-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qaj2jwohDPocWWjv7HVCFmQrsK+HVxvWp/o/Un5FalYz2diMMJk17JQdpQJhBcfx C7ccza3bdqRWaSetP8zIwQ== 0000912057-02-027056.txt : 20020712 0000912057-02-027056.hdr.sgml : 20020711 20020711170824 ACCESSION NUMBER: 0000912057-02-027056 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020430 FILED AS OF DATE: 20020711 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GLOBAL HIGH INCOME DOLLAR FUND INC CENTRAL INDEX KEY: 0000897996 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-07540 FILM NUMBER: 02701266 BUSINESS ADDRESS: STREET 1: C/O BRINSON ADVISORS, INC. STREET 2: 51 WEST 52ND ST CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2127133269 MAIL ADDRESS: STREET 1: C/O BRINSON ADVISORS, INC. STREET 2: 51 WEST 52ND ST CITY: NEW YORK STATE: NY ZIP: 10019 FORMER COMPANY: FORMER CONFORMED NAME: GLOBAL OPPORTUNITIES INCOME FUND INC /MD/ DATE OF NAME CHANGE: 19930624 N-30D 1 a2084313zn-30d.txt N-30D [LOGO--Three keys design for UBS Global Asset Management] GLOBAL HIGH INCOME DOLLAR FUND INC. SEMIANNUAL REPORT APRIL 30, 2002 GLOBAL HIGH INCOME DOLLAR FUND INC. DEAR SHAREHOLDER, We present you with the semiannual report for the Global High Income Dollar Fund Inc. for the six months ended April 30, 2002. A NEW GLOBAL BRAND Effective April 8, 2002, Brinson Advisors, Inc. changed its name to UBS Global Asset Management (US) Inc., a member of the UBS Global Asset Management division of UBS AG, one of the largest financial services firms in the world. This strategic branding move reflects the global integration and scope of the organization's investment approach and offerings. The UBS Global Asset Management organization strives to deliver superior investment performance to clients through the management and allocation of their investments across and within all major asset classes. Our strength lies in our globally integrated investment platform. With investment professionals throughout the world, the UBS Global Asset Management organization provides clients with uncommon research, asset allocation and risk management conducted on a fully global basis. We seek to maximize the benefits to clients, through understanding and acting upon their risk and return objectives. This covenant with our clients is the basis for the success of our business. Effective on the same date, the funds comprising the Brinson Mutual Fund Family were renamed UBS Funds. The Funds' investment objectives and investment processes remain the same. Q&A WITH PORTFOLIO MANAGER STUART WAUGH Q. HOW DID GLOBAL HIGH INCOME DOLLAR FUND INC. PERFORM DURING THE SIX MONTHS ENDED APRIL 30, 2002? A. For the six-month period, emerging market debt, as measured by the JP Morgan Emerging Market Bond Index-Global (EMBI-G), returned 6.72% outperforming government bonds in developed markets, as measured by the SSB World Government Bond Index (WGBI), which lost 0.99% on a currency-hedged basis measured in U.S. dollars. The Fund returned 10.24% for the period. An [SIDENOTE] GLOBAL HIGH INCOME DOLLAR FUND INC. INVESTMENT GOAL: Primarily, high level of current income; secondary, capital appreciation. PORTFOLIO MANAGER: Stuart Waugh UBS Global Asset Management (US) Inc. COMMENCEMENT: October 8, 1993 NYSE SYMBOL: GHI DIVIDEND PAYMENTS: Monthly 1 underweighting in Argentine bonds, which went into default in December 2001, is the primary reason for the Fund's outperformance relative to the EMBI-G. During the period, the median return for emerging market debt closed-end funds was 18.97%. The Fund's underperformance against its competitors was due to its underweighting in Brazil, a market that produced strong returns over the period. The Fund's lack of leverage in an appreciating market also held back its return relative to its competitors. Q. WHAT ACCOUNTED FOR THE WIDE DIVERGENCE IN THE PERFORMANCE OF EMERGING MARKET AND DEVELOPED MARKET DEBT? A. The investment environment for emerging-market debt changed significantly during the six months. Early in the period, the attacks of September 11 and concern that the debt crisis in Argentina would have a negative influence on valuations of other emerging market debt triggered a "flight-to-quality," as investors became more and more risk-averse. In addition, after the U.S. Treasury announced it would discontinue issuance of 30-year bonds, U.S. Treasury prices rose across all maturities. Against this backdrop, valuations of developed market government bonds rose and valuations of emerging market debt declined. As the period progressed, these trends reversed course. The investment environment became somewhat more positive, and investors became more willing to take on risk. This benefited emerging market debt securities relative to government bonds in developed markets. As a result, the performance of the EMBI-Global improved and the performance of the SSB WGBI weakened. In recent weeks, enthusiasm for riskier investments stalled and valuations of equities, high yield bonds and emerging market debt have moved sideways or have declined. Q. HOW DID YOU POSITION THE FUND RELATIVE TO THE EMBI-GLOBAL DURING THE PERIOD? A. We managed the Fund's allocation to Brazil at about half the weighting of the Index, as we considered the weighting of Brazilian bonds in the Index too large for the Fund in light of the country's financial vulnerabilities. This underweighted exposure, however, detracted from performance as that market produced strong returns. We kept assets available from the underweighting in Brazil in non-indexed credits, such as Trinidad & Tobago, foreign currency positions in East European government bonds and cash. Like the Index, the Fund was highly concentrated in credits of oil exporting countries. The Fund had a shorter duration than the Index. (Duration measures a Fund's sensitivity to interest rate changes. In general, a longer duration benefits a fund when interest rates decline. A shorter duration is advantageous when interest rates rise.) The Fund's shorter duration reflects the relative value and credit quality of individual securities, rather than a yield-curve strategy. 