Aberdeen Asia-Pacific Income Fund, Inc.

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-CSR

 

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

 

Investment Company Act file number:

   811-04611

Exact name of registrant as specified in charter:

   Aberdeen Asia-Pacific Income Fund, Inc.

Address of principal executive offices:

  

1735 Market Street, 32nd Floor

Philadelphia, PA 19103

Name and address of agent for service:

  

Andrea Melia

Aberdeen Asset Management Inc.

1735 Market Street 32nd Floor

Philadelphia, PA 19103

Registrant’s telephone number, including area code:

   800-522-5465

Date of fiscal year end:

   October 31

Date of reporting period:

   April 30, 2014

 

 

 


Item 1 – Reports to Stockholders


LOGO

 

Aberdeen Asia-Pacific Income Fund, Inc.

Semi-Annual Report

April 30, 2014


Managed Distribution Policy (unaudited)

 

 

 

The Board of Directors of the Fund has authorized a managed distribution policy (“MDP”) of paying monthly distributions at an annual rate set once a year. It is the Board’s intention that a monthly distribution of $0.035 per share be maintained for 12 months beginning with the June 30, 2014 distribution payment. With each distribution, the Fund will issue a notice to shareholders and an accompanying press release which will provide detailed information regarding the amount and composition of the distribution and other information required by the Fund’s MDP exemptive order. The Fund’s Board of Directors may amend or terminate the MDP at any time without prior notice to shareholders; however, at this time, there are no reasonably foreseeable circumstances that might cause the termination of the MDP. You should not draw any conclusions about the Fund’s investment performance from the amount of distributions or from the terms of the Fund’s MDP.

Distribution Disclosure Classification (unaudited)

 

 

The Fund’s policy is to provide investors with a stable monthly distribution out of current income, supplemented by realized capital gains and, to the extent necessary, paid-in capital.

The Fund is subject to U.S. corporate, tax and securities laws. Under U.S. tax rules, the amount applicable to the Fund and character of distributable income for each fiscal period depends on the actual exchange rates during the entire year between the U.S. Dollar and the currencies in which Fund assets are denominated and on the aggregate gains and losses realized by the Fund during the entire year.

Therefore, the exact amount of distributable income for each fiscal year can only be determined as of the end of the Fund’s fiscal year, October 31. Under Section 19 of the Investment Company Act of 1940, as amended (the “1940 Act”), the Fund is required to indicate the sources of certain distributions to shareholders. The estimated distribution composition may vary from month to month because it may be materially impacted by future income, expenses and realized gains and losses on securities and fluctuations in the value of the currencies in which the Fund’s assets are denominated.

Based on generally accepted accounting principles, the Fund estimates that distributions for the fiscal year commenced November 1, 2013, through the distributions declared on May 9, 2014 and June 10, 2014, consisted of 61% net investment income and 39% return of capital.

In January 2015, a Form 1099-DIV will be sent to shareholders, which will state the amount and composition of distributions and provide information with respect to their appropriate tax treatment for the 2014 calendar year.

Dividend Reinvestment and Direct Stock Purchase Plan (unaudited)

 

 

Computershare Trust Company, N.A., the Fund’s transfer agent, sponsors and administers a Dividend Reinvestment and Direct Stock Purchase Plan (the “Plan”), which is available to shareholders.

The Plan allows registered stockholders and first time investors to buy and sell shares and automatically reinvest dividends and capital gains through the transfer agent. This is a cost-effective way to invest in the Fund.

Please note that for both purchases and reinvestment purposes, shares will be purchased in the open market at the current share price and cannot be issued directly by the Fund.

For more information about the Plan and a brochure that includes the terms and conditions of the Plan, please call Computershare at 1-800-647-0584 or visit www.computershare.com/buyaberdeen.


Letter to Shareholders (unaudited)

 

 

 

Dear Shareholder,

We present this Semi-Annual Report which covers the activities of Aberdeen Asia-Pacific Income Fund, Inc. (the “Fund”) for the six months ended April 30, 2014. The Fund’s principal investment objective is to seek current income. The Fund may also achieve incidental capital appreciation.

Total Return Performance

The Fund’s total return, based on net asset value (“NAV”), net of fees, was 1.3% for the six months ended April 30, 2014 and 8.9% per annum since inception, assuming the reinvestment of dividends and distributions. The Fund’s total return for the six months ended April 30, 2014 and per annum since inception is based on the reported NAV on each period end.

Share Price and NAV

For the six months ended April 30, 2014, based on market price, the Fund’s total return was 0.3%, assuming reinvestment of dividends and distributions. The Fund’s share price decreased by 3.1% over the six month period, from $6.44 on October 31, 2013 to $6.24 on April 30, 2014. The Fund’s share price on April 30, 2014 represented a discount of 7.4% to the NAV per share of $6.74 on that date, compared with a discount of 6.5% to the NAV per share of $6.89 on October 31, 2013.

Portfolio Allocation

As of April 30, 2014, the Fund held 39.8% of its total investments in Australian debt securities, 56.1% in Asian debt securities, 3.3% in European debt securities, 0.4% in U.S. debt securities and 0.4% in Canadian debt securities.

Of the Fund’s total investments, 37.3% were held in U.S. Dollar-denominated bonds issued by foreign issuers, bringing the Fund’s U.S. Dollar exposure to 49.5%. The rest of the Fund’s currency exposure was 42.0% in the Australian Dollar and 8.5% in various Asian currencies.

Credit Quality

As of April 30, 2014, 68.1% of the Fund’s total investments were invested in securities where either the issue or the issuer was rated A or better by Standard & Poor’s(1) or Moody’s Investors Services, Inc.(2), or, if unrated, judged by Aberdeen Asset Management Asia Limited (the “Investment Manager”) to be of equivalent quality.

Portfolio Management

The Fund is managed by Aberdeen’s Asia Pacific fixed income team. The Asia Pacific fixed income team works in a truly collaborative fashion; all team members have both portfolio management and research responsibilities. The team is jointly and primarily responsible for the day-to-day management of the Fund. Effective January 21, 2014, Victor Rodriguez replaced Anthony Michael as part of the team having the most significant responsibility for the day-to-day management of the Fund’s portfolio and joined Nick Bishop, Adam McCabe, Kenneth Akintewe, and Thu Ha Chow.

Victor Rodriguez is a Senior Portfolio Manager on the Asia Pacific fixed income team and has been a Vice President of the Fund since 2009. Mr. Rodriguez has been part of the Asia Pacific fixed income team since 2009 when he joined Aberdeen following the acquisition of Credit Suisse Asset Management (Australia) Limited. He joined Credit Suisse Asset Management in 1995 as a member of the fixed income team and became a senior member of the team, specializing in credit strategies. Prior to this, Mr. Rodriguez spent two years working with Westpac Financial Services as an investment analyst. Mr. Rodriguez graduated from the University of Sydney, with a Bachelor of Economics degree. He is also a Certified Practicing Accountant and holds a Graduate Diploma in Applied Finance and Investment from the Securities Institute of Australia.

Managed Distribution Policy

Distributions to common shareholders for the twelve-months ended April 30, 2014 totaled $0.42 per share. Based on the share price of $6.24 on April 30, 2014, the distribution rate over the twelve-month period ended April 30, 2014 was 6.7%. Since all distributions are paid after deducting applicable withholding taxes, the effective distribution rate may be higher for those U.S. investors who are able to claim a tax credit.

On May 9, 2014 and June 10, 2014, the Fund announced that it will pay on May 30, 2014 and June 30, 2014, a distribution of US $0.035 per share to all shareholders of record as of May 21, 2014 and June 23, 2014, respectively.

The Fund’s policy is to provide investors with a stable monthly distribution out of current income, supplemented by realized capital gains and, to the extent necessary, paid-in capital, which is a non-taxable return of capital. It is the Board’s intention that a monthly distribution of $0.035 per share be maintained for twelve months, beginning with the June 30, 2014 distribution payment. This policy is subject to regular review at the Board’s quarterly meetings, unless market conditions require an earlier evaluation. The next annual review is scheduled to take place in June 2015.

Fund’s Leverage

The table below summarizes certain key terms of the Fund’s current leverage:

 

     

Amount

($ in millions)

     Maturity  

Revolving Credit Facility

   $ 150         April 9, 2017   

7-year Series A Senior Secured Notes

   $ 100         June 12, 2020   

10-year Series B Senior Secured Notes

   $ 100         June 12, 2023   

5-year Term Loan A

   $ 100         June 12, 2018   

3-year Term Loan B

   $ 100         June 12, 2016   

10-year Series A Mandatory Redeemable Preferred Shares

   $ 50         June 27, 2023   
 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

1


Letter to Shareholders (unaudited) (concluded)

 

 

 

The Series A Mandatory Redeemable Preferred Shares, with a liquidation value of $50 million, are rated “AA” by Fitch Ratings(3) and the $200 million 7 and 10 year Series A and B Senior Secured Notes are both rated “AAA” by Fitch Ratings.

We believe the Fund has been able to lock in an attractive rate cost of borrowing and extend the maturity of the leverage facility while diversifying its borrowing structure during what we believe to be a favorable current interest rate environment. A more detailed description of the Fund’s leverage can be found in the Notes to Financial Statements.

Open Market Repurchase Program

The Fund’s policy is generally to buy back Fund shares on the open market when the Fund trades at certain discounts to NAV. During the six months ended April 30, 2014 and fiscal year ended October 31, 2013, the Fund repurchased 3,292,483 and 0 shares, respectively.

Portfolio Holdings Disclosure

The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Q filings are available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information about the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund makes the information on Form N-Q available to shareholders on the Fund’s website or upon request and without charge by calling Investor Relations toll-free at 1-800-522-5465.

Proxy Voting

A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent twelve months ended June 30 is available by August 30 of the relevant year: (i) upon request and without charge by calling Investor Relations toll-free at 1-800-522-5465; and (ii) on the SEC’s website at http://www.sec.gov.

Investor Relations Information

As part of our ongoing commitment to provide information to our shareholders, I invite you to visit the Fund on the web at www.aberdeenfax.com. From this page, you can view monthly fact sheets, portfolio manager commentary, distribution and performance information, updated daily fact sheets courtesy of Morningstar®, and view portfolio charting and other timely data.

Please take a look at Aberdeen’s award-winning Closed-End Fund Talk Channel, where you can watch fund manager web casts and view our latest short films. For replays of recent broadcasts or to register for upcoming events, please visit Aberdeen’s Closed-End Fund Talk Channel at www.aberdeen-asset.us/aam.nsf/usclosed/aberdeentv.

Please ensure that you are enrolled in our email services, which feature timely news from Aberdeen portfolio managers located around the world. Enroll today at www.aberdeen-asset.us/aam.nsf/usclosed/email and be among the first to receive the latest closed-end fund news, announcements of upcoming fund manager web casts, films and other information.

Please contact Aberdeen Asset Management Inc. by:

 

 

calling toll free at 1-800-522-5465 in the United States, or

 

emailing InvestorRelations@aberdeen-asset.com

 

Visiting Aberdeen Closed-End Fund Center at http://www.aberdeen-asset.us/aam.nsf/usclosed/home;

 

visiting www.aberdeenfax.com

Yours sincerely,

 

LOGO

Christian Pittard

President

 

 

(1)   

Standard & Poor’s credit ratings are expressed as letter grades that range from “AAA” to “D” to communicate the agency’s opinion of relative level of credit risk. Ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. The investment grade category is a rating from AAA to BBB-.

(2)   

Moody’s is an independent, unaffiliated research company that rates fixed income securities. Moody’s assigns ratings on the basis of risk and the borrower’s ability to make interest payments. Typically securities are assigned a rating from ‘Aaa’ to ‘C’, with ‘Aaa’ being the highest quality and ‘C’ the lowest quality.

(3)   

Fitch is an international credit rating agency. Fitch ratings range from AAA (reliable and stable) to D (high risk).

All amounts are U.S. Dollars unless otherwise stated.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

2


Report of the Investment Manager (unaudited)

 

 

 

Market/economic review

Asian fixed income markets closed mixed over the six month period ended April 30, 2014 (the “reporting period”). Initial volatility was driven by uncertainty over the direction of the U.S. Federal Reserve’s (the “Fed”) monetary policy. When the Fed finally announced a tapering of its asset purchase program in December 2013, 10-year U.S. Treasury yields rose above 3% for the first time since July 2011. At the start of 2014, the broader emerging markets came under heavy pressure, which triggered a sharp devaluation of the Argentine Peso, as well as marked weakness in the Turkish Lira and South African Rand. In Asia, the Indian Rupee and the Indonesian Rupiah bore the brunt of the sell-off. Investor risk sentiment stabilized thereafter. Asian markets rebounded despite concerns over China’s slowing economy. Towards the end of the period, expectations of a normalization of Fed monetary policy were diminished by deteriorating U.S. economic data and softening inflation. As U.S. Treasury yields fell from their recent highs, carry trades resumed with a pick-up in flows back into emerging markets.

The Indian Rupee and Korean Won, as well as their respective overall markets, outperformed their regional peers by a large margin over the reporting period. Indian bond yields remained elevated but stable at close to 9%, while the Rupee was buoyed by positive market sentiment in the run-up to the Indian elections. Korea’s bond market was weak initially, but strong flows in the final months allowed bonds to deliver positive returns at the end of the period and drive a robust rally in the Won.

In Thailand, yields fell across the curve, most pronounced in the short end, on the back of deteriorating economic growth and central bank easing. The central bank cut interest rates to a three-year low in a bid to support the economy, underscoring the impact of the deepening political quagmire on domestic demand. The Baht, however, depreciated sharply against the U.S. Dollar because of political uncertainty and portfolio outflows.

The overall worst regional performer was the Philippines because of weak bond and currency performance, amid rising inflation and a more hawkish monetary policy tone. Other market laggards included Indonesia and China, attributable mainly to currency weakness. The Rupiah was significantly affected by the emerging market sell-off, although initial losses were mitigated by a recovery in the latter months of the reporting period. The Chinese Yuan suffered its heaviest depreciation since the currency was depegged from the U.S. Dollar. This was engineered by policymakers to reduce speculative positioning ahead of the widening of the Yuan’s trading band.

Australian government bond markets rose over the six-month period. The yield curve flattened slightly, as 10-year yields fell by 4 basis points (bps) to 3.95%, while the three-year equivalent closed 5 bps lower at 2.9%. Credit markets outperformed government bonds, as global spread volatility (the volatility of the difference in yield between types of bonds) was relatively low. Domestic economic data improved. Retail sales gathered pace, as employment rebounded. Gross domestic product grew by a solid 0.8% in the fourth quarter of 2013, boosted by consumption and exports. Against this backdrop, the central bank kept the cash rate unchanged at 2.5%, with its neutral stance indicating stable monetary policy over the short term.

Fund performance review

The Fund’s allocations to Asian local currency bonds, as well as Australian and New Zealand bonds, contributed positively to performance for the reporting period. However, this was overshadowed by negative security selection in U.S. Dollar denominated Asian credit.

In Asian local currency bonds, our interest rate strategies contributed positively, offsetting the drag from currency allocations. Specifically, both an overweight to the Fund’s benchmark and security selection in Sri Lanka added the most to Fund performance, along with the overweight to the higher-yielding Indian market. Regarding currencies, the main detractor was the exposure to the Chinese Yuan.

In the Australian segment of the Fund, both duration and currency strategies bolstered performance, particularly an underweight duration position in Australian bonds. Credit strategies also had a positive impact, with our preference for state government bonds over Commonwealth bonds contributing to performance.

Within the Fund’s U.S. Dollar-denominated Asian credit segment, negative security selection in high-yield financials outweighed the positive contribution from the overweight to the sector. The lack of

exposure to the oil and gas sector also detracted significantly from performance.

The Fund’s use of currency forwards had a negative impact on performance, primarily because of the negative carry associated with hedging the Indian Rupee, while the hedging of the Korean Won exposure also was a detractor. The Fund’s use of currency forwards to gain exposure to the Chinese Yuan also hindered performance. Finally, the Fund’s employment of U.S. Treasury futures to hedge the U.S. interest rate risk and the use of swaps to hedge the Revolving Credit Facility enhanced performance.

