<PAGE>
STRATEGIC GLOBAL INCOME FUND, INC.
PORTFOLIO OF INVESTMENTS NOVEMBER 30, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000)* MATURITY DATES INTEREST RATES VALUE
--------- -------------------- ---------------- ------------
<C> <S> <C> <C> <C>
LONG-TERM DEBT SECURITIES - 82.50%
Argentina - 4.91%
US$ 7,250 Republic of Argentina
Discount............... 03/31/23 6.563+% $ 4,377,187
US$ 10,500 Republic of Argentina
FRB.................... 03/31/05 6.813+ 6,844,635
US$ 5,500 Republic of Argentina
Par.................... 03/31/23 5.000# 2,880,625
------------
14,102,447
------------
Australia - 5.41%
12,300 New South Wales Treasury
Corp................... 04/01/97 to12/01/01 12.000 to 12.500 10,518,177
6,000 Queensland Treasury
Corp. Global Issue..... 05/15/03 10.500 5,016,393
------------
15,534,570
------------
Brazil - 9.35%
US$ 16,700 Republic of Brazil DCB.. 04/15/12 6.875+ 8,976,250
US$ 12,000 Republic of Brazil EI... 04/15/06 6.813+ 7,920,000
US$ 20,000 Republic of Brazil Par.. 04/15/24 4.250# 9,950,000
------------
26,846,250
------------
Canada - 4.07%
5,574 Government of Canada.... 06/01/23 8.000 4,267,648
6,562 Ontario Hydro Global.... 04/11/08 8.600@ 1,847,370
27,000 Province of British
Columbia............... 01/09/12 8.590@ 5,577,900
------------
11,692,918
------------
Denmark - 1.11%
17,000 Government of Denmark... 05/15/03 8.000 3,196,541
------------
Finland - 2.57%
28,000 Government of Finland... 03/15/04 9.500 7,392,089
------------
France - 1.87%
24,600 Government of France.... 10/25/05 to 10/25/19 7.750 to 8.500 5,362,338
------------
Germany - 11.20%
43,283 Federal Republic of
Germany................ 07/22/02 to 01/04/24 6.250 to 8.000 32,155,810
------------
Indonesia - 0.71%
5,000,000 Perusahaan Listrik
Negara FRN............. 10/29/00 16.860+ 2,030,874
------------
Ireland - 2.44%
3,980 Republic of Ireland..... 07/11/03 to 09/30/12 8.750 to 9.250 7,001,906
------------
Mexico - 5.70%
US$ 3,000 Fifth Mexican Acceptance
Corp................... 12/15/98 8.000 1,348,715
US$ 5,000 Mexican Multi Year
Refinance Loan
Participation.......... 03/20/05 6.750+ 3,550,000
US$ 14,000 United Mexican States
Collateralized Fixed
Rate Notes,
Discount(1)............ 12/31/19 6.766 to 6.875+ 9,625,000
US$ 3,000 United Mexican States
Collateralized Fixed
Rate Notes, Par(2)..... 12/31/19 6.250 1,833,750
------------
16,357,465
------------
Morocco - 2.17%
US$ 5,000 Kingdom of Morocco Loan
Participation, Tranche
A (JP Morgan)(3)....... 01/01/09 6.594+ 3,112,500
US$ 5,000 Kingdom of Morocco Loan
Participation, Tranche
A (Salomon
Brothers)(3)........... 01/01/09 6.594+ 3,112,500
------------
6,225,000
------------
</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)
Netherlands - 2.36%
9,410 Government of
Netherlands............ 09/15/01 to 06/01/06 8.500 to 8.750% $ 6,779,824
------------
New Zealand - 2.84%
10,100 Government of New
Zealand................ 02/15/00 6.500 6,434,745
2,470 International Bank For
Reconstruction &
Development(4)......... 07/25/97 12.500 1,731,400
------------
8,166,145
------------
Philippines - 1.05%
US$3,000 CE Casecnan Water &
Energy................. 11/15/10 11.950 3,018,750
------------
Poland - 3.81%
US$10,000 Republic of Poland Par.. 10/27/24 2.750# 4,493,750
US$10,000 Republic of Poland PDI.. 10/27/14 3.750# 6,437,500
------------
10,931,250
------------
South Africa - 2.16%
25,000 Government of South
Africa................. 08/31/10 13.000 6,211,594
------------
Spain - 8.89%
2,967,400 Government of Spain..... 08/30/98 to 03/25/00 11.450 to 12.250 25,516,752
------------
United Kingdom - 6.57%
