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:    1-800-522-5465
Date of fiscal year end:    October 31
Date of reporting period:    April 30, 2017


Item 1. Reports to Stockholders.


LOGO

Aberdeen Asia-Pacific Income Fund, Inc. (FAX)
Semi-Annual Report
April 30, 2017
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Aberdeen
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Managed Distribution Policy (unaudited)

 

 

 

The Board of Directors of the Aberdeen Asia-Pacific Income Fund, Inc. (the “Fund”) has authorized a managed distribution policy (“MDP”) of paying monthly distributions at an annual rate set once a year. The Fund’s current monthly distribution is set at a rate of $0.035 per share. 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 estimated 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 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 U.S. generally accepted accounting principles, the Fund estimates that distributions for the fiscal year commenced November 1, 2016, through the distributions declared on May 9, 2017 and June 9, 2017, consisted of 50% net investment income and 50% return of capital. The amounts and sources of distributions reported in this report are only estimates and are not being provided for tax reporting purposes.

In January 2018, 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 2017 calendar year.

Dividend Reinvestment and Direct Stock Purchase Plan (unaudited)

 

 

Computershare Trust Company, N.A. (“Computershare”), 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 shareholders 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 purchase 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-month period ended April 30, 2017. The Fund’s principal investment objective is to seek current income. The Fund may also achieve incidental capital appreciation.

NAV Total Return Performance

The Fund’s total return, based on net asset value (“NAV”), net of fees, was 0.2% for the six-month period ended April 30, 2017 and 8.1% per annum since inception, assuming the reinvestment of dividends and distributions. The Fund’s total return for the six-month period ended April 30, 2017 and per annum since inception is based on the reported NAV on each financial reporting period end.

Share Price Total Return Performance & Discount

For the six-month period ended April 30, 2017, based on market price, the Fund’s total return was 6.1%, assuming reinvestment of dividends and distributions. The Fund’s share price increased by 1.6% over the six-month period, from $4.92 on October 31, 2016 to $5.00 on April 30, 2017. The Fund’s share price on April 30, 2017 represented a discount of 8.4% to the NAV per share of $5.46 on that date, compared with a discount of 13.5% to the NAV per share of $5.69 on October 31, 2016.

Portfolio Allocation

As of April 30, 2017, the Fund held 31.9% of its total investments in Australian debt securities, 62.0% in Asian debt securities, 4.5% in European debt securities and 1.6% in U.S. debt securities.

Of the Fund’s total investments, 45.0% were held in U.S. Dollar-denominated bonds issued by foreign issuers. The rest of the Fund’s currency exposure was 27.7% in the Australian Dollar and 27.3% in various Asian currencies.

Credit Quality

As of April 30, 2017, 49.4% 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’s1 or Moody’s Investors Services, Inc. (“Moodys”).2

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 responsible for the day-to-day management of the Fund.

Effective March 15, 2017, Lin-Jing Leong replaced Victor Rodriguez as part of the team having the most significant responsibility for the day-to-day management of the Fund’s portfolio. This team also includes Kenneth Akintewe, Nick Bishop, David Choi and Adam McCabe.

Ms. Leong is an investment manager on the Asian local rates and currency team. She joined Aberdeen Asset Management Asia Limited in 2013 from the Reserve Management Section of the Central Bank of Malaysia where she specialized in investing in the Asian local current bond market.

Managed Distribution Policy

Distributions to common shareholders for the twelve-month period ended April 30, 2017 totaled $0.42 per share. Based on the share price of $5.00 on April 30, 2017, the distribution rate over the twelve-month period ended April 30, 2017 was 8.4%. 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, 2017 and June 9, 2017, the Fund announced that it will pay on May 26, 2017 and June 27, 2017, respectively, a distribution of U.S. $0.035 per share to all shareholders of record as of May 19, 2017 and June 20, 2017, 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. This policy is subject to an annual review as well as regular review at the Board’s quarterly meetings, unless market conditions require an earlier evaluation.

Fund’s Leverage

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

 

     

Amount

($ in millions)

     Maturity  

5-year Term Loan A

   $ 100        June 12, 2018  

4-year Term Loan B

   $ 100        December 14, 2019  

Revolving Credit Facility

   $ 75        April 7, 2020  

7-Year Series A Senior Secured Notes

   $ 100        June 12, 2020  

10-Year Series B Senior Secured Notes

   $ 100        June 12, 2023  

10-Year Series A Mandatory Redeemable Preferred shares

   $ 50        June 27, 2023  

15-Year Series C Senior Secured Notes

   $ 50        February 8, 2032  

The Series A Mandatory Redeemable Preferred Shares, with a liquidation value of $50 million, are rated AA by Fitch Ratings3 and the combined $250 million 7-, 10-year and 15-Year Series A, B and C Senior Secured Notes are 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

 

 

 

 

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.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

1


Letter to Shareholders (unaudited) (concluded)

 

 

 

 

description of the Fund’s leverage can be found in the Report of Investment Manager and 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 and management believes such repurchases may enhance shareholder value. During the six-month period ended April 30, 2017 and fiscal year ended October 31, 2016, the Fund repurchased 1,135,695 and 3,042,619 shares, respectively.

Merger of Aberdeen Asset Management PLC with Standard Life plc

The Fund’s investment manager, investment adviser, investment sub-adviser and administrator are each a subsidiary of Aberdeen Asset Management PLC (“Aberdeen PLC”). On March 6, 2017, the Boards of Standard Life plc and Aberdeen PLC announced that they had reached an agreement on the terms of a merger (“Merger”). The Boards of each of Standard Life plc and Aberdeen PLC believe that the Merger has a compelling strategic and financial rationale through combining complementary strengths to create a world-class investment group. The Merger is expected to occur in the third quarter of 2017, subject to various conditions and terms, including regulatory approvals. The portfolio management team for the Fund is not expected to change as a result of the Merger. In addition, the agreements that the Fund has with Aberdeen PLC’s subsidiary companies, the services provided by such companies, and the fees charged for those services are not expected to change as a result of the Merger.

Portfolio Holdings Disclosure

The Fund’s complete schedule of portfolio holdings for the second and fourth quarters of each fiscal year is included in the Fund’s semi-annual and annual reports to shareholders. The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“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 31 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.

 

Unclaimed Share Accounts

Please be advised that abandoned or unclaimed property laws for certain states require financial organizations to transfer (escheat) unclaimed property (including Fund shares) to the state. Each state has its own definition of unclaimed property, and Fund shares could be considered “unclaimed property” due to account inactivity (e.g., no owner-generated activity for a certain period), returned mail (e.g., when mail sent to a shareholder is returned to the Fund’s transfer agent as undeliverable), or a combination of both. If your Fund shares are categorized as unclaimed, your financial advisor or the Fund’s transfer agent will follow the applicable state’s statutory requirements to contact you, but if unsuccessful, laws may require that the shares be escheated to the appropriate state. If this happens, you will have to contact the state to recover your property, which may involve time and expense. For more information on unclaimed property and how to maintain an active account, please contact your financial adviser or the Fund’s transfer agent.

Investor Relations Information

As part of Aberdeen’s commitment to shareholders, we invite you to visit the Fund on the web at www.aberdeenfax.com. Here, you can view monthly fact sheets, quarterly commentary, distribution and performance information, updated daily data courtesy of Morningstar®, portfolio charting and other Fund literature.

Enroll in our email services today and be among the first to receive the latest closed-end fund news, announcements, videos and information. In addition, you can receive electronic versions of important Fund documents including annual reports, semi-annual reports, prospectuses, and proxy statements. Sign-up today at www.aberdeen-asset.us/aam.nsf/usclosed/email.

Contact Us:

 

 

Visit: cef.aberdeen-asset.us;

 

Watch: www.aberdeen-asset.us/aam.nsf/usclosed/aberdeentv;

 

Email: InvestorRelations@aberdeen-asset.com;

 

Call: 1-800-522-5465 (toll-free in the U.S.).

Yours sincerely,

/s/Christian Pittard

Christian Pittard

President

 

 

3  

Fitch Ratings (“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 Review

Asia-Pacific and emerging-market bond and currency markets ended with mixed performance over the six-month period ended April 30, 2017. Events in the U.S. held sway, notably Donald Trump’s win in the presidential election in November 2016. This halted the global bond market rally as investors considered the possibility that Trump would increase fiscal spending and lift the inflation outlook. Investors subsequently rotated back into bonds amid growing uncertainty over U.S. trade policies and their potential impact on global recovery. Towards the end of the reporting period, Asian government bonds rallied further as political tensions escalated following U.S. military strikes in Syria and several botched missile tests by North Korea. Meanwhile, the U.S. Federal Reserve (Fed) raised its benchmark interest rate in two 25-basis point increments in December 2016 and March 2017.

Australian government bond yields rose over the reporting period, with the short end of the curve outperforming the long end. The central bank kept interest rates on hold as inflation remained entrenched below its 2% target. With the frothy housing market presenting risks to the financial system, macroprudential1 measures were strengthened, including stricter rules for mortgages.

Regarding Asian local-currency government bonds, China was the main laggard for the reporting period as money-market rates on the mainland moved sharply higher after authorities tightened liquidity. Weakness in the yuan also prompted Beijing to impose more capital controls, which in turn sparked fears over increased regulatory scrutiny. Philippine bonds yields trended higher on expectations of rising inflation. Korean bonds also weakened as tensions with China escalated, even as Korean President Park Geun-hye was removed as president for alleged corruption. Thai bonds retreated in the wake of a prolonged period of mourning for the late king, while Hong Kong and Singapore bond yields tracked U.S. Treasury yields higher.

On a positive note, Indonesian and Indian bonds outperformed their Asia-Pacific region peers. Investor sentiment in Indonesia was buoyed by hopes that government reform momentum and infrastructure spending was gathering pace. Additionally, President Joko Widodo’s signature tax amnesty program netted 135 trillion rupiah (roughly US$10.1 billion) in revenues. In India, the government’s unexpected decision to replace large rupee denominations resulted in a flood of bank deposits that were channelled into government bonds. The ruling Bharatiya Janata Party’s victory in several state elections also reignited hopes that

economic reforms would accelerate. This helped mask early disappointment over the central bank’s move from an easing bias to a neutral policy stance. In Malaysia, fund outflows accelerated, but the market pared losses after the central bank eased rules on the short-selling of government bonds in an effort to bolster trading volumes and attract more investors.

Regional credit markets ended with a virtually flat return in the aggregate over the reporting period on the back of weaker U.S. Treasuries and tighter spreads. Non-investment-grade debt outperformed investment-grade bonds as investors retained their focus on yield. Investor sentiment was buttressed by signs of an economic pick-up in China and robust corporate bond demand, which helped consumer and industrial-related credits outperform. Towards the end of the period, investor caution prevailed amid record issuance, stretched valuations and a rising number of lower-quality credits being brought to market.

Fund performance review

The Fund’s strategies in Asian local-currency bonds and Asian U.S.-dollar bonds contributed to performance for the reporting period, while the strategies in Asian local-currency high-yield debt and Australian bonds detracted from performance.

In Asian local-currency bonds, the key contributors to Fund performance for the reporting period were the overweight positions in Indian bonds and the Indian rupee, which strengthened significantly against the U.S. dollar. The overweight allocation to Indonesian bonds also had a positive impact.

