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, 2018

 


Item 1. Reports to Stockholders.


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Aberdeen Standard
Investments
Aberdeen Asia-Pacific
Income Fund, Inc. (FAX)
Semi-annual Report
April 30, 2018
A marketplace in the SoHo district in Hong Kong.


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 (the “1940 Act”), 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 generally accepted accounting principles, the Fund estimates that distributions for the fiscal year commenced November 1, 2017, through the distributions declared on May 9, 2018 and June 11, 2018, consisted of 44% net investment income, 14% net realized short-term capital gains and 42% 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 2019, 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 2018 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, 2018. The Fund’s principal investment objective is to seek current income. The Fund may also achieve incidental capital appreciation.

Fund Updates

As of September 30, 2017, the Fund’s blended benchmark changed, as summarized below:

 

Index  

Previous

Weight

    New Index   

New

Weight

 

Bloomberg AusBond Composite Index1

    35.00  

Bloomberg AusBond Composite Index

     35.00

JP Morgan Asian Credit Index2

    40.00  

JP Morgan Asian Credit Diversified Index6

     40.00

Markit iBoxx Asia Government Index3

    15.00  

Markit iBoxx Asia Government Index

     15.00

Markit iBoxx Asia Government India Index4

    5.00  

Markit iBoxx Asia Government India Index

     5.00

Markit iBoxx Asia Government Indonesia Index5

    5.00  

Markit iBoxx Asia Government Indonesia Index

     5.00

 

1   

The Bloomberg AusBond Composite Bond Index includes investment grade fixed interest bonds of all maturities issued in the Australian debt market under Australian law.

2   

The JP Morgan Asian Credit Index (“JACI”) is a broad-based securities market index which consists of liquid US dollar-denominated debt securities issued out of Asia ex-Japan region.

3   

The Markit iBoxx Asia Government Index is a subset of the iBoxx Asia ex-Japan Index family investing in local currency sovereign bonds from China, Hong Kong, India, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan, and Thailand.

4   

The Markit iBoxx Asia Government India Index is a subset of the iBoxx Asia ex-Japan Index family investing in local currency sovereign bonds from India.

5   

The Markit iBoxx Asia Government Indonesia Index is a subset of the iBoxx Asia ex-Japan Index family investing in local currency sovereign bonds from Indonesia.

6  

The JP Morgan Asian Credit Diversified Index is a variant of the JACI which helps in reducing concentration risk of the JACI index to any particular market.

Total Investment Return

For the six-month period ended April 30, 2018, the total return to shareholders of the Fund based on the net asset value (“NAV”) and market price of the Fund are as follows:

 

NAV*

     -1.1%  

Market Price*

     -5.1%  

 

*   assuming the reinvestment of dividends and distributions

The Fund’s NAV total return is based on the reported NAV on each financial reporting period end which could differ from the NAV disclosed within the financial statements.

NAV, Share Price and Discount

The below table represents comparison from current year to prior year of Market Price to NAV and associated Premium / Discount.

 

      NAV      Market Price      Discount  

4/30/2018

   $ 5.14      $ 4.57        11.1

10/31/2017

   $ 5.43      $ 5.03        7.4

Portfolio Allocation

As of April 30, 2018, the Fund held 59.6% of its total investments in Asian debt securities, 32.9% in Australian debt securities, 5.0% in European debt securities, 2.2% in U.S. debt securities and 0.3% in developed Middle East debt securities.

Of the Fund’s total investments, excluding hedges, 36.9% were held in U.S. Dollar denominated bonds issued by foreign issuers. The rest of the Fund’s currency exposure was 35.5% in the Australian Dollar and 27.6% in various Asian currencies.

Of the Fund’s total investments, including hedges, 36.8% were held in U.S. Dollar denominated bonds issued by foreign issuers. The rest of the Fund’s currency exposure was 30.8% in the Australian Dollar and 32.4% in various Asian currencies.

Credit Quality

As of April 30, 2018, 45.1% of the Fund’s total investments were invested in securities where either the issue or the issuer was rated A or better by Standard & Poor’s* or Moody’s Investors Services, Inc. (“Moodys”).**

 

*   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-’.
**   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) (continued)

 

 

 

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.

Managed Distribution Policy

Distributions to common shareholders for the twelve-month period ended April 30, 2018 totaled $0.42 per share. Based on the share price of $4.57 on April 30, 2018, the distribution rate over the twelve-month period ended April 30, 2018 was 9.2%. 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, 2018 and June 11, 2018, the Fund announced that it will pay on May 31, 2018 and June 29, 2018, respectively, a distribution of U.S. $0.035 per share to all shareholders of record as of May 23, 2018 and June 21, 2018, 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  

4-year Term Loan B

   $ 100        December 14, 2019  

Revolving Credit Facility

   $ 100        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  

15-Year Series D Senior Secured Notes

   $ 100        August 10, 2032  

The Series A Mandatory Redeemable Preferred Shares, with a liquidation value of $50 million, are rated AA by Fitch Ratings3 and

the combined $350 million 7-year, 10-year and 15-Year Series A, B, C and D 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 description of the Fund’s leverage can be found in the Report of the 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, 2018 and fiscal year ended October 31, 2017, the Fund repurchased 200,000 and 1,135,695 shares, respectively.

Portfolio Holdings Disclosure

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

Proxy Voting

A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent twelve months ended June 30 is available by August 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.,

 

 

3  

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

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

2


Letter to Shareholders (unaudited) (concluded)

 

 

 

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 fact sheets 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 cef.aberdeen-asset.us/en/cefinvestorcenter/contact-us/email.

Contact Us:

 

 

Visit: cef.aberdeen-asset.us;

 

Watch: http://cef.aberdeen-asset.us/en/cefinvestorcenter/aberdeen-closed-end-fund-tv;

 

Email: InvestorRelations@aberdeenstandard.com; or

 

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

Yours sincerely,

/s/ Christian Pittard

Christian Pittard

President

 

 

 

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

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

3


Report of the Investment Manager (unaudited)

 

 

 

Market review

There was a distinct transition in risk sentiment in the Asian fixed-income markets during the six-month period ended April 30, 2018. Over the first half of the period to the end of January 2018, Asian bonds were relatively stable, while currencies appreciated significantly against the U.S. dollar. Emerging-market sovereign spreads in January hit their tightest levels since 2014, while Asian investment-grade1 corporate bond spreads reached their tightest levels since before the global financial crisis, as markets were supported by robust flows. Given the heavier positioning across markets, investor sentiment became vulnerable to several risks. The U.S. Federal Reserve (Fed) continued to raise the federal funds rate as expected, resulting in the two-year U.S. Treasury yield rising by about 90 basis points (bps) over the reporting period and the 10-year yield breaching 3% towards the end of April 2018. Concerns over the potential for a full-blown trade war between the U.S. and China weighed on investor sentiment, while worries over the U.S.’s withdrawal from the Iran nuclear deal raised geopolitical tensions in the Middle East and helped drive another surge in the Brent crude oil price, which neared US$75 per barrel at the end of the reporting period.

Asia-Pacific government bond yields generally rose over the reporting period, particularly in the second half and in April 2018. Several Asian central banks also raised their policy rates during the period, including Malaysia and South Korea, with the Philippines and Indonesia following suit soon after the end of the reporting period in May 2018, given firm growth and rising external inflation risks. While regional currencies generally exhibited better stability than their G102 and broader emerging-market counterparts, they depreciated in the final three months of the period, surrendering some earlier gains.

However, most Asian bond markets delivered positive total returns over the reporting period, and the majority of regional currencies ended firmer against the U.S. dollar. Notably, Chinese bonds posted solid performance as yields continued to move lower, benefiting from the market’s inclusion in the Bloomberg Barclays global bond indices. China, Malaysia, Thailand and South Korea, also have current account surpluses, and these markets outperformed their regional peers. All four markets saw robust currency appreciation over the reporting period, with the Malaysia ringgit, Thai baht, Korean won and Chinese yuan ending the reporting period up 7.9%, 5.3%, 4.9% and 4.8%, respectively, against the U.S. dollar. Indonesian bonds

were buoyed by their induction into the Bloomberg Barclays bond indices, but the Indonesian rupiah’s weakness pared the gains. Sri Lankan bonds benefited from the country’s improving fiscal management, but the Sri Lankan rupee’s decline trimmed the total returns. The Singapore dollar’s strength aided Singapore bond market returns, even though yields tracked U.S. Treasuries higher. Conversely, the Philippine and Indian markets lagged their peers. The former market was hampered by relatively weak bond performance and the latter by underperformance in the Indian rupee, which depreciated by 2.9% against the U.S. dollar over the period.