2 Q. WHAT IS YOUR OUTLOOK OVER THE NEXT SIX TO 12 MONTHS? A. Relatively low interest rates and inflation, prospects for a moderate global economic recovery and higher commodity prices have provided a favorable environment for emerging market economies and credit trends. However, the prospects of escalating militarism are complicating the global investment environment. President Bush has said that the war on terrorism will take a long time to win, and there are increasing trouble spots around the world. The escalation of these conflicts will likely reduce both portfolio and direct investment into emerging markets and may have a negative impact on valuations of emerging-market debt. When we evaluate individual markets, we see a mixed picture. RUSSIA Russia remains on a positive credit trajectory, benefiting not only from cyclical advantages (high oil prices) but also from economic and managerial reform. We believe Russian bond valuations will continue to benefit from upgrades by credit-rating agencies, and we have overweighted the Fund in Russian bonds. BRAZIL Brazil, which accounts for almost 20% of the EMBI-Global market capitalization, is a different story. We believe the country faces large fiscal challenges in rolling over its large stock of domestic debt. Brazil's debt problem is keeping real interest rates high; it is stifling economic performance and is leaving the financial system open to a shock. While the current Brazilian administration has been able to maintain confidence in the financial markets and has continued to refinance large amounts of short-term domestic debt, it is not clear that a new government will engender the same confidence. We have significantly underweighted Brazil relative to the EMBI-Global. MEXICO Mexican debt is now rated "investment grade" by two major credit agencies. However, Mexico must implement tax and microeconomic reforms to earn further upgrades. In the past, such reforms have presented huge hurdles. While we continue to believe the credit spreads offered for Mexican debt are relatively shallow considering the stagnant prospects for further fiscal and microeconomic reform, Mexico represents one of the less risky emerging-market credits. Therefore, from time to time, we may increase the Fund's weighting in Mexico as a defensive strategy. OTHER COUNTRIES Relative to the EMBI-Global, the Fund has a roughly neutral dollar weighting in a number of credits for which we believe the fundamentals are likely to be stable. These include Bulgaria, Malaysia, Morocco, the Philippines, South Korea and Venezuela. While news from Venezuela may continue to be negative because of the conflict between the Chavez government and the political opposition, we 3 expect the country's ability to support its low debt service payments from oil exports will remain unimpaired. Yields offered on Venezuelan debt are high, given the country's low debt stock. In managing the Fund, we will focus on optimizing income and avoiding negative downside credit surprises. PERFORMANCE REVIEW
NET ASSET VALUE RETURNS+ FUND LIPPER MEDIAN* - ------------------------------------------------------------------------------------------- 6 Months 10.24% 18.97% 1 Year 13.81% 19.79% 5 Years 9.55% 8.96% Inception++ 10.14% 9.51% MARKET PRICE RETURNS+ FUND LIPPER MEDIAN* - ------------------------------------------------------------------------------------------- 6 Months 21.49% 19.10% 1 Year 26.11% 25.36% 5 Years 14.68% 11.89% Inception++ 11.63% 11.20%
+ Past performance is no guarantee of future results. The Fund's share price and investment return will vary so that an investor's shares may be worth more or less than their original cost. NAV and market price returns for periods of one year or less have not been annualized. NAV return assumes, for illustration only, that dividends were reinvested at the net asset value on the ex-dividend dates. Returns do not reflect any commissions and are not representative of the performance of an individual investment. * The Lipper Median is the return of the fund that places in the middle of the Lipper Emerging Market Debt Funds. The Lipper Peer Group data are calculated by Lipper Inc.; used with permission. Lipper total return methodology compares a fund's NAV (or market price in the case of market price returns) at the beginning and end of a period, with the result being expressed as a percent change of the beginning net asset value (or market price). The net asset value (or market price) is adjusted to reflect the compounding effect of reinvesting income dividends as well as capital gains distributions, if any. Distributions are reinvested on the ex-dividend date at the ex-dividend NAV (or market price on the pay date). Lipper total returns do not reflect any commissions. o Inception for the Fund is October 8, 1993. Inception returns for the Lipper Median are shown as of nearest month end: October 31, 1993. 4 PORTFOLIO STATISTICS
CURRENCY EXPOSURE++* 4/30/02 10/31/01 - -------------------------------------------------------------------------------------------------------------- U.S. Dollar Denominated 96.8% U.S. Dollar Denominated 96.3% Foreign Denominated 3.2% Foreign Denominated 3.7 ------ ------ TOTAL 100.0% TOTAL 100.0% ====== ====== TOP TEN COUNTRIES (EXCLUDING THE UNITED STATES)* 4/30/02 10/31/01 - -------------------------------------------------------------------------------------------------------------- Russia 17.2% Mexico 12.9% Mexico 15.3 Russia 12.3 Brazil 9.2 Brazil 7.4 Philippines 5.9 Argentina 4.5 Venezuela 5.6 Venezuela 4.2 Korea 4.9 Korea 3.7 Trinidad & Tobago 3.7 Bulgaria 3.2 Peru 3.6 Peru 3.2 Hungary 3.1 Trinidad & Tobago 3.1 Malaysia 2.6 Malaysia 2.7 ----- ----- TOTAL 71.1% TOTAL 57.2% ===== ===== CREDIT QUALITY* 4/30/02 10/31/01 - -------------------------------------------------------------------------------------------------------------- A1/P1 8.5% 23.3% A 4.7 3.7 BBB 28.0 16.2 BB 15.1 19.1 B 36.9 29.3 CCC 1.6 0.9 CC -- 4.5 Selective Default 2.4 -- Non-Rated 2.8 3.0 ------ ------ TOTAL 100.0% 100.0% ====== ====== CHARACTERISTICS+ 4/30/02 10/31/01 - -------------------------------------------------------------------------------------------------------------- Net Asset Value $14.78 $14.16 Market Price $14.91 $12.98 12-Month Dividend $1.5940 $1.6054 Dividend at Period-End $0.1358 $0.1272 ------- ------- Net Assets (mm) $287.3 $275.2 ======= =======