The strategies in Asian U.S.-dollar bonds bolstered Fund performance due in part to security selection in investment-grade sovereigns and investment-grade quasi-sovereigns. The overweight to high-yield oil-and-gas bonds also benefited performance.

Conversely, our management of Asian local-currency high-yield bonds detracted from Fund performance due in part to security selection in Indonesia. However, the losses were mitigated by the positive impact of the Fund’s overweight to the Indian rupee.

In Australia, the exposure to local bonds recorded a positive an overall absolute return, but the performance lagged that of the Fund’s blended benchmark,2 thereby detracting from the Fund’s relative performance. Currency management also weighed on Fund performance.

 

 

1   

Macroprudential policy addresses the connection between individual financial institutions and markets, as well as their common exposure to economic risk factors.

2   

The Fund’s blended benchmark comprises 35% Bloomberg AusBond Composite Index; 40% J.P. Morgan Asian Credit Index; 19.25% Markit iBoxx Asia ex-Japan Government Bond Index; 15% Markit iBoxx Asia Government Index; 5% Markit iBoxx Asia Government India Index; and 5% Markit iBoxx Asia Government Indonesia Index.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

3


Report of the Investment Manager (unaudited) (continued)

 

 

 

The overall impact on performance from the Fund’s use of derivatives was relatively flat during the reporting period. Our hedging of Asian currency risk and hedging of U.S. Treasury risk had a slightly negative impact on Fund performance, while the Fund’s short Australian-dollar exposure contributed to performance.

Outlook

The global economy seems to be on a cyclical recovery. In the U.S., this is underscored by increases in both hiring and wages. However, we believe that underlying strength over the longer term remains elusive. This is attributable in part to persistent doubts over the effectiveness of the Trump presidency. In Europe, investors are wary of political developments, even though the market-friendly outcome of the French presidential election assuaged fears somewhat. In Asia, North Korea’s belligerence remains a concern, while the potential for systemic risk lingers in China, with the accompanying worries over deleveraging and credit-tightening. Nonetheless, we believe that Beijing will be keen to ensure stability ahead of its Party Congress meeting in late 2017.

We think that the Fed will not rush to normalize interest rates and the European Central Bank should maintain its easy monetary policy in the near term. In Australia, we believe that the central bank will favour targeted regulatory tweaks over rate hikes in a bid to rein in the frothy housing market, since overall inflation remains below its target. In most parts of the emerging world, inflation remains benign as the price of oil is expected to stay under pressure for some time. Therefore, we think that bond markets should find some support, although we may see a continued reduction in duration3 risk. In our view, government bonds, in particular, could benefit from their relative value compared to corporate bonds, where valuations appear stretched, especially moving towards the high-yield segment of the credit spectrum.

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 seek 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 February 8, 2017, the Fund entered into a note purchase agreement with institutional investors relating to the private placement of $50 million of Series C senior secured notes rated ‘AAA’ by Fitch Ratings. Net proceeds of the Series C notes were used to refinance $50 million of the Fund’s existing syndicated revolving credit facility (the “Revolving Credit Facility”). On April 7, 2017, the Fund renewed its $100 million Revolving Credit Facility for a 3-year period with a syndicate of banks. On June 12, 2013, the Fund entered into a note purchase agreement with institutional investors relating to the private placement of $200 million of Series A and Series B 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 (on December 14, 2015, the maturity of this loan was extended to December 14, 2019) 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, 2017 was $75 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 holders of the Notes have the right to cause a liquidation of the collateral (i.e., cause the sale of portfolio securities and other assets of the Fund).

 

 

3   

Duration is an estimate of bond price sensitivity to changes in interest rates. The higher the duration, the greater the change (i.e., higher risk) in relation to interest-rate movements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

4


Report of the Investment Manager (unaudited) (concluded)

 

 

 

 

Each of the Revolving Credit Facility Agreement, the Term Loan Agreement, the Note Purchase Agreement, and 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 cancellation of any and/or all of the forms of leverage. As of April 30, 2017, 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 interest rate exposure and hedge interest rate risk. On February 6, 2017, the Fund exited $50,000,000 in notional value of a swap maturing November 1, 2017. As of April 30, 2017, the Fund held interest rate swap agreements with an aggregate notional amount of

$75 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
Terms as of
April 30, 2017
   Amount
(in millions)
     Fixed Rate
Payable (%)
 

    6 months

   $ 16.0        0.84  

114 months

     59.0        1.57  

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)

 

 

 

The following table summarizes the six-month and average annual Fund performance for the 6-month, 1-year, 3-year, 5-year and 10-year periods as of April 30, 2017. The Fund’s principal investment objective is to seek current income. The Fund may also achieve incidental capital appreciation.

 

        6 Months        1 Year        3 Years        5 Years        10 Years  

Net Asset Value (NAV)

       0.2%          4.4%          1.1%          0.9%          5.1%  

Market Value

       6.1%          7.9%          0.8%          -0.9%          4.5%  

Returns represent past performance. Total investment return at 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. All return data at NAV includes fees charged to the Fund, which are listed in the Fund’s Statement of Operations under “Expenses.” The Fund’s total return is based on the reported NAV on each financial reporting period end. 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. The Fund’s total investment return is based on the reported NAV on the financial reporting 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 total annualized operating expense ratio based on the six-month period ended April 30, 2017 was 2.36%. The total annualized operating expense ratio, excluding interest expense and distributions to Series A Mandatory Redeemable Preferred Shares, based on the six-month period ended April 30, 2017 was 1.16%.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

6


Portfolio Composition (unaudited)

 

 

 

Quality of Investments(1)

As of April 30, 2017, 49.4% 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. The table below shows the asset quality of the Fund’s portfolio as of April 30, 2017 compared with the previous six and twelve months:

 

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

April 30, 2017*

       28.2          11.6          9.6          24.3          3.9          3.7          18.7  

October 31, 2016

       31.6          7.9          9.2          25.0          3.6          3.6          19.1  

April 30, 2016*

       37.2          11.2          10.3          22.4          6.4          4.1          8.4  

 

*   Unaudited
**   Below investment grade
***   Not Rated
(1)   For financial reporting purposes, credit quality ratings shown above reflect the lowest rating assigned by either Standard & Poor’s or Moody’s Investor Service if ratings differ. These rating agencies are independent, nationally recognized statistical rating organizations and are widely used. Investment grade ratings are credit ratings of BBB/Baa or higher. Below investment grade ratings are credit ratings of BB/Ba or lower. Investments designated NR are not rated by either rating agency. Unrated investments do not necessarily indicate low credit quality. Credit quality ratings are subject to change. The Investment Manager evaluated the credit quality of unrated investments based upon, but not limited to, credit ratings for similar investments.

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, 2017, compared with the previous six and twelve months:

 

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

April 30, 2017*

       31.9          62.0          4.5          1.6  

October 31, 2016

       32.5          62.8          4.4          0.3  

April 30, 2016*

       37.7          56.1          4.5          1.7  

 

*   Unaudited

Currency Composition

The table below shows the currency composition of the Fund’s total investments as of April 30, 2017, compared with the previous six and twelve months:

 

Date      Australian
Dollar
%
       Asian Currencies
(including NZ Dollar)
%
       US Dollar**
%
 

April 30, 2017*

       27.7          27.3          45.0  

October 31, 2016

       30.1          29.3          40.6  

April 30, 2016*

       40.3          17.6          42.1  

 

*   Unaudited
**   Includes U.S. Dollar-denominated bonds issued by foreign issuers: 45.0% of the Fund’s total investments on April 30, 2017, 40.6% of the Fund’s total investments on October 31, 2016, and 42.1% of the Fund’s total investments on April 30, 2016.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

7


Portfolio Composition (unaudited) (concluded)

 

 

 

Maturity Composition

As of April 30, 2017, the average maturity of the Fund’s total investments was 7.8 years, compared with 7.8 years at October 31, 2016, and 7.8 years at April 30, 2016. The following table shows the maturity composition of the Fund’s investments as of April 30, 2017, 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, 2017*

       22.9          18.7          38.1          20.3  

October 31, 2016

       18.7          17.6          45.2          18.5  

April 30, 2016*

       20.3          17.6          42.3          19.8  

 

*   Unaudited

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

8


Summary of Key Rates (unaudited)

 

 

 

The following table summarizes the movements of key interest rates and currencies from April 30, 2017 and the previous six and twelve month periods.

 

        April 30, 2017        October 31, 2016        April 30, 2016  

Australia

              

90 day Bank Bills

       1.75%          1.75%          2.16%  

10 yr bond

       2.22%          2.06%          2.30%  

Australian Dollar

       $0.75          $0.76          $0.76  

South Korea

              

90 day commercial paper

       1.41%          1.39%          1.61%  

10 yr bond

       2.19%          1.68%          1.80%  

South Korean Won*

       W1137.90          W1144.25          W1139.40  

Thailand

              

3 months deposit rate

       1.00%          1.00%          1.00%  

10 yr bond

       2.71%          2.13%          1.80%  

Thai Baht*

       B34.59          B35.00          B34.93  

Philippines

              

90 day T-Bills

       2.12%          1.56%          1.91%  

10 yr bond

       5.16%          3.93%          4.58%  

Philippine Peso*

       P49.97          P48.42          P46.89  

Malaysia

              

3-month T-Bills

       3.09%          2.62%          2.48%  

10 yr bond

       4.05%          3.60%          3.88%  

Malaysian Ringgit*

       R4.34          R4.20          R3.91  

Singapore

              

3-month T-Bills

       0.96%          0.79%          0.70%  

10 yr bond

       2.13%          1.89%          2.00%  

Singapore Dollar*

       S1.40          S1.39          S1.34  

India

              

3-month T-Bills

       6.18%          6.37%          6.81%  

10 yr bond

       6.96%          6.79%          7.44%  

Indian Rupee*

       64.33          66.79          66.33  

Indonesia

              

3 months deposit rate

       6.19%          6.32%          6.88%  

10 yr bond

       7.01%          7.21%          7.68%  

Indonesian Rupiah*

       Rp13329.00          Rp13048.00          Rp13188.00  

China Onshore

              

3-month Bill Yield

       2.63%          2.63%          2.21%  

10 yr bond

       3.46%          2.74%          2.89%  

Chinese Yuan Renminbi*

       ¥6.90          ¥6.77          ¥6.48  

Sri Lanka

              

3-month Generic Govt Yield

       10.15%          8.60%          8.38%  

10 yr bond

       12.22%          11.89%          12.59%  

Sri Lanka Rupee*

       Rs152.50          Rs147.90          Rs146.25  

U.S. $ Bonds**

              

Indonesia

       3.78%          3.59%          3.96%  

 

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

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

9


Portfolio of Investments (unaudited)

As of April 30, 2017

 

 

Principal
Amount
(000)
     Description          Value
(US$)
 

CORPORATE BONDS—66.0%

 

AUSTRALIA—2.6%

 

USD

    4,750     

APT Pipelines Ltd., 4.25%, 04/15/2027 (a)(b)

    $ 4,858,338  

AUD

    2,500     

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

      2,125,151  

AUD

    6,991     

Brisbane Square Finance Pty Ltd., Zero Coupon, 11/25/2025 (c)(d)(e)(f)

      5,669,398  

AUD

    7,300     

Qantas Airways Ltd., 7.50%, 06/11/2021

      6,213,962  

AUD

    3,800     

RWH Finance Pty Ltd., 2.82%, 03/26/2021 (b)(c)(d)(g)

