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

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

Market Review

Overall, the emerging markets debt asset class remained volatile during the third quarter, but posted better results in contrast to the prior three-month period. Negative investor sentiment in July and August given the decelerating growth in China, expectations for the US Federal Reserve Board (the “Fed”) to begin tapering its asset purchase program, rising US interest rates and weak investor demand dissipated with the Fed’s announcement to delay the taper. In September, as US interest rates declined and the demand for emerging markets debt stabilized, asset prices found more support. As was the case during the previous three months, US dollar-denominated emerging markets debt outperformed its local market counterparts during the third quarter. US dollar-denominated emerging markets debt, as measured by the JP Morgan Emerging Markets Bond Index Global (EMBI Global), posted a 0.87% 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 -0.43% return during the same time period.

Performance review

For the third quarter of 2013, the Fund posted a net asset value total return of -0.69%, and a market price total return of -4.39%. On a net asset value basis, the Fund underperformed its benchmark, the Global High Income Fund Index (the “Index”)¹, which returned 0.22% for the quarter.

The Fund's local currency overweight versus the US dollar was the largest detractor from results during the third quarter. While many of the Fund's local currency positions rallied in September, and offset much of their losses from the prior two months, that was not the case across all markets. One notable exception was the Indian rupee, as the currency sizably depreciated over the three-month period. Our exposure to longer duration Brazilian local debt was also negative for performance as their yields generally increased during the quarter. Elsewhere, an underweight to Eastern European debt modestly detracted from performance.

Conversely, an underweight to Indonesia's local currency debt was positive for performance, as both Indonesia and India saw sizable declines in their currencies over the three months. Security selection of Argentinean US dollar-denominated debt was also rewarded, as was our underweight to Malaysian local debt, especially in September. Toward the end of August and early September, we increased our US dollar exposures in a number of countries, including Turkey, Indonesia and India, which had been hard hit during the sell-off earlier in the summer. This was beneficial for performance as their spreads² subsequently narrowed during the rally in September.

Outlook

We have a neutral near-term outlook for the emerging markets asset class. Current account deficits in some developing countries, such as India, Turkey and Indonesia, have risen in recent months and pressured their currencies. This could lead to slightly higher inflation in those countries, as well as in South Africa and Brazil, given their weaker currencies. Finally, uncertainties regarding the timing and magnitude of the Fed's tapering could result in periods of heightened volatility.

However, we maintain our positive long-term outlook for the emerging markets asset class. While their economic expansions have decelerated somewhat, growth in developing countries should remain higher than their developed country counterparts. In addition, emerging markets debt-to-GDP ratios and fiscal budgets are relatively more attractive. We also believe that supply/demand technicals should be supportive and lead to spread tightening over time.

Please note that the Fund’s quarterly portfolio statistics, which in the past were disclosed as part of the Fund’s distribution declaration releases, will now be reflected in the quarterly commentaries, as seen below.

Portfolio statistics as of September 30, 2013^3
Top ten countries (bond holdings only)^4	Percentage of net assets
Brazil	12	.3%
Turkey	7	.9
Indonesia	6	.6
Russia	6	.0
Venezuela	5	.2
Mexico	4	.9
India	4	.4
Poland	3	.7
Malaysia	3	.6
Thailand	3	.4
Total	58	.0
Top ten currency exposures (includes all securities and other instruments)	Percentage of net assets
United States Dollar	52	.0%
Brazilian Real	9	.1
Russian Ruble	3	.9
Thailand Baht	3	.4
Polish Zloty	3	.4
Turkish Lira	3	.4
Euro	2	.8
Nigerian Naira	2	.4
Mexican Peso	2	.0
Malaysian Ringgit	1	.9
Credit quality^5	Percentage of net assets
AA	0	.9%
A	17	.2
BBB	18	.7
BB	10	.6
B	11	.0
Non-rated	39	.0
Cash and other assets, less liabilities	2	.6
Total	100	.0
Other characteristics
Net asset value per share^6	$11	.69
Market price per share^6	$10	.29
NAV distribution rate (DR)^6	7	.04%
Market distribution rate (DR)^6	8	.00%
Duration^7	6.17 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 are based on those assigned by Standard & Poor’s, a division of the McGraw-Hill Companies, Inc. (“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 www.standardandpoors.com. Please note that references to credit quality made in the commentary above 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 as a percentage of each 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.

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 http://www.ubs.com/closedendfundsinfo. You may also request copies of the fund overview by calling the Closed-End Funds Desk at 888-793 8637.

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