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

3


Report of the Investment Manager (unaudited) (continued)

 

 

 

Outlook

In our opinion, investor focus remains on the U.S. recovery and how this will influence Fed policy decisions and capital flows in Asia. While monetary policymakers are providing some support for growth, we believe that they are more intent on addressing domestic imbalances and driving reform, which may be at the expense of growth. Consumer prices remain inflated in India and Indonesia. We think that the inflation cycle in India will take some time to roll over and there is the ever-present risk of a food-price shock if agricultural production is affected by adverse weather. In Indonesia, we feel that a domestic fuel price hike after the elections could add 2% to inflation, which at the very least would deter the central bank from easing monetary policy. Inflation is also accelerating in the Philippines, Malaysia, Korea and Thailand. For the first three countries cited, where growth conditions are fairly well-supported, we believe that the probability of policy rate hikes is fairly high over the next six to nine months. Another key area of interest would be politics, with India, Indonesia and Thailand drawing the most attention, in our view. We continue to be cautious over the short term.

Regarding Australia, we are upbeat about the economic outlook in the year ahead. We expect growth to reach historical average levels due to a faster recovery in consumption and positive contributions from net exports and residential investment. Evidence that interest-rate-sensitive sectors are responding to easier financial conditions has become clearer since the latter part of 2013, in our view. Although our outlook for non-mining investment remains cautious, business conditions have followed business confidence upwards. We think that this, in turn, may help to stabilize the labor market. Retail spending accelerated strongly into the end of 2013 as well, better reflecting the improving consumer confidence. We continue to anticipate underlying inflation to remain in the upper half of the central bank’s target band, with headline inflation rising more quickly.

Loan Facilities and the Use of Leverage

The amounts borrowed under the Revolving Credit Facility, the Term Loan Facility, the Notes and the Series A MRPS (each as defined below) may be invested to return higher rates than the rates pursuant to which interests or dividends are paid under such forms of leverage. However, the cost of leverage could exceed the income earned by the Fund on the proceeds of such leverage. To the extent that the Fund is unable to invest the proceeds from the use of leverage in assets which pay interest at a rate which exceeds the rate paid on the leverage, the yield on the Fund’s common stock will decrease. In addition, in the event of a general market decline in the value of assets in which the Fund invests, the effect of that decline will be magnified in the Fund because of the additional assets purchased with the proceeds of the leverage.

The Fund employed leverage obtained via bank borrowing and other forms of leverage during the reporting period. On April 9, 2014, the Fund renewed its $150 million revolving credit facility for a 3-year period with a syndicate led by Bank of America Merrill Lynch (the “Revolving Credit Facility”). On June 12, 2013, the Fund entered into a note purchase agreement (the “Note Purchase Agreement”) with institutional investors relating to the private placement of $200 million of senior secured notes rated `AAA’ by Fitch Ratings, $100 million due June 12, 2020 and $100 million due June 12, 2023 (the “Notes”). On the same day, the Fund also entered into a term loan agreement providing for $200 million in secured term loans from Bank of America, N.A., $100 million due June 12, 2016 and $100 million due June 12, 2018 (the “Term Loan Facility”). On June 27, 2013, the Fund issued a private offering of 2 million shares of Series A Mandatory Redeemable Preferred Shares due June 25, 2023 (the “Series A MRPS”). The Series A MRPS have a liquidation value of $50 million and are rated “AA” by Fitch Ratings. The Fund’s outstanding balance as of April 30, 2014 was $150 million on the Revolving Credit Facility.

The Fund’s leveraged capital structure creates special risks not associated with unleveraged funds having similar investment objectives and policies. The funds borrowed pursuant to the Revolving Credit Facility, the Term Loan Facility and the Notes may constitute a substantial lien and burden by reason of their prior claim against the income of the Fund and against the net assets of the Fund in liquidation. The Fund is limited in its ability to declare dividends or other distributions under the terms of the various forms of leverage. In the event of an event of default under either the Revolving Credit

Facility or Term Loan Facility, the lenders have the right to cause a liquidation of the collateral (i.e., sell portfolio securities and other assets of the Fund) and, if any such default is not cured, the lenders may be able to control the liquidation as well. In the event of an event of default under the Note Purchase Agreement, the Noteholders have the right to cause a liquidation of the collateral (i.e., sell portfolio securities and other assets of the Fund).

Each of the Revolving Credit Facility Agreement, the Term Loan Agreement, the Note Purchase Agreement, or the securities purchase agreement relating to the Series A MRPS, includes usual and customary covenants for the applicable type of transaction. These covenants impose on the Fund asset coverage requirements, Fund composition requirements and limits on certain investments, such as illiquid investments, which are more stringent than those imposed on the Fund by the 1940 Act. The covenants or guidelines could impede the Fund’s investment manager, investment adviser, or sub-adviser from fully managing the Fund’s portfolio in accordance with the Fund’s investment objective and policies. Furthermore, non-compliance with such covenants or the occurrence of other events could lead to the

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

4


Report of the Investment Manager (unaudited) (concluded)

 

 

 

cancellation of any and/or all of the forms of leverage. As of April 30, 2014, the Fund was in compliance with all covenants under the agreements relating to the various forms of leverage.

Interest Rate Swaps

The Fund may enter into interest rate swaps to efficiently gain or hedge interest rate or currency risk. As of April 30, 2014, the Fund held interest rate swap agreements with an aggregate notional amount of $150 million, which represented 100% of the Fund’s Revolving Credit Facility. Under the terms of the agreements currently in effect, the Fund receives a floating rate of interest (three month USD-LIBOR BBA rate) and pays fixed rates of interest for the terms and based upon the notional amounts set forth below:

 

Remaining
Term as of
April 30, 2014
   Amount
(in millions)
     Fixed Rate
Payable (%)
 

42 months

   $ 66.0         0.84   

30 months

     84.0         1.42   

A significant risk associated with interest rate swaps is the risk that the counterparty may default or file for bankruptcy, in which case the Fund would bear the risk of loss of the amount expected to be received under the swap agreements. There can be no assurance that the Fund will have an interest rate swap in place at any given time nor can there be any assurance that, if an interest rate swap is in place, it will be successful in hedging the Fund’s interest rate risk with respect to the loan facility. The implementation of this strategy is at the discretion of the Leverage Committee of the Board.

Aberdeen Asset Management Asia Limited

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

5


Total Investment Return (unaudited)

April 30, 2014

 

 

The following table summarizes Fund performance compared to the Fund’s blended benchmark consisting of 45% of the UBS Composite Index, 35.75% of the JP Morgan Asian Credit Index, and 19.25% of the IBOXX Asia ex Japan Government Bond Index for the 1-year, 3-year, 5-year and 10-year periods annualized as of April 30, 2014.

 

        1 Year        3 Years        5 Years        10 Years  

Net Asset Value (NAV)

       -6.9        1.3        11.0        8.0

Market Value

       -12.4        0.6        11.4        8.6

Blended Benchmark

       -4.5        3.1        9.7        8.0

Returns represent past performance. Total investment return at net asset value (NAV) is based on changes in the NAV of Fund shares and assumes reinvestment of dividends and distributions, if any, at market prices pursuant to the dividend reinvestment program sponsored by the Fund’s transfer agent. Total investment return at market value is based on changes in the market price at which the Fund’s shares traded on the NYSE MKT during the period and assumes reinvestment of dividends and distributions, if any, at market prices pursuant to the dividend reinvestment program sponsored by the Fund’s transfer agent. The Fund’s total return is based on the reported NAV on each annual period end. Because the Fund’s shares trade in the stock market based on investor demand, the Fund may trade at a price higher or lower than its NAV. Therefore, returns are calculated based on both market price and NAV. Past performance is no guarantee of future results. The performance information provided does not reflect the deduction of taxes that a shareholder would pay on distributions received from the Fund. The current performance of the Fund may be lower or higher than the figures shown. The Fund’s yield, return, market price and NAV will fluctuate. Performance information current to the most recent month-end is available at www.aberdeenfax.com or by calling 800-522-5465.

The net operating expense ratio is 1.88%. The net operating expense ratio, excluding interest expense, is 1.12%.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

6


Portfolio Composition (unaudited)

 

 

 

Quality of Investments

As of April 30, 2014, 68.1% of the Fund’s total investments were invested in securities where either the issue or the issuer was rated “A” or better by Standard & Poor’s or Moody’s Investors Service, Inc., or, if unrated, judged to be of equivalent quality by the Investment Manager. The table below shows the asset quality of the Fund’s portfolio as of April 30, 2014, compared with the previous six and twelve months:

 

Date      AAA/Aaa
%
       AA/Aa
%
       A
%
       BBB/Baa
%
       BB/Ba*
%
       B*
%
       NR**
%
 

April 30, 2014

       35.0           14.0           19.1           16.2           10.4           3.1           2.2   

October 31, 2013

       34.4           13.9           21.6           16.2           9.7           2.2           2.0   

April 30, 2013

       35.4           11.2           23.5           11.7           15.0           1.6           1.6   

 

*   Below investment grade
**   Not Rated

Geographic Composition

The table below shows the geographical composition (with U.S. Dollar-denominated bonds issued by foreign issuers allocated into country of issuance) of the Fund’s total investments as of April 30, 2014, compared with the previous six and twelve months:

 

Date      Australia
%
       Asia
(including NZ)
%
       Europe
%
       United
States
%
       Canada
%
 

April 30, 2014

       39.8           56.1           3.3           0.4           0.4   

October 31, 2013

       37.6           55.5           4.4           1.7           0.8   

April 30, 2013

       39.7           53.4           4.4           2.4           0.1   

Currency Composition

The table below shows the currency composition of the Fund’s total investments as of April 30, 2014, compared with the previous six and twelve months:

 

Date      Australian
Dollar
%
       Asian Currencies
(including NZ Dollar)
%
       U.S. Dollar*
%
 

April 30, 2014

       42.0           8.5           49.5   

October 31, 2013

       41.4           19.8           38.8   

April 30, 2013

       43.7           19.4           36.9   

 

*   Includes U.S. Dollar-denominated bonds issued by foreign issuers: 37.3% of the Fund's total investments on April 30, 2014, 37.1% of the Fund's total investments on October 31, 2013, 36.9% of the Fund's total investments on April 30, 2013.

Maturity Composition

As of April 30, 2014, the average maturity of the Fund’s total investments was 6.3 years, compared with 6.9 years at October 31, 2013, and 7.2 years at April 30, 2013. The following table shows the maturity composition of the Fund’s investments as of April 30, 2014, compared with the previous six and twelve months:

 

Date      Under 3 Years
%
       3 to 5 Years
%
       5 to 10 Years
%
       10 Years & Over
%
 

April 30, 2014

       30.9           17.8           42.0           9.3   

October 31, 2013

       18.9           25.0           46.8           9.3   

April 30, 2013

       18.8           26.9           43.1           11.2   

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

7


Summary of Key Rates (unaudited)

 

 

 

The following table summarizes the movements of key interest rates and currencies from April 30, 2014 and the previous six and twelve month periods.

 

        April 30, 2014        October 31, 2013        April 30, 2013  

Australia

              

90 day Bank Bills

       2.68%           2.60%           2.91%   

10 yr bond

       3.85%           3.94%           3.09%   

Australian Dollar

       $0.93           $0.95           $1.04   

New Zealand

              

90 day Bank Bills

       3.35%           2.70%           2.67%   

10 yr bond

       4.41%           4.51%           3.17%   

New Zealand Dollar

       $0.86           $0.83           $0.86   

South Korea

              

90 day commercial paper

       2.65%           2.65%           2.81%   

10 yr bond

       3.53%           3.40%           2.77%   

South Korean Won*

       W1033.30           W1060.75           W1101.30   

Thailand

              

3 months deposit rate

       1.13%           1.63%           1.63%   

10 yr bond

       3.55%           3.90%           3.39%   

Thai Baht*

       B32.36           B31.13           B29.35   

Philippines

              

90 day T-Bills

       1.46%           0.25%           0.37%   

10 yr bond

       4.41%           3.63%           3.48%   

Philippine Peso*

       P44.58           P43.21           P41.16   

Malaysia

              

3-month T-Bills

       2.99%           2.95%           3.00%   

10 yr bond

       4.07%           3.59%           3.36%   

Malaysian Ringgit*

       R3.27           R3.16           R3.04   

Singapore

              

3-month T-Bills

       0.32%           0.29%           0.24%   

10 yr bond

       2.42%           2.15%           1.37%   

Singapore Dollar*

       S1.26           S1.24           S1.23   

US$ Bonds**

              

South Korea

       1.04%           1.53%           1.21%   

Malaysia

       3.47%           3.60%           2.80%   

Philippines

       2.44%           2.66%           2.10%   

 

*   These currencies are quoted Asian currency per U.S. Dollar. The Australian and New Zealand Dollars are quoted U.S. Dollars per currency.
**   Sovereign issues.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

8


Portfolio of Investments (unaudited)

As of April 30, 2014

 

 

Principal
Amount
(000)
     Description   Value
(US$)
 

COMMERCIAL MORTGAGE BACKED SECURITY—0.3%

  

AUSTRALIA—0.3%

  

AUD

    6,600      

ALE Finance Co. Pty Ltd., 4.83%, 05/20/2020 (a)

  $ 6,161,200   
            

Total Commercial Mortgage Backed Securities—0.3% (cost $7,090,713)

    6,161,200   

CORPORATE BONDS—60.2%

  

AUSTRALIA—9.8%

  

AUD

    5,000      

AAI Ltd., 6.75%, 09/23/2014 (a)(b)

    4,677,470   

AUD

    1,800      

AMP Group Finance Services Ltd., 7.00%, 03/02/2015

    1,718,602   

AUD

    2,500      

APT Pipelines Ltd., 7.75%, 07/22/2020

    2,579,067   

AUD

    5,300      

Australia & New Zealand Banking Group Ltd., 6.75%, 11/10/2014

    5,023,111   

AUD

    10,900      

BHP Billiton Finance Ltd., 3.75%, 10/18/2017

    10,135,327   

AUD

    9,000      

BP Capital Markets PLC, 4.50%, 09/05/2017

    8,507,320   

AUD

    4,000      

CFS Retail Property Trust, 6.25%, 12/22/2014

    3,783,335   

AUD

    4,300      

CFS Retail Property Trust, 7.25%, 05/02/2016

    4,264,863   

AUD

    8,200      

Coca-Cola Amatil Ltd., 4.25%, 11/13/2019

    7,566,382   

AUD

    5,300      

DnB NOR Boligkreditt, 6.25%, 06/08/2016

    5,186,873   

AUD

    10,600      

KfW, 6.25%, 02/23/2018 (c)

    10,807,721   

AUD

    10,500      

KfW, 6.25%, 12/04/2019 (c)

    10,880,270   

AUD

    15,000      

KfW, 6.25%, 05/19/2021 (c)

    15,649,148   

AUD

    3,300      

Kommunalbanken AS, 6.00%, 10/21/2014

    3,112,545   

AUD

    9,788      

Kommunalbanken AS, 6.50%, 04/12/2021

    10,244,780   

AUD

    17,600      

National Australia Bank Ltd., 6.75%, 09/16/2014

    16,585,686   

AUD

    2,900      

National Capital Trust III, 3.65%, 09/30/2016 (a)(b)(d)

    2,590,620   

AUD

    2,500      

National Wealth Management Holdings Ltd., 6.75%, 06/16/2016 (a)(b)

    2,398,493   

AUD

    4,800      

New Zealand Milk Australia Pty Ltd., 6.25%, 07/11/2016

    4,711,146   

AUD

    10,100      

QIC Finance Shopping Center Fund Pty Ltd., 6.75%, 07/07/2014

    9,442,296   

AUD

    4,000      

Rabobank Capital Funding Trust V, 3.37%, 12/31/2014 (a)(b)(d)(e)

    3,659,258   

AUD

    4,800      

Royal Womens Hospital Finance Pty Ltd., 6.20%, 03/26/2017 (a)(b)(f)

    4,316,150   

AUD

    6,000      

SPI Australia Assets Pty Ltd., 7.00%, 08/12/2015

    5,799,525   

AUD

    2,000      

Telstra Corp. Ltd., 8.75%, 01/20/2015

    1,930,401   

AUD

    3,000      

Vero Insurance Ltd., 6.75%, 10/06/2016 (a)(b)