      2,835,111  

USD

    7,000     

SGSP Australia Assets Pty Ltd., 3.25%, 07/29/2026 (a)

      6,830,117  

AUD

    2,000     

Telstra Corp. Ltd., 8.75%, 01/15/2020

      1,732,659  

USD

    5,965     

Transurban Finance Co. Pty Ltd., 3.38%, 12/22/2026 (a)(b)

            5,818,410  
                           36,083,146  

CHINA—13.8%

   

USD

    3,759     

361 Degrees International Ltd., 7.25%, 06/03/2019 (a)(b)

      4,063,866  

USD

    3,950     

Agile Group Holdings Ltd., 9.00%, 05/21/2018 (a)(b)

      4,320,170  

USD

    3,500     

Agile Group Holdings Ltd., 8.38%, 05/30/2017 (a)(b)

      3,652,600  

USD

    3,000     

China Aoyuan Property Group Ltd., 10.88%, 05/26/2018 (a)

      3,204,588  

CNH

    11,250     

China Development Bank Corp., 3.60%, 11/13/2018

      1,614,446  

USD

    3,300     

China Hongqiao Group Ltd., 6.88%, 05/03/2018 (a)

      3,234,059  

USD

    3,500     

China Hongqiao Group Ltd., 7.63%, 06/26/2017 (a)

      3,465,018  

USD

    7,000     

China Overseas Finance Cayman III Ltd., 5.38%, 10/29/2023 (a)

      7,731,269  

USD

    4,955     

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

      5,254,327  

USD

    7,500     

CNOOC Curtis Funding No 1 Pty Ltd., 4.50%, 10/03/2023 (a)

      7,984,245  

USD

    8,000     

CNOOC Nexen Finance 2014 ULC, 4.25%, 04/30/2024

      8,348,464  

USD

    2,000     

CNPC General Capital Ltd., 2.75%, 05/14/2019 (a)

      2,017,021  

USD

    6,810     

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

      7,137,888  

USD

    3,500     

FUXIANG Investment Management Ltd., 3.63%, 11/30/2019 (a)

      3,515,337  

USD

    8,600     

Green Dragon Gas Ltd., 10.00%, 05/29/2017 (a)(b)(d)

      7,912,000  

USD

    3,800     

Logan Property Holdings Co. Ltd., 11.25%, 06/04/2017 (a)(b)

      4,037,511  

USD

    18,800     

Proven Honour Capital Ltd., 4.13%, 05/19/2025 (a)

      19,082,715  

USD

    14,434     

Semiconductor Manufacturing International Corp., 4.13%, 10/07/2019 (a)

      14,809,962  

USD

    8,200     

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

      8,136,671  

USD

    1,600     

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

      1,666,995  

USD

    4,400     

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

      4,679,092  

USD

    5,900     

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

      6,243,604  

USD

    6,930     

Sinopec Group Overseas Development 2017 Ltd., 2.38%, 04/12/2020 (a)

      6,911,358  

USD

    12,330     

Sinopec Group Overseas Development 2017 Ltd., 3.00%, 04/12/2022 (a)

      12,369,148  

USD

    6,632     

State Grid Overseas Investment 2016 Ltd., 2.75%, 05/04/2022 (a)

      6,601,093  

USD

    14,738     

State Grid Overseas Investment 2016 Ltd., 3.50%, 05/04/2027 (a)

      14,702,572  

USD

    7,500     

Tencent Holdings Ltd., 3.80%, 02/11/2025 (a)

      7,736,211  

USD

    4,000     

Times Property Holdings Ltd., 11.45%, 03/05/2018 (a)(b)

      4,455,324  

USD

    4,300     

Yestar Healthcare Holdings Co, Ltd., 6.90%, 09/15/2019 (a)(b)

            4,501,515  
                           189,389,069  

GERMANY—3.5%

   

AUD

    7,500     

KfW, 3.75%, 07/18/2018 (h)

      5,738,856  

AUD

    5,000     

KfW, 6.00%, 08/20/2020 (h)

      4,188,507  

AUD

    10,600     

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

      8,219,292  

AUD

    10,500     

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

      8,676,552  

AUD

    15,000     

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

      12,884,902  

AUD

    10,000     

Landwirtschaftliche Rentenbank, 4.75%, 04/08/2024 (g)(h)

            8,332,093  
                           48,040,202  

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

10


Portfolio of Investments (unaudited) (continued)

As of April 30, 2017

 

 

Principal
Amount
(000)
     Description          Value
(US$)
 

CORPORATE BONDS (continued)

 

HONG KONG—7.2%

   

USD

    4,103     

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

    $ 4,151,813  

USD

    3,700     

China Water Affairs Group Ltd., 5.25%, 02/07/2020 (a)(b)

      3,777,889  

USD

    4,840     

CK Hutchison International 17 Ltd., 2.88%, 04/05/2022 (a)

      4,842,740  

USD

    3,900     

Far East Consortium International Ltd/HK, 3.75%, 09/08/2021 (a)

      3,763,360  

USD

    5,326     

FPC Treasury Ltd., 4.50%, 04/16/2023 (a)

      5,365,791  

USD

    17,000     

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

      18,140,989  

USD

    12,000     

Hongkong Electric Finance Ltd., 2.88%, 05/03/2026 (a)

      11,492,856  

USD

    1,600     

Hongkong Land Finance Cayman Islands Co. Ltd. (The), 4.50%, 06/01/2022

      1,736,688  

USD

    5,608     

HPHT Finance 15 Ltd., 2.88%, 03/17/2020 (a)

      5,632,075  

USD

    15,500     

Hutchison Whampoa Finance CI Ltd., 7.50%, 08/01/2027 (a)

      20,653,455  

USD

    3,973     

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

      4,376,712  

USD

    2,880     

Hutchison Whampoa International 03/33 Ltd., 7.45%, 11/24/2033 (a)

      4,023,423  

USD

    7,600     

Shimao Property Holdings Ltd., 8.38%, 02/10/2019 (a)(b)

      8,464,333  

USD

    2,871     

Standard Chartered PLC, 144A, 3.95%, 01/11/2023 (a)

            2,892,013  
                           99,314,137  

INDIA—9.5%

        

USD

    3,500     

Adani Transmission Ltd., 4.00%, 08/03/2026 (a)

      3,434,945  

USD

    4,060     

Adani Transmission Ltd., 4.00%, 08/03/2026 (a)

      3,984,537  

INR

    500,000     

Axis Bank Ltd., 8.85%, 12/05/2024

      8,173,107  

USD

    5,840     

Bharat Petroleum Corp. Ltd., 4.00%, 05/08/2025 (a)

      5,939,432  

USD

    6,487     

GCX Ltd., 7.00%, 05/30/2017 (a)(b)

      6,648,877  

INR

    250,000     

HDFC Bank Ltd., 7.95%, 09/21/2026

      3,911,950  

INR

    100,000     

Housing Development Finance Corp. Ltd., 8.65%, 09/18/2020

      1,555,497  

INR

    250,000     

Housing Development Finance Corp. Ltd., 8.75%, 01/13/2020 (b)

      3,906,292  

USD

    10,700     

ICICI Bank Ltd., 4.00%, 03/18/2026 (a)

      10,684,902  

INR

    300,000     

ICICI Bank Ltd., 7.60%, 10/07/2023

      4,606,690  

INR

    250,000     

ICICI Bank Ltd., 9.15%, 08/06/2024

      4,192,057  

INR

    200,000     

Indiabulls Housing Finance Ltd., 8.90%, 09/26/2021

      3,117,985  

INR

    100,000     

Indiabulls Housing Finance Ltd., 9.00%, 04/29/2026

      1,559,060  

INR

    250,000     

Indian Railway Finance Corp. Ltd., 8.83%, 03/25/2023

      4,180,857  

USD

    3,780     

Neerg Energy Ltd., 6.00%, 02/13/2020 (a)(b)

      3,817,320  

USD

    3,400     

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

      3,639,292  

INR

    200,000     

NTPC Ltd., 8.49%, 03/25/2025

      3,238,374  

INR

    100,000     

NTPC Ltd., 8.73%, 03/07/2023

      1,629,489  

INR

    100,000     

NTPC Ltd., 9.17%, 09/22/2024

      1,681,405  

INR

    250,000     

Power Finance Corp. Ltd., 8.39%, 04/19/2025

      4,007,605  

INR

    400,000     

Power Finance Corp. Ltd., 8.65%, 12/28/2024

      6,421,240  

INR

    200,000     

Power Grid Corp. of India Ltd., 8.93%, 10/20/2022

      3,327,701  

INR

    300,000     

Power Grid Corp. of India Ltd., 9.30%, 09/04/2024

      5,095,075  

USD

    7,000     

Reliance Industries Ltd., 4.13%, 01/28/2025 (a)

      7,172,929  

INR

    150,000     

Reliance Jio Infocomm Ltd., 8.95%, 10/04/2020

      2,414,102  

INR

    200,000     

Rural Electrification Corp. Ltd., 8.44%, 12/04/2021

      3,208,935  

INR

    150,000     

Rural Electrification Corp. Ltd., 9.34%, 08/25/2024

      2,552,539  

INR

    270,000     

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

      4,479,201  

INR

    100,000     

Tata Motors Ltd., 9.73%, 10/01/2020

      1,640,187  

USD

    10,575     

UPL Corp. Ltd., 3.25%, 10/13/2021 (a)

            10,549,620  
                           130,771,202  

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

11


Portfolio of Investments (unaudited) (continued)

As of April 30, 2017

 

 

Principal
Amount
(000)
     Description          Value
(US$)
 

CORPORATE BONDS (continued)

 

INDONESIA—2.6%

        

USD

    3,520     

Indika Energy Capital II Pte Ltd., 6.88%, 04/10/2020 (a)(b)

    $ 3,496,022  

USD

    1,200     

Jababeka International BV, 6.50%, 10/05/2020 (a)(b)

      1,237,451  

IDR

    30,000,000     

Lembaga Pembiayaan Ekspor Indonesia, 9.50%, 03/13/2020

      2,341,661  

USD

    3,490     

MPM Global Pte Ltd., 6.75%, 09/19/2017 (a)(b)

      3,638,335  

USD

    5,000     

Pelabuhan Indonesia II PT, 5.38%, 05/05/2045 (a)

      4,943,750  

USD

    7,000     

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

      7,437,962  

USD

    9     

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

      8,978  

USD

    4,000     

Pratama Agung Pte Ltd., 6.25%, 02/24/2018 (a)(b)

      4,177,676  

USD

    4,000     

TBG Global Pte Ltd., 4.63%, 05/25/2017 (a)(b)

      4,045,000  

USD

    4,164     

TBG Global Pte Ltd., 5.25%, 02/10/2019 (a)(b)

            4,278,052  
                           35,604,887  

JAPAN—0.5%

 

USD

    6,447     

Mizuho Financial Group, Inc., 2.95%, 02/28/2022

            6,486,108  

KUWAIT—1.1%

 

USD

    15,000     

Equate Petrochemical BV, 4.25%, 11/03/2026 (a)

            15,263,880  

MALAYSIA—3.6%

 

MYR

    5,000     

Cagamas Bhd, 4.20%, 10/22/2018

      1,161,108  

CNH

    35,000     

Cagamas Global PLC., 3.70%, 09/22/2017

      5,008,800  

MYR

    5,000     

Digi Telecommunications Sdn Bhd, 4.38%, 04/14/2022 (b)