* Weightings represent percentages of net assets as of the dates indicated. The Fund's portfolio is actively managed and its composition will vary over time. ++ Prices and other characteristics will vary over time. 5 Our ultimate objective in managing your investments is to help you successfully meet your financial goals. We thank you for your continued support and welcome any comments or questions you may have. For more information on the UBS Funds,(1) please contact your financial advisor or visit us at www.ubs.com. Sincerely, /s/ Brian M. Storms Brian M. Storms President Global High Income Dollar Fund Inc. PRESIDENT AND CHIEF OPERATING OFFICER UBS Global Asset Management (US) Inc. /s/ Stuart Waugh Stuart Waugh PORTFOLIO MANAGER Global High Income Dollar Fund Inc. EXECUTIVE DIRECTOR UBS Global Asset Management (US) Inc. This letter is intended to assist shareholders in understanding how the Fund performed during the six-month period ended April 30, 2002, and reflects our views at the time of its writing. Of course, these views may change in response to changing circumstances. We encourage you to consult your financial advisor regarding your personal investment program. 1. Mutual funds are sold by prospectus only. The prospectuses for the funds contain more complete information regarding risks, charges and expenses, and should be read carefully before investing. 6 PORTFOLIO OF INVESTMENTS -- APRIL 30, 2002 (UNAUDITED)
PRINCIPAL AMOUNT MATURITY INTEREST (000)** DATES RATES VALUE - --------- ------------- -------- ------------ LONG-TERM DEBT SECURITIES--89.19% ALGERIA--1.57% $ 3,095 The People's Democratic Republic of Algeria Loan Participation, Tranche 3 (JP Morgan Chase Bank) (1)(2) 03/04/10 2.875%+ $ 2,862,632 1,789 The People's Democratic Republic of Algeria Loan Participation, Tranche 3 (Salomon Brothers Holding Company, Inc.) (1)(2) 03/04/10 2.875+ 1,655,263 ----------- 4,517,895 ARGENTINA--2.37% 17,339 Republic of Argentina 06/19/18 to 12.000 to 06/19/31 12.250# 3,681,282 5,000 Republic of Argentina, PAR 03/31/23 6.000# 2,250,000 2,230 Republic of Argentina, Series F (1) 10/15/04 20.180* 869,700 ----------- 6,800,982 BRAZIL--9.24% 14,000 Federal Republic of Brazil 03/12/08 to 10.125 to 08/17/40 11.500 11,104,000 8,800 Federal Republic of Brazil, DISC 04/15/24 3.062+ 6,380,000 2,300 Federal Republic of Brazil, EXIT (1) 09/15/13 6.000 1,702,003 2,800 Federal Republic of Brazil, NMB 04/15/09 3.125+ 2,271,500 7,500 Federal Republic of Brazil, PAR 04/15/24 6.000 5,100,000 ----------- 26,557,503 BULGARIA--2.46% 2,285 Republic of Bulgaria 01/15/15 8.250 2,193,600 2,500 Republic of Bulgaria, DISC 07/28/24 2.813+ 2,281,250 2,850 Republic of Bulgaria, FLIRB 07/28/12 2.813+ 2,605,983 ----------- 7,080,833 CHILE--0.70% 2,000 Republic of Chile 07/23/07 5.625 1,995,726 COLOMBIA--1.70% 4,874 Republic of Colombia 04/09/11 to 9.750 to 02/25/20 11.750 4,895,982 DOMINICAN REPUBLIC--1.11% 3,000 Dominican Republic 09/27/06 9.500 3,195,000
7
PRINCIPAL AMOUNT MATURITY INTEREST (000)** DATES RATES VALUE - --------- -------- -------- ----------- LONG-TERM DEBT SECURITIES--(CONTINUED) ECUADOR--1.61% $ 1,750 Republic of Ecuador 11/15/12 12.000% $ 1,463,000 5,500 Republic of Ecuador 08/15/30 5.000++ 3,162,500 4,625,500 HUNGARY--0.85% HUF 651,100 Republic of Hungary 10/12/04 8.500 2,443,356 KOREA--4.91% $ 4,025 Korea Development Bank 11/16/06 5.250 4,004,410 8,660 Republic of Korea 04/15/08 8.875 10,112,331 ----------- 14,116,741 MALAYSIA--2.60% 7,176 Petroliam Nasional Berhad 10/18/06 to 7.125 to 10/15/26 7.625 7,456,004 MEXICO--15.33% 3,750 Mexican Multi Year Refinance Loan Participation (Salomon Brothers Holding Company, Inc.) (1)(2) 03/20/05 2.750+ 3,600,123 8,883 PEMEX Finance Ltd. (1) 02/15/07 to 8.450 to 11/15/18 9.150 9,772,984 18,318 United Mexican States 03/12/08 to 8.300 to 08/15/31 11.500 21,891,520 6,950 United Mexican States, DISC 12/31/19 2.833+ 6,984,750 1,885 United Mexican States, PAR 12/31/19 6.250 1,807,244 ----------- 44,056,621 MOROCCO--1.38% 4,299 Kingdom of Morocco Loan Participation, Tranche A (JP Morgan Chase Bank) (1)(2) 01/05/09 2.781+ 3,976,806 PANAMA--1.42% 4,853 Republic of Panama, PDI 07/17/16 2.625+ 4,064,544 PERU--3.60% 11,120 Republic of Peru, FLIRB 03/07/17 4.000%++ 8,006,400 2,970 Republic of Peru, PDI 03/07/17 4.500++ 2,324,025 ----------- 10,330,425
8
PRINCIPAL AMOUNT MATURITY INTEREST (000)** DATES RATES VALUE - --------- ----------- --------- ----------- LONG-TERM DEBT SECURITIES--(CONCLUDED) PHILIPPINES--5.85% $ 2,865 Philippine Long Distance Telephone 05/15/12 11.375% $ 2,925,881 11,065 Republic of Philippines 03/12/09 to 8.375 to 01/15/19 9.875 11,356,125 2,720 Republic of Philippines, DCB 12/01/09 2.938+ 2,516,000 ----------- 16,798,006 POLAND--1.58% PLN 18,470 Republic of Poland 11/12/06 8.500 4,542,978 QATAR--1.21% $ 3,002 State of Qatar 06/15/30 9.750 3,482,320 RUSSIA--17.18% 18,904 Russian Federation 07/24/05 to 8.250 to 03/31/10 10.000 19,190,410 43,624 Russian Federation 03/31/30 5.000++ 30,154,806 ----------- 49,345,216 TRINIDAD & TOBAGO--3.72% 4,650 Republic of Trinidad & Tobago 10/01/09 9.875 5,301,000 4,700 Republic of Trinidad & Tobago (1) 10/03/04 to 9.750 to 07/01/20 11.750 5,396,500 ----------- 10,697,500 TUNISIA--0.77% 2,250 Banque Centrale de Tunisie 04/25/12 7.375 2,207,813 TURKEY--2.47% 6,810 Republic of Turkey 01/15/30 11.875 7,092,615 VENEZUELA--5.56% 10,516 Republic of Venezuela 08/15/18 to 9.250 to 09/15/27 13.625 8,089,643 9,571 Republic of Venezuela, DCB 12/18/07 2.875+ 7,896,321 ----------- 15,985,964 =========== Total Long-Term Debt Securities (cost- $237,890,470) 256,266,330
9