Regional credit markets moved lower on a total-return basis over the reporting period, mainly because of relative weakness in U.S. Treasuries. Investment-grade credits underperformed high-yield issues. Spreads in the investment-grade segment widened by 20 bps in the final three months and nearly 10 bps over the full reporting period, while high-yield spreads ended the period only marginally wider. At the sector level, technology credits were among the biggest market laggards as several Chinese companies were targeted in the China-U.S. trade spat. Consumer-sector credits were also not spared amid fears that global trade would be hurt. Despite higher energy prices, oil-and-gas credits weakened. The highly leveraged utility sector was hampered by the prospect of rising borrowing costs. Scandals at several Chinese and Indian banks hurt investor sentiment in the financial sector, while ongoing deleveraging and property curbs in mainland China weighed on infrastructure-related credits.

Fund performance review

The Fund returned -1.14% on a net asset value basis for the six-month period ended April 30, 2018, versus the -0.73% return of its blended benchmark.3 The Fund’s strategies in Asian U.S. dollar-denominated credit and Australian bonds detracted from absolute performance as both market segments declined during the period. However, the Fund’s underweight allocations to these sectors bolstered relative performance.

Asian local-currency bonds recorded positive absolute returns for the reporting period but the Fund’s exposure to the sector did not have a significant impact on relative performance. The Fund’s overweight positions in Indonesia and Sri Lanka contributed to both absolute and relative performance as these markets performed well during the period. However, weakness in the Indonesian rupiah and Sri Lankan

 

 

1   

Companies whose bonds are rated as “investment grade” have a lower chance of defaulting on their debt than those rated as “non-investment grade.” Generally, these bonds are issued by long-established companies with strong balance sheets. Bonds rated BBB- or above are known as investment-grade bonds. Standard & Poor’s credit ratings 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   

The G-10 nations include Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the UK and the U.S.

3   

The Fund’s blended benchmark is composed of 35% Bloomberg AusBond Composite Index; 40% J.P. Morgan Asian Credit Diversified 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.

 

4


Report of the Investment Manager (unaudited) (concluded)

 

 

 

rupee reduced these gains. An overweight position in Indian bonds hurt the Fund’s relative performance as the market declined, exacerbated by the Indian rupee’s weakness. The Fund’s overweight exposure to Asian local-currency high-yield bonds relative to its blended benchmark detracted from absolute and relative performance, attributable mainly to negative duration4 effects in Indonesia.

We have positioned the Fund for many of the more acute risks that the Asian markets face. Specifically, the Fund has had very little exposure to markets with higher correlations to U.S. Treasuries such as Hong Kong and Singapore, reducing the impact from rising interest rates, or the Philippines which for domestic reasons has been among the weakest-performing markets. We have used futures to hedge U.S. interest-rate risk and swaps5 to lock in the cost of leverage. We also have employed hedges on the Australian dollar. We have sought more idiosyncratically driven and resilient fixed-income markets such as China, which recently has outperformed the overall Asia-Pacific region. With the capital market expanding, we believe that there is scope to add to the Fund’s positions in China. Furthermore, we have initiated positions in what we view as out-of-favor markets such as Sri Lanka, which benefited Fund performance over the reporting period.

As recently as April 2018, Indonesia and several other countries, including the Philippines and India, were still seeing upgrades by the credit-rating agencies. China, Malaysia, Thailand and Singapore run current account surpluses. During the heightened market volatility over the last several months of the reporting period, their respective currencies, to which the Fund has exposure, generally outperformed those of other emerging markets as well as many developed countries. India has very little U.S. dollar-denominated debt; indeed, the government does not issue sovereign debt. Indonesia has some of the lowest debt levels of any country in the world, with a debt to gross domestic product (GDP) ratio of roughly 25%. The fiscal deficit is capped by law at 3% of GDP, but is typically comfortably below that.

With robust and improving fundamentals, we believe that there is opportunity in the Asian fixed-income market. Consequently, we decreased the Fund’s holdings in relatively more defensive credits in Australia and added credit risk in that market, while we also reduced hedging of the Australian dollar. We also rotated out of some of the more defensive positions in the Asian credit markets. In the

Indonesian local currency market, the five- to twenty-year yield curve widened to a multi-year high–with essentially no deterioration in fundamentals and the central bank already raising interest rates. Therefore, we extended the Fund’s duration in Indonesia. Shortly after the end of the reporting period, we increased the Fund’s duration in Malaysia given domestic factors centered on the surprising results of the country’s parliamentary election, with longer-dated yields rising to levels that typically see strong domestic support. We also extended the Fund’s duration and rotated out of some more defensive credit holdings in the Chinese market.

The overall impact on relative performance from the Fund’s use of derivatives, excluding leverage, was generally positive, driven by the currency overlay6 into Asian currencies, and the hedging of both Australian dollar risk and U.S. Treasury risk. However, the impact of leverage applied at the total portfolio level was negative, factoring in negative bond and currency performance, particularly in the final three months of the reporting period, and the cost of leverage.

Outlook

Over the past several months, the global market environment has been hit by negative investor sentiment driven to a large degree by geopolitical risks and uncertainty over potential outcomes. Instability in the Middle East and doubts about the U.S. withdrawal from the Iran nuclear deal are being reflected in volatile oil prices. Stronger commodity prices typically have benefited most emerging markets and countries such as Australia, particularly in an environment where global economic growth is improving. However, for now, even commodity exporters are underperforming. Similarly, the threat of a global trade war has hurt market sentiment, although with rhetoric from key political leaders changing on a weekly basis, we believe that it is difficult to forecast the economic impact. In our view, investors ultimately will need clarity on policies, but in the meantime, the tendency has been towards pricing in the worst-case outcomes.

For the most part, economic and corporate performance has remained positive. Firm global and regional demand has supported exports and production as well as the technology cycle, which has benefited Asia. Domestic demand in the Asia-Pacific region has remained resilient, supporting improvement in earnings. We believe that fiscal consolidation generally remains on track. China is focused on reining in its excesses; while that could slow growth, it has also resulted in capacity reductions that have benefited other emerging-

 

 

4   

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.

5   

An interest rate swap is an agreement between two counterparties in which one stream of future interest payments is exchanged for another based on a specified principal amount.

6   

A currency overlay seeks to separate the management of currency risk from the asset allocation and security selection decisions of the investor’s money managers.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

5


Report of the Investment Manager (unaudited) (concluded)

 

 

 

market producers. In Asia, several countries, including India, Indonesia, Philippines and Vietnam, have seen ratings upgrades in recent years, and the outlook remains positive, with the Asia-Pacific region benefiting from positive political transitions and reform, in our view. Flows into emerging markets and Asia over the last two years have been strong, following the shocks that hit the region in the prior years. Therefore, we believe it is possible that global investors have been primed for negative news. Market concerns are varied, including the cost of financing external debt as the U.S. dollar appreciates; the ballooning fiscal deficit in the U.S.; weaker demand as exports suffer from escalating trade conflict; and the potential for a policy-induced economic slowdown in China. Additionally, we believe that Asia is more vulnerable to the rise in commodity prices, including oil, given its status as a net oil importer. For a country such as India, higher commodity prices comprise one of the bigger risks. Nonetheless, markets have a tendency to overreact, so whether these concerns materialize is anyone’s guess, in our opinion.

We anticipate that major global central banks may continue normalizing interest rates, led by the Fed. In our view, this should drive short-dated yields higher. However, Fed rate hikes and rising U.S. Treasury yields have been forecast so well, we do not believe that the increases should surprise investors. The Fed is normalizing monetary policy because U.S. and global economic growth is improving, which historically has been positive for emerging markets and Asia, as we have seen in the recovery in exports. Notably, in our view, the Fed increased its benchmark interest rate by more than 400 bps over the previous monetary policy tightening cycle from 2004 to 2006. However during that period the U.S. dollar sold off and emerging-market and Asian currencies performed well. A strengthening global economy historically has been supportive for Asian exports and the technology sector. We believe that these conditions comprise a favorable backdrop for the Asian markets.

Outside of the U.S., we believe that there will be gradual policy tightening, given the risks we cited previously. Some central banks in Asia, such as South Korea, the Philippines, Malaysia and Indonesia, have already commenced gradual rate hikes, with India likely to follow in the coming quarters, in our view, even though inflation remains relatively stable.

Our credit strategy remains defensive. We prefer companies that, in our view, have conservative capital structures, balance-sheet strength and cash-flow generation. We also like Chinese and Hong Kong property credits because we believe that they have good execution and sizeable, high-quality land banks,7 although we prefer

to position the Fund in shorter-dated debt, given our anticipation of greater supply in this segment. Overall, while we intend to maintain the Fund’s underweight allocation to commodities, we could make exceptions for companies that we believe have robust business models and improving debt levels. We see the widening in spreads as a healthy correction, which may present opportunities for us to add to holdings in issues that were previously too pricey. Yields on 10-year U.S. Treasuries have already moved towards upside forecasts of 3.25%, which in our view suggests the underlying drag from rising U.S. yields has been priced in to a great degree. In the near term, we believe that further spread-widening is likely, although we are generally seeing opportunities to increase risk.