      1,155,772  

USD

    7,000     

Gohl Capital Ltd., 4.25%, 01/24/2027 (a)

      7,114,611  

USD

    6,000     

Malayan Banking Bhd, 3.91%, 10/29/2021 (a)(b)(c)

      6,075,444  

USD

    3,360     

Malaysia Sovereign Sukuk Bhd, 3.04%, 04/22/2025 (a)

      3,324,384  

USD

    4,150     

Malaysia Sukuk Global Bhd, 3.18%, 04/27/2026 (a)(h)

      4,145,352  

USD

    50     

Petronas Capital Ltd., 5.25%, 08/12/2019 (a)

      53,182  

USD

    2,400     

Petronas Global Sukuk Ltd., 2.71%, 03/18/2020 (a)

      2,415,043  

MYR

    5,000     

Putrajaya Holdings Sdn Bhd, 5.10%, 04/22/2019

      1,173,428  

USD

    3,736     

RHB Bank Bhd, 2.50%, 10/06/2021 (a)

      3,654,839  

USD

    7,000     

TNB Global Ventures Capital Bhd, 3.24%, 10/19/2026 (a)

      6,761,692  

USD

    7,000     

Wakala Global Sukuk Bhd, 4.65%, 07/06/2021 (a)

            7,561,540  
                           49,605,195  

NETHERLANDS—0.4%

 

USD

    6,050     

Samvardhana Motherson Automotive Systems Group BV, 4.88%, 06/16/2019 (a)(b)

            6,224,240  

NORWAY—0.6%

 

AUD

    9,788     

Kommunalbanken AS, 6.50%, 04/12/2021

            8,398,300  

PHILIPPINES—3.2%

 

USD

    7,000     

ICTSI Treasury BV, 5.88%, 09/17/2025 (a)

      7,583,856  

USD

    3,446     

International Container Terminal Services, Inc., 7.38%, 03/17/2020 (a)

      3,859,334  

USD

    13,086     

Megaworld Corp., 4.25%, 04/17/2023 (a)

      13,020,191  

USD

    4,534     

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

      5,813,848  

USD

    7,000     

Royal Capital BV, 4.88%, 05/05/2024 (a)(b)(c)(i)

      6,870,633  

USD

    6,500     

SM Investments Corp., 4.25%, 10/17/2019 (a)

            6,695,097  
                           43,842,959  

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

12


Portfolio of Investments (unaudited) (continued)

As of April 30, 2017

 

 

Principal
Amount
(000)
     Description          Value
(US$)
 

CORPORATE BONDS (continued)

 

REPUBLIC OF SOUTH KOREA—3.9%

 

USD

    11,400     

Busan Bank Co. Ltd., 3.63%, 07/25/2026 (a)

    $ 10,941,150  

USD

    7,218     

Doosan Heavy Industries & Construction Co. Ltd., 2.13%, 04/27/2020 (a)

      7,085,902  

USD

    10,552     

Hyundai Capital Services, Inc., 2.63%, 09/29/2020 (a)

      10,493,014  

USD

    1,400     

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

      1,413,822  

USD

    13,652     

Korea National Oil Corp., 2.63%, 04/14/2026 (a)

      13,055,864  

USD

    3,000     

KT Corp., 2.50%, 07/18/2026 (a)

      2,838,248  

USD

    7,760     

Shinhan Bank, 2.88%, 03/28/2022 (a)

            7,754,873  
                           53,582,873  

SAUDI ARABIA—0.1%

 

USD

    1,500     

Saudi Electricity Global Sukuk Co. 3, 5.50%, 04/08/2044 (a)

            1,574,250  

SINGAPORE—2.7%

 

SGD

    2,750     

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

      1,984,000  

USD

    6,833     

DBS Group Holdings Ltd., 3.60%, 09/07/2021 (a)(b)(c)(i)

      6,720,262  

USD

    8,700     

Global Logistic Properties Ltd., 3.88%, 06/04/2025 (a)

      8,199,228  

USD

    8,900     

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

      8,958,891  

USD

    2,800     

SingTel Group Treasury Pte Ltd., 2.38%, 10/03/2026 (a)

      2,630,628  

USD

    9,000     

United Overseas Bank Ltd., 3.50%, 09/16/2021 (a)(b)(c)(g)

            9,076,860  
              37,569,869  

SUPRANATIONAL—5.4%

 

AUD

    14,000     

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

      11,647,046  

AUD

    16,800     

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

      13,995,073  

AUD

    15,000     

Inter-American Development Bank, 6.00%, 02/26/2021

      12,708,964  

AUD

    11,200     

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

      9,216,159  

AUD

    10,000     

International Bank for Reconstruction & Development, 4.25%, 06/24/2025

      8,162,197  

AUD

    6,900     

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

      5,620,772  

AUD

    15,600     

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

            12,956,292  
              74,306,503  

THAILAND—3.2%

 

USD

    4,800     

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

      6,701,837  

USD

    17,170     

Krung Thai Bank PCL, 5.20%, 12/26/2019 (a)(b)(c)(g)

      17,764,288  

USD

    14,000     

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

      14,748,356  

USD

    4,331     

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

            4,789,843  
              44,004,324  

UNITED ARAB EMIRATES—0.2%

 

USD

    2,089     

MAF Global Securities Ltd., 5.50%, 09/07/2022 (a)(b)(c)(i)

            2,109,368  

UNITED KINGDOM—1.9%

 

USD

    12,962     

HSBC Holdings PLC, 6.38%, 03/30/2025 (b)(c)(g)(i)

      13,545,290  

USD

    6,999     

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

      7,050,226  

USD

    5,000     

Standard Chartered PLC, 4.05%, 04/12/2026 (a)

            5,072,315  
              25,667,831  
            

Total Corporate Bonds—66.0% (cost $930,276,444)

            907,838,343  

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

13


Portfolio of Investments (unaudited) (continued)

As of April 30, 2017

 

 

Principal
Amount
(000)
     Description          Value
(US$)
 

GOVERNMENT BONDS—70.8%

 

AUSTRALIA—35.6%

 

AUD

    34,700     

Australia Government Bond, 3.25%, 04/21/2025 (a)

    $ 27,465,167  

AUD

    30,300     

Australia Government Bond, 3.25%, 04/21/2029 (a)

      23,838,956  

AUD

    91,900     

Australia Government Bond, 3.75%, 04/21/2037 (a)

      74,139,952  

AUD

    29,800     

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

      26,592,997  

AUD

    55,300     

Australia Government Bond, 5.50%, 01/21/2018 (a)

      42,593,468  

AUD

    7,000     

Australia Government Bond, 5.50%, 04/21/2023 (a)

      6,199,450  

AUD

    35,300     

Australia Government Bond, 5.75%, 07/15/2022 (a)

      31,156,155  

AUD

    7,500     

New South Wales Treasury Corp., 4.00%, 05/20/2026 (a)

      6,155,659  

AUD

    46,000     

New South Wales Treasury Corp., 6.00%, 02/01/2018

      35,554,200  

AUD

    15,000     

New South Wales Treasury Corp., 6.00%, 03/01/2022

      13,148,539  

AUD

    47,850     

Queensland Treasury Corp., 6.00%, 02/21/2018 (a)

      37,047,875  

AUD

    31,190     

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

      26,927,466  

AUD

    47,100     

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

      38,531,875  

AUD

    24,330     

Queensland Treasury Corp., 6.25%, 02/21/2020 (a)

      20,319,058  

AUD

    14,250     

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

      11,952,023  

AUD

    35,350     

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

      31,423,957  

AUD

    5,000     

Western Australian Treasury Corp., 2.50%, 07/23/2024

      3,623,908  

AUD

    25,000     

Western Australian Treasury Corp., 3.75%, 10/23/2018 (a)

      19,229,447  

AUD

    15,000     

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

            13,316,211  
              489,216,363  

CHINA—2.2%

 

CNY

    14,000     

China Government Bond, 2.85%, 01/28/2026

      1,929,231  

CNY

    20,000     

China Government Bond, 3.14%, 09/08/2020

      2,888,294  

CNY

    40,000     

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

      5,803,816  

CNY

    10,000     

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

      1,450,663  

CNY

    10,000     

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

      1,456,740  

CNY

    3,000     

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

      437,620  

CNY

    2,000     

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

      292,836  

CNY

    16,000     

China Government Bond, 3.64%, 04/09/2025 (j)

      2,337,240  

CNY

    10,000     

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

      1,501,434  

CNY

    30,000     

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

      4,572,588  

CNY

    20,000     

China Government Bond, 4.13%, 09/18/2024 (j)

      3,028,692  

CNY

    20,000     

China Government Bond, 4.15%, 04/28/2031 (j)

      3,061,751  

CNH

    10,000     

Export-Import Bank of China, 3.35%, 06/18/2017

            1,448,360  
              30,209,265  

INDIA—9.7%

 

INR

    150,000     

Export-Import Bank of India, 7.62%, 09/01/2026

      2,276,428  

INR

    750,000     

India Government Bond, 7.68%, 12/15/2023

      12,032,353  

INR

    1,000,000     

India Government Bond, 7.72%, 05/25/2025

      16,027,732  

INR

    300,000     

India Government Bond, 7.88%, 03/19/2030

      4,850,458  

INR

    1,026,780     

India Government Bond, 8.08%, 08/02/2022

      16,666,620  

INR

    1,425,000     

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

      23,024,172  

INR

    1,000,000     

India Government Bond, 8.17%, 12/01/2044

      16,557,485  

INR

    1,232,130     

India Government Bond, 8.27%, 06/09/2020

      19,934,726  

INR

    916,000     

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

      15,367,940  

INR

    360,440     

India Government Bond, 8.40%, 07/28/2024

      5,973,504  

INR

    9,230     

India Government Bond, 9.20%, 09/30/2030

            163,074  
              132,874,492  

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

14


Portfolio of Investments (unaudited) (continued)

As of April 30, 2017

 

 

Principal
Amount
(000)
     Description          Value
(US$)
 

GOVERNMENT BONDS (continued)

 

INDONESIA—13.4%

 

USD

    7,680     

Indonesia Government International Bond, 4.35%, 01/08/2027 (a)

    $ 8,014,034  

USD

    5,091     

Indonesia Government International Bond, 5.25%, 01/08/2047 (a)

      5,466,807  

IDR

    200,000,000     

Indonesia Treasury Bond, 7.00%, 05/15/2022

      15,184,935  

IDR

    120,000,000     

Indonesia Treasury Bond, 7.00%, 05/15/2027

      8,975,917  

IDR

    47,000,000     

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

      3,703,931  

IDR

    397,000,000     

Indonesia Treasury Bond, 8.25%, 05/15/2036

      31,348,376  

IDR

    114,000,000     

Indonesia Treasury Bond, 8.38%, 03/15/2024

      9,176,311  

IDR

    288,224,000     

Indonesia Treasury Bond, 8.38%, 09/15/2026

      23,505,101  

IDR

    120,400,000     

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

      9,583,945  

IDR

    340,600,000     

Indonesia Treasury Bond, 8.75%, 05/15/2031

      28,236,402  

IDR

    100,000,000     

Indonesia Treasury Bond, 8.75%, 02/15/2044

      8,163,936  

IDR

    30,000,000     

Indonesia Treasury Bond, 9.00%, 03/15/2029

      2,521,895  

IDR

    21,000,000     

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

      1,822,670  

USD

    4,970     

Perusahaan Penerbit SBSN Indonesia III, 3.40%, 03/29/2022 (a)