NUMBER OF RIGHTS VALUE - --------- ---------- RIGHTS--0.01% MEXICO--0.01% 14,195 United Mexican States Value Recovery Rights, Series A, Expiration Date 06/30/03 (3) $ 22,712 VENEZUELA--0.00% 27,250 Venezuela Oil Indexed Payment Obligations, Expiration Date 04/15/20 (3) 0 ========== Total Rights (cost--$0) 22,712 PRINCIPAL AMOUNT MATURITY INTEREST (000)** DATES RATES - ---------- ----------- ---------- SHORT-TERM DEBT SECURITIES--10.23% HUNGARY--2.23% HUF 1,715,000 Republic of Hungary 06/24/02 to 9.000 to 11/24/02 14.000 6,404,506 UNITED STATES--8.00% $ 23,000 Federal National Mortgage Association Certificate 05/09/02 2.349* 22,990,511 ========== Total Short-Term Debt Securities (cost--$29,086,565) 29,395,017 REPURCHASE AGREEMENT--1.14% 3,269 Repurchase agreement dated 04/30/02 with Societe Generale Securities Corp., collateralized by $3,210,000 U.S. Treasury Notes, 5.500% due 01/31/03 (value--$3,335,662); proceeds: $3,269,169 (cost--$3,269,000) 05/01/02 1.860 3,269,000 ========== Total Investments (cost--$270,246,035)--100.57% 288,953,059 Liabilities in excess of other assets(0.57%) (1,646,049) ------------ Net Assets--100.00% $287,307,010
Note: The Portfolio of Investments is listed by the issuer's country of origin. ** In U.S. dollars unless otherwise indicated. * Interest rate reflects yield to maturity at date of purchase. # Bond interest in default + Reflects rate at April 30, 2002 on variable rate instruments. ++ Reflects rate at April 30, 2002 on step coupon rate instruments. (1) Illiquid securities represent 10.38% of net assets. (2) Participation interest was acquired through the financial institution indicated parenthetically. (3) Rights do not currently accrue income. Periodic income, if any, will vary based on several factors including oil exports, prices, and inflation. DCB Debt Conversion Bond DISC Discount Bond EXIT Investment Bond FLIRB Front-loaded Interest Reduction Bond HUF Hungary Forints NMB New Money Bond PAR Par Bond PDI Past Due Interest Bond PLN Polish Zloties 10
CONTRACT TO IN EXCHANGE MATURITY UNREALIZED DELIVER FOR DATE DEPRECIATION ----------- ------------- --------- ------------ FORWARD FOREIGN CURRENCY CONTRACTS Polish Zloties 16,958,000 US $4,121,521 05/08/02 $115,714
INVESTMENTS BY TYPE OF ISSUER
PERCENTAGE OF NET ASSETS --------------------------------------- LONG-TERM SHORT-TERM ------------------ ---------- Government and other public issuers 84.78% 2.23% U.S. Agency Obligations -- 8.00 Financial Services 3.40 -- Repurchase Agreements -- 1.14 Telecom 1.02 -- ------- ------- 89.20% 11.37%
See accompanying notes to financial statements 11 STATEMENT OF ASSETS AND LIABILITIES-- APRIL 30, 2002 (UNAUDITED) ASSETS: Investments in securities, at value (cost--$270,246,035) $288,953,059 Cash 210 Interest receivable 4,125,074 Other assets 26,880 ------------ TOTAL ASSETS 293,105,223 LIABILITIES: Payable for investments purchased 5,093,388 Payable to investment advisor and administrator 297,003 Net unrealized depreciation on forward foreign currency contracts 115,714 Accrued expenses and other liabilities 292,108 ------------ TOTAL LIABILITIES 5,798,213 NET ASSETS: Capital stock--$0.001 par value; 100,000,000 shares authorized; 19,439,667 shares issued and outstanding 279,671,734 Distributions in excess of net investment income (5,730,247) Accumulated net realized loss from investment transactions (5,236,526) Net unrealized appreciation of investments, other assets and liabilities denominated in foreign currencies 18,602,049 ------------ NET ASSETS $287,307,010 ============ NET ASSET VALUE PER SHARE $14.78
See accompanying notes to financial statements 12 STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2002 (UNAUDITED) -------------- INVESTMENT INCOME: Interest $11,913,678 EXPENSES: Investment advisory and administration fees 1,754,962 Custody and accounting fees 111,392 Reports and notices to shareholders 42,088 Professional fees 37,025 Directors' fees 25,193 Transfer agency fees 6,150 Other expenses 39,271 ----------- 2,016,081 ----------- Net investment income 9,897,597 REALIZED AND UNREALIZED GAINS (LOSSES) FROM INVESTMENT ACTIVITIES: Net realized gain (loss) from: Investment transactions 3,108,862 Foreign currency transactions (108,895) Net change in unrealized appreciation/depreciation of: Investments 14,844,774 Other assets and liabilities denominated in foreign currencies (108,268) =========== Net realized and unrealized gain from investment activities 17,736,473 =========== Net increase in net assets resulting from operations $27,634,070
See accompanying notes to financial statements 13 STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS FOR THE ENDED YEAR ENDED APRIL 30, 2002 OCTOBER 31, (UNAUDITED) 2001 -------------- ------------- FROM OPERATIONS: Net investment income $ 9,897,597 $ 24,005,942 Net realized gain (loss) from investment transactions 3,108,862 (563,226) Net realized losses from foreign currency transactions (108,895) (1,636,328) Net change in unrealized appreciation/depreciation of: Investments 14,844,774 3,985,353 Other assets and liabilities denominated in foreign currencies (108,268) 45,634 ------------ ------------ Net increase in net assets resulting from operations 27,634,070 25,837,375 DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income (15,532,294) (22,369,614) Paid-in-capital -- (8,851,518) ------------ ------------ Total dividends and distributions to shareholders (15,532,294) (31,221,132) CAPITAL STOCK TRANSACTIONS: Cost of shares repurchased -- (1,366,396) Net increase (decrease) in net assets 12,101,776 (6,750,153) NET ASSETS: Beginning of period 275,205,234 281,955,387 End of period $287,307,010 $275,205,234