In Australia, unemployment has remained stubbornly high, with weakness in the housing market dampening inflation and credit growth. We believe that improving employment could begin to reverse these dynamics in the first half of 2019. However, in the medium term, we believe that this backdrop creates an outlook for yields to remain broadly stable, with domestic economic and inflation softness counterbalancing further rate hikes in the U.S. For the Australian dollar, net non-resident financial flows remain at the highest level since 2015. Global demand, firm commodity markets and a stable economy in China are all positive for the currency. However, the broad appreciation of the U.S. dollar and the Australian dollar’s higher volatility has driven notable weakness in the currency. The relationship to typical benchmarks of risk or demand, such as equities (i.e., the Standard & Poor’s 500 Index8) and commodities has, at least in the near term, foundered, with the currency overshooting on the downside to levels far below longer-term moving averages seen during some of the heavy sell-offs in 2016. Indeed, the Australian dollar has traded closer to levels in our estimated worst-case scenario,9 prompting us to reduce the Fund’s hedges.

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

 

 

7   

A land bank is a large body of land held by a public or private company for future development or sale.

8   

The S&P 500 Index comprises roughly 500 U.S. large-cap stocks and is considered to be representative of the broader U.S. equity market.

9   

Forecasts and estimates are offered as opinion and are not reflective of potential performance, are not guaranteed and actual events or results may differ materially.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

6


Report of the Investment Manager (unaudited) (concluded)

 

 

 

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 August 10, 2017, the Fund entered into a note purchase agreement with institutional investors relating to the private placement of $100 million of Series D senior secured notes rated ‘AAA’ by Fitch Ratings. Net proceeds of the Series D notes were used to pay down $100 million of the Fund’s existing 5-year Term Loan A originally maturing on June 12, 2018 (the “Term A Facility”). 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”), which was refinanced as outlined above. 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, 2018 was $100 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).

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, 2018, 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 manage interest rate exposure and hedge interest rate risk. As of April 30, 2018, the Fund held interest rate swap agreements with an aggregate notional amount of $100 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, 2018

   Amount
(in millions)
     Fixed Rate
Payable (%)
 

  99 months

   $ 25.0        2.27  

102 months

     59.0        1.57  

114 months

     16.0        2.36  

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.

 

7


Total Investment Return (unaudited)

 

 

 

The following table summarizes the average annual Fund performance for the 6-month, 1-year, 3-year, 5-year and 10-year periods as of April 30, 2018. 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)

       -1.1%          2.4%          2.7%          -0.3%          4.6%  

Market Value

       -5.1%          -0.6%          2.1%          -2.3%          4.4%  

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.” Total investment return at market value is based on changes in the market price at which the Fund’s shares traded on the NYSE American (formerly, 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 ended April 30, 2018. 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 annualized total operating expense ratio based on the six-month period ended April 30, 2018 was 2.58%. The annualized total operating expense ratio, excluding interest expense and distributions to Series A Mandatory Redeemable Preferred Shares, based on the six-month period ended April 30, 2018 was 1.15%.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

8


Portfolio Composition (unaudited)

 

 

 

Quality of Investments(1)

As of April 30, 2018, 45.1% of the Fund’s total investments were invested in securities where either the issue or the issuer was rated “A” or better by Standard & Poor’s or Moody’s. The table below shows the asset quality of the Fund’s portfolio as of April 30, 2018, compared to October 31, 2017 and April 30, 2017:

 

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

CCC**

%

       NR***
%
 

April 30, 2018*

       26.9          10.1          8.1          20.7          5.2          2.9          0.0          26.1  

October 31, 2017

       25.9          9.4          10.4          21.2          4.6          3.7          0.2          24.6  

April 30, 2017*

       28.2          11.6          9.6          24.3          3.9          3.7          0.0          18.7  

 

*   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 if ratings differ. These rating agencies are independent, nationally recognized statistical rating organization 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. Aberdeen Asset Management Asia Limited (“AAMAL” or 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, 2018, compared to October 31, 2017 and April 30, 2017:

 

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

Africa

%

      

Developed
Middle East

%

       Canada
%
 

April 30, 2018*

       59.6          32.9          5.0          2.2          0.0          0.3          0.0  

October 31, 2017

       61.0          31.4          4.6          2.6          0.4          0.4          0.0  

April 30, 2017*

       62.0          31.9          4.5          1.6          0.0          0.0          0.0  

 

*   Unaudited

Currency Composition

The table below shows the currency composition, including hedges, of the Fund’s total investments as of April 30, 2018, compared to October 31, 2017 and April 30, 2017:

 

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

April 30, 2018*

       30.8          32.4          36.8  

October 31, 2017

       27.6          28.7          43.7  

April 30, 2017*

       27.7          27.3          45.0  

 

*   Unaudited
**   Includes U.S. Dollar-denominated bonds issued by foreign issuers: 36.9% of the Fund’s total investments on April 30, 2018, 42.2% of the Fund’s total investments on October 31, 2017, and 39.8% of the Fund’s total investments on April 30, 2017.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

9


Portfolio Composition (unaudited) (concluded)

 

 

 

Maturity Composition

As of April 30, 2018, the average maturity of the Fund’s total investments was 9.3 years, compared with 8.1 years at October 31, 2017 and compared with 7.8 years at April 30, 2017. The following table shows the maturity composition of the Fund’s investments as of April 30, 2018, compared to October 31, 2017 and April 30, 2017:

 

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

April 30, 2018*

       20.9          25.2          29.3          24.6  

October 31, 2017

       25.2          21.2          34.6          19.0  

April 30, 2017*

       22.9          18.7          38.1          20.3  

 

*   Unaudited

Modified Duration

As of April 30, 2018, the modified duration of the Fund was 5.45 years. This calculation excludes the interest rate swaps that are used to manage the leverage of the Fund.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

10


Summary of Key Rates (unaudited)

 

 

 

The following table summarizes the movements of key interest rates and currencies from April 30, 2018 and the previous six- and twelve- month periods.

 

        Apr-18        Oct-17        Apr-17  

Australia

              

90 day Bank Bills

       2.03%          1.69%          1.75%  

10 yr bond

       2.43%          2.28%          2.22%  

currency USD per 1 AUD

       $0.75          $0.77          $0.75  

South Korea

              

90 day commercial paper

       1.65%          1.40%          1.41%  

10 yr bond

       2.72%          2.58%          2.19%  

currency local per 1USD

       W1,068.05          W1,120.35          W1,137.90  

Thailand

              

3 months deposit rate

       1.00%          1.00%          1.00%  

10 yr bond

       2.44%          2.32%          2.71%  

currency local per 1USD

       B31.56          B33.22          B34.59  

Philippines

              

90 day T-Bills

       3.48%          2.12%          2.12%  

10 yr bond

       6.20%          4.80%          5.16%  

currency local per 1USD

       P51.75          P51.63          P49.97  

Malaysia

              

3-month T-Bills

       3.24%          3.00%          3.09%  

10 yr bond

       4.13%          3.90%          4.05%  

currency local per 1USD

       RM3.92          RM4.23          RM4.34  

Singapore

              

3-month T-Bills

       1.52%          1.23%          0.96%  

10 yr bond

       2.53%          2.15%          2.13%  

currency local per 1USD

       S$1.32          S$1.36          S$1.40  

India

              

3-month T-Bills

       6.11%          6.10%          6.18%  

10 yr bond

       7.75%          6.86%          6.96%  

currency local per 1USD

       66.74          64.77          64.33  

Indonesia

              

3 months deposit rate

       5.76%          5.93%          6.19%  

10 yr bond

       6.88%          6.77%          7.01%  

currency local per 1USD

       Rp13,912.50          Rp13,562.50          Rp13,329.00  

China Onshore

              

3-month Bill Yield

       2.63%          2.63%          2.63%  

10 yr bond

       3.63%          3.88%          3.46%  

currency local per 1USD

       ¥6.34          ¥6.63          ¥6.90  

Sri Lanka

              

3-month Generic Govt Yield

       8.21%          8.80%          10.15%  

10 yr bond

       10.33%          10.38%          12.22%  

currency local per 1USD

       Rs157.70          Rs153.63          Rs152.50  

Yankee Bonds

              

Indonesia

       4.18%          3.22%          3.78%  

Sri Lanka

       6.67%          5.35%          n/a  

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

11


Portfolio of Investments (unaudited)

As of April 30, 2018

 

 

Principal
Amount
(000)
     Description          Value
(US$)
 

BANK LOANS—0.6%

 

AUSTRALIA—0.6%

 

AUD

    11,000     

Brickworks Ltd. Term Loan C, 3-month LIBOR + 2.100%, 4.13%, 10/16/2025 (a)(b)

          $ 8,281,349  
              8,281,349  
            

Total Bank Loans — 0.6% (cost $8,716,952)

            8,281,349  

CORPORATE BONDS—65.7%

 

AUSTRALIA—1.7%

 

AUD

    2,500     

APT Pipelines Ltd., 7.75%, 07/22/2020 (c)