      5,007,275  

USD

    4,970     

Perusahaan Penerbit SBSN Indonesia III, 4.15%, 03/29/2027 (a)

      5,063,188  

USD

    10,981     

Perusahaan Penerbit SBSN Indonesia III, 4.35%, 09/10/2024 (a)

      11,420,240  

USD

    7,000     

Perusahaan Penerbit SBSN Indonesia III, 4.55%, 03/29/2026 (a)

            7,315,000  
              184,509,963  

MALAYSIA—1.8%

 

MYR

    20,900     

Malaysia Government Bond, 3.76%, 03/15/2019

      4,856,349  

MYR

    43,600     

Malaysia Government Bond, 3.90%, 11/30/2026

      9,913,099  

MYR

    3,995     

Malaysia Government Bond, 4.25%, 05/31/2035

      888,815  

MYR

    39,725     

Malaysia Government Bond, 4.74%, 03/15/2046

            9,038,467  
              24,696,730  

OMAN—0.2%

 

USD

    2,009     

Oman Government International Bond, 6.50%, 03/08/2047 (a)

            2,164,083  

PHILIPPINES—0.9%

 

PHP

    347,040     

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

      7,294,049  

PHP

    544     

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

      11,816  

PHP

    251,000     

Philippine Government International Bond, 3.63%, 03/21/2033

      4,181,027  

PHP

    50,000     

Philippine Government International Bond, 6.25%, 01/14/2036

            1,110,778  
              12,597,670  

REPUBLIC OF SOUTH KOREA—3.2%

 

USD

    11,111     

Korea Development Bank, 2.63%, 02/27/2022

      11,048,196  

USD

    10,658     

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

      10,767,095  

KRW

    20,000,000     

Korea Monetary Stabilization Bond, 1.48%, 02/09/2018

      17,581,141  

KRW

    5,300,000     

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

            5,030,021  
              44,426,453  

SINGAPORE—1.6%

 

SGD

    11,800     

Singapore Government Bond, 2.13%, 06/01/2026

      8,507,419  

SGD

    2,500     

Singapore Government Bond, 2.88%, 09/01/2030

      1,907,937  

SGD

    15,250     

Singapore Government Bond, 3.00%, 09/01/2024

            11,690,048  
              22,105,404  

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

15


Portfolio of Investments (unaudited) (continued)

As of April 30, 2017

 

 

Principal
Amount
(000)
     Description          Value
(US$)
 

GOVERNMENT BONDS (continued)

 

SRI LANKA—1.8%

 

LKR

    471,000     

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

    $ 2,951,107  

LKR

    230,000     

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

      1,476,733  

LKR

    388,000     

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

      2,470,710  

LKR

    293,000     

Sri Lanka Government Bond, 8.75%, 05/15/2017

      1,920,078  

LKR

    80,000     

Sri Lanka Government Bond, 11.20%, 07/01/2022

      505,198  

LKR

    1,020,000     

Sri Lanka Government Bond, 11.40%, 01/01/2024

      6,433,471  

LKR

    610,000     

Sri Lanka Government Bonds, 10.60%, 09/15/2019

      3,909,932  

USD

    5,254     

Sri Lanka Government International Bond, 6.13%, 06/03/2025 (a)

            5,351,498  
              25,018,727  

THAILAND—0.4%

 

THB

    203,400     

Thailand Government Bond, 3.65%, 06/20/2031

            6,190,728  
      

Total Government Bonds—70.8% (cost $1,025,548,210)

            974,009,878  

SHORT-TERM INVESTMENT—2.3%

 

UNITED STATES—2.3%

 

State Street Institutional U.S. Government Money Market Fund (k)

    31,508,385       31,508,385  
              31,508,385  
      

Total Short-Term Investment—2.3% (cost $31,508,385)

            31,508,385  
      

Total Investments—139.1% (cost $1,987,333,039)

            1,913,356,606  
  

Long Term Debt Securities

      (525,000,000
  

Mandatory Redeemable Preferred Stock at Liquidation Value

      (50,000,000
      

Other Assets in Excess of Liabilities—2.7%

            37,588,744  
      

Net Assets—100.0%

          $ 1,375,945,350  

 

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—Thai Baht
IDR—Indonesian Rupiah   MYR—Malaysian Ringgit   USD—U.S. Dollar

 

(a)   Denotes a restricted security.
(b)   The maturity date presented for these instruments represents the next call/put date.
(c)   Variable or Floating Rate Security. Rate disclosed is as of April 30, 2017.
(d)   Illiquid security.
(e)   For this security the annuity payments increase by 3.25% every year, until the asset amortizes to zero.
(f)   Sinkable security.
(g)   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.
(h)   This security is government guaranteed.
(i)   Perpetual bond. This is a bond that has no maturity date, is redeemable and pays a steady stream of interest indefinitely. The maturity date presented for these instruments represents the next call/put date.
(j)   China A securities. These securities are issued in local currency, traded in the local markets and are held through a qualified foreign institutional investor license.
(k)   Registered investment company advised by State Street Global Advisors.

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

16


Portfolio of Investments (unaudited) (continued)

As of April 30, 2017

 

 

At April 30, 2017, 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          717          06/30/2017        $ 221,445  

United States Treasury Note 6%—5 year

       UBS          (299        06/30/2017          (217,647

United States Treasury Note 6%—10 year

       UBS          (1,626        06/21/2017          (2,286,767

United States Treasury Note 6%—30 year

       UBS          291          06/21/2017          795,012  

United States Treasury Note 6%—Ultra Long

       UBS          4          06/21/2017          (1,759
                                        $ (1,489,716

At April 30, 2017, 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)
 

Chinese Yuan Renminbi/United States Dollar

          
05/19/2017   

Standard Chartered Bank

     CNY 78,891,000        USD 11,400,000      $ 11,425,342      $ 25,342  

Chinese Yuan Renminbi Offshore/United States Dollar

          
05/19/2017   

Goldman Sachs

     CNH 52,469,160        USD 7,600,000        7,596,012        (3,988
05/19/2017   

Royal Bank of Canada

     CNH 7,634,091        USD 1,100,000        1,105,195        5,195  
05/19/2017   

Standard Chartered Bank

     CNH 58,121,280        USD 8,400,000        8,414,275        14,275  

Indonesian Rupiah/United States Dollar

          
06/21/2017   

State Street

     IDR 140,731,500,000        USD 10,500,000        10,500,336        336  

Philippine Peso/United States Dollar

          
05/19/2017   

Goldman Sachs

     PHP 849,208,100        USD 16,900,000        16,983,901        83,901  

Singapore Dollar/United States Dollar

          
06/16/2017   

Goldman Sachs

     SGD 44,242,600        USD 31,400,000        31,681,765        281,765  

South Korean Won/United States Dollar

          
06/26/2017   

Goldman Sachs

     KRW 32,449,140,000        USD 29,100,000        28,557,721        (542,279

Thai Baht/United States Dollar

          
05/17/2017   

Goldman Sachs

     THB 1,016,726,400        USD 28,800,000        29,391,171        591,171  
                       $ 145,655,718      $ 455,718  
Sale Contracts
Settlement Date*
   Counterparty    Amount
Purchased
     Amount Sold      Fair Value      Unrealized
Appreciation/
(Depreciation)
 

United States Dollar/Australian Dollar

    
05/26/2017   

Goldman Sachs

     USD 15,000,000        AUD 19,677,034      $ 14,727,596      $ 272,404  
06/23/2017   

Goldman Sachs

     USD 73,000,000        AUD 96,144,981        71,925,316        1,074,684  
07/25/2017   

Goldman Sachs

     USD 15,000,000        AUD 19,697,447        14,728,425        271,575  
07/27/2017   

UBS

     USD 10,000,000        AUD 13,246,788        9,904,782        95,218  

United States Dollar/Chinese Yuan Renminbi

    
05/19/2017   

Standard Chartered Bank

     USD 30,400,000        CNY 210,608,160        30,501,202        (101,202

United States Dollar/Chinese Yuan Renminbi Offshore

    
05/19/2017   

Goldman Sachs

     USD 2,500,000        CNH 17,278,761        2,501,463        (1,463

United States Dollar/Indian Rupee

    
07/13/2017   

UBS

     USD 22,840,000        INR 1,473,438,092        22,680,097        159,903  

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

17


Portfolio of Investments (unaudited) (concluded)

As of April 30, 2017

 

 

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

United States Dollar/Philippine Peso

    
05/19/2017   

Credit Suisse

     USD 3,400,000        PHP 171,904,000      $ 3,438,027      $ (38,027
05/19/2017   

Goldman Sachs

     USD 20,700,000        PHP 1,040,138,100        20,802,442        (102,442
05/19/2017   

Standard Chartered Bank

     USD 2,200,000        PHP 112,200,000        2,243,965        (43,965

United States Dollar/Singapore Dollar

    
06/16/2017   

Goldman Sachs

     USD 7,800,000        SGD 10,990,200        7,869,993        (69,993
06/16/2017   

Standard Chartered Bank

     USD 7,990,000        SGD 11,179,592        8,005,615        (15,615

United States Dollar/South Korean Won

    
05/19/2017   

Standard Chartered Bank

     USD 1,800,000        KRW 2,031,552,000        1,786,050        13,950  

United States Dollar/Thai Baht

    
05/17/2017   

Goldman Sachs

     USD 33,600,000        THB 1,184,258,800        34,234,139        (634,139
                       $ 245,349,112      $ 880,888  

 

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

At April 30, 2017, 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
 

Over-the-counter swap agreements:

           

USD

     16,000,000        11/01/2017     

Barclays Bank

     Receive     

3-month LIBOR Index

     0.84%      $ 10,906  

Centrally cleared swap agreements:

           

USD

     59,000,000        10/28/2026     

Citibank

     Receive     

3-month LIBOR Index

     1.57%        3,362,573  
       $ 3,373,479  

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

18


Statement of Assets and Liabilities (unaudited)

As of April 30, 2017

 

 

Assets

        

Investments, at value (cost $1,955,824,654)

   $ 1,881,848,221  

Short-term investments, at value (cost $31,508,385)

     31,508,385  

Foreign currency, at value (cost $12,639,413)

     12,565,555  

Cash at broker for futures contracts

     3,141,381  

Cash at broker for interest rate swaps

     3,053,624  

Cash

     89,768  

Cash at broker for China A shares

     66,838  

Interest receivable

     25,308,817  

Receivable for investments sold

     24,248,650  

Unrealized appreciation on forward foreign currency exchange contracts

     2,889,719  

Prepaid expenses in connection with revolving credit facility, senior secured notes, term loans and Series A Mandatory Redeemable Preferred Shares

     2,595,424  

Variation margin receivable for futures contracts

     1,016,457  

Due from broker

     145,648  

Unrealized appreciation on interest rate swaps

     10,906  

Prepaid expenses and other assets

     6,544  

Total assets

     1,988,495,937  

Liabilities

  

Senior secured notes payable (Note 8)

     250,000,000  

4-year term loan payable (Note 9)

     100,000,000  

5-year term loan payable (Note 9)

     100,000,000  

Revolving credit facility payable (Note 9)

     75,000,000  

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

     28,036,820  

Interest payable on revolving credit facility, senior secured notes and term loans