See accompanying notes to financial statements 14 Notes to Financial Statements (unaudited) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Global High Income Dollar Fund Inc. (the "Fund") was incorporated in Maryland on February 23, 1993 and is registered with the Securities and Exchange Commission as a closed-end, non-diversified management investment company. The Fund's primary investment objective is to achieve a high level of current income. As a secondary objective the Fund seeks capital appreciation, to the extent consistent with its primary objective. The preparation of financial statements in accordance with accounting principles generally accepted in the United States 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. The following is a summary of significant accounting policies: VALUATION OF INVESTMENTS -- The Fund calculates its net asset value based on the current market value, where available, for its portfolio securities. The Fund normally obtains market values for its securities from independent pricing sources and broker-dealers. Independent pricing sources may use reported last sale prices, current market quotations or valuations from computerized "matrix" systems that derive values based on comparable securities. A matrix system incorporates parameters such as security quality, maturity and coupon, and/or research and evaluations by its staff, including review of broker-dealer market price quotations, if available, in determining the valuation of the portfolio securities. Securities traded in the over-the-counter ("OTC") market and listed on The Nasdaq Stock Market, Inc. ("Nasdaq") normally are valued at the last sale price on Nasdaq prior to valuation. Other OTC securities are valued at the last bid price available prior to valuation. Securities which are listed on U.S. and foreign stock exchanges normally are valued at the last sale price on the day the securities are 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 valued on the exchange designated as the primary market by UBS Global Asset Management (US) Inc. ("UBS Global AM", formerly known as Brinson Advisors, Inc.), the investment advisor and administrator of the Fund. UBS Global AM is an indirect wholly owned asset management subsidiary of UBS AG, an internationally diversified organization with headquarters in Zurich, Switzerland and operations in many areas of the financial services industry. If a market value is not available from an independent pricing source for a particular security, that security is valued at fair value as determined in good faith by or under the direction of the Fund's board of directors (the "Board"). The amortized cost method of valuation, which approximates market value, generally is used to value short-term debt instruments with sixty days or less remaining to maturity, unless the Board determines that this does not represent fair value. All investments quoted in foreign 15 currencies will be valued weekly in U.S. dollars on the basis of the 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 materially affecting the value of such securities or currency exchange rates occur during such time periods, the securities will be valued at their fair value as determined in good faith by or under the direction of the Board. 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 or advised by UBS Global AM. INVESTMENT TRANSACTIONS AND INVESTMENT INCOME--Investment transactions are recorded on the trade date. Realized gains and losses from investment and foreign exchange transactions are calculated using the identified cost method. Interest income is recorded on an accrual basis. Discounts are accreted and premiums are amortized 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; and (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'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. Certain foreign exchange gains and losses included in realized and unrealized gains and losses 16 are included in or are a reduction of ordinary income in accordance with U.S. federal income tax regulations. 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 may also use forward contracts to enhance income. 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 excess of the value of the position being hedged by such contracts or (2) the Fund maintains cash or liquid 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. The amount of dividends from net investment income and distributions from net realized capital gains is determined in accordance with U.S. federal income tax regulations, which may differ from accounting principles generally accepted in the United States. 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 reclassification. 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 invests. The ability of the issuers of 17 debt securities held by the Fund to meet their obligations may be affected by economic and political developments particular to a specific industry, country or region. INVESTMENT ADVISOR AND ADMINISTRATOR The Board has approved an investment advisory and administration contract ("Advisory Contract") with UBS Global AM, under which UBS Global AM serves as investment advisor and administrator of the Fund. In accordance with the Advisory Contract, the Fund pays UBS Global AM an investment advisory and administration fee, which is accrued weekly and paid monthly, at the annual rate of 1.25% of the Fund's average weekly net assets. SECURITY LENDING The Fund may lend securities up to 33 1/3% of its total assets to qualified institutions. The loans are secured at all times by cash or U.S. government securities in an amount at least equal to the market value of the securities loaned, plus accrued interest, determined on a daily basis and adjusted accordingly. The Fund will regain ownership of loaned securities to exercise certain beneficial rights, however, the Fund may bear the risk of delay in recovery of, or even loss of rights in, the securities loaned should the borrower fail financially. The Fund receives compensation, which is included in interest income, for lending its securities from interest earned on the cash or U.S. government securities held as collateral, net of fee rebates paid to the borrower plus reasonable administrative and custody fees. UBS PaineWebber Inc. ("UBS PaineWebber(SM)*"), an indirect wholly owned subsidiary of UBS AG, has been approved as a borrower under the Fund's securities lending program. During the six months ended April 30, 2002, the Fund did not lend securities. CAPITAL STOCK There are 100,000,000 shares of $0.001 par value common stock authorized and 19,439,667 shares outstanding at April 30, 2002. For the six