      2,063,957  

AUD

    6,474     

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

      5,275,438  

AUD

    7,787     

CF Asia Pacific Group Pty Ltd., 8.35%, 11/30/2018 (b)(c)

      5,982,227  

AUD

    4,310     

NEXTDC Ltd., 6.25%, 06/09/2019 (b)(g)

      3,340,796  

AUD

    7,300     

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

            6,148,178  
              22,810,596  

CHINA—18.3%

 

USD

    3,759     

361 Degrees International Ltd., 7.25%, 06/03/2019 (c)(g)

      3,812,517  

USD

    3,950     

Agile Group Holdings Ltd., 9.00%, 05/30/2018 (c)(g)

      4,126,806  

CNY

    20,000     

Agricultural Development Bank of China, 4.39%, 09/08/2027

      3,095,484  

CNH

    10,000     

Bank of China Ltd., 4.88%, 04/20/2020

      1,596,083  

USD

    3,900     

Central China Real Estate Ltd., 6.50%, 05/30/2018 (c)(g)

      3,895,063  

USD

    4,500     

Central China Real Estate Ltd., 8.00%, 05/30/2018 (c)(g)

      4,558,959  

USD

    2,500     

China Aoyuan Property Group Ltd., 6.35%, 01/11/2020 (c)

      2,499,750  

USD

    3,000     

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

      3,009,000  

CNH

    11,250     

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

      1,774,215  

CNY

    70,000     

China Development Bank, 4.88%, 02/09/2028

      11,320,574  

CNH

    8,000     

China Development Bank Hong Kong, 3.20%, 09/21/2023

      1,220,809  

USD

    7,000     

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

      7,315,882  

USD

    4,955     

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

      5,049,700  

USD

    4,000     

Chinalco Capital Holdings Ltd., 4.25%, 04/21/2022 (c)

      3,883,548  

USD

    7,500     

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

      7,670,595  

USD

    8,000     

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

      8,046,024  

USD

    6,810     

Country Garden Holdings Co. Ltd., 7.25%, 05/30/2018 (c)(g)

      6,980,727  

CNY

    30,000     

Dalian Wanda Commercial Properties Co Ltd, 3.40%, 10/21/2019

      4,482,766  

USD

    3,730     

Franshion Brilliant Ltd., 3.60%, 03/03/2022 (c)

      3,609,144  

CNY

    40,000     

Franshion Brilliant Ltd., 5.20%, 03/08/2021 (c)

      6,288,528  

USD

    5,200     

Health and Happiness H&H International Holdings Ltd., 7.25%, 06/21/2018 (c)(g)

      5,309,200  

USD

    4,000     

Hilong Holding Ltd., 7.25%, 06/22/2020 (c)

      3,965,236  

USD

    4,300     

Industrial & Commercial Bank of China Ltd., 5 year CMT + 4.382%,6.00%, 12/10/2019 (c)(g)(h)

      4,387,397  

USD

    7,000     

New Metro Global Ltd., 4.75%, 02/11/2019 (c)

      6,982,402  

USD

    7,100     

New Metro Global Ltd., 5.00%, 08/08/2020 (c)(g)

      6,504,629  

USD

    7,000     

Postal Savings Bank of China Co. Ltd., 4.50%, 09/27/2022 (c)(g)(h)

      6,615,000  

USD

    18,800     

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

      17,940,840  

USD

    8,434     

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

      8,441,934  

USD

    7,600     

Shimao Property Holdings Ltd., 8.38%, 02/10/2019 (c)(g)

      8,089,995  

USD

    8,200     

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

      7,883,754  

USD

    1,600     

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

      1,605,922  

USD

    4,400     

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

      4,481,501  

USD

    5,900     

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

      5,991,432  

USD

    1,530     

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

      1,501,288  

USD

    6,632     

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

      6,419,493  

USD

    14,738     

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

      14,041,870  

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

12


Portfolio of Investments (unaudited) (continued)

As of April 30, 2018

 

 

Principal
Amount
(000)
     Description          Value
(US$)
 

CORPORATE BONDS (continued)

 

CHINA (continued)

   

USD

    7,500     

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

    $ 7,436,978  

USD

    3,700     

Tianqi Finco Co. Ltd., 3.75%, 11/28/2022 (c)

      3,575,928  

USD

    7,200     

Vanke Real Estate Hong Kong Co. Ltd., 3.98%, 11/09/2027 (c)

      6,675,797  

USD

    5,400     

Voyage Bonds Ltd., 3.38%, 09/28/2022 (c)

      5,175,376  

USD

    3,500     

Yankuang Group Cayman Ltd., 4.75%, 11/30/2020 (c)

      3,341,912  

USD

    2,882     

Yingde Gases Investment Ltd., 6.25%, 01/19/2021 (c)(g)

      2,739,180  

USD

    3,600     

Yunnan Energy Investment Overseas Finance Co. Ltd., 4.25%, 11/14/2022 (c)

            3,436,974  
              236,780,212  

GERMANY—3.6%

 

AUD

    7,500     

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

      5,667,271  

AUD

    5,000     

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

      4,067,031  

AUD

    20,500     

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

      16,383,165  

AUD

    15,000     

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

      12,519,819  

AUD

    10,000     

Landwirtschaftliche Rentenbank, 4.75%, 04/08/2024 (i)(j)

            8,262,769  
              46,900,055  

HONG KONG—3.6%

 

USD

    2,594     

CK Hutchison Capital Securities 17 Ltd., 5 year CMT + 2.070%,4.00%, 05/12/2022 (c)(g)(h)

      2,522,341  

USD

    4,840     

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

      4,706,141  

USD

    3,900     

Far East Consortium International Ltd., 3.75%, 09/08/2021 (c)

      3,757,030  

USD

    5,326     

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

      5,270,194  

USD

    8,000     

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

      7,367,776  

USD

    15,500     

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

      19,427,886  

USD

    980     

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

      1,316,310  

USD

    1,800     

WTT Investment Ltd., 5.50%, 11/21/2020 (c)(g)

            1,755,428  
              46,123,106  

INDIA—10.1%

 

USD

    9,480     

Adani Ports & Special Economic Zone Ltd., 4.00%, 06/30/2027 (c)(g)

      8,732,284  

INR

    350,000     

Adani Transmission Ltd., 10.25%, 04/15/2021

      5,451,053  

INR

    500,000     

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

      7,665,298  

USD

    3,840     

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

      3,702,194  

USD

    4,000     

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

      4,026,284  

INR

    350,000     

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

      5,040,404  

USD

    3,800     

Hindustan Petroleum Corp. Ltd., 4.00%, 07/12/2027 (c)

      3,570,431  

INR

    100,000     

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

      1,502,796  

INR

    250,000     

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

      3,775,794  

USD

    10,700     

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

      10,174,384  

INR

    400,000     

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

      5,814,210  

INR

    250,000     

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

      3,896,730  

INR

    200,000     

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

      3,024,075  

INR

    100,000     

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

      1,536,647  

INR

    250,000     

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

      3,812,631  

USD

    3,780     

Neerg Energy Ltd., 6.00%, 02/13/2020 (c)(g)

      3,702,937  

USD

    3,400     

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

      3,486,975  

INR

    200,000     

NTPC Ltd., 8.49%, 03/25/2025 (f)

      3,014,423  

INR

    100,000     

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

      1,530,298  

INR

    100,000     

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

      1,556,263  

INR

    250,000     

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

      3,745,348  

INR

    400,000     

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

      6,038,855  

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

13


Portfolio of Investments (unaudited) (continued)

As of April 30, 2018

 

 

Principal
Amount
(000)
     Description          Value
(US$)
 

CORPORATE BONDS (continued)

 

INDIA (continued)

   

INR

    200,000     

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

    $ 3,086,374  

USD

    7,000     

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

      6,915,565  

INR

    250,000     

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

      3,799,367  

INR

    200,000     

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

      3,005,805  

INR

    150,000     

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

      2,342,675  

INR

    70,000     

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

      1,082,552  

INR

    100,000     

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

      1,541,762  

USD

    7,475     

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

      7,265,685  

USD

    6,883     

Vedanta Resources PLC, 6.13%, 08/09/2021 (c)(g)

            6,621,983  
              130,462,082  

INDONESIA—1.5%

 

USD

    6,250     

Chandra Asri Petrochemical Tbk PT, 4.95%, 11/08/2021 (c)(g)

      5,811,375  

USD

    4,200     

Jababeka International BV, 6.50%, 10/05/2020 (c)(g)

      3,914,954  

IDR

    30,000,000     

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

      2,219,084  

USD

    3,600     

Medco Platinum Road Pte Ltd., 6.75%, 01/30/2022 (c)(g)

      3,440,437  

USD

    9     

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

      8,584  

USD

    4,164     

TBG Global Pte Ltd., 5.25%, 02/10/2019 (c)(g)

            4,131,125  
              19,525,559  

ISRAEL—0.5%

 

USD

    6,238     

Teva Pharmaceutical Finance Netherlands III BV, 6.00%, 04/15/2024 (c)