    2,872,896   

AUD

    8,900      

Wesfarmers Ltd., 8.25%, 09/11/2014

    8,417,837   

AUD

    4,000      

Westpac Banking Corp., 7.25%, 11/18/2016

    4,054,194   

AUD

    3,600      

Woolworths Ltd., 6.75%, 03/22/2016

    3,549,078   
                   174,464,394   

CHINA—13.1%

  

USD

    10,000      

Central China Real Estate Ltd., 6.50%, 06/04/2016 (b)(e)

    9,277,190   

USD

    8,450      

China Overseas Finance Cayman Island II Ltd., 5.50%, 11/10/2020 (e)

    8,810,739   

USD

    4,250      

China Resources Gas Group Ltd., 4.50%, 04/05/2022 (e)

    4,284,310   

USD

    8,150      

China Resources Gas Group Ltd., 4.50%, 04/05/2022 (e)

    8,215,795   

USD

    9,550      

CIFI Holdings Group Co. Ltd., 12.25%, 04/15/2016 (b)(e)

    10,087,188   

USD

    22,100      

CNOOC Finance 2012 Ltd., 3.88%, 05/02/2022 (e)

    21,841,518   

USD

    6,000      

CNOOC Finance 2013 Ltd., 3.00%, 05/09/2023

    5,503,614   

USD

    4,282      

CNPC General Capital Ltd., 3.40%, 04/16/2023 (e)

    4,044,636   

USD

    18,900      

COSL Finance BVI Ltd., 3.25%, 09/06/2022 (e)

    17,461,446   

USD

    23,200      

Country Garden Holdings Co. Ltd., 7.25%, 10/04/2017 (b)(e)

    21,460,000   

USD

    7,750      

ENN Energy Holdings Ltd., 6.00%, 05/13/2021 (e)

    8,444,322   

USD

    4,400      

Franshion Development Ltd., 6.75%, 04/15/2021 (e)

    4,482,500   

USD

    13,200      

Franshion Investment Ltd., 4.70%, 10/26/2017 (e)

    13,266,000   

USD

    11,200      

KWG Property Holding Ltd., 13.25%, 03/22/2017 (e)

    12,432,000   

USD

    6,077      

Longfor Properties Co. Ltd., 6.75%, 01/29/2018 (b)(e)

    5,644,877   

USD

    4,044      

MIE Holdings Corp., 7.50%, 04/25/2017 (b)(e)

    4,069,275   

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

9


Portfolio of Investments (unaudited) (continued)

As of April 30, 2014

 

 

Principal
Amount
(000)
     Description   Value
(US$)
 

CORPORATE BONDS (continued)

  

CHINA (continued)

  

USD

    10,200      

Sinopec Capital 2013 Ltd., 3.13%, 04/24/2023 (e)

  $ 9,446,914   

USD

    1,600      

Sinopec Group Overseas Development 2012 Ltd., 3.90%, 05/17/2022 (e)

    1,587,157   

USD

    1,300      

Sinopec Group Overseas Development 2012 Ltd., 4.88%, 05/17/2042 (e)

    1,285,148   

USD

    4,400      

Sinopec Group Overseas Development 2013 Ltd., 4.38%, 10/17/2023 (e)

    4,477,440   

USD

    3,460      

Sinopec Group Overseas Development 2014 Ltd., 4.38%, 04/10/2024 (e)

    3,492,489   

USD

    6,750      

Talent Yield Investments Ltd., 4.50%, 04/25/2022 (e)

    6,759,902   

USD

    17,800      

Trillion Chance Ltd., 8.50%, 01/10/2017 (b)(e)

    17,355,000   

USD

    19,000      

Wanda Properties Overseas Ltd., 4.88%, 11/21/2018 (e)

    18,654,162   

USD

    10,165      

Yingde Gases Investment Ltd., 8.13%, 04/22/2016 (b)(e)

    10,330,181   
                   232,713,803   

HONG KONG—6.6%

  

USD

    2,200      

AIA Group Ltd., 2.25%, 03/11/2019 (e)

    2,176,915   

USD

    13,513      

AIA Group Ltd., 3.13%, 03/13/2023 (e)

    12,686,950   

USD

    10,103      

Champion MTN Ltd., 3.75%, 01/17/2023 (e)

    8,958,684   

USD

    12,400      

HLP Finance Ltd., 4.75%, 06/25/2022 (e)

    12,368,082   

USD

    1,600      

Hutchison Whampoa International Ltd., 4.63%, 09/11/2015 (e)

    1,679,595   

USD

    4,100      

Hutchison Whampoa International Ltd., 4.63%, 01/13/2022 (e)

    4,352,224   

USD

    1,900      

Hutchison Whampoa International Ltd., 7.45%, 11/24/2033 (e)

    2,590,099   

USD

    16,014      

Hutchison Whampoa International Ltd., 7.63%, 04/09/2019 (e)

    19,521,771   

USD

    13,200      

Metropolitan Light International Ltd., 5.25%, 01/17/2015 (b)(e)

    13,386,120   

USD

    3,800      

Pacnet Ltd., 9.00%, 12/12/2016 (b)(e)

    4,066,000   

USD

    14,745      

Standard Chartered PLC, 3.95%, 01/11/2023 (e)

    14,299,804   

USD

    1,800      

Swire Pacific MTN Financing Ltd., 6.25%, 04/18/2018

    2,050,823   

USD

    2,440      

Swire Properties MTN Financing Ltd., 2.75%, 03/07/2020 (e)

    2,347,722   

USD

    17,300      

Swire Properties MTN Financing Ltd., 4.38%, 06/18/2022 (e)

    17,784,348   
                   118,269,137   

INDIA—2.5%

 

USD

    3,050      

Bank of Baroda, 5.00%, 08/24/2016 (e)

    3,203,805   

USD

    3,800      

Bharti Airtel International Netherlands BV, 5.13%, 03/11/2023 (e)

    3,716,400   

USD

    7,000      

HDFC Bank Ltd., 3.00%, 03/06/2018 (e)

    6,867,980   

USD

    3,515      

ICICI Bank Ltd., 4.80%, 05/22/2019 (e)

    3,645,452   

USD

    4,400      

NTPC Ltd., 4.75%, 10/03/2022 (e)

    4,298,193   

USD

    12,500      

NTPC Ltd., 5.63%, 07/14/2021 (e)

    12,963,163   

INR

    270,000      

Rural Electrification Corp. Ltd., 9.35%, 06/15/2022

    4,385,621   

USD

    4,800      

State Bank of India, 3.62%, 04/17/2019 (e)

    4,748,760   
                   43,829,374   

INDONESIA—3.7%

 

IDR

    24,000,000      

Bank OCBC Nisp Tbk PT, 6.90%, 02/19/2015

    2,022,348   

USD

    7,600      

Indo Energy Finance BV, 7.00%, 05/05/2015 (b)(e)

    7,334,000   

USD

    12,400      

Indo Energy Finance II BV, 6.38%, 01/24/2018 (b)(e)

    9,625,500   

USD

    3,150      

Majapahit Holding BV, 7.88%, 06/29/2037 (e)

    3,492,563   

USD

    8,900      

Majapahit Holding BV, 8.00%, 08/07/2019 (e)

    10,324,000   

USD

    10,100      

Pertamina Persero PT, 4.30%, 05/20/2023 (e)

    9,178,375   

USD

    10,100      

Pertamina Persero PT, 6.00%, 05/03/2042 (e)

    9,014,250   

USD

    10,609      

Perusahaan Listrik Negara PT, 5.25%, 10/24/2042 (e)

    8,659,596   

USD

    4,600      

TBG Global Pte Ltd., 4.63%, 04/03/2016 (b)(e)

    4,525,250   
                   64,175,882   

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

10


Portfolio of Investments (unaudited) (continued)

As of April 30, 2014

 

 

Principal
Amount
(000)
     Description   Value
(US$)
 

CORPORATE BONDS (continued)

  

MALAYSIA—2.8%

 

MYR

    5,000      

AmBank M Bhd, 4.95%, 03/25/2015

  $ 1,546,368   

USD

    11,700      

AMBB Capital (L) Ltd., 6.77%, 01/27/2016 (a)(b)(d)

    11,744,002   

MYR

    15,000      

Bank Pembangunan Malaysia Bhd, 4.15%, 04/10/2015 (c)

    4,623,142   

CNH

    10,000      

Danga Capital Bhd, 2.90%, 10/20/2014 (e)

    1,597,292   

USD

    900      

Petroliam Nasional Bhd, 7.63%, 10/15/2026 (e)

    1,204,937   

USD

    6,050      

PETRONAS Global Sukuk Ltd., 4.25%, 08/12/2014 (e)

    6,105,853   

USD

    50      

PETRONAS Capital Ltd., 5.25%, 08/12/2019 (e)

    56,011   

USD

    6,791      

Petronas Capital Ltd., 7.88%, 05/22/2022 (e)

    8,837,930   

USD

    2,650      

Public Bank Bhd, 6.84%, 08/22/2016 (a)(b)

    2,753,652   

USD

    11,550      

SBB Capital Corp., 6.62%, 11/02/2015 (a)(b)(d)(e)

    11,838,750   
                   50,307,937   

PHILIPPINES—2.9%

 

USD

    3,700      

Energy Development Corp., 6.50%, 01/20/2021 (e)

    3,871,125   

USD

    6,100      

Philippine Long Distance Telephone Co., 8.35%, 03/06/2017

    7,068,375   

USD

    7,400      

Power Sector Assets & Liabilities Management Corp., 6.88%, 11/02/2016 (c)(e)

    8,315,750   

USD

    19,200      

Power Sector Assets & Liabilities Management Corp., 7.25%, 05/27/2019 (c)(e)

    23,088,000   

USD

    8,000      

Power Sector Assets & Liabilities Management Corp., 7.39%, 12/02/2024 (c)(e)

    10,130,000   
                   52,473,250   

REPUBLIC OF SOUTH KOREA—8.2%

 

USD

    3,000      

Export-Import Bank of Korea, 5.13%, 03/16/2015

    3,112,296   

USD

    4,300      

Export-Import Bank of Korea, 5.88%, 01/14/2015

    4,452,663   

USD

    10,000      

Korea Development Bank (The), 3.00%, 03/17/2019

    10,245,780   

USD

    2,050      

Korea Expressway Corp., 1.88%, 10/22/2017 (e)

    2,048,403   

USD

    12,750      

Korea Expressway Corp., 4.50%, 03/23/2015 (e)

    13,139,258   

USD

    17,500      

Korea Finance Corp., 3.25%, 09/20/2016

    18,308,692   

USD

    10,350      

Korea Finance Corp., 4.63%, 11/16/2021

    11,280,972   

USD

    2,300      

Korea Gas Corp., 2.25%, 07/25/2017 (e)

    2,330,190   

USD

    1,400      

Korea Gas Corp., 2.88%, 07/29/2018 (e)

    1,422,026   

USD

    4,000      

Korea Hydro & Nuclear Power Co. Ltd., 2.88%, 10/02/2018 (e)

    4,057,064   

USD

    17,600      

Korea Hydro & Nuclear Power Co. Ltd., 3.00%, 09/19/2022 (e)

    16,993,381   

USD

    3,000      

Korea South-East Power Co. Ltd., 3.63%, 01/29/2017 (e)

    3,143,835   

USD

    12,470      

Korea South-East Power Co. Ltd., 6.00%, 05/25/2016 (e)

    13,639,312   

USD

    11,000      

Korea Western Power Co. Ltd., 2.88%, 10/10/2018 (e)

    11,130,009   

USD

    12,780      

Minera y Metalergica del Boleo SA de CV (Korea Resources Corp.), 2.88%, 05/07/2019 (e)

    12,719,678   

USD

    4,200      

Shinhan Bank, 1.88%, 07/30/2018 (e)

    4,088,330   

USD

    5,880      

Shinhan Bank, 5.66%, 03/02/2015 (a)(b)(e)

    6,041,700   

USD

    7,896      

Woori Bank Co. Ltd., 4.75%, 04/30/2024 (e)

    7,866,319   
                   146,019,908   

SINGAPORE—1.9%

 

SGD

    2,750      

CapitaMalls Asia Treasury Ltd., 3.95%, 08/24/2017

    2,311,987   

SGD

    3,000      

CMT MTN Pte. Ltd., 2.85%, 09/01/2014

    2,407,523   

USD

    8,600      

CMT MTN Pte. Ltd., 4.32%, 04/08/2015 (e)

    8,809,376   

USD

    8,900      

Oversea-Chinese Banking Corp. Ltd., 3.15%, 03/11/2018 (a)(b)(e)

    8,848,478   

USD

    7,450      

Oversea-Chinese Banking Corp. Ltd., 3.75%, 11/15/2017 (a)(b)(e)

    7,613,155   

USD

    4,000      

United Overseas Bank Ltd., 2.88%, 10/17/2017 (a)(b)(e)

    3,995,200   
                   33,985,719   

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

11


Portfolio of Investments (unaudited) (continued)

As of April 30, 2014

 

 

Principal
Amount
(000)
     Description   Value
(US$)
 

CORPORATE BONDS (continued)

  

SRI LANKA—0.2%

 

USD

    3,300      

Bank of Ceylon, 5.33%, 04/16/2018 (e)

  $ 3,279,375   

SUPRANATIONAL—4.9%

 

AUD

    14,000      

Asian Development Bank, 5.00%, 03/09/2022

    13,640,956   

AUD

    13,800      

Asian Development Bank, 5.50%, 02/15/2016

    13,393,561   

AUD

    16,800      

Asian Development Bank, 6.25%, 03/05/2020

    17,470,860   

AUD

    10,000      

Inter-American Development Bank, 6.00%, 05/25/2016

    9,849,446   

AUD

    11,200      

Inter-American Development Bank, 6.50%, 08/20/2019

    11,707,151   

AUD

    8,900      

International Bank for Reconstruction & Development, 5.75%, 10/21/2019

    9,034,390   

AUD

    10,300      

International Bank for Reconstruction & Development, 6.00%, 11/09/2016

    10,246,071   

AUD

    2,600      

International Finance Corp., 5.75%, 07/28/2020

    2,639,985   
                   87,982,420   

THAILAND—3.6%

 

USD

    5,000      

Bangkok Bank PCL, 3.88%, 09/27/2022 (e)

    4,869,390   

USD

    2,400      

Bangkok Bank PCL, 4.80%, 10/18/2020 (e)

    2,524,841   

USD

    4,200      

Bangkok Bank PCL, 5.00%, 10/03/2023 (e)

    4,396,367   

USD

    4,800      

Bangkok Bank PCL, 9.03%, 03/15/2029 (e)

    6,298,685   

USD

    17,930      

PTT Global Chemical PCL, 4.25%, 09/19/2022 (e)

    17,646,723   

USD

    7,400      

PTTEP Canada International Finance Ltd., 5.69%, 04/05/2021 (e)

    8,164,938   

USD

    4,500      

Siam Commercial Bank Ltd., 3.38%, 09/19/2017 (e)

    4,610,601   

USD

    12,002      

Siam Commercial Bank PCL, 3.50%, 04/07/2019 (e)

    12,066,235   

USD

    4,000      

Thai Oil PCL, 3.63%, 01/23/2023 (e)

    3,742,108   
                   64,319,888   
            

Total Corporate Bonds — 60.2% (cost $1,080,291,058)

    1,071,821,087   

GOVERNMENT BONDS—69.6%

  

AUSTRALIA—39.8%

  

AUD

    158,200      

Australia Government Bond, 4.50%, 10/21/2014

    148,317,001   

AUD

    58,800      

Australia Government Bond, 4.50%, 04/21/2033 (e)

    54,710,975   

AUD

    38,950      

Australia Government Bond, 5.50%, 04/21/2023

    40,671,806   

AUD

    35,300      

Australia Government Bond, 5.75%, 07/15/2022

    37,308,746   

AUD

    68,500      

Australia Government Bond, 6.25%, 04/15/2015

    65,827,521   

AUD

    5,950      

Queensland Treasury Corp., 6.00%, 10/14/2015 (c)

    5,785,246   

AUD

    27,100      

Queensland Treasury Corp., 6.00%, 04/21/2016

    26,652,221   

AUD

    22,850      

Queensland Treasury Corp., 6.00%, 02/21/2018

    23,184,208   

AUD

    31,190      

Queensland Treasury Corp., 6.00%, 06/14/2021 (c)

    32,789,564   

AUD

    47,100      

Queensland Treasury Corp., 6.25%, 06/14/2019 (c)