months ended April 30, 2002, the Fund did not repurchase any shares of common stock. For the year ended October 31, 2001, the Fund repurchased 107,400 shares of its common stock at an average market price per share of $12.66 and a weighted average discount from net asset value of 12.12%. For the period September 17, 1998 (commencement of repurchase program) through April 30, 2002, the Fund repurchased 3,297,000 shares of common stock at an average market price per share of $11.68 and a weighted average discount from net asset value of 14.88%. At April 30, 2002, paid-in-capital has been reduced by the cost of $38,698,693 of capital stock repurchased. - -------------------- * UBS PaineWebber is a service mark of UBS AG. 18 FEDERAL TAX STATUS For federal income tax purposes, the cost of securities owned at April 30, 2002, was substantially the same as the cost of securities for financial statement purposes. At April 30, 2002, the components of net unrealized appreciation of investments were as follows: Gross appreciation (investments having an excess of value over cost) $29,130,427 Gross depreciation (investments having an excess of cost over value) (10,423,403) Net unrealized appreciation of investments $18,707,024
For the six months ended April 30, 2002, total aggregate purchases and sales of portfolio securities, excluding short-term securities, were $82,223,853 and $52,927,034, respectively. 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 October 31, 2001, the Fund had a net capital loss carryforward of $8,236,493, which is available as a reduction, to the extent provided in the regulations, of future net realized capital gains, and will expire as follows: $7,673,267 on October 31, 2007 and $563,226 on October 31, 2009. To the extent that such losses are used to offset future net realized capital gains, as provided in the regulations, such gains will not be distributed. 19 FINANCIAL HIGHLIGHTS Selected data for a share of common stock outstanding thoughout each period is presented below:
FOR THE SIX MONTHS ENDED FOR THE YEARS ENDED OCTOBER 31, APRIL 30, 2002 ------------------------------------------------------------------- (UNAUDITED) 2001 2000 1999 1998 1997 -------------- --------- --------- ---------- --------- -------- NET ASSET VALUE, BEGINNING OF PERIOD $ 14.16 $ 14.42 $ 13.66 $ 13.02 $ 15.16 $ 14.99 Net investment income 0.51 1.24 1.48 1.10 1.28 1.31 Net realized and unrealized gains (losses) from investment and foreign currency transactions 0.91 0.10 0.71 0.78 (2.12) 0.13 Net increase (decrease) from investment operations 1.42 1.34 2.19 1.88 (0.84) 1.44 Dividends from net investment income (0.80) (1.15) (1.48) (1.10) (1.10) (1.08) Distributions from net realized gains from investment transactions -- -- -- (0.30) (0.11) -- Distributions from paid-in-capital -- (0.46) -- -- -- -- Distributions in excess of net investment income -- -- (0.09) -- (0.10) (0.19) Total dividends and distributions to shareholders (0.80) (1.61) (1.57) (1.40) (1.31) (1.27) Net increase in net asset value resulting from repurchase of common stock -- 0.01 0.14 0.16 0.01 -- -------- -------- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 14.78 $ 14.16 $ 14.42 $ 13.66 $ 13.02 $ 15.16 MARKET VALUE, END OF PERIOD $ 14.91 $ 12.98 $ 12.63 $ 11.50 $ 11.50 $ 12.81 -------- -------- -------- -------- -------- -------- TOTAL INVESTMENT RETURN(1) 21.49% 15.80% 24.55% 13.23% (0.70)% 11.47% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's) $287,307 $275,205 $281,955 $284,266 $294,067 $344,612 Expenses to average net assets 1.44%* 1.41% 1.39% 1.42% 1.44% 1.42% Net investment income to average net assets 7.05%* 8.46% 10.12% 8.27% 8.55% 8.24% Portfolio turnover rate 22% 51% 43% 33% 89% 56%
* Annualized. (1) Total investment return is calculated assuming a purchase 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 and other distributions at prices obtained under the Fund's Dividend Reinvestment Plan. Total investment return does not reflect brokerage commissions and has not been annualized for a period of less than one year. 20 THE FUND Global High Income Dollar Fund Inc. (the "Fund") is a non-diversified, closed-end management investment company whose shares trade on the New York Stock Exchange ("NYSE"). The Fund's primary investment objective is to achieve a high level of current income. As a secondary objective, the Fund seeks capital appreciation, to the extent consistent with its primary objective. The Fund's investment advisor and administrator is UBS Global Asset Management (US) Inc. ("UBS Global AM"), an indirect wholly owned asset management subsidiary of UBS AG, which had over $74.0 billion in assets under management as of May 31, 2002. INVESTMENT POLICY CHANGES The Fund's board approved modifications to the Fund's investment policies as a result of a new rule promulgated by the Securities and Exchange Commission. This rule generally requires a fund with a name suggesting that it focuses on a particular type of investment to invest at least 80% of its net assets (plus the amount of any borrowing for investment purposes) in the type of investment suggested by its name. The investment policy changes became effective on April 8, 2002. These changes are not expected to affect materially portfolio management. The new 80% policy has been adopted as a "non-fundamental" investment policy. This means that this investment policy may be changed by the Fund's board without shareholder approval. However, the Fund has also adopted a policy to provide its shareholders with at least 60 days' prior written notice of any change to its 80% investment policy. Many of the Fund's other investment policies also are non-fundamental policies and may be changed by its board without shareholder approval. The Fund will interpret these new policies as if the following phrase appeared immediately after the words "net assets": "(plus the amount of any borrowing for investment purposes)." If subsequent to an investment, the Fund's 80% policy is no longer met (E.G., bonds are called or mature resulting in a large influx of cash), then