            6,053,121  
              6,053,121  

KUWAIT—0.3%

 

USD

    3,500     

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

            3,399,669  

MALAYSIA—2.7%

 

MYR

    5,500     

Cagamas Bhd, 4.45%, 11/25/2020

      1,406,304  

MYR

    2,500     

Cagamas Bhd, 5.80%, 08/08/2018

      640,345  

MYR

    5,000     

CIMB Group Holdings Bhd, 4.95%, 03/29/2023

      1,265,635  

MYR

    5,000     

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

      1,273,900  

USD

    7,000     

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

      6,736,282  

MYR

    5,000     

Konsortium Lebuhraya Utara-Timur KL Sdn Bhd, 4.75%, 12/02/2024

      1,280,130  

USD

    6,000     

Malayan Banking Bhd, 5 year USD Swap + 2.542%,3.91%, 10/29/2021 (c)(g)

      5,950,914  

MYR

    4,800     

Malaysia Airports Capital Bhd, 4.55%, 08/28/2020

      1,228,400  

USD

    3,600     

Press Metal Labuan Ltd., 4.80%, 10/30/2020 (c)(g)

      3,439,076  

MYR

    5,000     

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

      1,287,269  

USD

    3,736     

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

      3,603,450  

USD

    7,000     

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

            6,511,631  
              34,623,336  

NETHERLANDS—0.5%

 

USD

    6,050     

Samvardhana Motherson Automotive Systems Group BV, 4.88%, 06/16/2019 (c)(g)

            6,103,059  

OMAN—0.3%

 

USD

    4,053     

Oztel Holdings SPC Ltd., 6.63%, 04/24/2028 (c)

            3,939,030  

PHILIPPINES—2.7%

 

USD

    4,000     

AYC Finance Ltd., 5.13%, 09/13/2022 (c)(g)(h)

      3,879,860  

USD

    7,000     

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

      7,442,785  

USD

    3,446     

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

      3,676,086  

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

14


Portfolio of Investments (unaudited) (continued)

As of April 30, 2018

 

 

Principal
Amount
(000)
     Description          Value
(US$)
 

CORPORATE BONDS (continued)

 

PHILIPPINES (continued)

 

USD

    13,086     

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

    $ 13,259,769  

USD

    7,000     

Royal Capital BV, 5 year CMT + 5.930%,4.88%, 05/05/2024 (c)(d)(g)(h)

            6,842,500  
                           35,101,000  

REPUBLIC OF SOUTH KOREA—5.5%

 

USD

    11,400     

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

      10,472,063  

USD

    7,218     

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

      7,010,355  

USD

    6,000     

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

      5,864,645  

USD

    6,160     

Industrial Bank of Korea, 5 year CMT + 2.085%,3.90%, 07/31/2022 (c)(g)(h)

      5,857,156  

USD

    11,111     

Korea Development Bank (The), 2.63%, 02/27/2022

      10,728,543  

USD

    10,658     

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

      10,319,555  

USD

    13,652     

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

      12,313,396  

USD

    7,760     

Shinhan Bank Co. Ltd., 2.88%, 03/28/2022 (c)

      7,513,384  

USD

    1,050     

SK Telecom Co. Ltd., 3.75%, 04/16/2023 (c)

            1,043,370  
                           71,122,467  

SINGAPORE—2.2%

 

USD

    6,833     

DBS Group Holdings Ltd., 5 year USD Swap + 2.390%,3.60%, 09/07/2021 (c)(g)(h)

      6,637,993  

USD

    7,289     

Marble II Pte Ltd., 5.30%, 06/20/2019 (c)(g)

      7,194,877  

USD

    3,800     

Parkway Pantai Ltd., 5 year CMT + 4.430%,4.25%, 07/27/2022 (c)(g)(h)

      3,667,000  

USD

    2,800     

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

      2,510,127  

USD

    9,000     

United Overseas Bank Ltd., 5 year USD Swap + 2.236%,3.50%, 09/16/2021 (c)(g)(j)

            8,832,717  
                           28,842,714  

SUPRANATIONAL—5.1%

 

AUD

    14,000     

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

      11,438,847  

AUD

    6,800     

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

      5,480,244  

AUD

    4,000     

EUROFIMA, 5.50%, 06/30/2020

      3,200,859  

AUD

    9,610     

Eurofima, 6.25%, 12/28/2018 (c)

      7,424,673  

AUD

    6,685     

Eurofima, 6.25%, 12/28/2018 (c)

      5,164,822  

AUD

    15,000     

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

      12,372,110  

AUD

    11,200     

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

      8,891,602  

AUD

    15,600     

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

            12,614,488  
                           66,587,645  

THAILAND—3.0%

 

USD

    1,200     

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

      1,639,488  

USD

    17,170     

Krung Thai Bank PCL, 5 year CMT + 3.535%,5.20%, 12/26/2019 (c)(d)(g)(j)

      17,430,640  

USD

    10,000     

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

      10,111,320  

USD

    4,331     

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

      4,579,730  

USD

    5,386     

PTTEP Treasury Center Co. Ltd., 5 year CMT + 2.724%,4.60%, 07/17/2022 (c)(g)(h)

            5,266,878  
                           39,028,056  

UNITED ARAB EMIRATES—1.7%

 

USD

    6,105     

Abu Dhabi National Energy Co. PJSC, 4.88%, 04/23/2030 (c)

      6,051,081  

USD

    7,500     

DIB Sukuk Ltd., 3.66%, 02/14/2022 (c)

      7,371,450  

USD

    5,400     

First Abu Dhabi Bank PJSC, 3.00%, 03/30/2022 (c)

      5,238,000  

USD

    3,700     

MAF Global Securities Ltd., 5 year USD Swap + 3.476%,5.50%, 09/07/2022 (c)(d)(g)(h)

            3,643,686  
                           22,304,217  

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

15


Portfolio of Investments (unaudited) (continued)

As of April 30, 2018

 

 

Principal
Amount
(000)
     Description          Value
(US$)
 

CORPORATE BONDS (continued)

 

UNITED KINGDOM—2.4%

 

USD

    12,962     

HSBC Holdings PLC, 5 year USD ICE Swap + 4.368%,6.38%, 03/30/2025 (g)(h)(j)

    $ 13,350,860  

USD

    6,999     

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

      6,872,731  

USD

    5,000     

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

      4,876,345  

USD

    2,759     

Standard Chartered PLC, 5 year USD Swap + 5.723%,7.75%, 04/02/2023 (c)(g)(h)

      2,938,335  

USD

    2,871     

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

            2,819,203  
              30,857,474  
      

Total Corporate Bonds—68.7% (cost $894,930,045)

            850,563,398  

GOVERNMENT BONDS—73.0%

 

AUSTRALIA—37.2%

 

AUD

    46,300     

Australia Government Bond, 2.75%, 11/21/2028 (c)

      34,718,255  

AUD

    12,400     

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

      9,698,250  

AUD

    87,500     

Australia Government Bond, 3.25%, 06/21/2039 (c)

      66,754,251  

AUD

    51,000     

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

      41,926,949  

AUD

    17,700     

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

      15,815,969  

AUD

    6,700     

Australia Government Bond, 5.25%, 03/15/2019 (c)

      5,186,817  

AUD

    81,700     

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

      70,299,768  

AUD

    6,000     

New South Wales Treasury Corp., 3.00%, 04/20/2029 (c)

      4,399,434  

AUD

    13,500     

New South Wales Treasury Corp., 3.00%, 02/20/2030 (c)

      9,798,351  

AUD

    7,500     

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

      6,064,709  

AUD

    25,000     

New South Wales Treasury Corp., 6.00%, 05/01/2020

      20,242,930  

AUD

    15,000     

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

      12,757,407  

AUD

    22,000     

Queensland Treasury Corp., 4.25%, 07/21/2023 (c)

      17,768,098  

AUD

    51,400     

Queensland Treasury Corp., 5.50%, 06/21/2021 (c)

      42,301,876  

AUD

    4,690     

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

      3,924,770  

AUD

    47,100     

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

      37,152,409  

AUD

    16,200     

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

      13,075,146  

AUD

    20,000     

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

      17,271,732  

AUD

    5,000     

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

      3,667,862  

AUD

    22,000     

Western Australian Treasury Corp., 2.75%, 10/20/2022

      16,626,796  

AUD

    25,000     

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

      18,978,593  

AUD

    15,000     

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

            12,873,734  
              481,304,106  

CHINA—2.1%

 

CNY

    130,000     

China Development Bank, 4.24%, 08/24/2027

      20,031,789  

CNY

    4,000     

China Government Bond, 2.85%, 01/28/2026 (k)

      593,855  

CNY

    10,000     

China Government Bond, 3.14%, 09/08/2020 (k)

      1,570,765  

CNY

    3,000     

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

      474,659  

CNY

    10,000     

China Government Bond, 3.52%, 05/04/2027 (k)

