News Column

Global High Income Fund Inc. – Fund Commentary and Portfolio Statistics

February 6, 2014

NEW YORK--(BUSINESS WIRE)-- Global High Income Fund Inc. (the "Fund") (NYSE:GHI) is a non-diversified, closed-end management investment company seeking high current income and, secondarily, capital appreciation through investments primarily in securities of emerging markets debt issuers.

Fund Commentary for the fourth quarter 2013 from UBS Global Asset Management (Americas) Inc. (“UBS Global AM”), the Fund’s investment advisor

Market Review

The emerging markets debt asset class experienced periods of volatility and generated mixed results during the fourth quarter of 2013. The quarter began on a positive note, as investor sentiment remained positive following the US Federal Reserve Board's (the "Fed") surprise decision in September to delay the tapering of its asset purchase program. However, a portion of those gains were given back in November, as US economic data was largely positive and rates moved higher. In addition, investor sentiment for the asset class was impacted by concerns regarding China's economy and generally falling commodity prices. US dollar-denominated emerging markets debt outperformed its local market counterparts during the fourth quarter. As measured by the JP Morgan Emerging Markets Bond Index Global (EMBI Global), US dollar-denominated debt posted a 0.91% return over the three months, whereas local currency emerging markets debt, as measured by the JP Morgan Government Bond Index-Emerging Markets Global Diversified (GBI-EM Global Diversified), posted a -1.54% return during the same time period.

Performance review

For the fourth quarter of 2013, the Fund posted a net asset value total return of -1.01%, and a market price total return of -1.64%. On a net asset value basis, the Fund underperformed its benchmark, the Global High Income Fund Index (the “Index”)1 ,which declined 0.31% for the quarter.

The Fund's allocation to longer-term Brazilian local debt was a drag on results. Brazil's local debt poorly performed due to negative economic sentiment and fears of higher inflation. Rising US interest rates also negatively impacted the country's local yields as they followed US Treasury yields upward. An overweight to Venezuelan US dollar-denominated debt was not rewarded. It performed poorly, especially in November, amid concerns about the country's upcoming local elections and its weakening financial situation. Elsewhere, the Fund's underweights to Polish US dollar-denominated debt and Hungarian local debt detracted from performance, as they both outperformed the Index.

The Fund's underweights to a number of countries contributed to performance. In particular, our underweight to local Indonesian debt was beneficial for results, as it performed poorly given the country's rising current account deficit. An underweight to US dollar-denominated and local Turkish debt was positive as well for the Fund's results, as they were also dragged down by the country's mounting current account deficit, as well as political unrest toward the end of the quarter. Our limited exposure to Ukraine was additive, as a liquidity crisis in the country dragged down the performance of its local debt. Elsewhere, overweights to Sri Lanka US dollar-denominated debt and Belarus US dollar-denominated debt enhanced the Fund's results, as their spreads2 narrowed during the quarter.


We continue to have a neutral near-term outlook for the emerging markets asset class. In recent months there has been mounting evidence that the growth in many developing countries has decelerated. In some countries, this has led to growing current account deficits. Looking ahead, this could negatively impact their currencies and put further strains on their economies. Continued rising US Treasury yields could also adversely affect the asset class in 2014, although we believe that the impact will be less severe than was the case last year. We maintain our positive long-term outlook for the emerging markets asset class. While it may take some time, we expect growth in emerging market countries to once again surpass their developed country counterparts.

Portfolio statistics as of December 31, 20133


Top ten countries (bond holdings only)4

    Percentage of net assets
Brazil     11.7%
Turkey     7.0
Indonesia     6.5
Russia     6.4
Venezuela     5.0
Mexico     4.9
Malaysia     4.4
Poland     3.7
India     3.7
South Africa     3.6
Total     56.9


Top ten currency exposures (includes all securities and other instruments)    