under normal circumstances, the Fund's future investments would be made in a manner that would bring the Fund's investments back in line with the 80% threshold. In order to place these changes in context, reproduced below are prior policies that were impacted by this change as well as new policies which replace the prior policies: PRIOR POLICIES IMPACTED BY CHANGE: Under normal market conditions, the Fund invests at least 65% of its total assets in U.S. dollar-denominated debt securities of issuers located in emerging market countries, including Brady Bonds... and zero coupon securities. The Fund may also invest up to 35% of its total assets in non-U.S. dollar-denominated debt securities (i) of issuers located in emerging market countries or (ii) of issuers not located in emerging market countries 21 that are denominated in or indexed to the currencies of emerging market countries. The Fund's investment in debt securities will consist of (i) debt securities issued or guaranteed by governments, their agencies, instrumentalities or political subdivisions located in emerging market countries, or by central banks located in emerging market countries (collectively, "Sovereign Debt"); (ii) interests in issuers organized and operated for the purpose of securitizing or restructuring the investment characteristics of Sovereign Debt; and (iii) debt securities issued by banks and other business entities located in emerging market countries or issued by banks or other business entities not located in emerging market countries but denominated in or indexed to the currencies of emerging market countries. .... The Fund may invest up to 35% of its total assets in non-U.S. dollar-denominated debt securities that may be denominated in the local currencies of emerging market countries, as well as in reserve currencies such as the British Pound Sterling.... .... When [the adviser]... believes unusual circumstances warrant a defensive posture, the Fund temporarily may commit all or any portion of its assets to cash (U.S. dollars or foreign currencies) or money market instruments of U.S. or foreign issuers, including repurchase agreements. In addition, the fund may commit up to 35% of its assets to cash (U.S. dollars) or U.S. dollar-denominated money market instruments of U.S. issuers, including repurchase agreements, for liquidity purposes (such as clearance of portfolio transactions, the payment of dividends and expenses and share repurchases) or pending investment. REVISED POLICIES: Under normal market conditions, the Fund invests at least 65% of its total assets in debt securities of issuers located in emerging market countries, including Brady Bonds... and zero coupon securities. The Fund's investment in debt securities may include (i) debt securities issued or guaranteed by governments, their agencies, instrumentalities or political subdivisions located in emerging market countries, or by central banks located in emerging market countries (collectively, "Sovereign Debt"); (ii) interests in issuers organized and operated for the purpose of securitizing or restructuring the investment characteristics of Sovereign Debt; and (iii) debt securities issued by banks and other business entities located in emerging market countries or issued by banks or other business entities not located in emerging market countries but denominated in or indexed to the currencies of or interest rates prevailing in emerging market countries. .... Under normal circumstances, the Fund invests at least 80% of its net assets in U.S. dollar-denominated debt securities. The Fund may invest up to 20% 22 of its net assets in non-U.S. dollar-denominated debt securities under normal circumstances; these investments may be denominated in the local currencies of emerging market countries, as well as in reserve currencies such as the British Pound Sterling.... These non-U.S. dollar-denominated investments may include debt securities (i) of issuers located in emerging market countries or (ii) of issuers not located in emerging market countries that are denominated in or indexed to the currencies of emerging market countries. When [the adviser] ... believes unusual circumstances warrant a defensive posture, the Fund temporarily may commit all or any portion of its assets to cash (U.S. dollars or foreign currencies) or money market instruments of U.S. or foreign issuers, including repurchase agreements. Under normal market conditions, the fund may commit up to 20% of its net assets to cash (U.S. dollars) as well as invest up to a total of 35% of its total assets in a combination of cash (U.S. dollars) and U.S. dollar-denominated money market instruments of U.S. issuers, including repurchase agreements, for liquidity purposes (such as clearance of portfolio transactions, the payment of dividends and expenses and share repurchases) or as part of its ordinary investment activities. The fund's investments in U.S. dollar-denominated money market instruments are considered to be investments in U.S. dollar-denominated debt securities for purposes of the 80% minimum noted above. SHAREHOLDER INFORMATION The Fund's NYSE trading symbol is "GHI." 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 in numerous other publications. An annual meeting of shareholders of the Fund was held on February 21, 2002. At the meeting Margo N. Alexander, Richard Q. Armstrong, David J. Beaubien, E. Garrett Bewkes, Jr., Richard R. Burt, Meyer Feldberg, George W. Gowen, William W. Hewitt, Jr., Morton L. Janklow, Frederic V. Malek, Carl W. Schafer and William D. White were elected to serve as directors until the next annual meeting of shareholders, or until their successors are elected and qualified. 23
SHARES SHARES WITHHOLD TO ELECT TWELVE MEMBERS OF ITS BOARD OF DIRECTORS: VOTED FOR AUTHORITY - -------------------------------------------------- ---------- --------- Margo N. Alexander 18,183,634 322,093 Richard Q. Armstrong 18,278,296 227,431 David J. Beaubien 18,274,806 230,921 E. Garrett Bewkes, Jr. 18,169,914 335,813 Richard R. Burt 18,284,695 221,032 Meyer Feldberg 18,281,370 224,357 George W. Gowen 18,267,318 238,409 William W. Hewitt, Jr. 18,270,622 235,105 Morton L. Janklow 18,267,027 238,700 Frederic V. Malek 18,277,987 227,740 Carl W. Schafer 18,274,516 231,211 William D. White 18,266,857 238,870