      1,551,870  

CNY

    2,000     

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

      317,654  

CNY

    20,000     

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

            3,245,000  
              27,785,592  

INDIA—8.1%

 

INR

    150,000     

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

      2,132,277  

INR

    750,000     

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

      11,178,079  

INR

    1,000,000     

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

      14,893,617  

INR

    1,675,000     

India Government Bond, 7.73%, 12/19/2034

      24,269,179  

INR

    1,041,880     

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

      15,767,138  

INR

    1,739,000     

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

      27,286,197  

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

16


Portfolio of Investments (unaudited) (continued)

As of April 30, 2018

 

 

Principal
Amount
(000)
     Description          Value
(US$)
 

GOVERNMENT BONDS (continued)

 

INDIA (continued)

 

INR

    110,440     

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

    $ 1,693,667  

INR

    9,590     

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

      156,337  

INR

    50,000     

State of Karnataka India, 7.38%, 09/27/2027

      711,278  

INR

    500,000     

State of Maharashtra India, 7.20%, 08/09/2027

            6,969,149  
              105,056,918  

INDONESIA—13.8%

 

USD

    4,402     

Indonesia Government International Bond, 3.85%, 07/18/2027 (c)

      4,242,458  

USD

    1,880     

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

      1,882,721  

USD

    591     

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

      610,341  

IDR

    464,400,000     

Indonesia Treasury Bond, 5.63%, 05/15/2023

      32,261,822  

IDR

    179,570,000     

Indonesia Treasury Bond, 6.13%, 05/15/2028

      12,132,672  

IDR

    13,800,000     

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

      999,353  

IDR

    623,000,000     

Indonesia Treasury Bond, 7.50%, 05/15/2038

      44,779,874  

IDR

    288,224,000     

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

      22,405,338  

IDR

    300,000,000     

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

      24,204,852  

IDR

    100,000,000     

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

      8,194,070  

IDR

    30,000,000     

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

      2,466,443  

IDR

    21,000,000     

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

      1,776,190  

USD

    4,970     

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

      4,884,019  

USD

    4,970     

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

      4,839,538  

USD

    10,981     

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

      11,060,063  

USD

    1,500     

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

            1,507,500  
              178,247,254  

MALAYSIA—2.7%

 

MYR

    37,600     

Malaysia Government Bond, 3.44%, 02/15/2021

      9,511,041  

MYR

    24,900     

Malaysia Government Bond, 4.05%, 09/30/2021

      6,398,288  

MYR

    3,500     

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

      863,970  

MYR

    61,100     

Malaysia Government Bond, 4.76%, 04/07/2037

      15,527,981  

MYR

    10,000     

Malaysia Government Investment Issue, 4.76%, 08/04/2037

            2,512,496  
              34,813,776  

MONGOLIA—0.4%

 

USD

    3,145     

Mongolia (Government of) Credit Linked Note, Zero Coupon, 07/23/2018 (a)(b)

      3,132,527  

USD

    2,200     

Mongolia Government International Bond, 5.63%, 05/01/2023 (c)

            2,133,846  
              5,266,373  

NORWAY—0.7%

 

AUD

    7,000     

Kommunalbanken, 4.50%, 04/17/2023 (c)

      5,658,761  

AUD

    4,988     

Kommunalbanken AS, 6.50%, 04/12/2021

            4,173,584  
              9,832,345  

PHILIPPINES—1.0%

 

PHP

    251,000     

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

      3,439,500  

PHP

    200,000     

Philippine Government Bond, 4.63%, 09/09/2040

      2,847,146  

PHP

    544     

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

      10,867  

PHP

    300,000     

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

            6,739,793  
              13,037,306  

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

17


Portfolio of Investments (unaudited) (continued)

As of April 30, 2018

 

 

Principal
Amount
(000)
     Description          Value
(US$)
 

GOVERNMENT BONDS (continued)

 

REPUBLIC OF SOUTH KOREA—0.5%

 

KRW

    8,200,000     

Korea Treasury Bond, 2.25%, 09/10/2037

          $ 7,145,044  

SAUDI ARABIA—0.8%

 

USD

    4,549     

Saudi Government International Bond, 4.63%, 10/04/2047 (c)

      4,162,335  

USD

    6,007     

Saudi Government International Bond, 5.00%, 04/17/2049 (c)

            5,760,653  
              9,922,988  

SINGAPORE—1.3%

 

SGD

    6,300     

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

      4,633,303  

SGD

    15,250     

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

            11,903,281  
                           16,536,584  

SRI LANKA—2.2%

 

LKR

    471,000     

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

      2,972,724  

LKR

    388,000     

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

      2,458,791  

LKR

    745,000     

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

      4,781,960  

LKR

    1,680,000     

Sri Lanka Government Bond, 10.75%, 01/15/2019

      10,759,052  

LKR

    80,000     

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

      525,983  

LKR

    90,000     

Sri Lanka Government Bonds, 9.25%, 05/01/2020

      565,512  

LKR

    150,000     

Sri Lanka Government Bonds, 11.00%, 08/01/2021

      981,114  

LKR

    240,000     

Sri Lanka Government Bonds, 11.50%, 12/15/2021

      1,596,971  

USD

    3,547     

Sri Lanka Government International Bond, 5.75%, 04/18/2023 (c)

            3,524,569  
                           28,166,676  

SUPRANATIONAL—1.6%

 

AUD

    10,000     

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

      8,119,675  

AUD

    15,900     

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

            12,572,445  
                           20,692,120  

THAILAND—0.5%

 

THB

    203,400     

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

            6,957,105  
            

Total Government Bonds—70.0% (cost $1,000,666,565)

            944,764,187  

SHORT-TERM INVESTMENT—3.2%

 

UNITED STATES—3.2%

 

State Street Institutional U.S. Government Money Market Fund, Institutional Class, 1.28% (l)

    41,621,346       41,621,346  
                           41,621,346  
            

Total Short-Term Investment—3.2% (cost $41,621,346)

            41,621,346  
            

Total Investments—142.5% (cost $1,945,934,908)

            1,845,230,280  
  

Long Term Debt Securities

      (550,000,000
  

Mandatory Redeemable Preferred Stock at Liquidation Value

      (50,000,000
      

Other Assets in Excess of Liabilities—3.8%

            49,325,359  
      

Net Assets—100.0%

          $ 1,294,555,639  

 

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

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

18


Portfolio of Investments (unaudited) (continued)

As of April 30, 2018

 

 

 

(a)   Level 3 security. See Note 2(a) of the accompanying Notes to Financial Statements.
(b)   Illiquid security.
(c)   Denotes a restricted security.
(d)   Variable or Floating Rate Security. Rate disclosed is as of April 30, 2018.
(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 represents the next call/put date.
(h)   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.
(i)   This security is government guaranteed.
(j)   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.
(k)   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.
(l)   Registered investment company advised by State Street Global Advisors. The rate shown is the 7 day yield as of April 30, 2018.

At April 30, 2018, the Fund held the following futures contracts:

 

Futures Contracts   Number of
Contracts
Long/(Short)
    Expiration
Date
    Notional
Amount
    Market
Value
    Unrealized
Appreciation/
(Depreciation)
 

Long Contract Positions

 

     

United States Treasury Note 6%—2 year

    501       06/29/2018     $ 106,455,862     $ 106,235,485     $ (220,377

United States Treasury Note 6%—Ultra Long

    299       06/20/2018       46,003,647       46,980,375       976,728  
                                    $ 756,351  

Short Contract Positions

 

     

United States Treasury Note 6%—10 year

    (687     06/20/2018     $ (82,226,377   $ (82,182,375   $ 44,002  

United States Treasury Note 6%—5 year

    (419     06/29/2018       (47,689,722     (47,559,774     129,948  
                                    $ 173,950  

At April 30, 2018, 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)
 

Indian Rupee/United States Dollar

          
07/10/2018   

UBS

     INR1,491,803,140        USD22,700,000      $ 22,260,253      $ (439,747

Malaysian Ringgit/United States Dollar

          
05/04/2018   

HSBC Bank plc

     MYR21,932,920        USD5,600,000        5,589,938        (10,062

Philippine Peso/United States Dollar

          
06/22/2018   

Citibank

     PHP257,458,250        USD4,900,001        4,971,958        71,957  
06/22/2018   

Goldman Sachs

     PHP215,127,000        USD4,100,000        4,154,469        54,469  

Singapore Dollar/United States Dollar

          
05/25/2018   

UBS

     SGD38,800,000        USD29,492,247        29,277,583        (214,664

South Korean Won/United States Dollar

          
06/29/2018   

Citibank

     KRW61,601,120,000        USD58,400,000        57,611,429        (788,571

Thai Baht/United States Dollar

          
06/22/2018   

UBS

     THB1,073,940,275        USD34,473,093        34,078,021        (395,072
                $ 157,943,651      $ (1,721,690

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

19


Portfolio of Investments (unaudited) (concluded)

As of April 30, 2018

 

 

Sale Contracts
Settlement Date*
   Counterparty    Amount
Purchased
     Amount Sold      Fair Value      Unrealized
Appreciation
 

