -------- -------
<S> <C> <C> <C>
10,337,102 569,813 454,811
</TABLE>
3. Approval of the proposed changes to the Fund's fundamental
investment restrictions and policies:
<TABLE>
<CAPTION>
SHARES SHARES SHARES
VOTED FOR AGAINST ABSTAIN
--------- ------- -------
<S> <C> <C> <C>
Modification of fundamental restriction on
concentration; 7,888,332 732,252 541,142
Modification of fundamental restriction on
senior
securities and borrowing; 7,879,340 741,593 540,793
Modification of fundamental restriction on
making loans; 7,801,639 833,648 526,439
Modification of fundamental restriction on
underwriting securities; 7,829,976 809,454 522,295
Modification of fundamental restriction on
real
estate investments; 7,844,866 793,391 523,469
Modification of fundamental restriction on
investing
in commodities; 7,782,601 852,841 526,284
Elimination of fundamental restriction on
margin
transactions; 7,763,878 872,279 525,568
Elimination of fundamental restriction on
short sales; 7,731,078 906,969 523,678
Elimination of fundamental restriction on
investments in oil, gas and mineral leases
and programs; 7,811,783 825,660 524,283
</TABLE>
(Broker non-votes and abstentions are included within the "Shares
Withhold Authority" and "Shares Abstain" totals.)
13
<PAGE>
STRATEGIC GLOBAL INCOME FUND, INC.
DISTRIBUTION POLICY
The Fund has established a Dividend Reinvestment Plan under which
all shareholders whose shares are registered in their own names,
or in the name of PaineWebber or its nominee, will have all
dividends and other distributions on their shares 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 contract such broker or
nominee to determine whether, or how, they may participate in the
Dividend Reinvestment Plan. Additional shares acquired under the
Dividend Reinvestment 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.
The Fund will not issue any new shares in connection with its
Dividend Reinvestment Plan.
The Transfer Agent will serve as agent for the shareholders in
administering the Plan. After the Fund declares a dividend or
determines to make a capital gain distribution, the Transfer Agent
will, as agent for the participants, receive the cash payment and
use it to buy Fund shares in the open market, on the NYSE or
elsewhere, for the participants' accounts.
14