DIVIDEND REINVESTMENT PLAN The Fund's Board has established a Dividend Reinvestment Plan (the "Plan") under which all shareholders whose shares are registered in their own names, or in the name of UBS PaineWebber Inc. or its nominee, will have all dividends and other distributions on their shares of common stock 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 contact such broker or nominee to determine whether, or how, they may participate in the Plan. The ability of such shareholders to participate in the Plan may change if their shares are transferred into the name of another broker or nominee. A shareholder may elect not to participate in the Plan or may terminate participation in the Plan at any time without penalty, and shareholders who have previously terminated participation in the Plan may rejoin it at any time. Changes in elections must be made in writing to the Fund's transfer agent and should include the shareholder's name and address as they appear on that share certificate or in the transfer agent's records. An election to terminate participation in the Plan, until such election is changed, will be deemed an election by a shareholder to take all subsequent distributions in cash. An election will be effective only for distributions declared and having a record date at least ten days after the date on which the election is received. Additional shares of common stock acquired under the 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 number of shares of common stock purchased with each dividend will be equal to 24 the result obtained by dividing the amount of the dividend payable to a particular shareholder by the average price per share (including applicable brokerage commissions) that the transfer agent was able to obtain in the open market. The Fund will not issue any new shares in connection with the Plan. There currently is no charge to participants for reinvesting dividends or other distributions. The transfer agent's fees for handling the reinvestment of distributions are paid by the Fund. However, each participant pays a pro rata share of brokerage commissions incurred with respect to the transfer agent's open market purchases of common stock in connection with the reinvestment of distributions. The automatic reinvestment of dividends and other distributions in shares of common stock does not relieve participants of any income tax that may be payable on such distributions. Experience under the Plan may indicate that changes are desirable. Accordingly, the Fund reserves the right to amend or terminate the Plan with respect to any dividend or other distribution if notice of the change is sent to Plan participants at least 30 days before the record date for such distribution. The Plan also may be amended or terminated by the transfer agent by at least 30 days' written notice to all Plan participants. Additional information regarding the Plan may be obtained from, and all correspondence concerning the Plan should be directed to, the transfer agent at PFPC Inc., P.O. Box 8030, Boston, Massachusetts 02266-8030. For further information regarding the Plan, you may also contact the transfer agent directly at 1-800-331-1710. DISTRIBUTION POLICY The Fund's Board adopted a managed distribution policy in December 1999, which means that the Fund will make regular monthly distributions at an annualized rate equal to 11% of the Fund's net asset value, as determined as of the last trading day during the first week of that month (usually a Friday, unless the NYSE is closed that Friday). Prior to December 20, 1999, the Fund's distributions varied based on the Fund's net investment income and realized capital gains or losses. To the extent that the Fund's taxable income in any fiscal year exceeds the aggregate amount distributed based on a fixed percentage of its net asset value, the Fund would distribute that excess near the end of the fiscal year. If the aggregate amount distributed by the Fund (based on a fixed percentage of its net asset value) exceeds its taxable income, the amount of that excess would constitute a return of capital for tax purposes. Monthly distributions based on a fixed percentage of the Fund's net asset value may require the Fund to make multiple distributions of long-term capital gains during a single fiscal year. The Fund has received exemptive relief from the Securities and Exchange Commission that enables it to do so. The Fund's Board will annually reassess the annualized percentage of net assets at which the Fund's monthly distributions will be made. 25 DIRECTORS E. Garrett Bewkes, Jr. George W. Gowen CHAIRMAN William W. Hewitt, Jr. Margo N. Alexander Morton L. Janklow Richard Q. Armstrong Frederic V. Malek David J. Beaubien Carl W. Schafer Richard R. Burt William D. White Meyer Feldberg PRINCIPAL OFFICERS Brian M. Storms Paul H. Schubert PRESIDENT VICE PRESIDENT AND TREASURER Amy R. Doberman Stuart Waugh VICE PRESIDENT AND SECRETARY VICE PRESIDENT INVESTMENT ADVISOR AND ADMINISTRATOR UBS Global Asset Management (US)Inc. 51 West 52nd Street New York, New York 10019-6114 THIS REPORT IS SENT TO THE SHAREHOLDERS OF THE FUND FOR THEIR INFORMATION. IT IS NOT A PROSPECTUS, CIRCULAR OR REPRESENTATION INTENDED FOR THE USE IN THE PURCHASE OR SALE OF SHARES OF THE FUND OR OF ANY SECURITIES MENTIONED IN THIS REPORT. THE FINANCIAL INFORMATION INCLUDED HEREIN IS TAKEN FROM THE RECORDS OF THE FUND WITHOUT EXAMINATION BY INDEPENDENT ACCOUNTANTS WHO DO NOT EXPRESS AN OPINION THEREON. NOTICE IS HEREBY GIVEN IN ACCORDANCE WITH SECTION 23(c) OF THE INVESTMENT COMPANY ACT OF 1940 THAT FROM TIME TO TIME THE FUND MAY PURCHASE SHARES OF ITS COMMON STOCK IN THE OPEN MARKET AT MARKET PRICES.] [LOGO--Three keys design for UBS Global Asset Management] UBS GLOBAL ASSET MANAGEMENT (US) INC. 51 West 52nd Street New York, NY 10019-6114 -----END PRIVACY-ENHANCED MESSAGE-----