United States Dollar/Australian Dollar

          
05/25/2018   

UBS

     USD91,151,489        AUD117,500,000      $ 88,462,034      $ 2,689,455  

United States Dollar/CNH

          
07/27/2018   

Goldman Sachs

     USD24,148,192        CNH152,819,420        24,099,889        48,303  

United States Dollar/Indian Rupee

          
07/10/2018   

UBS

     USD22,800,000        INR1,498,374,960        22,358,315        441,685  

United States Dollar/Malaysian Ringgit

          
05/04/2018   

Standard Chartered Bank

     USD19,400,000        MYR75,879,220        19,338,972        61,028  
                       $ 154,259,210      $ 3,240,471  
                       $ 312,202,861      $ 1,518,781  

 

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

At April 30, 2018, the Fund held the following centrally cleared interest rate swaps:

 

Currency    Notional
Amount
     Expiration
Date
    Counterparty   Receive (Pay)
Floating Rate
  Floating Rate Index    Fixed
Rate
  Premiums
Paid
(Received)
    Unrealized
Appreciation
 

USD

     16,000,000        10/24/2027     Citibank   Receive  

3-month LIBOR Index

   2.36%   $     $ 806,589  

USD

     25,000,000        07/07/2026     Citibank   Receive  

3-month LIBOR Index

   2.27%           1,101,007  

USD

     59,000,000        10/28/2026     Citibank   Receive  

3-month LIBOR Index

   1.57%           6,165,108  
                                               $ 8,072,704  

 

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

20


Statement of Assets and Liabilities (unaudited)

As of April 30, 2018

 

 

Assets

        

Investments, at value (cost $1,904,313,562)

   $ 1,803,608,934  

Short-term investments, at value (cost $41,621,346)

     41,621,346  

Foreign currency, at value (cost $20,762,457)

     20,499,257  

Cash at broker for interest rate swaps

     3,991,768  

Cash at broker for futures contracts

     161,517  

Cash at broker for forward foreign currency contracts

     1,680,000  

Cash at broker for China A shares

     71,897  

Interest receivable

     25,310,087  

Receivable for investments sold

     3,415,839  

Unrealized appreciation on forward foreign currency exchange contracts

     3,366,897  

Variation margin receivable for futures contracts

     1,150,678  

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

     2,653,943  

Prepaid expenses and other assets

     12,962  

Total assets

     1,907,545,125  

Liabilities

  

Senior secured notes payable (Note 8)

     350,000,000  

Revolving credit facility payable (Note 9)

     100,000,000  

4-year term loan payable (Note 9)

     100,000,000  

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

     50,000,000  

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

     4,121,196  

Payable for investments purchased

     3,306,795  

Unrealized depreciation on forward foreign currency exchange contracts

     1,848,116  

Due to custodian

     1,244,420  

Investment management fees payable (Note 3)

     1,077,353  

Administration fees payable (Note 3)

     226,687  

Variation margin payable for futures contracts

     220,377  

Dividend payable on Series A Mandatory Redeemable Preferred Shares

     190,712  

Deferred foreign capital gains tax

     139,406  

Investor relations fees payable (Note 3)

     48,130  

Variation margin payable for centrally cleared swaps

     28,446  

Director fees payable

     6,174  

Other

     531,674  

Total liabilities

     612,989,486  
          

Net Assets Applicable to Common Shareholders

   $ 1,294,555,639  

Composition of Net Assets:

  

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

   $ 2,519,308  

Paid-in capital in excess of par

     1,393,932,088  

Distributions in excess of net investment income

     (28,504,470

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

     (35,302,233

Net unrealized (depreciation) on investments, futures contracts and interest rate swaps

     (8,778,264

Accumulated net realized foreign exchange gains

     52,945,506  

Net unrealized foreign exchange and forward foreign currency contract loss

     (82,256,296

Net Assets Applicable to Common Shareholders

   $ 1,294,555,639  

Net asset value per share based on 251,930,824 shares issued and outstanding

   $ 5.14  

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

21


Statement of Operations (unaudited)

For the Six-Month Period Ended April 30, 2018

 

 

Net Investment Income

        

Income

  

Interest and amortization of discount and premium and other income (net of foreign withholding taxes of $1,382,649)

   $ 43,008,226  

Total Investment Income

     43,008,226  

Expenses

  

Investment management fee (Note 3)

     5,202,494  

Administration fee (Note 3)

     1,095,501  

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

     331,375  

Custodian’s fees and expenses

     280,337  

Insurance expense

     167,366  

Reports to shareholders and proxy solicitation

     140,706  

Directors’ fees and expenses

     124,677  

Investor relations fees and expenses (Note 3)

     120,045  

Legal fees and expenses

     90,536  

Transfer agent’s fees and expenses

     66,691  

Independent auditors’ fees and expenses

     44,405  

Miscellaneous

     68,090  

Total operating expenses, excluding interest expense

     7,732,223  

Interest expense (Notes 8 & 9)

     8,651,470  

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

     1,036,980  

Net operating expenses

     17,420,673  
          

Net investment income applicable to common shareholders

     25,587,553  

Net Realized/Unrealized Gain/(Loss) from Investments and Foreign Currency Related Transactions:

  

Net realized gain/(loss) from:

  

Investment transactions (including $1,071,634 capital gains tax)

     6,316,857  

Futures contracts

     3,040,707  

Interest rate swaps

     (133,795

Forward foreign currency exchange contracts

     7,863,329  

Foreign currency transactions

     (1,302,700
       15,784,398  

Net change in unrealized appreciation/(depreciation) on:

  

Investments (including $(376,348) change in deferred capital gains tax)

     (48,157,738

Interest rate swaps

     4,670,632  

Futures contracts

     172,109  

Forward foreign currency exchange rate contracts

     (3,358,330

Foreign currency translation

     (15,368,337
       (62,041,664

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

     (46,257,266

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

   $ (20,669,713

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

22


Statements of Changes in Net Assets

 

 

 

     

For the
Six-Month

Period Ended
April 30, 2018
(unaudited)

     For the
Year Ended
October 31, 2017
 

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

     

Operations:

     

Net investment income

   $ 25,587,553      $ 57,653,853  

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

     9,223,769        25,469,128  

Net realized gain/(loss) from foreign currency transactions

     6,560,629        (73,119,445

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

     (43,314,997      (38,643,224

Net change in unrealized appreciation/(depreciation) on foreign currency translation

     (18,726,667      68,804,295  

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

     (20,669,713      40,164,607  

Distributions to Common Shareholders from:

     

Net investment income

     (52,945,723      (66,636,882

Tax return of capital

            (39,328,863

Net decrease in net assets applicable to common shareholders from distributions

     (52,945,723      (105,965,745

Common Stock Transactions:

     

Repurchase of common stock resulting in the reduction of 200,000 and 1,135,695 shares of common stock, respectively (Note 6)

     (932,500      (5,446,710

Change in net assets from common stock transactions

     (932,500      (5,446,710

Change in net assets applicable to common shareholders resulting from operations

     (74,547,936      (71,247,848

Net Assets Applicable to Common Shareholders:

     

Beginning of period

     1,369,103,575        1,440,351,423  

End of period (including distributions in excess of net investment income of ($28,504,470) and ($1,146,300), respectively)

   $ 1,294,555,639      $ 1,369,103,575  

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

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

23


Statement of Cash Flows (unaudited)

For the Six-Month Period Ended April 30, 2018

 

 

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

  

Cash flows provided from (used for) operating activities:

  

Interest received (excluding discount and premium amortization of $5,543,009)

   $ 47,033,711  

Operating expenses paid

     (15,698,209

Dividends paid to Series A Mandatory Redeemable Preferred Shares

     (1,031,485

Payments received from broker for collateral on interest rate swaps

     12,844,319  

Purchases and sales of short-term portfolio investments, net

     8,425,484  

Purchases of long-term portfolio investments

     (659,599,689

Proceeds from sales of long-term portfolio investments

     661,725,948  

Realized gains on forward foreign currency exchange contracts closed

     7,863,329  

Realized losses on interest rate swap transactions

     (133,795

Payments received from broker for futures contracts

     3,370,561  

Increase in cash collateral held at broker for China A shares

     (717

Increase in collateral to broker for forward currency exhange contracts

     (2,119,869

Decrease in prepaid expenses and other assets

     167,350  

Net cash provided from operating activities

     62,846,938  

Cash flows provided from (used for) financing activities

  

Repurchase of common stock

     (932,500

Dividends paid to common shareholders

     (52,958,496

Negative cash due to custodian

     (5,559,669

Net cash used for financing activities

     (59,450,665

Effect of exchange rate on cash

     (1,514,969

Net increase in cash

     1,881,304  

Cash at beginning of period

     17,373,533  

Cash at end of period

   $ 19,254,837  

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

   $ (20,669,713

Decrease in investments

     21,386,753  

Net realized gain on investment transactions

     (6,316,857

Net realized foreign exchange losses

     1,302,700  

Net change in unrealized appreciation/depreciation on investments

     48,157,738  

Net change in unrealized foreign exchange gains/losses

     18,726,667  

Increase in interest receivable

     (1,517,524

Decrease in receivable for investments sold

     2,818,543  

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

     (27,488

Increase in dividend payable to preferred shares

     5,495  

Net change in variation margin on future contracts

     (172,109

Net decrease in other assets

     167,350  

Decrease in payable for investments purchased

     (8,110,544

Change in interest receivable/payable for closed interest rate swaps

     7,513,261  

Payments received from broker for interest rate swaps

     660,426  

Payments received from broker for futures contracts

     329,854  

Collateral to broker for forward foreign currency exchange contracts

     (2,119,869

Increase in cash collateral at broker for China A shares

     (717

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

     264,526  

Increase in accrued expenses and other liabilities

     448,446  

Total adjustments

     83,516,651  

Net cash provided from operating activities

   $ 62,846,938  

See Notes to Financial Statements.