    49,271,343   

AUD

    24,330      

Queensland Treasury Corp., 6.25%, 02/21/2020

    25,452,082   

AUD

    131,500      

Treasury Corp. of Victoria, 5.75%, 11/15/2016

    130,284,962   

AUD

    14,250      

Treasury Corp. of Victoria, 6.00%, 06/15/2020

    14,835,184   

AUD

    35,350      

Treasury Corp. of Victoria, 6.00%, 10/17/2022

    37,214,139   

AUD

    15,000      

Western Australian Treasury Corp., 7.00%, 07/15/2021

    16,489,290   
                   708,794,288   

CHINA—3.4%

 

CNY

    15,000      

China Development Bank, 5.80%, 01/03/2016

    2,436,311   

CNH

    17,500      

China Government Bond, 1.40%, 08/18/2016 (e)

    2,734,870   

CNH

    10,000      

China Government Bond, 1.80%, 12/01/2015

    1,588,662   

CNH

    18,000      

China Government Bond, 2.48%, 12/01/2020

    2,647,835   

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

12


Portfolio of Investments (unaudited) (continued)

As of April 30, 2014

 

 

Principal
Amount
(000)
     Description   Value
(US$)
 

GOVERNMENT BONDS (continued)

  

CHINA (continued)

 

CNY

    50,000      

China Government Bond, 3.28%, 08/05/2020 (g)

  $ 7,578,603   

CNY

    10,000      

China Government Bond, 3.36%, 05/24/2022 (g)

    1,493,287   

CNY

    70,000      

China Government Bond, 3.41%, 06/24/2020 (g)

    10,699,086   

CNY

    20,000      

China Government Bond, 3.46%, 07/11/2020 (g)

    3,064,832   

CNY

    8,000      

China Government Bond, 3.55%, 10/20/2016 (g)

    1,267,798   

CNY

    2,000      

China Government Bond, 3.57%, 11/17/2021 (g)

    304,318   

CNY

    40,000      

China Government Bond, 3.60%, 02/17/2016 (g)

    6,370,559   

CNY

    4,000      

China Government Bond, 3.77%, 08/15/2016

    637,637   

CNY

    20,000      

China Government Bond, 3.83%, 01/27/2018 (g)

    3,173,789   

CNY

    60,000      

China Government Bond, 4.08%, 08/22/2023 (g)

    9,361,152   

CNY

    30,000      

China Government Bond, 4.10%, 09/27/2032 (g)

    4,415,022   

CNY

    18,000      

China Government Bond, 4.13%, 11/07/2018 (g)

    2,881,009   
                   60,654,770   

INDIA—2.4%

  

INR

    2,010,000      

India Government Bond, 7.28%, 06/03/2019

    31,363,531   

INR

    440,000      

India Government Bond, 8.12%, 12/10/2020

    7,013,636   

INR

    125,000      

India Government Bond, 8.30%, 07/02/2040

    1,893,598   

INR

    16,000      

India Government Bond, 8.33%, 06/07/2036

    244,009   

INR

    150,000      

India Government Bond, 8.83%, 12/12/2041

    2,382,430   
                   42,897,204   

INDONESIA—3.9%

 

IDR

    167,000,000      

Indonesia Government Bond Barclays Credit Linked Note, 9.50%, 06/17/2015

    14,820,050   

USD

    7,989      

Indonesia Government International Bond, 3.38%, 04/15/2023 (e)

    7,240,031   

USD

    14,700      

Indonesia Government International Bond, 4.63%, 04/15/2043 (e)

    12,329,625   

USD

    3,500      

Indonesia Government International Bond, 5.25%, 01/17/2042 (e)

    3,202,500   

USD

    7,400      

Indonesia Government International Bond, 5.88%, 03/13/2020 (e)

    8,103,000   

USD

    1,400      

Indonesia Government International Bond, 5.88%, 01/15/2024 (e)

    1,515,500   

USD

    6,900      

Indonesia Government International Bond, 6.63%, 02/17/2037 (e)

    7,443,375   

IDR

    47,000,000      

Indonesia Treasury Bond, 8.25%, 06/15/2032

    3,947,325   

IDR

    80,000,000      

Indonesia Treasury Bond, 8.38%, 03/15/2034

    6,763,828   

IDR

    21,000,000      

Indonesia Treasury Bond, 9.50%, 07/15/2031

    1,970,765   

USD

    2,050      

Perusahaan Penerbit SBSN, 4.00%, 11/21/2018 (e)

    2,101,250   
                   69,437,249   

MALAYSIA—3.3%

 

MYR

    1,450      

Bank Negara Malaysia Monetary Notes, 0.00%, 06/19/2014 (h)

    442,311   

MYR

    1,450      

Bank Negara Malaysia Monetary Notes, 0.00%, 07/17/2014 (h)

    441,339   

MYR

    37,800      

Malaysia Government Bond, 3.31%, 10/31/2017

    11,497,300   

MYR

    600      

Malaysia Government Bond, 3.49%, 03/31/2020

    180,281   

MYR

    98,400      

Malaysia Government Bond, 3.58%, 09/28/2018

    30,080,116   

MYR

    29,500      

Malaysia Government Bond, 4.01%, 09/15/2017

    9,170,512   

MYR

    20,400      

Malaysia Government Bond, 4.16%, 07/15/2021

    6,328,235   

MYR

    3,500      

Malaysia Government Bond, Series 0113, 3.17%, 07/15/2016

    1,068,248   
                   59,208,342   

NEW ZEALAND—0.2%

 

NZD

    2,150      

New Zealand Government Bond, 6.00%, 04/15/2015

    1,897,958   

NZD

    1,500      

Province of Quebec, 6.75%, 11/09/2015

    1,340,177   
                   3,238,135   

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

13


Portfolio of Investments (unaudited) (continued)

As of April 30, 2014

 

 

Principal
Amount
(000)
     Description   Value
(US$)
 

GOVERNMENT BONDS (continued)

  

PHILIPPINES—3.7%

 

PHP

    260,000      

Philippine Government Bond, 3.25%, 08/15/2023

  $ 5,406,804   

PHP

    715,000      

Philippine Government Bond, 5.75%, 11/24/2021

    17,623,772   

PHP

    5,544      

Philippine Government Bond, 6.38%, 01/19/2022

    142,550   

PHP

    44,000      

Philippine Government Bond, 8.00%, 07/19/2031

    1,319,494   

PHP

    94,000      

Philippine Government Bond, 8.75%, 05/27/2030

    2,989,630   

PHP

    331,030      

Philippine Government Bond, 9.13%, 09/04/2016

    8,484,207   

USD

    8,300      

Philippine Government International Bond, 6.50%, 01/20/2020

    9,866,625   

USD

    7,050      

Philippine Government International Bond, 7.75%, 01/14/2031

    9,693,750   

USD

    7,970      

Philippine Government International Bond, 9.88%, 01/15/2019

    10,550,287   
                   66,077,119   

REPUBLIC OF SOUTH KOREA—7.9%

 

USD

    5,600      

Korea Land & Housing Corp., 1.88%, 08/02/2017 (e)

    5,599,485   

KRW

    7,000,000      

Korea Monetary Stabilization Bond, 2.47%, 04/02/2015

    6,761,751   

KRW

    30,000,000      

Korea Monetary Stabilization Bond, 2.76%, 06/02/2015

    29,052,676   

KRW

    17,380,935      

Korea Treasury Bond, 1.50%, 06/10/2021 (i)

    16,820,752   

KRW

    9,500,000      

Korea Treasury Bond, 2.75%, 09/10/2017

    9,127,631   

KRW

    22,000,000      

Korea Treasury Bond, 2.75%, 03/10/2018

    21,067,688   

KRW

    15,000,000      

Korea Treasury Bond, 3.25%, 06/10/2015

    14,602,463   

KRW

    15,500,000      

Korea Treasury Bond, 3.25%, 09/10/2018

    15,076,026   

KRW

    10,300,000      

Korea Treasury Bond, 3.38%, 09/10/2023

    9,860,329   

KRW

    4,780,000      

Korea Treasury Bond, 3.50%, 03/10/2017

    4,700,137   

KRW

    3,300,000      

Korea Treasury Bond, 3.75%, 06/10/2022

    3,262,788   

KRW

    5,000,000      

Korea Treasury Bond, 4.25%, 06/10/2021

    5,105,598   
                   141,037,324   

SINGAPORE—1.2%

 

SGD

    3,000      

Housing & Development Board, 1.01%, 09/19/2016

    2,374,786   

SGD

    3,000      

Housing & Development Board, 1.83%, 11/21/2018 (e)

    2,341,172   

SGD

    750      

Housing & Development Board, 2.02%, 02/22/2016

    608,119   

SGD

    2,000      

Housing & Development Board, 3.14%, 03/18/2021

    1,618,239   

SGD

    15,700      

Singapore Government Bond, 2.25%, 06/01/2021

    12,635,576   

SGD

    1,800      

Singapore Government Bond, 3.50%, 03/01/2027

    1,544,798   
                   21,122,690   

SRI LANKA—1.1%

 

LKR

    151,000      

Sri Lanka Government Bonds, 8.00%, 11/15/2018

    1,117,434   

LKR

    650,000      

Sri Lanka Government Bonds, 8.50%, 11/01/2015

    5,052,648   

LKR

    230,000      

Sri Lanka Government Bonds, 8.50%, 04/01/2018

    1,758,437   

LKR

    388,000      

Sri Lanka Government Bonds, 8.50%, 07/15/2018

    2,959,103   

LKR

    648,600      

Sri Lanka Government Bonds, 10.60%, 07/01/2019

    5,306,614   

USD

    2,850      

Sri Lanka Government International Bond, 6.25%, 07/27/2021 (e)

    2,935,500   
                   19,129,736   

THAILAND—2.7%

 

THB

    557,000      

Thailand Government Bond, 1.20%, 07/14/2021 (e)(i)

    17,671,690   

THB

    407,000      

Thailand Government Bond, 2.80%, 10/10/2017

    12,651,185   

THB

    257,200      

Thailand Government Bond, 3.25%, 06/16/2017

    8,133,362   

THB

    321,000      

Thailand Government Bond, 3.45%, 03/08/2019

    10,066,445   
                   48,522,682   
            

Total Government Bonds—69.6% (cost $1,239,034,694)

    1,240,119,539   

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

14


Portfolio of Investments (unaudited) (continued)

As of April 30, 2014

 

 

Principal
Amount
(000)
     Description   Value
(US$)
 

RESIDENTIAL MORTGAGE BACKED SECURITY—0.1%

  

AUSTRALIA—0.1%

  

AUD

    1,773      

Westpac Securitisation Trust, 2.76%, 05/21/2038 (a)(b)(e)

  $ 1,642,923   
            

Total Residential Mortgage Backed Securities—0.1% (cost $1,490,030)

    1,642,923   

SHORT-TERM INVESTMENT—0.6%

  

UNITED STATES—0.6%

  

USD

    10,076      

Repurchase Agreement, Fixed Income Clearing Corp, 0.00% dated 04/30/2014, due 05/01/2014 in the amount of $10,076,000 (collateralized by $10,700,000 U.S. Treasury Notes, maturing 08/31/2018- 04/30/2020; value of $10,287,637)

    10,076,000   
            

Total Short-Term Investment—0.6% (cost $10,076,000)

    10,076,000   
            

Total Investments—130.8% (cost $2,337,982,495)

    2,329,820,749   
            

Liabilities in Excess of Other Assets—(30.8)%

    (548,587,110
            

Net Assets—100.0%

  $ 1,781,233,639   

 

AUD—Australian Dollar   INR—Indian Rupee   PHP—Philippine Peso
CNH—Chinese Yuan Renminbi Offshore   KRW—South Korean Won   SGD—Singapore Dollar
CNY—Chinese Yuan Renminbi   LKR—Sri Lanka Rupee   THB—Thailand Baht
HKD—Hong Kong Dollar   MYR—Malaysian Ringgit   USD—U.S. Dollar
IDR—Indonesian Rupiah   NZD—New Zealand Dollar  

 

(a)   Indicates a variable rate security. The maturity date presented for these instruments is the later of the next date on which the security can be redeemed at par or the next date on which the rate of interest is adjusted. The interest rate shown reflects the rate in effect at April 30, 2014.
(b)   The maturity date presented for these instruments represents the next call/put date.
(c)   This security is government guaranteed.
(d)   Perpetual bond. This is a bond that has no maturity date, is redeemable and pays a steady stream of interest indefinitely.
(e)   Denotes a restricted security, see Note 2(c).
(f)   Illiquid security.
(g)   China A shares. These shares are issued in local currency, traded in the local stock markets and are held through a qualified foreign institutional investor license.
(h)   Issued with a zero coupon.
(i)   Inflation linked security.

At April 30, 2014, the Fund held the following futures contracts:

 

Futures Contracts      Counterparty        Number of
Contracts
Long (Short)
       Expiration
Date
       Unrealized
Appreciation/
(Depreciation)
 

United States Treasury Note 6%—2 year

       UBS           211           06/30/2014         $ 34,556   

United States Treasury Note 6%—5 year

       UBS           116           06/30/2014           (4,101

United States Treasury Note 6%—10 year

       UBS           (2,591        06/19/2014           294,719   

United States Treasury Bond 6%—30 year

       UBS           121           06/19/2014           330,473   
                                        $ 655,647   

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

15


Portfolio of Investments (unaudited) (continued)

As of April 30, 2014

 

 

At April 30, 2014, the Fund’s open forward foreign currency exchange contracts were as follows:

 

Purchase Contracts
Settlement Date*
   Counterparty    Amount
Purchased
     Amount Sold      Fair Value      Unrealized
Appreciation/
(Depreciation)
 

Australian Dollar/United States Dollar

  

     
07/31/2014   

State Street

     AUD110,018,240         USD95,300,000       $ 101,575,298       $ 6,275,298   

Chinese Renminbi/United States Dollar

  

     
03/10/2015   

Credit Suisse

     CNY99,408,000         USD16,000,000         15,736,565         (263,435
03/10/2015   

Deutche Bank

     CNY88,836,500         USD14,380,000         14,063,067         (316,933
03/10/2015   

HSBC

     CNY78,212,500         USD12,500,000         12,381,258         (118,742

Hong Kong Dollar/United States Dollar

  

     
05/14/2014   

Standard Chartered Bank

     HKD3,101,840         USD400,000         400,095         95   

Indonesian Rupiah/United States Dollar

  

     
06/12/2014   

Goldman Sachs

     IDR806,156,700,000         USD69,900,000         69,287,583         (612,417

Malaysian Ringgit/United States Dollar

  

     
06/30/2014   

Credit Suisse

     MYR149,000,650         USD44,900,000         45,447,595         547,595   

Singapore Dollar/United States Dollar

  

     
06/16/2014   

Standard Chartered Bank

     SGD57,679,300         USD46,250,000         46,008,245         (241,755

Thai Baht/United States Dollar

  

     
06/12/2014   

Royal Bank of Canada

     THB65,505,900         USD2,010,000         2,023,253         13,253   
06/30/2014   

Goldman Sachs

     THB29,136,300         USD870,000         899,251         29,251   
                       $ 307,822,210       $ 5,312,210   
Sale Contracts
Settlement Date*
   Counterparty    Amount
Purchased
     Amount Sold      Fair Value      Unrealized
Appreciation/
(Depreciation)
 

United States Dollar/Australian Dollar

  

     
05/29/2014   

Credit Suisse

     USD28,738,798         AUD31,000,000       $ 28,745,803       $ (7,005
07/31/2014   

Credit Suisse

     USD84,935,672         AUD92,807,665         85,685,485         (749,813

United States Dollar/Chinese Renminbi Offshore

  

     
10/30/2014   

Royal Bank of Canada

     USD11,600,000         CNH72,902,566         11,592,112         7,888   

United States Dollar/Indian Rupee

  

     
05/12/2014   

HSBC

     USD15,120,000         INR934,128,720         15,464,489         (344,489
05/12/2014   

State Street

     USD3,400,000         INR211,174,000         3,495,983         (95,983
05/12/2014   

UBS

     USD13,700,000         INR848,715,000         14,050,466         (350,466
06/09/2014   

Royal Bank of Canada

     USD2,300,000         INR140,679,500         2,315,176         (15,176

United States Dollar/Indonesian Rupiah

  

     
06/12/2014   

Goldman Sachs

     USD74,850,000         IDR863,843,850,000         74,245,680         604,320   
06/12/2014   

HSBC

     USD4,800,000         IDR55,704,000,000         4,787,649         12,351   
06/12/2014   

Standard Chartered Bank

     USD16,800,000         IDR193,032,000,000         16,590,721         209,279   

United States Dollar/Malaysian Ringgit

  

     
06/30/2014   

Credit Suisse

     USD43,900,000         MYR146,011,400         44,535,826         (635,826
06/30/2014   

Deutsche Bank

     USD12,450,000         MYR40,381,575         12,317,030         132,970   
06/30/2014   

Goldman Sachs

     USD24,470,000         MYR79,491,619         24,246,222         223,778   

United States Dollar/Philippine Peso

  

     
06/16/2014   

UBS

     USD35,500,000         PHP1,579,454,000         35,402,654         97,346   

United States Dollar/Singapore Dollar

  

     
06/16/2014   

Credit Suisse

     USD25,300,000         SGD31,680,660         25,270,271         29,729   
06/16/2014   

Royal Bank of Canada

     USD35,600,000         SGD44,696,156         35,652,161         (52,161

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

16


Portfolio of Investments (unaudited) (concluded)

As of April 30, 2014

 

 

Sale Contracts
Settlement Date*
   Counterparty    Amount
Purchased
     Amount Sold      Fair Value      Unrealized
Appreciation/
(Depreciation)
 

United States Dollar/South Korean Won

  

     
06/16/2014   

Goldman Sachs

     USD24,400,000         KRW25,212,520,000       $ 24,382,597       $ 17,403   
06/16/2014   

Royal Bank of Canada

     USD2,000,000         KRW2,083,900,000         2,015,304         (15,304
06/16/2014   

State Street

     USD97,320,000         KRW101,169,006,000         97,838,817         (518,817

United States Dollar/Thai Baht

  

     
06/30/2014   

State Street

     USD34,700,000         THB1,128,097,000         34,817,133         (117,133
06/30/2014   

UBS

     USD 7,200,000         THB 233,301,600         7,200,527         (527
                       $ 600,652,106       $ (1,567,636

 

*   Certain contracts with different trade dates and like characteristics have been shown net.

