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Strategic Global Income Fund, Inc. Announces Election of New Director by Board, Extension of Waiver Reducing Advisory Fee and A

^{Published on 2010-07-30 14:16:27 - Market Wire}
 

NEW YORK--([ BUSINESS WIRE ])--Strategic Global Income Fund, Inc. (the "Fund") (NYSE: SGL) is a non-diversified, closed-end management investment company seeking a high level of current income as a primary objective and capital appreciation as a secondary objective through investments in US and foreign debt securities.

Election of new director by Board

The Fund announced that the Funda™s Board of Directors (aBoarda) elected Barry M. Mandinach to serve as a Class III director. Mr. Mandinach is currently a managing director of UBS Global Asset Management (US) Inc. and UBS Global Asset Management (Americas) Inc. (collectively, aUBS Global AMa"Americas regiona). He is the Head of Institutional & Wholesale Business (US) and Chief Marketing Officer (US) for UBS Global AMa"Americas region. Mr. Mandinach has been with UBS Global AM a" Americas region or its predecessors since 2001.

Extension of waiver reducing advisory fee

The Fund also announced the extension of the voluntary fee waiver arrangement with UBS Global Asset Management (Americas) Inc. (aUBS Global AMa), the Funda™s investment advisor and administrator. Pursuant to its advisory contract with UBS Global AM (the "Advisory Contract"), the Fund pays UBS Global AM an investment advisory and administration fee, accrued weekly and paid monthly, at the annual rate of 1.00% of the Fund's average weekly net assets. For the period from August 1, 2009, through July 31, 2010, UBS Global AM had voluntarily agreed to waive a portion of the fee it received under the Advisory Contract so as not to exceed the annual rate of 0.95% of the Fund's average weekly net assets. Effective August 1, 2010, UBS Global AM has agreed to extend this voluntary fee waiver through July 31, 2011. The effect of the voluntary fee waiver is to reduce the fee rate from 1.00% to 0.95% for such period.

Fund Commentary for the month of June 2010

Market Review

Overall, bond yields continued to fall in June as the combination of ongoing European sovereign debt concerns and banking uncertainty, increased risk aversion and fears of a double-dip recession caused many investors to seek the safety of core developed market bonds. The exceptions to the yield declines were unsurprising as peripheral European countries such as Spain, Portugal, Greece and Eastern European countries experienced further spread widening versus the more prominent issuers in the sovereign debt markets, resulting in higher overall yields. (aSpreadsa refer to differences between the yields paid on US Treasury bonds and other types of debt, such as emerging markets (EM) bonds.) However, Europe as a whole posted negative returns in June, contrasting sharply with the strong returns coming from other regions.

Sector Overview

In June, the US Treasury market reacted to economic doubts, and yields declined. The 10-year US Treasury yield finished the month at 2.93%, down from 3.28% at the end of May.

Local emerging market investments, which refer to debt denominated in a local currency other than the US dollar (USD), also were positive,¹ but underperformed USD-denominated debt in the period.²

From a regional USD emerging markets debt perspective, Latin America contributed the most, as higher beta countries garnered investorsa™ attention once again.³ The Dominican Republic, Uruguay and Venezuela were among the outperformers. Conversely, lower beta regions like Asia and the Middle East did not follow the market, and underperformed in June. Local emerging markets recovered with a contribution from local yield returns, while currency returns were flat relative to the USD overall.⁴

Within the securitized space, commercial mortgage-backed securities (CMBS) experienced a backup in spreads in recent weeks and continue to be attractive, given their strong technical characteristics.

In the high yield sector, June was a volatile month, but posted a positive return for the period.⁵ From a ratings perspective, higher-quality credits broadly outperformed lower- quality credits, with securities rated BB (and the equivalent) outperforming B- and CCC-rated securities and lower.

Performance Review

For the month of June, the Fund posted a net asset value total return of 0.66% and a market price total return of 4.33%. The Fund underperformed the Strategic Global Benchmark (the aBenchmarka), on a net asset value basis for the month, mainly driven by short duration exposure in certain developed countries (e.g., Japan) and in the US Treasury market, as well as underweight currency exposure to the Japanese yen (JPY).⁶ Also, our underweight to emerging markets detracted from performance, but was slightly offset by our exposure to high yield, mortgage-backed securities (MBS) and corporate bonds. Specifically within high yield, positions in gaming, diversified financials and healthcare helped performance, while exposure to banks and thrifts, cable and telecommunications sectors detracted from performance.

Outlook

Concerns regarding a global economic slowdown and an uneven recovery have led to increased volatility in the financial markets. The key issue will be the impact, if any, of the financial marketa™s recent decline on the global economy.

We believe that the fundamentals in the credit and emerging debt markets will remain supportive for spread tightening as the year progresses. We also feel that demand for these securities will increase, given investors' search for higher yields.

In addition, we continue to have a positive long-term outlook for the spread sectors (non-US Treasury debt), along with opportunities in the local currency markets. The recent weakness we have seen in this area was largely the result of widespread investor risk aversion, not the deterioration of economic fundamentals in those countries.

Disclaimers Regarding Fund Commentary - The Fund Commentary is intended to assist shareholders in understanding how the Fund performed during the month noted.Views and opinions were current as of the date of this press release.They are not guarantees of performance or investment results and should not be taken as investment advice.Investment decisions reflect a variety of factors, and the Fund and UBS Global AM reserve the right to change views about individual securities, sectors and markets at any time.As a result, the views expressed should not be relied upon as a forecast of the Funda™s future investment intent.

Past performance does not predict future performance. The return and value of an investment will fluctuate so that an investora™s shares, when sold, may be worth more or less than their original cost. The Funda™s net asset value (aNAVa) returns assume, for illustration only, that dividends and other distributions, if any, were reinvested at the NAV on the payable dates. The Funda™s market price returns assume that all dividends and other distributions, if any, were reinvested at prices obtained under the Funda™s Dividend Reinvestment Plan. Returns for periods of less than one year have not been annualized. 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 As measured by J.P. Morgan Government Bond Index-Emerging Markets Global Diversified Index.

² As measured by the J.P. Morgan Emerging Markets Bond Index Global (EMBI Global).

³ In general, beta is a measure of the volatility relative to a respective market. Higher beta countries refer to countries that are considered to have more risk than lower beta countries.

⁴ We attribute local market performance to two components a" (1) actual performance of local bonds (also referred to as alocal yieldsa), and (2) actual currency performance relative to USD.

⁵ As measured by the BofA Merrill Lynch US High Yield Cash Pay Constrained Index

⁶ The Strategic Global Benchmark is an unmanaged index compiled by the advisor, constructed as follows: 67% Citigroup World Government Bond Index (WGBI) and 33% JPMorgan Emerging Markets Bond Index Global (EMBI Global). Investors should note that indices do not reflect the deduction of fees or expenses.