On the downside, the Fund's overweights to investment grade and high yield corporate bonds detracted from performance, as their spreads widened. However, this was not enough to offset the benefits of our security selection in the credit space. An out-of-benchmark allocation to MBS was also a drag on results. Elsewhere, the Fund's currency positioning modestly detracted from performance. In particular, an overweight to the US dollar and shorts to the euro and yen were headwinds for the Fund's results.Within the emerging markets debt asset class, our positioning in Venezuelan and Nigerian dollar-denominated debt, as well as Russian quasi-sovereigns, enhanced the Fund's performance during the second quarter. 8 Brazilian local duration exposure also contributed to the Fund's results. On the downside, an underweight to Ukraine was modestly negative for performance. Investor sentiment for Ukraine improved given ongoing negotiations in its conflict with Russia. However, we maintain our underweight as the country's economic backdrop remains extremely weak, which increases the likelihood of a more difficult debt restructuring. Outlook We have an overall positive outlook for the US economy. After a weak start to the year, economic data have improved in recent months. The labor market continues to strengthen. The housing market has shown signs of increased activity, and consumer confidence has risen. That being said, growth for the year as a whole will likely be far from robust. Overseas, economic growth in Europe, while modest, has improved of late, as has growth in Japan. Growth in China remains a concern, although its central bank has a number of tools it can use to help spur its economy. Turning to the fixed income market, credit spreads widened during the second quarter. Looking ahead, we continue to believe we are in the midst of a "coupon clipping" environment, as we feel we are in the latter stages of the credit cycle. From a rate perspective, much will depend on the Fed's actions. We expect the US central bank to begin the process of normalizing monetary policy in late 2015. While we feel the Fed will take a conservative approach, we believe the uncertainty surrounding rate hikes will lead to periods of volatility in the fixed income market.
We have a cautious but somewhat improving medium-term outlook for the emerging markets debt asset class. Growth in many developing countries is showing signs of strengthening. This, coupled with generally weaker local currencies, could have a positive impact for emerging markets exporters. Finally, inflation is relatively benign overall and, as such, we do not expect to see policy tightening from emerging markets central banks in the near-term. While certain geopolitical issues have been priced into the market in our view, we expect to see continued periods of elevated volatility. Within the asset class, we feel US dollar-denominated debt should outperform local debt for the year as a whole.
|Portfolio statistics as of June 30, 2015 9|
|Top ten countries (bond holdings only) 10||Percentage of net assets|
|Top ten currency breakdown (includes all securities and other instruments) 11||Percentage of net assets|
|United States Dollar||75.1%|
|New Zealand Dollar||4.4|
|Credit quality 12||Percentage of net assets|
|US Treasury 13||3.7|
|US Agency 13,14||2.0|
|CCC and Below||2.1|
|Cash and other assets, less liabilities||2.7|
|Net asset value per share 15||$9.71|
|Market price per share 15||$8.27|
|Duration 16||5.1 yrs|
|Weighted average maturity||7.7 yrs|
Disclaimers Regarding Fund Commentary - The Fund Commentary is intended to assist shareholders in understanding how the Fund performed during the period 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 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, credit and the risks associated with investing in the securities of non-US issuers, including those located 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. 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. ©UBS 2015. All rights reserved.The key symbol and UBS are among the registered and unregistered trademarks of UBS.