10,500 United Kingdom Gilt..... 01/22/97 to 07/14/00 13.000 to 15.500 18,879,012
------------
United States - 1.07%
2,730 U.S. Treasury Note...... 11/15/00 8.500 3,074,663
------------
Venezuela - 2.24%
US$ 8,500 Republic of Venezuela
DCB.................... 12/18/07 6.813+ 3,910,000
US$ 3,000 Republic of Venezuela
FLIRB.................. 03/31/07 6.813# 1,383,750
US$ 2,250 Republic of Venezuela
Par (5)................ 03/31/20 6.750 1,139,062
------------
6,432,812
------------
Total Long-Term Debt Securities
(cost--$235,301,794)............... 236,909,010
------------
SHORT-TERM DEBT SECURITIES - 9.88%
United States - 9.88%
28,500 U.S. Treasury Bills
(cost - $28,384,354)... 12/07/95 to 02/08/96 5.209 to 5.433@ 28,384,354
------------
INDEXED SECURITY - 2.34%
Thailand - 2.34%
US$ 7,000 Morgan Guaranty Trust
Company Thailand Baht
Linked CD (cost -
$6,847,300)........... 02/05/96 12.600@ 6,716,955
------------
REPURCHASE AGREEMENT - 2.68%
7,682 Repurchase Agreement
dated 11/30/95 with
Morgan Stanley Group,
Inc. collateralized by
$5,860,000 U.S.
Treasury Bonds, 8.875%
due 2/15/19; proceeds:
$7,683,253 (cost -
$7,682,000)........... 12/01/95 5.870 7,682,000
------------
Total Investments (cost -
$278,215,448) - 97.40%............ 279,692,319
Other assets in excess of
liabilities - 2.60%............... 7,466,659
------------
Net Assets - 100.00%............... $287,158,978
============
</TABLE>
- -------
Note: The Portfolio of Investments is listed by the issuer's country of origin.
* In local currency unless otherwise indicated
FLIRB - Front Loaded Interest Reduction Bond
FRB - Floating Rate Bond
FRN - Floating Rate Note
EI - Eligible Interest
DCB - Debt Conversion Bond
2
<PAGE>
STRATEGIC GLOBAL INCOME FUND, INC.
PDI - Past Due Interest Bond
+ Reflects rate at November 30, 1995 on variable rate instruments
# Reflects rate at November 30, 1995 on step coupon rate instruments
@ Yield to maturity for zero coupon bonds and discounted securities
(1) With an additional 23,844,000 recoverable rights attached maturing on
06/30/03 with no market value
(2) With an additional 3,000,000 recoverable rights attached maturing on
06/30/03 with no market value
(3) Participation interest was acquired through the financial institution
indicated parenthetically
(4) "Supranational" security denominated in New Zealand Dollars
(5) With 11,250 oil warrants attached expiring on 04/15/20 with no market value
FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS TO IN APPRECIATION
DELIVER EXCHANGE FOR MATURITY DATES (DEPRECIATION)
-------------- ------------------ -------------------- --------------
<S> <C> <C> <C> <C>
Australian Dollars...... 3,680,000 US$ 2,767,286 12/11/95 $ 36,366
Australian Dollars...... 3,653,000 US$ 2,690,617 02/20/96 (12,348)
Belgium Francs.......... 615,668,400 US$ 20,813,648 12/21/95 to 09/30/96 (6,990)
Belgium Francs.......... 66,225,000 US$ 2,311,518 09/30/96 54,371
British Pounds.......... 6,550,000 US$ 10,313,630 01/12/96 295,091
British Pounds.......... 1,795,840 US$ 2,793,205 02/16/96 49,476
British Pounds.......... 2,700,000 US$ 4,205,385 12/18/95 75,106
Danish Kroners.......... 28,500,000 US$ 5,179,692 12/15/95 93,411
Finish Markkas.......... 31,535,930 US$ 7,282,073 12/08/95 to 12/18/95 (51,703)
German Deutchemarks..... 16,073,000 US$ 11,461,338 01/24/96 to 05/17/96 292,876
German Deutchemarks..... 9,139,000 US$ 6,440,905 01/18/96 122,896
German Deutchemarks..... 4,224,000 US$ 2,852,404 12/20/95 (67,748)
German Deutchemarks..... 5,047,500 US$ 3,403,115 12/20/95 (86,342)
Greek Drachmas.......... 1,576,200,000 US$ 6,599,003 12/20/95 to 12/27/95 (3,062)