At April 30, 2014, the Fund’s interest rate swaps were as follows:

 

Currency    Notional
Amount
     Expiration
Date
     Counterparty    Receive (Pay)
Floating Rate
   Floating Rate Index    Fixed
Rate
     Unrealized
Appreciation/
(Depreciation)
 

USD

     84,000,000         10/31/2016      

Barclays Bank

   Receive   

3-month LIBOR Index

     1.42%       $ (1,409,837

USD

     66,000,000         11/01/2017      

Barclays Bank

   Receive   

3-month LIBOR Index

     0.84%         572,962   
                                               $ (836,875

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

17


Statement of Assets and Liabilities (unaudited)

As of April 30, 2014

 

 

Assets

        

Investments, at value (cost $2,327,906,495)

   $ 2,319,744,749   

Repurchase agreement, at value (cost $10,076,000)

     10,076,000   

Foreign currency, at value (cost $36,174,337)

     36,115,582   

Cash at broker for futures contracts

     3,701,553   

Cash at broker for interest rate swaps

     1,050,000   

Cash at broker for China A shares

     72,923   

Cash

     1,432   

Interest receivable

     26,802,147   

Unrealized appreciation on forward foreign currency exchange contracts

     8,200,556   

Receivable for investments sold

     3,989,832   

Variation margin receivable for futures contracts

     659,748   

Unrealized appreciation on interest rate swaps

     572,962   

Prepaid expenses in connection with Revolving Credit Facility, senior secured notes, term loans and Series A Mandatory Redeemable Preferred Shares

     3,560,836   

Prepaid expenses in connection with the at-the-market stock offering

     219,465   

Prepaid expenses

     17,425   

Total assets

     2,414,785,210   

Liabilities

  

Senior secured notes payable (Note 8)

     200,000,000   

Revolving Credit Facility payable (Note 9)

     150,000,000   

3-year term loan payable (Note 9)

     100,000,000   

5-year term loan payable (Note 9)

     100,000,000   

Series A Mandatory Redeemable Preferred Shares ($25.00 liquidation value per share; 2,000,000 shares outstanding) (Note 7)

     50,000,000   

Payable for investments purchased

     22,224,422   

Unrealized depreciation on forward foreign currency exchange contracts

     4,455,982   

Interest payable on Revolving Credit Facility, senior secured notes and term loans

     3,215,426   

Unrealized depreciation on interest rate swaps

     1,409,837   

Investment management fees payable (Note 3)

     1,121,407   

Deferred foreign capital gains tax

     284,578   

Administration fees payable (Note 3)

     229,470   

Dividend payable on Series A Mandatory Redeemable Preferred Shares

     189,064   

Investor relations fees payable (Note 3)

     55,731   

Director fees payable

     40,034   

Variation margin payable for futures contracts

     4,101   

Accrued expenses

     321,519   

Total liabilities

     633,551,571   
          

Net Assets Applicable to Common Shareholders

   $ 1,781,233,639   

Composition of Net Assets:

  

Common stock (par value $.01 per share)

   $ 2,641,154   

Paid-in capital in excess of par

     1,652,818,405   

Distributions in excess of net investment income

     (28,629,632

Accumulated net realized loss from investments, interest rate swaps and futures contracts

     (148,759,038

Net unrealized appreciation on investments, futures contracts and interest rate swaps

     36,869,016   

Accumulated net realized foreign exchange gains

     307,842,114   

Net unrealized foreign exchange and forward foreign currency contract loss

     (41,548,380

Net Assets Applicable to Common Shareholders

   $ 1,781,233,639   

Net asset value per common share based on 264,115,445 shares issued and outstanding

   $ 6.74   

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

18


Statement of Operations (unaudited)

For the Six Months Ended April 30, 2014

 

 

Net Investment Income

        

Income

  

Interest and amortization of discount and premium (net of foreign withholding taxes of $501,204)

   $ 54,577,220   

Expenses

  

Investment management fee (Note 3)

     6,110,043   

Administration fee (Note 3)

     1,251,822   

Revolving Credit Facility, senior secured notes, term loans and Series A Mandatory Redeemable Preferred Shares fees and expenses

     815,454   

Custodian’s fees and expenses

     437,006   

Investor relations fees and expenses (Note 3)

     273,512   

Reports to shareholders and proxy solicitation

     212,257   

Insurance expense

     202,725   

Directors’ fees and expenses

     154,531   

Legal fees and expenses

     91,307   

Transfer agent’s fees and expenses

     72,780   

Independent auditors’ fees and expenses

     67,327   

Miscellaneous

     148,492   

Total operating expenses, excluding interest expense

     9,837,256   

Interest expense (Notes 8 & 9)

     6,660,365   

Total operating expenses

     16,497,621   
          

Net Investment Income

     38,079,599   

Distributions to Series A Mandatory Redeemable Preferred Shares (Note 7)

     (1,036,980

Net investment income applicable to common shareholders

     37,042,619   

Realized and Unrealized Gains/(Losses) on Investments, Interest Rate Swaps, Futures Contracts and Foreign Currencies

  

Net realized gain/(loss) from:

  

Investment transactions (including $38,467 capital gains tax)

     (1,735,287

Interest rate swaps

     (687,317

Futures contracts

     (3,388,593

Forward and spot foreign currency exchange contracts

     (5,461,110

Foreign currency transactions

     (51,003,656
       (62,275,963

Net change in unrealized appreciation/(depreciation) on:

  

Investments (including $100,723 change in deferred capital gains tax)

     4,509,828   

Interest rate swaps

     670,321   

Futures contracts

     1,529,815   

Forward foreign currency exchange contracts

     6,122,604   

Foreign currency translation

     26,913,504   
       39,746,072   

Net loss from investments, interest rate swaps, futures contracts and foreign currencies

     (22,529,891

Net Increase in Net Assets Applicable to Common Shareholders Resulting from Operations

   $ 14,512,728   

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

19


Statements of Changes in Net Assets

 

 

 

      For the Six
Months Ended
April 30, 2014
(unaudited)
     For the
Year Ended
October 31, 2013
 

Increase/(Decrease) in Net Assets Applicable to Common Shareholders

     

Operations:

     

Net investment income

   $ 37,042,619       $ 79,435,526   

Net realized gain/(loss) from investments, interest rate swaps and futures contracts

     (5,811,197      37,439,978   

Net realized loss from foreign currency transactions

     (56,464,766      (3,693,314

Net change in unrealized appreciation/depreciation on investments, interest rate swaps and futures contracts

     6,709,964         (124,629,665

Net change in unrealized appreciation/depreciation on foreign currency translation

     33,036,108         (113,658,709

Net increase/(decrease) in net assets applicable to common shareholders resulting from operations

     14,512,728         (125,106,184

Distributions to Common Shareholders from:

     

Net investment income

     (55,914,079      (111,875,139

Net decrease in net assets applicable to common shareholders from distributions

     (55,914,079      (111,875,139

Common Stock Transactions:

     

Proceeds from the at-the-market stock offering (Note 5)

             37,174,650   

Expenses in connection with the at-the-market stock offering (Note 5)

             (59,829

Repurchase of common stock from open market repurchase program of 3,292,483 and 0 shares of common stock, respectively (Note 6)

     (19,835,016        

Change in net assets from common stock transactions

     (19,835,016      37,114,821   

Change in net assets applicable to common shareholders resulting from operations

     (61,236,367      (199,866,502

Net Assets Applicable to Common Shareholders:

     

Beginning of period

     1,842,470,006         2,042,336,508   

End of period (including distributions in excess of net investment income of ($28,629,632) and ($9,758,172), respectively)

   $ 1,781,233,639       $ 1,842,470,006   

Amounts listed as “–” are $0 or round to $0.

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

20


Statement of Cash Flows (unaudited)

For the Six Months Ended April 30, 2014

 

 

Increase/(Decrease) in Cash (Including Foreign Currency)

  

Cash flows provided from (used for) operating activities:

  

Interest received (excluding discount and premium amortization of $5,841,083)

   $ 64,278,529   

Operating expenses paid

     (16,914,636

Dividends paid to Series A Mandatory Redeemable Preferred Shares

     (1,031,250

Purchases and sales of short-term portfolio investments, net

     32,848,000   

Purchases of long-term portfolio investments

     (788,569,070

Proceeds from sales of long-term portfolio investments

     863,497,743   

Realized losses on forward foreign currency exchange contracts closed

     (4,639,252

Realized losses on interest rate swap transactions

     (687,317

Payments paid to broker for futures contracts

     (4,041,971

Increase in cash collateral held at broker for China A shares

     (129

Decrease in prepaid expenses and other assets

     202,725   

Net cash provided from operating activities

     144,943,372   

Cash flows provided from (used for) financing activities

  

Repurchase of common stock from open market repurchase program

     (19,835,016

Dividends paid to common shareholders

     (65,278,796

Net cash used for financing activities

     (85,113,812

Effect of exchange rate on cash

     (51,655,360

Net increase in cash

     8,174,200   

Cash at beginning of period

     27,942,814   

Cash at end of period

   $ 36,117,014   

Reconciliation of Net Increase in Net Assets from Operations to Net Cash (Including Foreign Currency) Provided from (Used for) Operating Activities

  

Net increase in total net assets resulting from operations

   $ 14,512,728   

Decrease in investments

     107,613,187   

Net realized loss on investment transactions

     1,735,287   

Net realized foreign exchange losses

     51,825,514   

Net change in unrealized appreciation/depreciation on investments, futures contracts and interest rate swaps

     (4,509,828

Net change in unrealized foreign exchange gains/losses

     (33,036,108

Decrease in interest receivable

     3,860,226   

Increase in receivable for investments sold

     (250,960

Increase in interest payable on Revolving Credit Facility, senior secured notes and term loans

     43,860   

Increase in dividend payable to preferred shares

     5,730   

Net change in variation margin on future contracts

     (1,529,815

Net decrease in other assets

     202,725   

Increase in payable for investments purchased

     6,255,529   

Net change in unrealized appreciation/depreciation on interest rate swaps

     (670,321

Payments made to broker for futures contracts

     (653,378

Increase in cash collateral at broker for China A shares

     (129

Increase in prepaid expenses in connection with Revolving Credit Facility, senior secured notes, term loans and Series A Preferred Shares

     (89,524

Decrease in accrued expenses and other liabilities

     (371,351

Total adjustments

     130,430,644   

Net cash provided from operating activities

   $ 144,943,372   

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

21


Financial Highlights

 

 

 

   

For the Six
Months Ended

April 30, 2014
(unaudited)

    For the Year Ended October 31,  
      2013     2012     2011     2010     2009  

Per Share Operating Performance(a):

                                               
Net asset value per common share, beginning of period     $6.89        $7.78        $7.48        $7.27        $6.53        $4.91   
Net investment income     0.14        0.30        0.36        0.39        0.37        0.35   
Net realized and unrealized gains/(losses) on investments, interest rate swaps, futures contracts and foreign currency transactions     (0.09     (0.77     0.36        0.24        0.79        1.73   
Total from investment operations applicable to common shareholders     0.05        (0.47     0.72        0.63        1.16        2.08   
Distributions to Series A Mandatory Redeemable Preferred Shares:            
Net investment income                                          
Distributions to common shareholders from:            
Net investment income     (0.21     (0.42     (0.42     (0.42     (0.42     (0.38
Tax return of capital                                        (0.09
Total distributions to common shareholders     (0.21     (0.42     (0.42     (0.42     (0.42     (0.47
Expenses in connection with the at-the-market stock offering (Note 5)                                          
Impact of at-the-market stock offering (Note 5)                                          
Impact of open market repurchase program (Note 6)     0.01                                    0.01   
Net asset value per common share, end of period     $6.74        $6.89        $7.78        $7.48        $7.27        $6.53   
Market value, end of period     $6.24        $6.44        $7.90        $6.93        $6.90        $6.04   
Total Investment Return Based on(b):            
Market value     0.33%        -13.37%        20.47%        6.59%        21.73%        58.26%   
Net asset value     1.29%        -5.89% (c)      9.92% (c)      9.20%        18.63%        45.66%   
Ratio to Average Net Assets Applicable to Common Shareholders/Supplementary Data(d):            
Net assets applicable to common shareholders, end of period (000 omitted)     $1,781,234        $1,842,470        $2,042,337        $1,951,739        $1,897,181        $1,703,352   
Average net assets applicable to common shareholders (000 omitted)     $1,765,857        $1,953,410        $1,965,038        $1,937,986        $1,753,665        $1,457,521   
Net operating expenses     1.88% (e)      1.50%        1.38%        1.49%        1.89%        2.20%   
Net operating expenses without reimbursement     1.88% (e)      1.50%        1.38%        1.49%        1.89%        2.22% (f) 
Net operating expenses, excluding interest expense     1.12% (e)      1.03%        1.01%        1.05%        1.19%        1.37%   
Net investment income     4.23% (e)      4.07%        4.85%        5.30%        5.44%        6.40%   
Portfolio turnover     25%        42%        38%        72%        67%        68%   
Leverage (senior securities) outstanding (000 omitted)     $550,000        $550,000        $600,000        $600,000        $600,000        $600,000   
Leverage (preferred stock) outstanding (000 omitted)     $50,000        $50,000                               
Asset coverage ratio on long-term debt obligations at period end(g)     433%        444%        440%        425%        416%        384%   
Asset coverage per $1,000 on long-term debt obligations at period end     $4,330        $4,441        $4,404        $4,253        $4,162        $3,839   
Asset coverage ratio on total leverage at period end(h)     397%        407%                               
Asset coverage per share on total leverage at period end     $3,969        $4,071                               

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

22


Financial Highlights (concluded)

 

 

 

 

(a)   Based on average shares outstanding.
(b)   Total investment return based on market value is calculated assuming that shares of the Fund’s common stock were purchased at the closing market price as of the beginning of the period, dividends, capital gains, and other distributions were reinvested as provided for in the Fund’s dividend reinvestment plan and then sold at the closing market price per share on the last day of the period. The computation does not reflect any sales commission investors may incur in purchasing or selling shares of the Fund. The total investment return based on the net asset value is similarly computed except that the Fund’s net asset value is substituted for the closing market value.
(c)   The total return shown above includes the impact of financial statement rounding of the NAV per share and/or financial statement adjustments.
(d)   Ratios calculated on the basis of income, expenses and preferred share dividends applicable to both the common and preferred shares relative to the average net assets of common shareholders. For the six months ended April 30, 2014 and for each of the years ended October 31, 2013, 2012, 2011, 2010, and 2009 the ratios of net investment income before preferred stock dividends to average net assets of common shareholders were 4.35%, 4.10%, 4.85%, 5.30%, 5.44% and 6.40%, respectively.
(e)   Annualized.
(f)   In 2009, the Fund filed a non-routine proxy to consider the approval of a new sub-advisory agreement among the Fund, Investment Manager, and Sub-Adviser. The Fund and the Investment Manager agreed to each bear equal responsibility with respect to the costs of soliciting proxies associated with the non-routine item.
(g)   Asset coverage ratio is calculated by dividing net assets plus the amount of any borrowings, including Series A Mandatory Redeemable Preferred Shares, for investment purposes by the amount of any long-term debt obligations, which includes the senior secured notes, Revolving Credit Facility and term loans.
(h)   Asset coverage ratio is calculated by dividing net assets plus the amount of any borrowings, including Series A Mandatory Redeemable Preferred Shares, for investment purposes by the amount of any borrowings.