     3,480,373  

Variation margin payable for futures contracts

     2,506,173  

Unrealized depreciation on forward foreign currency exchange contracts

     1,553,113  

Investment management fees payable (Note 3)

     862,122  

Deferred foreign capital gains tax

     398,465  

Administration fees payable (Note 3)

     181,537  

Dividend payable on Series A Mandatory Redeemable Preferred Shares

     162,457  

Investor relations fees payable (Note 3)

     83,898  

Variation margin payable for centrally cleared interest rate swaps

     74,423  

Other accrued expenses

     211,206  

Total liabilities

     612,550,587  
          

Net Assets Applicable to Common Shareholders

   $ 1,375,945,350  

Composition of Net Assets:

  

Common stock (par value $0.01 per share) (Note 5)

   $ 2,521,308  

Paid-in capital in excess of par

     1,452,902,180  

Distributions in excess of net investment income

     (24,179,705

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

     (55,396,179

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

     42,455,100  

Accumulated net realized foreign exchange gains

     71,193,455  

Net unrealized foreign exchange and forward foreign currency contract loss

     (113,550,809

Net Assets Applicable to Common Shareholders

   $ 1,375,945,350  

Net asset value per share based on 252,130,824 shares issued and outstanding

   $ 5.46  

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

19


Statement of Operations (unaudited)

For the Six-Month Period Ended April 30, 2017

 

 

Net Investment Income

        

Income

  

Interest and amortization of discount and premium and other income (net of foreign withholding taxes of $838,453)

   $ 46,065,553  
       46,065,553  

Expenses

  

Investment management fee (Note 3)

     5,179,382  

Administration fee (Note 3)

     1,090,235  

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

     389,530  

Custodian’s fees and expenses

     310,865  

Investor relations fees and expenses (Note 3)

     225,283  

Insurance expense

     171,257  

Reports to shareholders and proxy solicitation

     147,721  

Directors’ fees and expenses

     122,320  

Legal fees and expenses

     79,717  

Transfer agent fees

     66,096  

Independent auditors’ fees and expenses

     43,650  

Miscellaneous

     68,447  

Total operating expenses, excluding interest expense

     7,894,503  

Interest expense (Notes 8 & 9)

     7,215,311  

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

     998,915  

Net operating expenses

     16,108,729  
          

Net investment income applicable to common shareholders

     29,956,824  

Net Realized and Unrealized Gains/(Losses) on Investments and Foreign Currency Related Transactions

  

Net realized gain/(loss) from:

  

Investment transactions (including $553,804 capital gains tax)

     4,987,514  

Interest rate swaps

     (159,476

Futures contracts

     1,871,729  

Forward and spot foreign currency exchange contracts

     1,403,998  

Foreign currency transactions

     (32,059,938
       (23,956,173

Net change in unrealized appreciation/(depreciation) on:

  

Investments (including $(350,395) change in deferred capital gains tax)

     (32,297,989

Interest rate swaps

     2,799,917  

Futures contracts

     (1,226,785

Forward foreign currency exchange rate contracts

     (560,826

Foreign currency translation

     19,343,941  
       (11,941,742

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

     (35,897,915

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

   $ (5,941,091

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

20


Statements of Changes in Net Assets

 

 

 

      For the
Six-Month
Period Ended
April 30, 2017
(unaudited)
     For the
Year Ended
October 31, 2016
 

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

     

Operations:

     

Net investment income

   $ 29,956,824      $ 61,690,456  

Net realized gain from investments, interest rate swaps and futures contracts

     6,699,767        35,760,472  

Net realized loss from foreign currency transactions

     (30,655,940      (92,657,070

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

     (30,724,857      18,986,629  

Net change in unrealized appreciation on foreign currency translation

     18,783,115        110,378,001  

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

     (5,941,091      134,158,488  

Distributions to Common Shareholders from:

     

Net investment income

     (53,018,272      (59,990,293

Tax return of capital

            (46,911,791

Net decrease in net assets applicable to common shareholders from distributions

     (53,018,272      (106,902,084

Common Stock Transactions:

     

Repurchase of common stock resulting in the reduction of 1,135,695 and 3,042,619 shares of common stock, respectively (Note 6)

     (5,446,710      (14,553,549

Change in net assets from common stock transactions

     (5,446,710      (14,553,549

Change in net assets applicable to common shareholders resulting from operations

     (64,406,073      12,702,855  

Net Assets Applicable to Common Shareholders:

     

Beginning of period

     1,440,351,423        1,427,648,568  

End of period (including distributions in excess of net investment income of ($24,179,705) and ($1,118,257), respectively)

   $ 1,375,945,350      $ 1,440,351,423  

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

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

21


Statement of Cash Flows (unaudited)

For the Six-Month Period Ended April 30, 2017

 

 

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

  

Cash flows provided from (used for) operating activities:

  

Interest received (excluding discount and premium amortization of $5,677,767)

   $ 52,959,731  

Operating expenses paid

     (15,462,060

Dividends paid to Series A Mandatory Redeemable Preferred Shares

     (1,031,250

Payments received from broker for collateral on interest rate swaps

     7,195,492  

Purchases and sales of short-term portfolio investments, net

     (22,551,870

Purchases of long-term portfolio investments

     (493,827,330

Proceeds from sales of long-term portfolio investments

     572,049,416  

Realized gains on forward foreign currency exchange contracts closed

     1,371,946  

Realized losses on interest rate swap transactions

     (159,476

Payments received from broker for futures contracts

     565,898  

Increase in cash collateral held at broker for China A shares

     (105

Decrease in prepaid expenses and other assets

     184,298  

Net cash provided from operating activities

     101,294,690  

Cash flows provided from (used for) financing activities

  

Decrease in bank loan

     (50,000,000

Issuance of senior secured notes and secured term loans

     50,000,000  

Repurchase of common stock

     (5,446,710

Dividends paid to common shareholders

     (53,018,272

Change in payable due to custodian

     (6,346,246

Net cash used for financing activities

     (64,811,228

Effect of exchange rate on cash

     (32,069,850

Net increase in cash

     4,413,612  

Cash at beginning of period

     8,241,711  

Cash at end of period

   $ 12,655,323  

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

  

Net decrease in total net assets resulting from operations

   $ (5,941,091

Decrease in investments

     53,719,644  

Net realized gain on investment transactions

     (4,987,514

Net realized foreign exchange losses

     32,027,886  

Net change in unrealized appreciation/depreciation on investments

     32,297,989  

Net change in unrealized foreign exchange gains/losses

     (18,783,115

Decrease in interest receivable

     1,216,411  

Increase in receivable for investments sold

     (20,403,849

Increase in interest payable on bank loan, senior secured notes and term loans

     299,622  

Decrease in dividend payable to preferred shares

     (32,335

Net change in variation margin on future contracts

     1,226,785  

Net decrease in other assets

     184,298  

Increase in payable for investments purchased

     28,032,188  

Change in interest receivable/payable for closed interest rate swaps

     4,164,692  

Payments received from broker for interest rate swaps

     230,883  

Payments made to broker for futures contracts

     (1,305,831

Increase in cash collateral at broker for China A shares

     (105

Increase in prepaid expenses in connection with revolving credit facility, senior secured notes, term loans and Series A Preferred Shares

     (412,665

Decrease in accrued expenses and other liabilities

     (239,203

Total adjustments

     107,235,781  

Net cash provided from operating activities

   $ 101,294,690  

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

22


Financial Highlights

 

 

 

   

For the
Six-Month
Period Ended

April 30, 2017

(unaudited)

    For the Fiscal Years Ended October 31,  
      2016     2015     2014     2013     2012  

Per Share Operating Performance(a):

                                               
Net asset value per common share, beginning of period     $5.69       $5.57       $6.58       $6.89       $7.78       $7.48  
Net investment income     0.12       0.24       0.28       0.28       0.30       0.36  
Net realized and unrealized gains/(losses) on investments, interest rate swaps, futures contracts and foreign currency transactions     (0.14     0.29       (0.88     (0.18     (0.77     0.36  
Total from investment operations applicable to common shareholders     (0.02     0.53       (0.60     0.10       (0.47     0.72  
Distributions to common shareholders from:            
Net investment income     (0.21     (0.24     (0.40     (0.42     (0.42     (0.42
Tax return of capital           (0.18     (0.02                  
Total distributions to shareholders     (0.21     (0.42     (0.42     (0.42     (0.42     (0.42
Capital Share Transactions:            
Impact due to open market repurchase policy (Note 7)           0.01       0.01       0.01              
Total capital share transactions           0.01       0.01       0.01              
Net asset value per common share, end of period     $5.46       $5.69       $5.57       $6.58       $6.89       $7.78  
Market value, end of period     $5.00       $4.92       $4.75       $5.88       $6.44       $7.90  
Total Investment Return Based on(b):            
Market value     6.09%       12.90%       (12.38%     (2.17%     (13.37%     20.47%  
Net asset value     0.18%       11.35%       (8.19%     2.33%       (5.89% )(c)      9.92% (c) 
Ratio to Average Net Assets Applicable to Common Shareholders/Supplementary Data(d):            
Net assets applicable to common shareholders, end of period (000 omitted)     $1,375,945       $1,440,351       $1,427,649       $1,718,944       $1,842,470       $2,042,337  
Average net assets applicable to common shareholders (000 omitted)     $1,373,802       $1,433,905       $1,549,308       $1,771,852       $1,953,410       $1,965,038  
Net operating expenses     2.36% (f)      2.23%       2.15% (e)      1.97%       1.50%       1.38%  
Net operating expenses, excluding interest expense and distributions to Series A Mandatory Redeemable Preferred Shares     1.16% (f)      1.14%       1.14% (e)      1.09%       1.03%       1.01%  
Net investment income     4.40% (f)      4.30%       4.65%       4.14%       4.07%       4.85%  
Portfolio turnover     25%       52%       45%       49%       42%       38%  
Leverage (senior securities) outstanding (000 omitted)     $525,000       $525,000       $525,000       $550,000       $550,000       $600,000  
Leverage (preferred stock) outstanding (000 omitted)     $50,000       $50,000       $50,000       $50,000       $50,000       $–  
Asset coverage ratio on long-term debt obligations at period end(g)     372%       384%       381%       422%       444%       440%  
Asset coverage per $1,000 on long-term debt obligations at period end     $3,716       $3,839       $3,815       $4,216       $4,441       $4,404  
Asset coverage ratio on total leverage at period end(h)     339%       350%       348%       386%       407%        
Asset coverage per share on total leverage at period end     $3,393       $3,505       $3,483       $3,862       $4,071       $–  

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

23


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-month period ended April 30, 2017 and fiscal years ended October 31, 2016, 2015, 2014, 2013 and 2012, the ratios of net investment income before preferred stock dividends to average net assets of common shareholders were 4.54%, 4.16%, 4.79%, 4.26%, 4.10% and 4.85%, respectively.
(e)   The expense ratio includes a one-time expense associated with the August 2011 shelf offering costs attributable to the registered but unsold shares that expired in August 2014.
(f)   Annualized.
(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.

 

24


Notes to Financial Statements (unaudited)

April 30, 2017

 

 

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.