Italian Lira............ 10,825,187,500 US$ 6,697,511 01/10/96 (72,321)
Netherlands Guilders.... 7,507,000 US$ 4,518,215 12/18/95 (117,785)
Spanish Pesetas......... 2,212,460,600 US$ 17,587,990 12/12/95 to 01/22/96 (300,566)
Spanish Pesetas......... 852,543,500 US$ 6,911,543 01/23/96 29,641
U.S. Dollars............ 10,538,658 BEF 307,834,200 12/21/95 (183,795)
U.S. Dollars............ 2,944,991 DEM 4,224,000 12/20/95 (24,839)
U.S. Dollars............ 3,517,422 DEM 5,047,500 12/20/95 (27,964)
U.S. Dollars............ 6,503,145 DEM 9,139,000 01/18/96 (185,136)
U.S. Dollars............ 5,190,311 DKK 28,500,000 12/15/95 (104,029)
U.S. Dollars............ 3,929,332 GBP 2,538,000 01/12/96 (44,921)
U.S. Dollars............ 2,772,043 GRD 655,200,000 12/27/95 (19,351)
U.S. Dollars............ 6,646,316 ITL 10,825,187,500 01/10/96 123,516
U.S. Dollars............ 4,677,701 NLG 7,507,000 12/18/95 (41,701)
---------
$(177,851)
=========
</TABLE>
CURRENCY TYPE ABBREVIATIONS:
BEF - Belgium Francs
DEM - German Deutchemarks
DKK - Danish Kroners
GBP - British Pounds
GRD - Greek Drachmas
ITL - Italian Lira
NLG - Netherlands Guilders
INVESTMENTS BY TYPE OF ISSUER
<TABLE>
<CAPTION>
PERCENTAGE OF NET ASSETS
--------------------------
LONG-TERM SHORT-TERM
------------ ------------
<S> <C> <C>
Government and other
public issuers......... 80.74% 9.88%
Banks................... -- 2.34
Repurchase Agreement.... -- 2.68
Other................... 1.76 --
------------ ------------
82.50% 14.90%
============ ============
</TABLE>
See accompanying notes to financial statements
3
<PAGE>
STRATEGIC GLOBAL INCOME FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES NOVEMBER 30, 1995
<TABLE>
<S> <C>
Assets
Investments in securities, at value (cost - $278,215,448)........ $279,692,319
Cash............................................................. 253,928
Cash denominated in foreign currencies, at value (cost-$446)..... 438
Receivables for investments sold................................. 5,473,564
Interest receivable.............................................. 7,099,264
Unrealized appreciation of forward foreign currency contracts.... 1,172,750
Receivable for foreign taxes withheld............................ 726,949
Deferred organizational expenses................................. 41,159
Other assets..................................................... 16,684
------------
Total assets..................................................... 294,477,055
------------
Liabilities
Payable for investments purchased................................ 5,508,989
Unrealized depreciation of forward foreign currency contracts.... 1,350,601
Payable to investment adviser and administrator.................. 233,692
Accrued expenses and other liabilities........................... 224,795
------------
Total liabilities................................................ 7,318,077
------------
Net Assets
Capital stock--$0.001 par value; total authorized shares--
100,000,000; 21,407,128 shares issued and outstanding........... 296,211,812
Undistributed net investment income.............................. 559,478
Accumulated net realized losses from investments................. (10,728,029)
Net unrealized appreciation of investments and assets and
liabilities denominated in foreign currencies................... 1,115,717
------------
Net assets....................................................... $287,158,978
============
Net asset value per share........................................ $13.41
======
</TABLE>
See accompanying notes to financial statements
4
<PAGE>
STRATEGIC GLOBAL INCOME FUND, INC.