Amounts listed as “–” are $0 or round to $0.

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

23


Notes to Financial Statements (unaudited)

April 30, 2014

 

 

1. Organization

Aberdeen Asia-Pacific Income Fund, Inc. (the “Fund”) was incorporated in Maryland on March 14, 1986 as a closed-end, non-diversified management investment company. The Fund’s principal investment objective is to seek current income. The Fund may also achieve incidental capital appreciation. To achieve its investment objectives, the Fund normally invests at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in Asian debt securities, Australian debt securities and New Zealand debt securities. This 80% investment policy is a non-fundamental policy of the Fund and may be changed by the Fund’s Board of Directors (the “Board”) upon 60 days’ prior written notice to shareholders. There can be no assurance that the Fund will achieve its investment objectives. The ability of issuers of debt securities held by the Fund to meet their obligations may be affected by economic developments in a specific industry, country or region.

2. Summary of Significant Accounting Policies

The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements. The policies conform to accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The accounting records of the Fund are maintained in U.S. Dollars and the U.S. Dollar is used as both the functional and reporting currency. However, the Australian Dollar is the functional currency for U.S. federal tax purposes.

(a) Security Valuation:

The Fund is required to value its securities at fair market value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Long-term debt and other fixed-income securities are valued at the last quoted or evaluated bid price on the valuation date provided by an independent pricing service provider. If there are no current day bids, the security is valued at the previously applied bid. Short-term debt securities (such as commercial paper, and U.S. treasury bills)

having a remaining maturity of 60 days or less are valued at amortized cost, which approximates fair value. Debt and other fixed-income securities are generally determined to be Level 2 investments.

Exchange traded derivatives are generally Level 1 investments and over-the-counter derivatives are generally Level 2 investments.

In the event that a security’s market quotations are not readily available or are deemed unreliable, the security is valued at fair value as determined by the Fund’s Pricing Committee, taking into account the relevant factors and surrounding circumstances using valuation policies and procedures approved and established by the Board. A security that has been fair valued by the Pricing Committee may be classified as Level 2 or 3 depending on the nature of the inputs.

In accordance with the authoritative guidance on fair value measurements and disclosures under GAAP, the Fund discloses the fair value of its investments using a three-level hierarchy that classifies the inputs to valuation techniques used to measure the fair value. The hierarchy assigns Level 1 measurements to valuations based upon other significant observable inputs, including unadjusted quoted prices in active markets for identical assets, Level 2 measurements to valuations based upon other significant observable inputs, including adjusted quoted prices in active markets for identical assets, and Level 3 measurements to valuations based upon unobservable inputs that are significant to the valuation. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability, which are based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. A financial instrument’s level within the fair value hierarchy is based upon the lowest level of any input that is significant to the fair value measurement. The three-tier hierarchy of inputs is summarized below:

Level 1 – quoted prices in active markets for identical investments;

Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, and credit risk); or

Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments).

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

24


Notes to Financial Statements (unaudited) (continued)

April 30, 2014

 

 

A summary of standard inputs is listed below:

 

Security Type    Standard Inputs
   

Debt and other fixed-income securities

   Reported trade data, broker-dealer price quotations, benchmark yields, issuer spreads on comparable securities, credit quality, yield, and maturity.
   

Forward foreign currency contracts

   Forward exchange rate quotations.
   

Swap agreements

   Market information pertaining to the underlying reference assets, i.e., credit spreads, credit event probabilities, fair values, forward rates, and volatility measures.

The following is a summary of the inputs used as of April 30, 2014 in valuing the Fund’s investments at fair value. The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. Please refer to the Portfolio of Investments for a detailed breakout of the security types:

 

Assets      Level 1        Level 2        Level 3  

Fixed Income Investments

                

Commercial Mortgage Backed Security

     $         $ 6,161,200         $   

Corporate Bonds

                 1,071,821,087             

Government Bonds

                 1,240,119,539             

Residential Mortgage Backed Security

                 1,642,923             

Total Fixed Income Investments

                 2,319,744,749             

Short-Term Investment

                 10,076,000             

Total Investments

     $         $ 2,329,820,749         $   

Other Financial Instruments

                

Futures Contracts

     $ 659,748         $         $   

Forward Foreign Currency Exchange Contracts

                 8,200,556             

Interest Rate Swap Agreements

                 572,962             

Total Other Financial Instruments

     $ 659,748         $ 8,773,518         $   

Total Assets

     $ 659,748         $ 2,338,594,267         $   

Liabilities

                

Other Financial Instruments

                

Futures Contracts

     $ (4,101      $         $   

Forward Foreign Currency Exchange Contracts

                 (4,455,982          

Interest Rate Swap Agreements

                 (1,409,837          

Total Liabilities – Other Financial Instruments

     $ (4,101      $ (5,865,819      $   

Amounts listed as “–” are $0 or round to $0.

 

For movements between the levels within the fair value hierarchy, the Fund has adopted a policy of recognizing transfers at the end of each period. During the period ended April 30, 2014, there were no transfers between Levels 1, 2 and 3. For the period ended April 30, 2014, there have been no significant changes to the fair valuation methodologies.

 

(b) Repurchase Agreements:

The Fund may enter into repurchase agreements under the terms of a Master Repurchase Agreement. It is the Fund’s policy that its custodian/counterparty segregate the underlying collateral securities, the value of which exceeds the principal amount of the repurchase transaction, including accrued interest. The repurchase price generally equals the price paid by the Fund plus interest negotiated

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

25


Notes to Financial Statements (unaudited) (continued)

April 30, 2014

 

 

on the basis of current short-term rates. To the extent that any repurchase transaction exceeds one business day, the collateral is valued on a daily basis to determine its adequacy. Under the Master Repurchase Agreement, if the counterparty defaults and the value of the collateral declines, or if bankruptcy proceedings are commenced with respect to the counterparty of the security, realization of the collateral by the Fund may be delayed or limited. The Fund held a repurchase agreement of $10,076,000 as of April 30, 2014. The value of the related collateral exceeded the value of the repurchase agreement at April 30, 2014. Repurchase agreements are subject to contractual netting arrangements with the counterparty, Fixed Income Clearing Corp. For additional information on individual repurchase agreements, see the schedules of investments.

(c) Restricted Securities:

Restricted securities are privately-placed securities whose resale is restricted under U.S. securities laws. The Fund may invest in restricted securities, including unregistered securities eligible for resale without registration pursuant to Rule 144A and privately-placed securities of U.S. and non-U.S. issuers offered outside the U.S. without registration pursuant to Regulation S under the Securities Act of 1933, as amended (the “1940 Act”). Rule 144A securities may be freely traded among certain qualified institutional investors, such as the Fund, but resale of such securities in the U.S. is permitted only in limited circumstances.

(d) Foreign Currency Translation:

Foreign securities, currencies, and other assets and liabilities denominated in foreign currencies are translated into U.S. Dollars at the exchange rate of said currencies against the U.S. Dollar, as of the “Valuation Time,” as provided by an independent pricing service approved by the Board. The Valuation Time is as of the close of regular trading on the New York Stock Exchange (usually 4:00 p.m. Eastern Time).

Foreign currency amounts are translated into U.S. Dollars on the following basis:

 

(i)   market value of investment securities, other assets and liabilities – at the exchange rates at the current daily rates of exchange; and

 

(ii)   purchases and sales of investment securities, income and expenses – at the rate of exchange prevailing on the respective dates of such transactions.

The Fund isolates that portion of the results of operations arising from changes in the foreign exchange rates due to the fluctuations in the market prices of the securities held at the end of the reporting period. Similarly, the Fund isolates the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of portfolio securities sold during the reporting period.

Net exchange gain/(loss) is realized from sales and maturities of portfolio securities, sales of foreign currencies, settlement of securities transactions, dividends, interest and foreign withholding taxes recorded on the Fund’s books. Net unrealized foreign exchange appreciation/(depreciation) includes changes in the value of portfolio securities and other assets and liabilities arising as a result of changes in the exchange rate. The net realized and unrealized foreign exchange gain/(loss) shown in the composition of net assets represents foreign exchange gain/(loss) for book purposes that may not have been recognized for tax purposes.

Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of domestic origin, including unanticipated movements in the value of the foreign currency relative to the U.S. Dollar. Generally, when the U.S. Dollar rises in value against foreign currency, the Fund’s investments denominated in that currency will lose value because its currency is worth fewer U.S. Dollars; the opposite effect occurs if the U.S. Dollar falls in relative value.

(e) Derivative Financial Instruments:

The Fund is authorized to use derivatives to manage currency, interest rate and credit risk and as a substitute for physical securities. Losses may arise due to changes in the value of the contract or if the counterparty does not perform under the contract. The use of derivative instruments involves, to varying degrees, elements of market risk in excess of the amount recognized in the Statement of Assets and Liabilities.

Forward Foreign Currency Exchange Contracts:

A forward foreign currency exchange contract (“forward contract”) involves an obligation to purchase and sell a specific currency at a future date at a price set at the time of the contract. Forward contracts are used to manage the Fund’s currency exposure in an efficient manner. They are used to sell unwanted currency exposure that comes with holding securities in a market, or to buy currency exposure where the exposure from holding securities is insufficient to give the desired currency exposure either in absolute terms or relative to the benchmark. The use of forward contracts allows the separation of decision-making between markets and their currencies. The forward contract is marked-to-market daily and the change in market value is recorded by the Fund as unrealized appreciation or depreciation. Forward contracts’ prices are received daily from an independent pricing provider. When the forward contract is closed, the Fund records a realized gain or loss equal to the difference between the value at the time it was opened and the value at the time it was closed. These realized and unrealized gains and losses are reported on the Statement of Operations. The Fund could be

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

26


Notes to Financial Statements (unaudited) (continued)

April 30, 2014

 

 

exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts and from unanticipated movements in exchange rates. During the six months ended April 30, 2014, the Fund used forward contracts to hedge positions in the Australian Dollar, Chinese Yuan Renminbi Offshore, Indonesian Rupiah, Indian Rupee, South Korean Won, Malaysian Ringgit, Philippine Peso, Singapore Dollar and Thai Baht.

While the Fund may enter into forward contracts to seek to reduce currency exchange rate risks, transactions in such contracts involve certain risks. The Fund could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts and from unanticipated movements in exchange rates. Thus, while the Fund may benefit from such transactions, unanticipated changes in currency prices may result in a poorer overall performance for the Fund than if it had not engaged in any such transactions. Moreover, there may be imperfect correlation between the Fund’s portfolio holdings or securities quoted or denominated in a particular currency and forward contracts entered into by the Fund. Such imperfect correlation may prevent the Fund from achieving a complete hedge, which will expose the Fund to the risk of foreign exchange loss.

Forward contracts are subject to the risk that the counterparties to such contracts may default on their obligations. Since a forward foreign currency exchange contract is not guaranteed by an exchange or clearing house, a default on the contract would deprive the Fund of unrealized profits, transaction costs or the benefits of a currency hedge or force the Fund to cover its purchase or sale commitments, if any, at the market price at the time of the default.

Futures Contracts:

The Fund may invest in financial futures contracts (“futures contracts”) for the purpose of hedging its existing portfolio securities, or securities that the Fund intends to purchase, against fluctuations in value caused by changes in prevailing market interest rates or prices. Futures contracts may also be entered into for non-hedging purposes; however, in those instances, the aggregate initial margin and premiums required to establish the Fund’s positions may not exceed 5% of the Fund’s net asset value after taking into account unrealized profits and unrealized losses on any such contract it has entered.

Upon entering into a futures contract, the Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount. This payment is known as initial margin. Subsequent payments, known as “variation margin,” are calculated each day, depending on the daily fluctuations in the fair value/market value of the underlying assets. An unrealized gain/(loss) equal to the variation margin is recognized on a daily

basis. When the contract expires or is closed, the gain/(loss) is realized and is presented in the Statement of Operations as a net realized gain/(loss) on futures contracts. Futures contracts are valued daily at their last quoted sale price on the exchange on which they are traded.

A “sale” of a futures contract means a contractual obligation to deliver the securities or foreign currency called for by the contract at a fixed price at a specified time in the future. A “purchase” of a futures contract means a contractual obligation to acquire the securities or foreign currency at a fixed price at a specified time in the future. During the six months ended April 30, 2014, the use of bond futures contracts was primarily to hedge the U.S. interest rate risk.

There are significant risks associated with the Fund’s use of futures contracts, including the following: (1) the success of a hedging strategy may depend on the ability of the Fund’s investment adviser and/or sub-adviser to predict movements in the prices of individual securities, fluctuations in markets and movements in interest rates; (2) there may be an imperfect or no correlation between the movement in the price of futures contracts, interest rates and the value/market value of the securities held by the Fund; (3) there may not be a liquid secondary market for a futures contract; (4) trading restrictions or limitations may be imposed by an exchange; and (5) government regulations may restrict trading in futures contracts. In addition, should market conditions change unexpectedly, the Fund may not achieve the anticipated benefits of the futures contracts and may realize a loss.

Swaps:

A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset or notional principal amount. The Fund will enter into swaps only on a net basis, which means that the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the difference between the two payments. Risks may arise as a result of the failure of the counterparty to the swap contract to comply with the terms of the swap contract. The loss incurred by the failure of a counterparty is generally limited to the net interest payment to be received by the Fund, and/or the termination value at the end of the contract. Therefore, the Fund considers the creditworthiness of each counterparty to a swap contract in evaluating potential credit risk. Additionally, risks may arise from unanticipated movements in interest rates or in the value of the underlying reference asset or index. The Fund records unrealized gains/(losses) on a daily basis representing the value and the current net receivable or payable relating to open swap contracts. Net amounts received or paid on the swap contract are recorded as realized gains/(losses). Fluctuations in the value

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

27


Notes to Financial Statements (unaudited) (continued)

April 30, 2014

 

 

of swap contracts are recorded for financial statement purposes as unrealized appreciation or depreciation of swap contracts. Realized gains/(losses) from terminated swaps are included in net realized gains/(losses) on swap contracts transactions. During the six month period ended April 30, 2014, the Fund used interest rate swaps as a tool to hedge the Revolving Credit Facility (as defined below) of the Fund.

The Fund is a party to International Swap Dealers Association, Inc. Master Agreements (“ISDA Master Agreements”). These agreements are with select counterparties and they govern transactions, including certain over-the-counter derivative and foreign exchange contracts, entered into by the Fund and the counterparty. The ISDA Master

Agreements maintain provisions for general obligations, representations, agreements, collateral, and events of default or termination. The occurrence of a specified event of termination may give a counterparty the right to terminate all of its contracts and affect settlement of all outstanding transactions under the applicable ISDA Master Agreement.

Effective June 10, 2013, certain swaps, including interest rate swaps, must be cleared pursuant to U.S. Commodity Futures Trading Commission (“CFTC”) regulations. As a result, interest rate swaps entered into by the Fund after June 10, 2013 can no longer be traded over-the-counter and became subject to various regulations and rules of the CFTC.