The Fund may invest up to 80% of its total assets, plus the amount of any borrowings for investment purposes, in “Asian debt securities,” which include: (1) debt securities of Asian Country (as defined below) issuers, including securities issued by Asian Country governmental entities, as well as by banks, companies and other entities which are located in Asian Countries, whether or not denominated in an Asian Country currency; (2) debt securities of other issuers denominated in, or linked to, the currency of an Asian Country, including securities issued by supranational issuers, such as The World Bank and derivative debt securities that replicate, or substitute for, the currency of an Asian Country; (3) debt securities issued by entities which, although not located in an Asian Country, derive at least 50% of their revenues from Asian Countries or have at least 50% of their assets located in Asian Countries; and (4) debt securities issued by a wholly-owned subsidiary of an entity located in an Asian Country, provided that the debt securities are guaranteed by the parent entity located in the Asian Country. With reference to items (3) and (4) above, Asian debt securities may be denominated in an Asian Country currency or in Australian, New Zealand or U.S. Dollars. The maximum country exposure to any one Asian Country (other than Korea) is limited to 20% of the Fund’s total assets and the maximum currency exposure to any one Asian Country currency (other than Korea) is limited to 10% of the Fund’s total assets. The maximum country exposure for Korea is limited to 40% of the Fund’s total assets, and the maximum currency exposure for Korea is limited to 25% of the Fund’s total assets.

“Asian Countries” (each, an “Asian Country”) include Bangladesh, China, Hong Kong, India, Indonesia, Japan, Malaysia, Pakistan, the Philippines, Singapore, South Korea, Taiwan, Thailand, Vietnam, Sri Lanka, Kazakhstan and Mongolia, and such other countries on the

Asian continent approved for investment by the Board upon the recommendation of Aberdeen Asset Management Asia Limited, the Fund’s investment manager (“AAMAL” or the “Investment Manager”).

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 generally accepted accounting principles 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 values its securities at current market value or fair value, consistent with regulatory requirements. “Fair Value” is defined in the Fund’s Valuation and Liquidity Procedures as the price that could be received to sell an asset or paid to transfer a liability in an orderly transaction between willing market participants without a compulsion to contract at the measurement date.

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 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 similar 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.

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

25


Notes to Financial Statements (unaudited) (continued)

April 30, 2017

 

 

 

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 approved by the Board. Pricing services generally price debt securities assuming orderly transactions of an institutional “round lot” size and the strategies employed by the Fund’s investment adviser generally trade in round lot sizes. In certain circumstances, some trades may occur in smaller “odd lot” sizes which may be effected at lower or higher prices than institutional round lot trades. 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, if it represents the best approximation of fair value. Debt and other fixed-income securities are generally determined to be Level 2 investments.

Short-term investments are comprised of cash and cash equivalents invested in short-term investment funds which are redeemable daily. The Fund sweeps available cash into the State Street Institutional U.S. Government Money Market Fund; a “government money market fund” pursuant to Rule 2a-7 under the Investment Company Act of 1940, as amended (the “1940 Act”), which has an objective, which is not guaranteed, to maintain a $1.00 per share net asset value (“NAV”). Registered investment companies are valued at their net asset value as reported by such company. Generally, these investment types are categorized as Level 1 investments.

Derivatives are valued at fair value. Exchange traded derivatives are generally Level 1 investments and over-the-counter derivatives are

generally Level 2 investments. Forward foreign currency contracts are generally valued based on the bid price of the forward rates and the current spot rate. Forward exchange rate quotations are available for scheduled settlement dates, such as 1-, 3-, 6-, 9- and 12-month periods. An interpolated valuation is derived based on the actual settlement dates of the forward contracts held. Futures contracts are valued at the settlement price or at the last bid price if no settlement price is available. Interest rate swaps agreements are generally valued by an approved pricing agent based on the terms of the swap agreement (including future cash flows).

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 by the Board. A security that has been fair valued by the Fund’s Pricing Committee may be classified as Level 2 or Level 3 depending on the nature of the inputs. The three-level 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).

 

 

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.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

26


Notes to Financial Statements (unaudited) (continued)

April 30, 2017

 

 

The following is a summary of the inputs used as of April 30, 2017 in valuing the Fund’s investments and other financial instruments at fair value. The inputs or methodology 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:

 

Investments, at Value      Level 1        Level 2        Level 3        Total  

Fixed Income Investments

                     

Corporate Bonds

     $        $ 907,838,343        $        $ 907,838,343  

Government Bonds

                974,009,878                   974,009,878  

Total Fixed Income Investments

                1,881,848,221                   1,881,848,221  

Short-Term Investment

       31,508,385                            31,508,385  

Total Investments

     $ 31,508,385        $ 1,881,848,221        $        $ 1,913,356,606  

Other Financial Instruments

                     

Futures Contracts

     $ 1,016,457        $        $        $ 1,016,457  

Forward Foreign Currency Exchange Contracts

                2,889,719                   2,889,719  

Interest Rate Swap Agreements

                3,373,479                   3,373,479  

Total Other Financial Instruments

     $ 1,016,457        $ 6,263,198        $          7,279,655  

Total Assets

     $ 32,524,842        $ 1,888,111,419        $        $ 1,920,636,261  

Liabilities

                     

Other Financial Instruments

                     

Futures Contracts

     $ (2,506,173      $        $        $ (2,506,173

Forward Foreign Currency Exchange Contracts

                (1,553,113                 (1,553,113

Total Liabilities

     $ (2,506,173      $ (1,553,113      $        $ (4,059,286

 

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. For the six-month period ended April 30, 2017, there were no transfers between Levels 1, 2, or 3. For the six-month period ended April 30, 2017, there were no significant changes to the fair valuation methodologies.

b. 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 “1933 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.

c. 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 current daily rates of exchange at the Valuation Time; and

 

(ii)   purchases and sales of investment securities, income and expenses – at the relevant rates 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.

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

27


Notes to Financial Statements (unaudited) (continued)

April 30, 2017

 

 

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.

d. 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, which may be any fixed number of days from the date of the contract agreed upon by the parties, 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 exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts or from unanticipated movements in exchange rates. During the six-month period ended April 30, 2017, the Fund used forward contracts to hedge and efficiently manage Australian and certain Asian currency exposure.

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 a counterparty 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, (a) either the aggregate initial margin and premiums required to establish the Fund’s position may not exceed 5% of the Fund’s NAV after taking into account unrealized profits and unrealized losses on any such contract into which it has entered into, or (b) the aggregate net notional value of the Funds’ position may not exceed 100% of the Fund’s NAV after taking into account unrealized profits and unrealized losses on any such contract which it has entered into.

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

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

28


Notes to Financial Statements (unaudited) (continued)

April 30, 2017

 

 

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-month period ended April 30, 2017, the Fund used U.S. Treasury futures to efficiently manage U.S. interest rate exposure and 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 and/or meet certain obligations at specified intervals based upon or calculated by reference to changes in specified prices or rates (interest rates in the case of interest rate swaps, currency exchange rates in the case of currency swaps) or the occurrence of a credit event with respect to an underlying reference obligation (in the case of a credit default swap) 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 amount of the difference between the two payments. Except for currency swaps and credit default swaps, the notional principal amount is used solely to calculate the payment streams but is not exchanged. With respect to

currency swaps, actual principal amounts of currencies may be exchanged by the counterparties at the initiation, and again upon the termination of the transaction.

Traditionally, swaps were customized, privately negotiated agreements executed between two parties (“OTC Swaps”) but since 2013, certain swaps are required to be cleared pursuant to rules and regulations related to the Dodd–Frank Wall Street Reform and Consumer Protection Act (“Dodd Frank”) and/or Regulation (EU) No 648/2012 on OTC Derivatives, Central Counterparties and Trade Repositories (“EMIR”) (“Cleared Swaps”). Like OTC Swaps, Cleared Swaps are negotiated bilaterally. Unlike OTC Swaps, the act of clearing results in two swaps executed between each of the parties and a central counterparty (“CCP”), and thus the counterparty credit exposure of the parties is to the CCP rather than to one another. Upon entering into a Cleared Swap, the Fund is required to pledge 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 or loss equal to the variation margin is recognized on a daily basis. When the contract matures or is terminated, the gain or loss is realized and is presented in the Statements of Operations as a net realized gain or loss on swap contracts. As of March 2017, the Fund may be required to provide variation and/or initial margin for OTC Swaps pursuant to further rules and regulations related to Dodd Frank and EMIR. The margin requirements associated with OTC Swaps and Cleared Swaps may not be the same.

The rights and obligations of the parties to a swap are memorialized in either an International Swap Dealers Association, Inc. Master Agreement (“ISDA”) for OTC Swaps or a futures agreement with an OTC addendum for Cleared Swaps (“Clearing Agreement”). These agreements are with certain counterparties whose creditworthiness is monitored on an ongoing basis by risk professionals. Both the ISDA and Clearing Agreement maintain provisions for general obligations, representations, agreements, collateral, and events of default or termination. The occurrence of a specified event of default or termination by one party may give the other party the right to terminate and settle all of its contracts.

Entering into swap agreements involves, to varying degrees, elements of credit, market and interest risk in excess of the amounts reported on the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform and that there may be unfavorable changes in the value of the index or securities underlying the

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

29


Notes to Financial Statements (unaudited) (continued)

April 30, 2017

 

 

agreement. The Fund’s maximum risk of loss from counterparty risk related to swaps is the fair value of the contract. This risk is mitigated by the posting of collateral by the counterparties to the Fund to cover the Fund’s exposure to the counterparty.

Interest Rate Swaps

The Fund uses interest rate swap contracts to manage its exposure to interest rates. Interest rate swap contracts typically represent the exchange between the Fund and a counterparty of respective commitments to make variable rate and fixed rate payments with respect to a notional amount of principal. Interest rate swap

contracts may have a term that is greater than one year, but typically require periodic interim settlement in cash, at which time the specified value of the variable interest rate is reset for the next settlement period. Net payments of interest are recorded as realized gains or losses. During the period that the swap contract is open, the contract is marked-to-market as the net amount due to or from the Fund and changes in the value of swap contracts are recorded as unrealized gains or losses. During the six-month period ended April 30, 2017, the Fund used interest rate swaps to hedge the interest rate risk on the Fund’s Revolving Credit Facility (as defined in Note 9 below).