STATEMENT OF OPERATIONS FOR THE YEAR ENDED NOVEMBER 30, 1995
<TABLE>
<S> <C>
Investment income:
Interest (net of foreign
withholding taxes)...... $29,012,558
-----------
Expenses:
Investment advisory and
administration.......... 2,781,097
Custody and accounting... 398,414
Reports and notices to
shareholders............ 98,452
Legal and audit fees..... 51,764
Transfer agency fees..... 35,229
Directors' fees and
expenses................ 31,414
Amortization of
organizational expenses. 30,828
Other expenses........... 11,961
-----------
3,439,159
-----------
Net investment income.... 25,573,399
-----------
Realized and unrealized
gains (losses) from
investment activities:
Net realized losses from:
Investment
transactions........... (9,801,966)
Foreign currency
transactions........... (245,668)
Net change in unrealized
appreciation/depreciation
of:
Investments............. 18,526,720
Assets and liabilities
denominated in foreign
currencies............. (2,797,304)
-----------
Net realized and
unrealized gains from
investment activities... 5,681,782
-----------
Net increase in net
assets resulting from
operations.............. $31,255,181
===========
</TABLE>
See accompanying notes to financial statements
5
<PAGE>
STRATEGIC GLOBAL INCOME FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
NOVEMBER 30,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
From operations:
Net investment income.............................. $ 25,573,399 $ 23,695,055
Net realized gains (losses) from investment
transactions...................................... (9,801,966) 4,387,962
Net realized losses from foreign currency
transactions...................................... (245,668) (11,333,743)
Net change in unrealized appreciation/depreciation
of investments.................................... 18,526,720 (33,840,900)
Net change in unrealized appreciation/depreciation
of assets and liabilities denominated in foreign
currencies........................................ (2,797,304) 1,625,132
------------ ------------
Net increase (decrease) in net assets resulting
from operations................................... 31,255,181 (15,466,494)
------------ ------------
Dividends and distributions to shareholders from:
Net investment income.............................. (23,868,947) (17,346,720)
Net realized gains from investment transactions.... -- (3,295,953)
Paid-in-capital.................................... -- (3,613,743)
------------ ------------
(23,868,947) (24,256,416)
------------ ------------
Net increase (decrease) in net assets.............. 7,386,234 (39,722,910)
Net Assets:
Beginning of year.................................. 279,772,744 319,495,654
------------ ------------
End of year (including undistributed net investment
income of $559,478 at
November 30, 1995)................................ $287,158,978 $279,772,744
============ ============
</TABLE>
See accompanying notes to financial statements
6
<PAGE>
NOTES TO FINANCIAL STATEMENTS
ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Strategic Global Income Fund, Inc. (the "Fund") was incorporated in Maryland on
November 15, 1991 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.
Valuation of Investments - Securities which are listed on U.S. and foreign
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 by Mitchell Hutchins
Asset Management Inc. ("Mitchell Hutchins"), a wholly owned subsidiary of
PaineWebber Incorporated and investment adviser of the Fund as the primary
market. Securities traded in the over-the-counter ("OTC") market and listed on
the National Association of Securities Dealers Automated Quotation System
("NASDAQ") are valued at the last trade price on NASDAQ 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 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 occured materially
affecting the value of such securities or assets 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.
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
7
<PAGE>
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 sales of investments 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 values of the Fund's portfolio are
presented at the foreign exchange rates at the end 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;
such amount is categorized as foreign exchange gain or loss for both financial
reporting and income tax purposes. Foreign security and currency transactions
may involve certain considerations and risks not typically associated with
investing in U.S. companies and U.S. government securities. These risks include
revaluation of currencies and future adverse political and economic
developments, which could cause securities and their markets to be less liquid
and prices more volatile than those of comparable U.S. companies and U.S.
government securities.
Forward Foreign Currency Contracts - The Fund may enter into forward foreign
currency 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 contracts would not obligate the Fund to deliver an amount of foreign
currency in
8
<PAGE>
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 an unrealized gain or loss 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. Dividends and distributions which exceed net investment
income and net realized capital gains for financial reporting purposes, but not
for tax purposes, are reported as dividends in excess of net investment income
or distributions in excess of net realized capital gains. To the extent they
exceed net investment income and net realized capital gains for tax purposes,
they are reported as distributions of paid-in-capital.