 

 

Summary of Derivative Instruments:

The Fund may use derivatives for various purposes as noted above. The following is a summary of the fair value of Derivative Instruments, not accounted for as hedging instruments, as of April 30, 2014:

 

     Asset Derivatives      Liability Derivatives  
     Period Ended April 30, 2014      Period Ended April 30, 2014  
Derivatives not accounted for
as hedging instruments
and risk exposure
   Statement of Assets
and Liabilities Location
   Fair Value      Statement of Assets
and Liabilities Location
   Fair Value  

Interest rate swaps
(interest rate risk)

   Unrealized appreciation on interest rate swaps    $ 572,962       Unrealized depreciation on interest rate swaps    $ 1,409,837   

Forward foreign exchange contracts (foreign exchange risk)

   Unrealized appreciation on forward currency exchange contracts    $ 8,200,556       Unrealized depreciation on forward currency exchange contracts    $ 4,455,982   

Futures contracts
(interest rate risk)*

   Unrealized appreciation on futures contracts    $ 659,748       Unrealized depreciation on futures contracts    $ 4,101   

Total

        $ 9,433,266            $ 5,869,920   

 

*   Includes cumulative appreciation/depreciation on futures contracts as reported in the Portfolio of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

28


Notes to Financial Statements (unaudited) (continued)

April 30, 2014

 

 

The Fund has transactions that may be subject to enforceable master netting agreements. A reconciliation of the gross amounts on the Statements of Assets and Liabilities to the net amounts by broker and derivative type, including any collateral received or pledged, is included in the following tables:

Financial Assets, Derivative Assets, and Collateral Held by Counterparty as of April 30, 2014:

 

                Gross Amounts Not Offset
in the
Statement of Assets &
Liabilities
        
         Gross Amounts of
Assets Presented
in Statement of
Financial  Position
     Financial
Instrument
     Collateral
Received (1)
     Net Amount
(not less than 0)
 
Derivative   Counterparty                            

Forward Foreign Currency Contracts (2)

           
  Credit Suisse    $ 577,324       $ (577,324    $       $   
  Deutsche Bank      132,970         (132,970                
  Goldman Sachs      874,752         (612,417              262,335   
  HSBC      12,351         (12,351                
  Royal Bank of Canada      21,141         (21,141                
  Standard Chartered Bank      209,374         (209,374                
  State Street      6,275,298         (731,933              5,543,365   
  UBS      97,346         (97,346                

Interest Rate Swaps (2)

           
  Barclays Bank      572,962         (572,962                

Futures (2)

           
    UBS      659,748         (4,101      (655,647        
         $ 9,433,266       $ (2,971,919    $ (655,647    $ 5,805,700   

 

(1)   In some instances, the actual collateral received and/or pledged may be more than the amount shown here due to overcollateralization.
(2)   Includes financial instrument (swaps, forwards and futures) which are not subject to master netting arrangement, or another similar arrangement.

Amounts listed as “–” are $0 or round to $0.

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

29


Notes to Financial Statements (unaudited) (continued)

April 30, 2014

 

 

Financial Assets, Derivative Liabilities, and Collateral Held by Counterparty as of April 30, 2014:

 

                Gross Amounts Not Offset
in the
Statement of Assets &
Liabilities
        
         Gross Amounts
of Liabilities
Presented in
Statement of
Financial  Position
     Financial
Instrument
     Collateral
Received (1)
     Net Amount
(not less than 0)
 
Derivative   Counterparty                            

Forward Foreign Currency Contracts (2)

           
  Credit Suisse    $ 1,656,079       $ (577,324    $       $ 1,078,755   
  Deutsche Bank      316,933         (132,970              183,963   
  Goldman Sachs      612,417         (612,417                
  HSBC      463,231         (12,351              450,880   
  Royal Bank of Canada      82,641         (21,141              61,500   
  Standard Chartered Bank      241,755         (209,374              32,381   
  State Street      731,933         (731,933                
  UBS      350,993         (97,346              253,647   

Interest Rate Swaps (2)

           
  Barclays Bank      1,409,837         (572,962      (836,875        

Futures (2)

           
    UBS      4,101         (4,101                
         $ 5,869,920       $ (2,971,919    $ (836,875    $ 2,061,126   

 

(1)   In some instances, the actual collateral received and/or pledged may be more than the amount shown here due to overcollateralization.
(2)   Includes financial instrument (swaps, forwards and futures) which are not subject to master netting arrangement, or another similar arrangement.

Amounts listed as “–” are $0 or round to $0.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

30


Notes to Financial Statements (unaudited) (continued)

April 30, 2014

 

 

The Effect of Derivative Instruments on the Statement of Operations

for the Six Months Ended April 30, 2014

 

Derivatives not accounted for as
hedging instruments under
Statement 133(a)
     Location of Gain or (Loss)
on Derivatives
     Realized
Gain or
(Loss) on
Derivatives
       Change in
Unrealized
Appreciation/
Depreciation
on Derivatives
 
     Realized/Unrealized Gain/(Loss) from Investments, Interest Rate Swaps, Futures Contracts and Foreign Currencies          

Interest rate swaps (interest rate risk)

          $ (687,317      $ 670,321   

Forward foreign exchange contracts
(foreign exchange risk)

            (4,639,252        6,122,604   

Futures contracts (interest rate risk)

              (3,388,593        1,529,815   

Total

              $(8,715,162)         $ 8,322,740   

 

Information about futures contracts reflected as of the date of this report is generally indicative of the type of activity for the six months ended April 30, 2014. In December 2013, the Fund increased its holdings in 10-year U.S. Treasury Bill futures contracts. In January 2014, the Fund increased its holdings in all of its futures contracts. The quarterly weighted average of contracts and notional values for the Fund’s future positions were as follows:

 

Quarter     

Weighted Average

Contracts

      

Weighted Average

Notional Value

 

1st Quarter

       (1,146      $ (107,633,333

2nd Quarter

       (2,013        (171,133,333

Information about forward currency contracts reflected as of the date of this report is generally indicative of the type of activity for the month ended April 30, 2014. The volume of forward contracts varied throughout the period with an average notional value of 516,960,745. The quarterly average notional values for the Fund’s forward contracts were as follows:

 

Quarter     

Average

Notional Value

 

1st Quarter

     $ 383,530,000   

2nd Quarter

       650,391,490   

Information about interest rate swaps reflected as of the date of this report is generally indicative of the type and volume of activity for the six months ended April 30, 2014. The overall notional value and volume of interest rate swap positions was unvaried for the period.

The Fund values derivatives at fair value, as described in the results of operations. Accordingly, the Fund does not follow hedge accounting even for derivatives employed as economic hedges.

(f) Credit-Linked Notes:

The Fund invests in credit-linked securities, which are unstructured, unleveraged pass-through vehicles to an underlying security denominated in a local currency, used for the purposes of efficiently managing access to the market and interest rate risk. For instance, the Fund may invest in credit-linked securities as a cash management tool in order to gain exposure to a certain market and/or to remain fully invested when more traditional income producing securities are not available. Like an investment in a bond, investments in credit-linked securities represent the right to receive periodic income payments (in the form of distributions) and payment of principal at the end of the term of the security. However, these payments are conditioned on the issuer’s receipt of payments from, and the issuer’s potential obligations to, the counterparties to the derivative instruments and other securities in which the issuer invests. For instance, the issuer may sell one or more credit default swaps, under which the issuer would receive a stream of payments over the term of the swap agreements provided that no event of default has occurred with respect to the referenced debt obligation upon which the swap is based. If a default occurs, the stream of payments may stop and the issuer would be obligated to pay the counterparty the par value (or other agreed upon value) of the referenced debt obligation. This, in turn, would reduce the amount of income and principal that the Fund would receive. The Fund’s investments in these instruments are indirectly subject to the

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

31


Notes to Financial Statements (unaudited) (continued)

April 30, 2014

 

 

risks associated with derivative instruments, including, among others, credit risk, default or similar event risk, counterparty risk, interest rate risk, leverage risk and management risk. It is also expected that the securities will be exempt from registration under the 1933 Act. Accordingly, there may be no established trading market for the securities and they may constitute illiquid investments.

(g) Security Transactions, Investment Income and Expenses:

Security transactions are recorded on the trade date. Realized and unrealized gains/(losses) from security and currency transactions are calculated on the identified cost basis. Interest income and expenses are recorded on an accrual basis. Discounts and premiums on securities purchased are accreted or amortized on an effective yield basis over the estimated lives of the respective securities. Expenses are accrued on a daily basis.

(h) Distributions:

The Fund has a managed distribution policy to pay distributions from net investment income supplemented by net realized foreign exchange gains, net realized short-term capital gains and return of capital distributions, if necessary, on a monthly basis. The managed distribution policy is subject to regular review by the Board. The Fund will also declare and pay distributions at least annually from net realized gains on investment transactions and net realized foreign exchange gains, if any. Dividends and distributions to shareholders are recorded on the ex-dividend date.

Dividends and distributions to shareholders are determined in accordance with federal income tax regulations, which may differ from GAAP. These differences are primarily due to differing treatments for foreign currencies, loss deferrals and recognition of market discount and premium.

Distributions to Series A Mandatory Redeemable Preferred Shares (the “Series A MRPS”) shareholders are accrued daily and paid quarterly based on an annual rate of 4.125%. The Fund may not pay distributions to its preferred shareholders unless (i) the pro forma asset coverage ratios for the Series A MRPS, as calculated in accordance with the Fitch Ratings total and net overcollateralization tests per the ‘AA’ rating guidelines outlined in Fitch Rating’s closed-end fund criteria, is in excess of 100%, and (ii) the Fund’s asset coverage ratios for the Series A MRPS, as calculated in accordance with the 1940 Act, is in excess of 225%. The character of distributions to Series A MRPS shareholders made during the year may differ from their ultimate characterization for federal income tax purposes.

(i) Federal Income Taxes:

For federal income and excise tax purposes, substantially all of the Fund’s transactions are accounted for using the Australian Dollar as

the functional currency. Accordingly, realized currency gains/(losses) are realized from changes in the foreign exchange rates against the Australian Dollar or are a result from the repatriation of Australian Dollars into U.S. Dollars. This may differ substantially from the realized currency gains recognized under GAAP within the financial statements. Furthermore, the Fund’s distribution requirements are calculated on a federal tax basis whereby currency gains/(losses) are considered income and distributed out as such.

The Fund intends to continue to qualify as a “regulated investment company” by complying with the provisions available to certain investment companies, as defined in Subchapter M of the Internal Revenue Code of 1986, as amended, and to make distributions of net investment income and net realized capital gains sufficient to relieve the Fund from all, or substantially all, federal income taxes. Therefore, no federal income tax provision is required. Since tax authorities can examine previously filed tax returns, the Fund’s U.S. federal and state tax returns for each of the four fiscal years up to the most recent fiscal year ended October 31, 2013 are subject to such review.

(j) Cash Flow Information:

The Fund invests in securities and distributes dividends from net investment income and net realized gains on investment and currency transactions which are paid in cash or are reinvested at the discretion of shareholders. These activities are reported in the Statements of Changes in Net Assets and additional information on cash receipts and cash payments is presented in the Statement of Cash Flows. Cash includes domestic and foreign currency but does not include cash at brokers in segregated accounts for financial futures contracts because it is designated as collateral.

3. Agreements and Transactions with Affiliates

(a) Investment Manager, Investment Adviser, and Investment Sub-Adviser:

Aberdeen Asset Management Asia Limited (the “Investment Manager”) serves as investment manager to the Fund, pursuant to a management agreement. Aberdeen Asset Management Limited (the “Investment Adviser”) serves as the investment adviser and Aberdeen Asset Managers Limited (“AAML” or the “Sub-Adviser”) serves as the sub-adviser, pursuant to an advisory agreement and a sub-advisory agreement, respectively. The Investment Manager, the Investment Adviser and the Sub-Adviser are wholly-owned subsidiaries of Aberdeen Asset Management PLC.

The Investment Manager makes investment decisions on behalf of the Fund on the basis of recommendations and information furnished to it by the Investment Adviser, including the selection of

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

32


Notes to Financial Statements (unaudited) (continued)

April 30, 2014

 

 

and the placement of orders with brokers and dealers to execute portfolio transactions on behalf of the Fund. The Sub-Adviser manages the portion of the Fund’s assets that the Investment Manager allocates to it.

The management agreement provides the Investment Manager with a fee, payable monthly by the Fund, at the following annual rates: 0.65% of the Fund’s average weekly Managed Assets up to $200 million, 0.60% of Managed Assets between $200 million and $500 million, 0.55% of Managed Assets between $500 million and $900 million, 0.50% of Managed Assets between $900 million and $1.75 billion and 0.45% of Managed Assets in excess of $1.75 billion. Managed Assets is defined in the management agreement to mean total assets of the Fund, including any form of investment leverage, minus all accrued expenses incurred in the normal course of operations, but not excluding any liabilities or obligations attributable to investment leverage obtained through (i) indebtedness of any type (including, without limitation, borrowing through a credit facility or the issuance of debt securities), (ii) the issuance of preferred stock or other similar preference securities, (iii) the reinvestment of collateral received for securities loaned in accordance with the Fund’s investment objectives and policies, and/or (iv) any other means.

The Investment Manager pays fees to the Investment Adviser for its services rendered. The Investment Manager informed the Fund that it paid $1,069,632 to the Investment Adviser, with respect to the Fund, during the six months ended April 30, 2014. As compensation for its services under the Sub-Advisory Agreement, the Sub-Adviser receives an annual fee paid by the Investment Manager in the amount of $100,000, to be paid in monthly increments.

(b) Fund Administration:

Aberdeen Asset Management Inc. (“AAMI”), an affiliate of the Investment Manager, Investment Adviser and Sub-Adviser, is the Fund’s Administrator, pursuant to an agreement under which AAMI receives a fee, payable monthly by the Fund, at an annual fee rate of 0.125% of the Fund’s average weekly Managed Assets up to $1 billion, 0.10% of the Fund’s average weekly Managed Assets between $1 billion and $2 billion, and 0.075% of the Fund’s average weekly Managed Assets in excess of $2 billion. For the six months ended April 30, 2014, AAMI earned $1,251,822 from the Fund for administration fees.

(c) Investor Relations:

Under the terms of an Investor Relations Services Agreement, AAMI serves as the Fund’s investor relations services provider.

Pursuant to the terms of the Investor Relations Services Agreement, AAMI provides, among other things, objective and timely information to shareholders based on publicly-available information; provides information efficiently through the use of technology while offering shareholders immediate access to knowledgeable investor relations representatives; develops and maintains effective communications with investment professionals from a wide variety of firms; creates and maintains investor relations communication materials such as fund manager interviews, films and webcasts, published white papers, magazine and articles and other relevant materials discussing the Fund’s investment results, portfolio positioning and outlook; develops and maintains effective communications with large institutional shareholders; responds to specific shareholder questions; and reports activities and results to the Board and management detailing insight into general shareholder sentiment.

For the six months ended April 30, 2014, the Fund paid fees of approximately $267,136 for investor relations services. Investor relations fees and expenses in the Statement of Operations include certain out-of-pocket expenses.

4. Investment Transactions

Purchases and sales of investment securities (excluding short-term securities) for the six months ended April 30, 2014, were $544,999,092 and $756,536,370, respectively.

5. Capital

The authorized capital of the Fund is 400 million shares of $0.01 par value common stock. During the six months ended April 30, 2014, the Fund repurchased 3,292,483 shares pursuant to its Open Market Repurchase Program, see Note 6 for further information. As of April 30, 2014, there were 264,115,445 shares of common stock issued and outstanding.

The Fund has filed a “shelf” registration statement with the Securities and Exchange Commission, which became effective on August 17, 2012 and permits the Fund to issue up to $375,000,000 in shares of common stock through one or more public offerings, including at-the-market offerings (“ATM offerings”). The shelf registration is not currently effective and the Fund cannot offer shares for sale until it becomes effective. Shares are only offered through ATM offerings when the premium to net asset value is greater than the costs associated with the transaction. Any proceeds raised are used for investment purposes. The Fund has entered into a sales agreement with JonesTrading Institutional Services LLC (“JonesTrading”) pursuant to which the Fund may offer and sell up to 25,000,000 of its shares of its common stock through one of more ATM offerings from time to time through JonesTrading Institutional

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

33


Notes to Financial Statements (unaudited) (continued)

April 30, 2014

 

 

LLC as its agent for the offer and sale of the shares. For the six months ended April 30, 2014 and fiscal year ended October 31, 2013, 0 and 4,790,583 shares, respectively, were sold through ATM offerings made pursuant to the sales agreement. Offering costs were previously capitalized as a prepaid expense. When shares of common stock are sold, a portion of the cost attributable to those shares will be charged to paid-in capital. For the six months ended April 30, 2014, these costs were $0. These costs are noted on the Statements of Changes in Net Assets.