 

 

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, 2017:

 

     Asset Derivatives      Liability Derivatives  
     Sixth-Month Period Ended April 30, 2017      Sixth-Month Period Ended April 30, 2017  
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)

   Variation margin
receivable for centrally
cleared interest rate
swaps
   $      Variation margin
payable for centrally
cleared interest rate
swaps
   $ 74,423  

Interest rate swaps
(interest rate risk)

   Unrealized appreciation
on over-the-counter
interest rate swaps
     10,906      Unrealized depreciation
on over-the-counter
interest rate swaps
      

Forward foreign exchange contracts (foreign exchange risk)

   Unrealized appreciation
on forward currency
exchange contracts
     2,889,719      Unrealized depreciation
on forward currency
exchange contracts
     1,553,113  

Futures contracts
(interest rate risk)

   Variation margin
receivable for
futures contracts
     1,016,457      Variation margin
payable for
futures contracts
     2,506,173  

Total

        $ 3,917,082           $ 4,133,709  

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

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

30


Notes to Financial Statements (unaudited) (continued)

April 30, 2017

 

 

The Fund has transactions that may be subject to enforceable master netting agreements. A reconciliation of the gross amounts on the Statement of Assets and Liabilities as of April 30, 2017 to the net amounts by broker and derivative type, including any collateral received or pledged, is included in the following tables:

 

          Gross Amounts Not Offset
in Statement of
Assets & Liabilities
          Gross Amounts Not Offset
in Statement of
Assets and Liabilities
 
Description   Gross Amounts
of Assets
Presented in
Statement of
Financial
Position
    Financial
Instruments
    Collateral
Received (1)
    Net
Amount (3)
   

Gross Amounts

of Liabilities

Presented in

Statement of

Financial
Position

    Financial
Instruments
    Collateral
Pledged (1)
    Net
Amount (3)
 
            Assets                          Liabilities                

Forward foreign currency (2)

 

Credit Suisse

  $     $     $     $     $ 38,027     $     $     $ 38,027  

Goldman Sachs

    2,575,500       (1,354,304           1,221,196       1,354,304       (1,354,304            

Royal Bank of Canada

    5,195                   5,195                          

Standard Chartered Bank

    53,567       (53,567                 160,782       (53,567           107,215  

State Street

    336                   336                          

UBS

    255,121                   255,121                          

Interest rate swaps (2)

               

Barclays Bank

  $ 10,906     $     $     $ 10,906     $     $     $     $  

 

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 instruments (swaps and forwards) which are not subject to a master netting arrangement across funds, or another similar arrangement.
3.   Net amounts represent the net receivable/(payable) that would be due from/to the counterparty in the event of default. Exposure from financial derivative instruments can only be netted across transactions governed under the same master netting arrangements with the same legal entity.

The Effect of Derivative Instruments on the Statement of Operations for the six-month period ended April 30, 2017:

 

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 (credit risk)

          $ (159,476      $ 2,799,917  

Forward foreign exchange contracts (foreign exchange risk)

            1,371,651          (560,826

Futures contracts (interest rate risk)

              1,871,729          (1,226,785

Total

            $ 3,083,904        $ 1,012,306  

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

31


Notes to Financial Statements (unaudited) (continued)

April 30, 2017

 

 

Information about derivatives reflected as of the date of this report is generally indicative of the type of activity for the six-month period ended April 30, 2017. The table below summarizes the weighted average values of derivatives holdings for the Fund during the six-month period ended April 30, 2017.

 

Derivative     

Average

Notional Value

 

Purchase Forward Foreign Currency Contracts

     $ 296,669,926  

Sale Forward Foreign Currency Contracts

       393,751,621  

Long Futures Contracts

       163,316,667  

Short Futures Contracts

       151,716,667  

Interest Rate Swaps

       100,000,000  

e. Bank Loans:

The Fund may invest in bank loans. Bank loans include floating and fixed-rate debt obligations. Floating rate loans are debt obligations issued by companies or other entities with floating interest rates that reset periodically. Bank loans may include, but are not limited to, term loans, delayed funding loans, bridge loans and revolving credit facilities. Loan interest will primarily take the form of assignments purchased in the primary or secondary market but may include participants. Floating rate loans are secured by specific collateral of the borrower and are senior to most other securities of the borrower (e.g., common stock or debt instruments) in the event of bankruptcy. Floating rate loans are often issued in connection with recapitalizations, acquisitions, leveraged buyouts, and refinancings. Floating rate loans are typically structured and administered by a financial institution that acts as the agent of the lenders participating in the floating rate loan. Floating rate loans may be acquired directly through the agent, as an assignment from another lender who holds a direct interest in the floating rate loan, or as a participation interest in another lender’s portion of the floating rate loan.

The Fund may also enter into, or acquire participation in, delayed funding loans and revolving credit facilities. Delayed funding loans and revolving credit facilities are borrowings in which the Fund agrees to make loans up to a maximum amount upon demand by the borrowing issuer for a specified term. A revolving credit facility differs from a delayed funding loan in that as the borrowing issuer repays the loan, an amount equal to the repayment is again made available to the borrowing issuer under the facility. The borrowing issuer may at any time borrow and repay amounts so long as, in the aggregate, at any given time the amount borrowed does not exceed the maximum amount established by the loan agreement. Delayed funding loans and revolving credit facilities usually provide for floating or variable rates of interest.

There are a number of risks associated with an investment in bank loans including credit risk, interest rate risk, illiquid securities risk, and prepayment risk. There is also the possibility that the collateral securing a loan, if any, may be difficult to liquidate or be insufficient to cover the amount owed under the loan. These risks could cause the Fund to lose income or principal on a particular investment, which in turn could affect the Fund’s returns. In addition, bank loans may settle on a delayed basis, resulting in the proceeds from the sale of such loans not being readily available to make additional investments or to meet the Fund’s redemption obligations. To the extent the extended settlement process gives rise to short-term liquidity needs, the Fund may hold additional cash, sell investments or temporarily borrow from banks or other lenders.

As of April 30, 2017, the Fund held no unfunded commitments or bridge loans.

f. 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.

g. 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

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

32


Notes to Financial Statements (unaudited) (continued)

April 30, 2017

 

 

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 fiscal year may differ from their ultimate characterization for federal income tax purposes. For tax purposes, the Fund’s distributions to Series A MRPS shareholders for the six-month period ended April 30, 2017 were 100% net investment income.

h. Federal Income Taxes:

For U.S. federal income purposes, the Fund is comprised of a separately identifiable unit called Qualified Business Unit (“QBU”) (see the Internal Revenue Code of 1986, as amended (“IRC”) section 987). The Fund has operated with a QBU for U.S. federal income purposes since 1990. The home office of the Fund is designated as the United States and of the QBU is Australia with a functional currency of Australian dollar. The securities held within the Fund reside within either the QBU or the home office depending on certain factors including geographic region. As an example, New Zealand and Indonesian securities reside within the Australian QBU. When sold, Australian dollar denominated securities within the Australian QBU generate capital gain/loss (which are translated for U.S. federal income tax purposes into U.S. Dollars based on the weighted average exchange rate for the period) but not currency gain/loss. When a New Zealand security is sold within the Australian QBU, the sale generates capital gain/loss as well as currency gain/loss based on the currency exchange between the New Zealand dollar and the Australian dollar.

Currency gain/loss related to currency exchange between the U.S. Dollar and the QBU functional currency is generated when money is transferred from a QBU to the home office. The currency gain/loss would result from the difference between the current exchange rate and the fiscal year to date average exchange rate until which profits are utilized and the pooled U.S. Dollar basis in the QBU (which is generally computed based on the currency exchange rates from when money was transferred into such QBU and from gain/losses generated within such QBU based on the weighted average exchange rates for the periods such gain/loss was recognized). Based on the QBU structure, there may be sizable differences in the currency gain/loss recognized for U.S. federal income tax purposes and what is reported within the financial statements under GAAP. As of the Fund’s fiscal year-end, the calculation of the composition of distributions to shareholders is finalized and reported in the Fund’s annual report to shareholders.

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 IRC, and to make distributions of net investment income and net realized capital gains sufficient to relieve the Fund from 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 are subject to such review.

i. Foreign Withholding Tax:

Dividend and interest income from non-U.S. sources received by the Fund are generally subject to non-U.S. withholding taxes. In addition, the Fund may be subject to capital gains tax in certain countries in which it invests. The above taxes may be reduced or eliminated under the terms of applicable U.S. income tax treaties with some of these countries. The Fund accrues such taxes when the related income is earned.

In addition, when the Fund sells securities within certain countries in which it invests, the capital gains realized may be subject to tax. Based on these market requirements and as required under GAAP, the Fund accrues deferred capital gains tax on securities currently held that have unrealized appreciation within these countries. The amount of deferred capital gains tax accrued is reported on the Statement of Operations as part of the Net Change in Unrealized Appreciation/Depreciation on Investments.

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.

k. 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 on the basis of current short-term rates. To the extent that any

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

33


Notes to Financial Statements (unaudited) (continued)

April 30, 2017

 

 

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. Repurchase agreements are subject to contractual netting arrangements with the counterparty, Fixed Income Clearing Corp. To the extent the Fund enters into repurchase agreements, additional information on individual repurchase agreements is included in the Statements of Investments.

3. Agreements and Transactions with Affiliates

a. Investment Manager, Investment Adviser, and Investment Sub-Adviser:

AAMAL 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, with the Investment Manager. The Investment Manager, the Investment Adviser and the Sub-Adviser (collectively, the “Advisers”) 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 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 Investment Adviser and Sub-Adviser are paid by the Investment Manager, not the Fund.

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.

For the six-month period ended April 30, 2017, AAMAL earned $5,179,382 from the Fund for investment management fees.

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-month period ended April 30, 2017, AAMI earned $1,090,235 from the Fund for administration fees.

c. Investor Relations:

Under the terms of the Investor Relations Services Agreement, AAMI provides and pays third parties to provide enhanced investor relations services to the Fund and certain other funds advised by AAMAL or its affiliates as part of an Investor Relations Program. Under the Investor Relations Services Agreement, the Fund owes a portion of the fees related to the Investor Relations Program (the “Fund’s Portion”). However, investor relations services fees are capped by AAMI so that the Fund will only pay up to an annual rate of 0.05% of the Fund’s average weekly net assets. Any difference between the capped rate of 0.05% of the Fund’s average weekly net assets and the Fund’s Portion is paid for by AAMI.

Pursuant to the terms of the Investor Relations Services Agreement, AAMI, among other things, provides 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 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.

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

34


Notes to Financial Statements (unaudited) (continued)

April 30, 2017

 

 

During the six-month period ended April 30, 2017, the Fund incurred investor relations fees of approximately $190,923. For the six-month period ended April 30, 2017, AAMI did not waive any investor relations fees because the Fund did not reach the capped amount.

4. Investment Transactions

Purchases and sales of investment securities (excluding short-term securities) for the six-month period ended April 30, 2017, were $461,476,749 and $511,279,253, respectively.

5. Capital

The authorized capital of the Fund is 400 million shares of $0.01 par value common stock. During the six-month period ended April 30, 2017, the Fund repurchased 1,135,695 shares pursuant to its Open Market Repurchase Program, see Note 6 for further information. As of April 30, 2017, there were 252,130,824 shares of common stock issued and outstanding.

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. The Fund reports repurchase activity on the Fund’s website on a monthly basis.

For the six-month period ended April 30, 2017 and fiscal year ended October 31, 2016, the Fund repurchased 1,135,695 and 3,042,619 shares, respectively, through this program.

7. Preferred Shares

At April 30, 2017, the Fund had 2,000,000 shares of Series A MRPS outstanding with an aggregate liquidation preference of $50,000,000 ($25.00 per share). 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, 2017.

 

Mandatory
Redemption
Date
     Annual Fixed
Rate
    Aggregate
Liquidation
Preference
     Estimated Fair
Value
 
  June 27, 2023        4.125   $ 50,000,000      $ 50,589,407  

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-month period ended April 30, 2017, the Fund paid $998,915 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. As of April 30, 2017, 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, 2017, the Fund had $250,000,000 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, $100,000,000 in 3.69% Series B Senior Secured Notes due June 12, 2023 and $50,000,000 in 3.87% Series C Senior Secured Notes Due February 8, 2032) (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

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

35


Notes to Financial Statements (unaudited) (continued)

April 30, 2017

 

 

other secured indebtedness. Holders of the Notes are entitled to receive cash interest payments semi-annually until maturity. The Series A Notes, the Series B Notes and the Series C Notes accrue interest at annual fixed rates of 3.05%, 3.69% and 3.87%, respectively.

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