Federal Taxes--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.
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
9
<PAGE>
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 in a
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. Prior to August 15, 1995, BEA Associates
served as the Fund's Latin American debt adviser pursuant to a sub-advisory
contract with Mitchell Hutchins. Mitchell Hutchins (not the Fund) paid BEA
Associates a fee, computed weekly and paid monthly, in an amount equal to the
annual rate of 0.25% of the Fund's average weekly net assets.
INVESTMENTS IN SECURITIES
For federal income tax purposes, the cost of securities owned at November 30,
1995, was substantially the same as the cost of securities for financial
statement purposes.
At November 30, 1995, 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).................................................. $10,166,615
Gross depreciation (from investments having an excess of
cost over value).................................................. (8,689,744)
-----------
Net unrealized appreciation of investments......................... $ 1,476,871
===========
</TABLE>
For the year ended November 30, 1995, aggregate purchases and sales of
portfolio securities, excluding short-term securities, were $323,137,238 and
$273,519,445, 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 November 30, 1995, Mitchell Hutchins owned
7,128 shares.
10
<PAGE>
FEDERAL TAX STATUS
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.
To reflect reclassifications arising from permanent "book/tax" differences for
the year ended November 30, 1995, accumulated net realized gain/loss was
increased by $64,563; undistributed net investment income was decreased by
$183,118; and capital stock was increased by $118,555.
11
<PAGE>
STRATEGIC GLOBAL INCOME FUND, INC.
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Net Increase
Net Realized and (Decrease) in
Unrealized Gains Net Assets
(Losses) from Resulting
Investment and from
Net Investment Foreign Currency Investment
Income Transactions Operations
--------------- ------------------ ----------------
Total Per Total Per Total Per
Quarter Ended (000's) Share (000's) Share (000's) Share
------------- -------- ------ --------- ------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
November 30,
1995............ $ 6,297 $ 0.29 $ 4,849 $ 0.23 $ 11,146 $ 0.52
August 31, 1995.. 6,730 0.31 1,473 0.07 8,203 0.38
May 31, 1995..... 6,490 0.30 14,104 0.66 20,594 0.96
February 28,
1995............ 6,056 0.29 (14,744) (0.69) (8,688) (0.40)
-------- ------ --------- ------- -------- ------
Totals........... $ 25,573 $ 1.19 $ 5,682 $ 0.27 $ 31,255 $ 1.46
======== ====== ========= ======= ======== ======
November 30,
1994............ $ 6,233 $ 0.26 $ (5,485) $ (0.23) $ 748 $ 0.03
August 31, 1994.. 5,790 0.27 (6,310) (0.29) (520) (0.02)
May 31, 1994..... 6,262 0.29 (22,922) (1.07) (16,660) (0.78)
February 28,
1994............ 5,410 0.26 (4,445) (0.21) 965 0.05
-------- ------ --------- ------- -------- ------
Totals........... $ 23,695 $ 1.08 $ (39,162) $ (1.80) $(15,467) $(0.72)
======== ====== ========= ======= ======== ======
</TABLE>
12
<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 Period
For the Years Ended February 3, 1992+
November 30, to
----------------------------- November 30, 1992
<S> <C> <C> <C> -----------------
1995 1994 1993
-------- -------- --------
Net asset value,
beginning of period. $13.07 $14.92 $13.47 $14.03
-------- -------- -------- --------
Net investment
income.............. 1.19 1.08 1.12 1.02
Net realized and
unrealized gains
(losses) from
investment and
foreign currency
transactions....... 0.27 (1.80) 1.51 (0.82)
-------- -------- -------- --------
Total increase
(decrease) from
investment
operations.......... 1.46 (0.72) 2.63 0.20
-------- -------- -------- --------
Dividends from net
investment income... (1.12) (0.82) (1.12) (0.70)
Distributions from
net realized gains
from investment and
foreign currency
transactions....... -- (0.15) (0.06) (0.03)
Return of capital... -- (0.16) -- --
-------- -------- -------- --------
Total dividends and
distributions....... (1.12) (1.13) (1.18) (0.73)
-------- -------- -------- --------
Offering costs
charged to capital.. -- -- -- (0.03)
-------- -------- -------- --------
Net asset value, end
of period........... $13.41 $13.07 $14.92 $13.47
======== ======== ======== ========
Market value, end of
period.............. $11.25 $11.13 $14.25 $12.88
======== ======== ======== ========
Total investment
return(1)........... 11.81% (14.53)% 19.92% (9.67)%
======== ======== ======== ========
Ratios/Supplemental
Data:
Net assets, end of
period (000's)...... $287,159 $279,773 $319,496 $288,251
Ratio of expenses to
average net assets.. 1.24% 1.27% 1.58%** 1.34%*
Ratio of net
investment income to
average net assets. 9.20% 8.01% 7.81%** 8.79%*
Portfolio turnover
rate................ 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 of common stock 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 to common stockholders at
prices obtained under the Fund's Dividend Reinvestment Plan.