Percentage of net assets

United States Dollar     53.5%
Brazilian Real     8.9
Russian Ruble     3.8
Polish Zloty     3.7
Turkish Lira     3.0
Euro     2.9
Thai Baht     2.8
South African Rand     2.6
Malaysian Ringgit     2.6
Peruvian Nuevo Sol     1.9
Credit quality5     Percentage of net assets
AA     0.9%
A     18.0
BBB     19.3
BB     10.6
B     10.1
Non-rated     38.9
Cash and other assets, less liabilities     2.2
Total     100.0
Net asset value per share6     $11.37
Market price per share6     $9.92
NAV distribution rate (DR)6     6.97%
Market distribution rate (DR) 6     7.98%
Duration 7     5.99 yrs
Weighted average maturity     8.7 yrs

1 Global High Income Fund Index is an unmanaged index compiled by the advisor, currently constructed as follows: 50% JP Morgan Emerging Markets Bond Index (EMBI Global) and 50% JP Morgan Government Bond Index-Emerging Markets Global Diversified (GBI-EM Global Diversified). Investors should note that indices do not reflect the deduction of fees and expenses.

2 "Spreads" refers to differences between the yields paid on US Treasury bonds and other types of debt, such as emerging markets bonds.

3 The Fund’s portfolio is actively managed, and its portfolio composition will vary over time.

4 Excludes exposures obtained via derivatives (e.g., swaps).

5 Credit quality ratings shown in the table are based on those assigned by Standard & Poor’s Financial Services LLC, a part of McGraw-Hill Financial, (“S&P”), to individual portfolio holdings. S&P is an independent ratings agency. Rating reflected represents S&P individual debt issue credit rating. While S&P may provide a credit rating for a bond issuer (e.g., a specific company or country); certain issues, such as some sovereign debt, may not be covered or rated and therefore are reflected as non-rated for the purposes of this table. Credit ratings range from AAA, being the highest, to D, being the lowest, based on S&P’s measures; ratings of BBB or higher are considered to be investment grade quality. Unrated securities do not necessarily indicate low quality. Further information regarding S&P’s rating methodology may be found on its website at Please note that references to credit quality made in the commentary preceding the table reflect ratings based on multiple providers (not just S&P) and thus may not align with the data represented in this table.

6 Net asset value (NAV), market price and distribution rates will fluctuate. NAV distribution rate (DR) is calculated by multiplying the current month’s distribution by 12 and dividing by the month-end net asset value. Market distribution rate (DR) is calculated by multiplying the current month’s distribution by 12 and dividing by the month-end market price.

7 Duration is a measure of price sensitivity of a fixed income investment or portfolio (expressed as % change in price) to a 1 percentage point (i.e., 100 basis points) change in interest rates, accounting for optionality in bonds such as prepayment risk and call/put features.

Any performance information reflects the deduction of the Fund’s fees and expenses, as indicated in its shareholder reports, such as investment advisory and administration fees, custody fees, exchange listing fees, etc. It does not reflect any transaction charges that a shareholder may incur when (s)he buys or sells shares (e.g., a shareholder’s brokerage commissions).

Disclaimers Regarding Fund Commentary -The Fund Commentary is intended to assist shareholders in understanding how the Fund performed during the period noted. The 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 Fund’s future investment intent.

Past performance does not predict future performance. The return and value of an investment will fluctuate so that an investor's shares, when sold, may be worth more or less than their original cost. Any Fund net asset value ("NAV") returns cited in a Fund Commentary assume, for illustration only, that dividends and other distributions, if any, were reinvested at the NAV on the payable dates. Any Fund market price returns cited in a Fund Commentary assume that all dividends and other distributions, if any, were reinvested at prices obtained under the Fund'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 on the sale of Fund shares.

Investing in the Fund entails specific risks, such as interest rate risk and the risks associated with investing in the securities of issuers in emerging market countries.The value of the Fund's investments in foreign securities may fall due to adverse political, social and economic developments abroad and due to decreases in foreign currency values relative to the US dollar.Investments in emerging market issuers may decline in value because of unfavorable government actions, greater risks of political instability or the absence of accurate information about emerging market issuers. Further detailed information regarding the Fund, including a discussion of principal objectives, principal investment strategies and principal risks, may be found in the fund overview located at You may also request copies of the fund overview by calling the Closed-End Funds Desk at 888-793 8637.

©UBS 2014. All rights reserved.

The key symbol and UBS are among the registered and unregistered trademarks of UBS.

UBS Global Asset Management

Closed-End Funds Desk: 888-793-8637

Source: Global High Income Fund Inc.

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