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

24


 

 

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Financial Highlights

 

 

 

   

For the
Six-Month
Period Ended

April 30, 2018
(unaudited)

    For the Fiscal Years Ended October 31,  
      2017     2016     2015     2014     2013  

Per Share Operating Performance(a):

                                               
Net asset value per common share, beginning of period     $5.43       $5.69       $5.57       $6.58       $6.89       $7.78  
Net investment income     0.10       0.23       0.24       0.28       0.28       0.30  
Net realized and unrealized gains/(losses) on investments, interest rate swaps, futures contracts and foreign currency transactions     (0.18     (0.07     0.29       (0.88     (0.18     (0.77
Total from investment operations applicable to common shareholders     (0.08     0.16       0.53       (0.60     0.10       (0.47
Distributions to Series A Mandatory Redeemable Preferred Shares:            
Net investment income                                    
Distributions to common shareholders from:            
Net investment income     (0.21     (0.26     (0.24     (0.40     (0.42     (0.42
Tax return of capital           (0.16     (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 6)                 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     $5.14       $5.43       $5.69       $5.57       $6.58       $6.89  
Market value, end of period     $4.57       $5.03       $4.92       $4.75       $5.88       $6.44  
Total Investment Return Based on(b):            
Market value     (5.11%     11.19%       12.90%       (12.38%     (2.17%     (13.37%
Net asset value     (1.14%     3.79%       11.35%       (8.19%     2.33%       (5.89% )(c) 
Ratio to Average Net Assets Applicable to Common Shareholders/Supplementary Data(d):            
Net assets applicable to common shareholders, end of period (000 omitted)     $1,294,556       $1,369,104       $1,440,351       $1,427,649       $1,718,944       $1,842,470  
Average net assets applicable to common shareholders (000 omitted)     $1,359,159       $1,382,050       $1,433,905       $1,549,308       $1,771,852       $1,953,410  
Net operating expenses     2.58% (e)      2.42%       2.23%       2.15% (f)      1.97%       1.50%  
Net operating expenses, excluding interest expense and distributions to Series A Mandatory Redeemable Preferred Shares     1.15% (e)      1.15%       1.14%       1.14% (f)      1.09%       1.03%  
Net investment income     3.80% (e)      4.17%       4.30%       4.65%       4.14%       4.07%  
Portfolio turnover     30%       57%       52%       45%       49%       42%  
Leverage (senior securities) outstanding (000 omitted)     $550,000       $550,000       $525,000       $525,000       $550,000       $550,000  
Leverage (preferred stock) outstanding (000 omitted)     $50,000       $50,000       $50,000       $50,000       $50,000       $50,000  
Asset coverage ratio on long-term debt obligations at period end(g)     344%       358%       384%       381%       422%       444%  
Asset coverage per $1,000 on long-term debt obligations at period end     $3,445       $3,580       $3,839       $3,815       $4,216       $4,441  
Asset coverage ratio on total leverage at period end(h)     316%       328%       350%       348%       386%       407%  
Asset coverage per share on total leverage at period end     $3,158       $3,282       $3,505       $3,483       $3,862       $4,071  

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

26


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, 2018 and fiscal years ended October 31, 2017, 2016, 2015, 2014 and 2013, the ratios of net investment income before preferred stock dividends to average net assets of common shareholders were 3.95%, 4.32%, 4.16%, 4.79%, 4.26% and 4.10%, respectively.
(e)   Annualized.
(f)   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.
(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.

 

27


Notes to Financial Statements (unaudited)

April 30, 2018

 

 

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 Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services-Investment Companies.

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 transact 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, the highest level, 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, the lowest level, 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

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

28


Notes to Financial Statements (unaudited) (continued)

April 30, 2018

 

 

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.

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. If there are no current day bids, the security is valued at the previously applied bid. 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. 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.

 

29


Notes to Financial Statements (unaudited) (continued)

April 30, 2018

 

 

The following is a summary of the inputs used as of April 30, 2018 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:

 

        Level 1-Quoted
Prices ($)
       Level 2-Other
Significant
Observable
Inputs ($)
       Level  3-Significant
Unobservable
Inputs ($)
       Total ($)  

Investments, at Value

 

Investments in Securities

 

Fixed Income Investments

                     

Bank Loans

     $        $        $ 8,281,349        $ 8,281,349  

Corporate Bonds

                888,768,290                   888,768,290  

Government Bonds

                903,426,768          3,132,527          906,559,295  

Total Fixed Income Investments

                1,792,195,058          11,413,876          1,803,608,934  

Short-Term Investment

       41,621,346                            41,621,346  

Total Investments

     $ 41,621,346        $ 1,792,195,058        $ 11,413,876        $ 1,845,230,280  

Other Financial Instruments

                     

Centrally Cleared Interest Rate Swap Agreements

     $        $ 8,072,704        $        $ 8,072,704  

Forward Foreign Currency Exchange Contracts

                3,366,897                   3,366,897  

Futures Contracts

       1,150,678                            1,150,678  

Total Other Financial Instruments

     $ 1,150,678        $ 11,439,601        $        $ 12,590,279  

Total Assets

     $ 42,772,024        $ 1,803,634,659        $ 11,413,876        $ 1,857,820,559  

Liabilities

                     

Other Financial Instruments

                     

Forward Foreign Currency Exchange Contracts

     $        $ (1,848,116      $        $ (1,848,116

Futures Contracts

       (220,377                          (220,377

Total Liabilities – Other Financial Instruments

     $ (220,377      $ (1,848,116      $        $ (2,068,493

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 fiscal period. For the six-month period ended April 30, 2018, there were no transfers between Levels 1, 2, or 3. For the six-month period ended April 30, 2018, there were no significant changes to the fair valuation methodologies. Level 3 investments held, at the beginning, during and at the end of the six-month period in relation to net assets were not significant (less than 0.89% of total net assets) and accordingly, a reconciliation of Level 3 assets for the six-month period ended April 30, 2018 is not presented. The valuation technique used at April 30, 2018 was a single unadjusted

broker quote and fair valuation as determined by the Funds Pricing Committee. The inputs utilized by the broker to value the investment were not available.

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. Rule 144A

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

30


Notes to Financial Statements (unaudited) (continued)

April 30, 2018

 

 

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.

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 the foreign 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, 2018, 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.

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

31


Notes to Financial Statements (unaudited) (continued)

April 30, 2018

 

 

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 Fund’s 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 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, 2018, 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

 

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

32


Notes to Financial Statements (unaudited) (continued)

April 30, 2018

 

 

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 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, 2018, 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, 2018:

 

    

Asset Derivatives

    

Liability Derivatives

 
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
   $ 8,072,704      Variation margin
payable for centrally
cleared interest rate swaps
   $  

Forward foreign exchange contracts (foreign exchange risk)

   Unrealized appreciation
on forward currency
exchange contracts
     3,366,897      Unrealized depreciation
on forward currency
exchange contracts
     1,848,116  

Futures contracts (interest rate risk)

   Variation margin receivable for futures contracts      1,150,678      Variation margin
payable for futures contracts
     220,377  

Total

        $ 12,590,279           $ 2,068,493  

 

*   The values shown reflect unrealized appreciation/(depreciation) and the values shown in the Statement of Assets and Liabilities reflects variation margin.

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

 

Aberdeen Asia-Pacific Income Fund, Inc.

 

33


Notes to Financial Statements (unaudited) (continued)

April 30, 2018

 

 

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, 2018 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)

 

Citibank

  $ 71,957     $ (71,957   $     $     $ 788,571     $ (71,957   $ (716,614   $  

Goldman Sachs

    102,772                   102,772                          

HSBC Bank plc

                            10,062             (10,062      

Standard Chartered Bank

    61,028                   61,028                          

UBS

    3,131,140       (1,049,483           2,081,657       1,049,483       (1,049,483            

 

1.   In some instances, the actual forwards and swaps collateral received and/or pledged may be more than the amount shown here due to overcollateralization.