Returns do not reflect brokerage commissions and have not been
annualized for periods less than one year.
13
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Strategic Global Income Fund, Inc.
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Strategic Global Income Fund, Inc.
(the "Fund") as of November 30, 1995, 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
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at
November 30, 1995, by correspondence with the custodians and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Strategic Global Income Fund, Inc. at November 30, 1995 and the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the indicated periods, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
New York, New York
January 25, 1996
14
<PAGE>
STRATEGIC GLOBAL INCOME FUND, INC.
TAX INFORMATION
We are required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise you within 60 days of the Fund's fiscal year end (November
30, 1995) as to the federal tax status of distributions received by
shareholders during such fiscal year. Accordingly, we are advising you that all
dividends paid during the fiscal year by the Fund were derived from net
investment income and are taxable as ordinary income.
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 information
reporting.
Since the Fund's fiscal year is not the calendar year, another notification
will be sent in respect of calendar 1995. 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 1996. Shareholders are advised to consult their own tax
advisers with respect to the tax consequences of their investment in the Fund.
15
<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 over $44
billion in assets under management as of December 31, 1995.
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 as a portfolio manager for the last eight years. 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 as of November 30, 1995 of approximately $2 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. Prior to August 15, 1995, BEA Associates served as
the Fund's Latin American debt adviser pursuant to a sub-advisory
contract with Mitchell Hutchins; that sub-advisory contract was
terminated and Mitchell Hutchins has assumed responsibility for
the management of the Fund's Latin American debt 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.
16
<PAGE>
STRATEGIC GLOBAL INCOME FUND, INC.
An annual meeting of shareholders of the Fund was held on March
16, 1995. At the meeting, E. Garrett Bewkes, Jr., Meyer Feldberg,
George W. Gowen, Frederic V. Malek, Frank P.L. Minard, Judith
Davidson Moyers, and Thomas F. Murray were elected as directors to
serve until the annual meeting of shareholders in 1996, or until
their successors are elected and qualified, and the selection of
Ernst & Young LLP as the Fund's independent auditors for the
fiscal year ending November 30, 1995 was ratified. The votes were
as follows:
<TABLE>
<CAPTION>
SHARES SHARES
VOTED WITHHOLD
FOR AUTHORITY*
---------- -----------
<S> <C> <C>
E. Garrett Bewkes, Jr. ......................... 19,764,215 477,255
Meyer Feldberg.................................. 19,814,464 427,005
Paul B. Guenther(1)............................. 19,811,588 429,882
George W. Gowen................................. 19,798,353 443,116
Frederic V. Malek............................... 19,787,645 453,824
Frank P.L. Minard(2)............................ 19,813,434 428,035
Judith Davidson Moyers.......................... 20,018,124 223,345
Thomas F. Murray................................ 19,776,464 465,005
</TABLE>
<TABLE>
<CAPTION>
SHARES SHARES SHARES
VOTED VOTED WITHHOLD
FOR AGAINST AUTHORITY
---------- -------- ----------
<S> <C> <C> <C>
Ratification of the selection of Ernst
& Young LLP........................... 19,860,135 244,582 136,753
</TABLE>
-------
* Broker non-votes and abstentions are included with the "Shares
Withhold Authority" totals.
(1)Effective May 1, 1995, Paul B. Guenther resigned as a Director
of The Fund.
(2) Effective December 1, 1995, Frank P.L. Minard resigned as a
Director of The Fund.
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.
17