6. Open Market Repurchase Program

On March 1, 2001, the Board approved a stock repurchase program. The Board amended the program on December 12, 2007. The stock repurchase program allows the Fund to repurchase up to 10% of its outstanding common stock in the open market during any 12-month period, if and when the discount to NAV is at least 8%. For the six months ended April 30, 2014 and fiscal year ended October 31, 2013, the Fund repurchased 3,292,483 and 0 shares, respectively, through this program.

7. Preferred Shares

At April 30, 2014, the Fund has 2,000,000 shares of Series A MRPS outstanding with an aggregate liquidation preference of $50,000,000 ($25.00 per share) (the “Series A MRPS”) The following table shows the mandatory redemption date, annual fixed rate, aggregate liquidation preference and estimated fair value of the Series A MRPS at April 30, 2014.

 

Mandatory
Redemption
Date
     Annual
Fixed Rate
    Aggregate
Liquidation
Preference
     Estimated
Fair Value
 
  June 27, 2023         4.125   $ 50,000,000       $ 49,589,101   

Holders of the Series A MRPS are entitled to receive quarterly cumulative cash dividend payments on the first business day following each calendar quarter at an annual fixed rate of 4.125% until maturity. The Series A MRPS were issued in private placement offerings to institutional investors and are not listed on any exchange or automated quotation system. Distributions are accrued daily and paid quarterly and are presented in the Statement of Assets and Liabilities as a dividend payable to preferred shareholders. For the six months ended April 30, 2014, the Fund paid $1,036,980 in distributions to preferred shareholders.

The Series A MRPS rank senior to all of the Fund’s outstanding shares of common stock and on a parity with shares of any other series of preferred stock as to the payment of dividends to which the shares are entitled and the distribution of assets upon dissolution, liquidation or winding up of the affairs of the Fund.

The estimated fair value of Series A MRPS was calculated, for disclosure purposes, by discounting future cash flows by a rate equal to the current U.S. Treasury rate with an equivalent maturity date, plus the spread between the U.S. insurance and financial debt rate and the U.S. Treasury rate plus a market spread for the issuance of preferred shares.

The Series A MRPS are redeemable in certain circumstances at the option of the Fund. The Series A MRPS are also subject to mandatory redemption, unless otherwise prohibited by the 1940 Act, if the Fund fails to maintain (1) asset coverage, as determined in accordance with Section 18(h) of the 1940 Act, of at least 225%, with respect to all outstanding preferred stock, as of the last day of any month or (2) eligible assets with an aggregate agency discounted value at least equal to the basic maintenance amount as provided in the Fund’s rating agency guidelines. April 30, 2014, the Fund was in compliance with the asset coverage and basic maintenance requirements of the Series A MRPS.

Except for matters which do not require the vote of the holders of the Series A MRPS under the 1940 Act and except as otherwise provided in the Fund’s Charter or Bylaws, or as otherwise required by applicable law, holders of the Series A MRPS have one vote per share and generally vote together with holders of common stock as a single class on all matters submitted to the Fund’s stockholders. The holders of the Series A MRPS, voting separately as a single class, have the right to elect at least two directors of the Fund.

8. Senior Secured Notes

At April 30, 2014, the Fund had $200,000,000 in aggregate principal amount of senior secured notes rated ‘AAA’ by Fitch Ratings outstanding ($100,000,000 in 3.05% Series A Senior Secured Notes due June 12, 2020 and $100,000,000 in 3.69% Series B Senior Secured Notes due June 12, 2023) (collectively, the “Notes”). The Notes are secured obligations of the Fund and, upon liquidation, dissolution or winding up of the Fund, will rank senior to all unsecured and unsubordinated Indebtedness and senior to any common or preferred stock pari passu in priority and security with all other secured Indebtedness. Noteholders are entitled to receive cash interest payments semi-annually until maturity. The Series A Notes and the Series B Notes accrue interest at annual fixed rates of 3.05% and 3.69%, respectively.

The Notes were issued in private placement offerings to institutional investors and are not listed on any exchange or automated quotation system.

The Notes may be prepaid in certain limited circumstances at the option of the Fund. The Notes are also subject to optional

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

34


Notes to Financial Statements (unaudited) (continued)

April 30, 2014

 

 

prepayment to the extent needed to satisfy certain requirements if the Fund fails to meet an asset coverage ratio required by the terms of the Notes and is not able to cure the coverage deficiency by the applicable deadline.

The estimated fair value of each series of fixed-rate Notes was calculated, for disclosure purposes, by discounting future cash flows by a rate equal to the current U.S. Treasury rate with an equivalent maturity date, plus either 1) the spread between the interest rate on recently issued debt and the U.S. Treasury rate with a similar maturity date or 2) if there has not been a recent debt issuance, the spread between the AAA corporate finance debt rate and the U.S. Treasury rate with an equivalent maturity date. The following table shows the maturity date, interest rate, notional/carrying amount and estimated fair value for each series of Notes outstanding at April 30, 2014.

 

Series   Maturity
Date
    Interest
Rate
    Notional/
Carrying
Amount
    Estimated
Fair Value
 

Series A

    June 12, 2020        3.05%      $ 100,000,000      $ 99,383,659   

Series B

    June 12, 2023        3.69%      $ 100,000,000      $ 99,642,732   

9. Credit Facilities

On April 9, 2014, the Fund renewed its credit agreement providing for a $150,000,000 senior secured revolving credit facility (the “Revolving Credit Facility”) with a syndicate of banks with Bank of America Merrill Lynch, N.A., acting as administrative agent. On June 12, 2013 the Fund entered into a term loan agreement (the “Term Loan Agreement”) providing for $200,000,000 of senior secured term loans (the “Term Loan Facility”) from Bank of America, N.A. At April 30, 2014 the Fund had $150,000,000 outstanding under the Revolving Credit Facility and $200,000,000 outstanding under the Term Loan Facility. Under the terms of the Revolving Credit Facility and the Term Loan Agreement and applicable regulations, the Fund is required to maintain certain asset coverage ratios for the amount of its outstanding borrowings.

For the six months ended April 30, 2014, the average interest rate on the Revolving Credit Facility was 1.032% and the average balance of the Revolving Credit Facility was $150,000,000. Pursuant to the Term Loan Agreement, there is a $100,000,000 term loan facility which accrues interest at 2.80% per annum (the “Term A Facility”) and a $100,000,000 term loan facility which accrues interest at 2.16% per annum (the “Term B Facility”; the Term A Facility and the Term B Facility defined herein as the “Term Loan Facility”). For the six months ended April 30, 2014, the average interest rate on the Term Loan Facility was 2.48% and the average balance of the Term Loan Facility was $200,000,000. The interest expense is accrued on a daily basis and is payable on a monthly basis or on the last date of the respective

LIBOR period, as applicable, for the Revolving Credit Facility, and payable on the last business day of each March, June, September, December and the maturity date for the Term Loan Facility.

The estimated fair value of each Term Loan Facility was calculated, for disclosure purposes, by discounting future cash flows by a rate equal to the current U.S. Treasury rate with an equivalent maturity date, the spread between the U.S. insurance and financial debt rate and the U.S. Treasury rate. The following table shows the maturity date, interest rate, notional/carrying amount and estimated fair value for each Term Loan Facility outstanding at April 30, 2014.

 

Series   Maturity
Date
    Interest
Rate
    Notional/
Carrying
Amount
    Estimated
Fair Value
 

Term A Facility

    June 12, 2018        2.80%      $ 100,000,000      $ 101,254,031   

Term B Facility

    June 12, 2016        2.16%      $ 100,000,000      $ 101,282,667   

The Revolving Credit Facility has a term of 3-years and is not a perpetual form of leverage; there can be no assurance that the Revolving Credit Facility will be available for renewal on acceptable terms, if at all. The Term A Facility and the Term B Facility have 5- and 3-year terms, respectively. Bank loan fees and expenses included in the Statement of Operations include fees for the renewal of the Revolving Credit Facility as well as commitment fees for any portion of the loan facility not drawn upon at any time during the period.

The estimated fair value of the Revolving Credit Facility was calculated, for disclosure purposes, by discounting future cash flows by a rate equal to the current U.S. Treasury rate with an equivalent maturity date, the spread between the U.S. insurance and financial debt rate and the U.S. Treasury rate. The following table shows the maturity date, interest rate, notional/carrying amount and estimated fair value outstanding as of April 30, 2014.

 

Maturity Date    Interest
Rate
    Notional/
Carrying
Amount
     Estimated
Fair Value
 

April 9, 2017

     1.18   $ 150,000,000       $ 146,514,373   

10. Risks of Leveraged Capital Structure

The amounts borrowed under the Revolving Credit Facility, the Term Loan Facility and the Notes and other funds obtained through various forms of leverage, including the Series A MRPS, may be invested to return higher rates than the rates pursuant to which interests or dividends are paid under such forms of leverage. However, the cost of leverage could exceed the income earned by the Fund on the proceeds of such leverage. To the extent that the Fund is unable to invest the proceeds from the use of leverage in assets which pay interest at a rate which exceeds the rate paid on the leverage, the yield on the Fund’s common stock will decrease. In addition, in the event of a general market decline in the value of

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

35


Notes to Financial Statements (unaudited) (continued)

April 30, 2014

 

 

assets in which the Fund invests, the effect of that decline will be magnified in the Fund because of the additional assets purchased with the proceeds of the leverage.

The Fund’s leveraged capital structure creates special risks not associated with unleveraged funds having similar investment objectives and policies. The funds borrowed pursuant to the Revolving Credit Facility, the Term Loan Facility and the Notes may constitute a substantial lien and burden by reason of their prior claim against the income of the Fund and against the net assets of the Fund in liquidation. The Fund is limited in its ability to declare dividends or other distributions under the terms of the various forms of leverage. In the event of an event of default under either the Revolving Credit Facility or Term Loan Facility, the lenders have the right to cause a liquidation of the collateral (i.e., sell portfolio securities and other assets of the Fund) and, if any such default is not cured, the lenders may be able to control the liquidation as well. In the event of an event of default under the Note Purchase Agreement, the Noteholders have the right to cause a liquidation of the collateral (i.e., sell portfolio securities and other assets of the Fund).

Each of the Revolving Credit Facility Agreement, the Term Loan Agreement, the Note Purchase Agreement or the securities purchase agreement relating to the Series A MRPS includes usual and customary covenants for the applicable type of transaction. These covenants impose on the Fund asset coverage requirements, Fund composition requirements and limits on certain investments, such as illiquid investments, which are more stringent than those imposed on the Fund by the 1940 Act. The covenants or guidelines could impede the Investment Manager, Investment Adviser, or Sub-Adviser from fully managing the Fund’s portfolio in accordance with the Fund’s investment objective and policies. Furthermore, non-compliance with such covenants or the occurrence of other events could lead to the cancellation of any and/or all of the forms of leverage. As of April 30, 2014, the Fund was in compliance with all covenants under the agreements relating to the various forms of leverage.

During the six months ended April 30, 2014, the Fund incurred fees of approximately $768,527 for the Revolving Credit Facility, Term Loan Facility and Notes.

11. Portfolio Investment Risks

(a) Credit and Market Risk:

A debt instrument’s price depends, in part, on the credit quality of the issuer, borrower, counterparty, or underlying collateral and can decline in response to changes in the financial condition of the issuer, borrower, counterparty, or underlying collateral, or changes in specific or general market, economic, industry, political, regulatory,

geopolitical, or other conditions. Funds that invest in high yield and emerging market instruments are subject to certain additional credit and market risks. The yields of high yield and emerging market debt obligations reflect, among other things, perceived credit risk. The Fund’s investments in securities rated below investment grade typically involve risks not associated with higher rated securities including, among others, greater risk of not receiving timely and/or ultimate payment of interest and principal, greater market price volatility, and less liquid secondary market trading.

(b) Interest Rate Risk:

The prices of fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the creditworthiness of individual issuers, including governments. Generally, the Fund’s fixed income securities will decrease in value if interest rates rise and vice versa, and the volatility of lower-rated securities is even greater than that of higher-rated securities. Also, longer-term securities are generally more volatile, so the average maturity or duration of these securities affects risk.

(c) Risks Associated with Foreign Securities and Currencies:

Investments in securities of foreign issuers carry certain risks not ordinarily associated with investments in securities of U.S. issuers. These risks include future political and economic developments, and the possible imposition of exchange controls or other foreign governmental laws and restrictions. In addition, with respect to certain countries, there is the possibility of expropriation of assets, confiscatory taxation, and political or social instability or diplomatic developments, which could adversely affect investments in those countries.

Certain countries also may impose substantial restrictions on investments in their capital markets by foreign entities, including restrictions on investments in issuers of industries deemed sensitive to relevant national interests. These factors may limit the investment opportunities available and result in a lack of liquidity and high price volatility with respect to securities of issuers from developing countries.

(d) Focus Risk:

The Fund may have elements of risk not typically associated with investments in the United States due to focused investments in a limited number of countries or regions subject to foreign securities or currencies risks. Such focused investments may subject the Fund to additional risks resulting from political or economic conditions in such countries or regions and the possible imposition of adverse governmental laws or currency exchange restrictions could cause the securities and their markets to be less liquid and their prices to be more volatile than those of comparable U.S. securities.

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

36


Notes to Financial Statements (unaudited) (concluded)

April 30, 2014

 

 

(e) Risks Associated with Mortgage-backed Securities:

The value of mortgage-backed securities can fall if the owners of the underlying mortgages default or pay off their mortgages sooner than expected, which could happen when interest rates fall.

12. Contingencies

In the normal course of business, the Fund may provide general indemnifications pursuant to certain contracts and organizational documents. The Fund’s maximum exposure under these arrangements is dependent on future claims that may be made against the Fund, and therefore, cannot be estimated; however, based on experience, the risk of loss from such claims is considered remote.

13. Tax Information:

The U.S. federal income tax basis of the Fund’s investments and the net unrealized appreciation as of April 30, 2014 were as follows:

 

Cost      Appreciation      Depreciation    

Net

Unrealized

Appreciation

 
  $2,311,063,813       $ 47,680,867       $ (28,923,931   $ 18,756,936   

14. Subsequent Events

Management has evaluated the need for disclosures and/or adjustments resulting from subsequent events through the date the Financial Statements were issued. Based on this evaluation, no disclosures or adjustments were required to the Financial Statements as of April 30, 2014.

On May 9, 2014 and June 10, 2014, the Fund announced that it will pay on May 30, 2014 and June 30, 2014 a distribution of $0.035 per share to all shareholders of record as of May 21, 2014 and June 23, 2014, respectively.

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

37


Supplemental Information (unaudited)

 

 

 

Results of Annual Meeting of Shareholders

The Annual Meeting of Shareholders was held on Thursday, March 27, 2014 at 712 Fifth Avenue, 49th Floor, New York, New York. The description of the proposals and number of shares voted at the meeting are as follows:

1. To elect one director to serve as Class II director (Common & Preferred) for three year terms or until their successors are duly elected and qualify:

 

      Votes For     Votes Withheld  

P. Gerald Malone

     214,448,304        8,890,574   

2. To elect two directors to serve as Preferred Directors for a three year term ending 2017 (Sacks) and a one year term ending 2015 (Potter) or until their successors are duly elected and qualify:

 

      Votes For     Votes Withheld  

Peter D. Sacks

     2,000,000          

William J. Potter

     2,000,000          

Directors whose term of office continued beyond this meeting are as follows: Martin J. Gilbert, John T. Sheehy and Neville J. Miles.

Amounts listed as “–” are $0 or round to $0.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

38


Corporate Information

 

 

 

Directors

P. Gerald Malone, Chairman

Martin J. Gilbert

Neville J. Miles

William J. Potter

Peter D. Sacks

John T. Sheehy

Officers

Christian Pittard, President

Jeffrey Cotton, Chief Compliance Officer and Vice President, Compliance

Megan Kennedy, Vice President and Secretary

Andrea Melia, Treasurer and Principal Accounting Officer